Construction Litigation Update – July 2021

Duties and Roles of Expert Witnesses in Litigation and an Update on the Impact of COVID-19 on Contracts in the Kingdom of Saudi Arabia

The firm’s update addresses 2 recent judicial decisions.  The first is a case in the English Court of Appeal which will be of interest to practitioners who brief expert witnesses in litigation and arbitration (including construction disputes).  The second is a case in the Kingdom of Saudi Arabia (“KSA”) in relation to the impact of COVID-19 on parties’ contracts.

A Lesson on the Duties of Party Appointed Experts: Secretariat Consulting & Ors v A Company (English Court of Appeal)

Party appointed expert witnesses have an important role in modern litigation and arbitration.  In construction cases in particular, expert witnesses are often relied upon to a significant extent by parties to develop and then explain to the court or arbitral tribunal complex technical, delay or quantum issues.  A party’s case can succeed or fail on the strength of its expert evidence.  Maintaining the credibility of an expert, including his or her independence, in the eyes of the decision maker is of critical importance.  

Under English law, as in many jurisdictions, expert witnesses owe their primary duties to the court (or tribunal).  An expert must maintain their professional independence from their client, who instructs and pays them.  In practice, there is a risk that experts may become absorbed into the ‘team’ of lawyers and client personnel of the party instructing them.  The provision of expert services for construction disputes can be very lucrative for professional experts.  

While the rules dealing with a lawyer’s duties in relation to conflicts of interest are well understood, an expert’s obligations to avoid a conflict of interest may be less clear.  In Secretariat Consulting Pte Ltd & Ors v A Company [2021] EWCA Civ 6 (the “Secretariat case”), the Court of Appeal of England & Wales provided helpful guidance about the duties and roles of expert witnesses in litigation and their obligations to avoid conflicts of interest. 

Background to the Secretariat Case

Secretariat is a large global provider of expert services, including delay and quantum expert services for construction disputes.  Its experts are often ranked highly in the league tables, and they are instructed on the largest construction disputes.  In this case, the respondent to the appeal (the “Developer”) was the developer of a large petrochemical plant, and was a party to two separate arbitrations brought by its project manager (“Arbitration 1”) and a sub-contractor (“Arbitration 2”).  An expert from Secretariat’s Singapore office was engaged by the Developer in Arbitration 1.  Separately, the project manager sought to engage a different expert from Secretariat’s UK office (which was a different corporate entity to the Singapore office) in Arbitration 2.  This led to a situation where different offices of Secretariat would be providing expert services both for and against the Developer in separate arbitrations which related to the same petrochemical plant. 

The Developer asserted that Secretariat was conflicted and sought and obtained an urgent ex parte injunction from the English High Court (the Technology and Construction Court, or “TCC”) to restrain Secretariat UK from acting in Arbitration 2.  At first instance it was found that Secretariat owed the Developer a fiduciary duty of loyalty and that Secretariat’s engagement in Arbitration 2 had or would be in breach of that duty.  This was significant as it was the first decision in England where an expert had been found to owe fiduciary duties to a client.  Such duties are typically reserved for established categories of relationships, such as a solicitor and their client, because of the special nature of such relationship.  On this basis, Secretariat was restrained from acting in Arbitration 2.  Secretariat appealed that decision to the Court of Appeal. 

The Court of Appeal’s Decision 

In a unanimous verdict, the Court of Appeal dismissed Secretariat’s appeal.  The Court stated that a fiduciary duty of loyalty may exist between an expert and a client, but concluded that it was unnecessary to make such a finding for the purposes of this case.  In reaching this decision, the Court noted that Secretariat’s retainer with the Developer included conflict of interest provisions, which were standard and would typically be contained in the vast majority (if not all) expert witness retainers.  Accordingly, Secretariat’s obligation to avoid a conflict of interest was contractual in nature.  The Court therefore left open the possible existence of the more general fiduciary duty found at first instance for another day.

The Court found that Secretariat’s contractual duty to avoid conflict extended to all entities that formed part of the Secretariat group.  The Court was concerned that in accepting both retainers, Secretariat would effectively be giving advice for and against the Developer in respect of issues which had a significant degree of overlap.  This would lead to a situation where Secretariat could be providing conflicting advice in relation to the same issues concerning the petrochemical plant. 

The Court made some interesting comments about the roles that expert witnesses play in modern litigation.  The Court noted that an expert’s overriding duty to the Court or tribunal could be one of the main reasons why they owed a duty of loyalty to a client.  Clients require frank and honest opinions from experts on the merits of their cases, and accordingly the Court concluded that an expert who fully complies with their duty of independence to the Court or tribunal is an expert who provides their client with the best possible service.  One of the criticisms levied at the heavy reliance upon evidence from party-appointed experts, particularly in international arbitration, is a perceived lack of independence .   The Court’s comments underscore the importance of party-appointed experts maintaining their independence and adhering to their primary duty to the Court (or tribunal), even though the Court recognised that “the professional expert witness will be viewed, and rightly so, as part of the client’s litigation team.”  Courts and arbitral tribunals expect this of expert witnesses.  In our experience, cases can be won or lost based on a judge or tribunal’s conclusion as to the independence of the parties’ expert witnesses.

COVID-19: Enhanced Powers of KSA Courts to Re-write Contracts 

The coronavirus pandemic has caused major disruption to construction contracts globally.  The firm has previously published a number of articles regarding the extent to which parties may be able to rely on force majeure provisions in their contracts if they consider that they are impacted by COVID-19, particularly in relation to contracts governed by the laws of various states in the Middle East (https://www.quinnemanuel.com/covid-center/). 

In a recent ruling of the General Panel of the Supreme Court of the KSA, the Court held that the coronavirus pandemic constitutes a force majeure event where performance of contractual obligations has become impossible, and where: 

1. The contract was entered into in advance of any restrictions being imposed in response to COVID-19 and its performance continued thereafter; 

2. The pandemic has directly impacted performance of the contract, and this could not be avoided; 

3. The impact on performance is solely attributable to the pandemic; 

4. The counterparty has not waived, or otherwise settled, its rights in this regard; and 

5. The impact of the pandemic has not otherwise been addressed pursuant to the decision of a competent authority, or a special law. 

 

The ruling was not issued in relation to a particular set of proceedings, but rather as a guide for the KSA Courts to apply in future cases.  The ruling empowers Courts in the KSA to rewrite the parties’ contracts in order to ameliorate the effects of the pandemic on a party.  This power allows the Courts in the KSA to increase the contract sum where the effect of the pandemic has been to increase the cost of performance to a party.  The Courts could also reduce a supply obligation or suspend the contract if the pandemic has resulted in a decreased or total lack of availability of goods required to perform the contract.  Furthermore, this ruling requires the KSA Courts to suspend contracts in circumstances where the pandemic has resulted in project delays.  It is expected that this ruling will be the subject of significant attention in litigation in the KSA and in arbitrations concerning projects governed by the laws of the KSA (both in relation to construction disputes and more broadly).