Guy Elkington and Paul Taplin, Ankura
This is an extract from the third edition of GAR’s The Guide to Construction Arbitration. The whole publication is available here.
Duties of an expert
This chapter focuses more on the role of an expert, and the management of that role, as opposed to the duties of an expert. In most legal systems rules of evidence and codes of practice require that an expert has an (overriding) duty to present independent and impartial opinion to a tribunal and to enclose some form of declaration of independence and truth with their report. Many of these codes of practice also require an expert to state the extent of his or her instructions and care should be taken to ensure that those instructions are wholly consistent with the expert’s duties.
For a party entering the formal dispute arena for the first time, the concept that the expert or experts whose fees they are paying are duty-bound to give independent evidence that may not necessarily support their case may be a strange concept, but the risks of attempting to unduly influence an expert’s evidence or opinions need to be understood. The pitfalls are clearly visible in several recent judgments from the Technology and Construction Court of England and Wales, and incur a risk that an expert’s entire evidence could be discarded.
The litmus test for an expert in terms of independence is whether his or her opinion would be the same if he or she were instructed by the other party.
Similarly, an expert’s instructions should be sufficiently all-encompassing such that an expert is not restricted to providing an opinion that relates to his or her instructing party’s liability position and ignores any alternative positions or methodologies being advanced in the arbitration. There will be cost implications in providing an opinion on alternatives, and this may need to be caveated as subject to approval (on fees).
Types of experts
Firstly, there are experts who assist the tribunal in understanding what went wrong and why. These experts could be, for example, planning or scheduling experts who will opine on the causes and extent of delays to a project, or technical experts (usually from a design or engineering background) who may opine on issues of defective design, materials or workmanship, and changes to design or design standards. Where negligence is alleged, there may be experts advising on whether a specific standard of care or performance had been met. The issue of who is liable under the contract or at law for the consequences of those issues is in most jurisdictions a matter for the tribunal (and not an expert), but a tribunal may need assistance on discrete legal issues from a legal expert if the dispute involves laws or jurisdictions that are unfamiliar to the tribunal.
On the above issues there may be significant divergence in opinion between party appointed experts, often because there may be a range of differing methodologies or forms of analysis available to experts or conflicting data. If these differences are extreme, a tribunal may feel it has to appoint its own expert to advise it on the competing expert evidence, which, to a fee-paying party, will add a further layer of expense.
Secondly, there may be experts who will opine on the (often financial) consequences of the above issues who will tend to be quantity surveyors, cost engineers, property experts, or accountants. This evidence is often provided on an ‘if’ basis, namely, if the tribunal decides that a variation or breach has occurred. This could involve opining on the valuation of variations, the audit and applicability of costs to compute the amount of damages arising from delays or disruption including changes in property values or defects (on a diminution of value or rectification basis), losses of profit (in the event of the termination of a contract), business interruption costs and losses of opportunity. There are fewer areas of controversy and differing methodologies in the analysis of quantum or consequences and therefore a higher likelihood that competent experts should be able to agree ‘figures as figures’ on a range of liability positions or, where there are differing methodologies, then on those alternatives.
Cultural and jurisdictional differences
In many parts of the world, and particularly in the developing world, arbitration is often the only realistic option for the resolution of large and complex construction disputes. In addition to issues of confidentiality and the ability to select a specialist tribunal, the procedure and the seat, arbitration is often utilised in jurisdictions where, in addition to issues of confidentiality and flexibility, the local courts may be perceived as being unused to dealing with large and complex technical disputes.
In these situations, the conduct of a large construction arbitration often falls to individuals selected from a relatively small (in global terms) group of people comprising arbitrators, lawyers and counsel from a limited number of jurisdictions.
For historical reasons, a larger proportion of these individuals currently come from a common law background rather than a civil law background. This can result in arbitrations in civil law jurisdictions being conducted by tribunals from a mix of civil and common law backgrounds and occasionally wholly from a common law background. Equally, parties and their advisers may also come from differing jurisdictions. This can lead to a variety of expectations as to the nature and use of expert evidence and can also lead to procedural differences as to whether expert evidence is presented as part of a party’s pleaded case (memorial pleadings) or whether expert evidence is adduced after the parties have pleaded their case and after (or concurrent with) factual witness evidence. This is discussed further below but can have implications for expert evidence.
There can be differing views as to the role and boundaries of expert evidence between civil and common law jurisdictions. These are not universal but often stem from the experience of both lawyers and experts in construction litigation in that jurisdiction, which can manifest itself in the conduct of an arbitration either in that location or involving tribunal members or lawyers from those jurisdictions.
In some civil law jurisdictions (notably the Middle East), construction cases may be pleaded in a brief format where a series of written allegations are made with relevant documents attached. The court will then appoint an expert who will undertake an investigation into the claims and defences and possibly hold meetings with the parties on an individual basis, based on a pre-issued questionnaire in some cases.
In other jurisdictions, it may be a requirement that both parties attend and are privy to all meetings and communications between the parties, the expert and the court. The expert may also gather additional evidence during the investigation phase. Some laws require that a party is duty-bound to provide the expert with the evidence requested. The expert will then submit a report to the court that may be quite wide-ranging in its scope and that will contain recommendations. The court can then choose whether to adopt the expert’s report, and where it does so the report effectively forms its judgments on the issue.
In many European jurisdictions, the court will appoint its own expert. There is a natural suspicion in some jurisdictions that party appointed experts are subject to manipulation by those instructing them and are biased and less reliable with the inevitable result that the court is presented with two opposing opinions. There is a view that the only credible expertise is neutral expertise (which a party appointed expert is assumed not to provide) and as such the appointment of experts is a matter for the court and not the parties. In addition, there is a perceived cost and time saving that goes with that approach. Conversely, in a common law jurisdiction there may be a greater tendency for parties to appoint their own ‘backroom’ experts to allow them to cross-examine and interrogate the evidence of a court appointed expert (albeit they may not recover the costs of doing so), which may lead to the cost of three experts instead of one.
In some geographies it is customary for an expert to undertake a more hands-on role, and in arbitrations that adopt a civil jurisdiction procedure (in every sense) there may be a tendency to allow a party more latitude to quantify or advance their claims through expert evidence. This can cause tensions when a tribunal or counsel are from a common law jurisdiction where they may view an expert’s evidence where the claim is being presented via its expert (or prepared by its expert) with a degree of suspicion.
However, leaving the experts to work out what the client’s case is, and then to present it in a report, is a complete distortion of the role of independent expert evidence.
In fact such an approach is likely to lead to the judge or tribunal concluding that the expert is not independent, as he is simply confirming what he has previously said, or is acting as an advocate for his client, rather than expressing an unbiased opinion on both the parties’ factual cases. This can lead to the complete rejection of his evidence, and serious costs consequences.
Where opposing experts in an arbitration (absent directions from the tribunal) are from opposing schools of thought, this can also lead to a mismatch in expert evidence, particularly if one expert undertakes more of an investigatory function.
Regarding the issue of single experts (whether jointly appointed or tribunal appointed) or party appointed experts, the nature of the expertise may also have some relevance. There are some areas of expert evidence (e.g., delay experts) where there may be a considerable range or divergence of opinion. This may be born out of methodology issues, the interpretation of data, or where subjectivity is involved where ‘weight’ has to be attached to an event or item of evidence. The tribunal may justifiably want the benefit of that range of opinion.
Alternatively, there may be some areas of expert evidence, including aspects of quantum or accounting evidence, where there are fewer controversies of methodology and where party appointed experts often achieve a higher degree of agreement. In such instances, the appointment of a single expert may present fewer issues.
There is a growing number of experienced construction arbitrators from both common law and civil jurisdictions who have experienced the pros and cons that both jurisdictions have to offer in terms of the approach to and scope of expert evidence. A key advantage of arbitration is that it can be flexible and can blend the approaches available. If parity of evidence is desirable, particularly where participants and experts are from a variety of jurisdictions, it is advisable that appropriate directions are given as early as is reasonably practicable as to where the boundaries and limits of expert evidence should lie.
Memorial versus pleadings – issues for experts
Some procedural rules stipulate that a memorial style process be adopted. This is where a party must submit all the evidence that it intends to rely upon (factual, witness evidence and expert evidence) at the outset with its statement of claim or defence.
The perceived advantage of a memorial approach is that it gets all the evidence out earlier and the tribunal get greater visibility on the case and sees the evidence earlier. It also means that the parties must spend more money earlier in the process than it would under a common law pleading style, which may encourage settlement, avoid ambushes, and discourage a claimant from ‘trying it on’. If there are evidential shortcomings with a case, a memorial approach may highlight these earlier and this may force a reappraisal of a party’s true position.
However, construction disputes are usually evidentially heavy and complex, and if a memorial approach is to be followed, sufficient time and planning must be allowed for what can be complex ‘choreography’. Ideally what needs to be submitted is:
- a pleaded statement of claim;
- documentary evidence that provides all the necessary backup to support that claim;
- factual witness evidence that is relevant to the issues being claimed; and
- expert evidence.
If an expert is to provide a proper report based on all the available evidence, then, at least, developed drafts of the first three points above need to be provided to the expert in sufficient time for him or her to be able to analyse the relevant evidence and conclude his or her opinion. Those instructing the expert will want the expert’s report some time in advance of the finalisation of the statement of claim and witness statements.
In reality, all of the above must proceed within the same time frame and the identification and assembly of evidence usually takes longer than planned. This results in the expert or experts being provided with evidence in a piecemeal manner or the expert being relied upon to say what evidence is required (to produce an opinion) and to identify gaps where additional evidence has to be located. What can then evolve is a ‘chicken and egg’ scenario as expert opinion develops with the flow of the factual evidence, often involving some element of partial analysis or re-work as the pressures of the arbitral timetable make themselves felt. Claimants understandably want the process to proceed as quickly as possible and may be under considerable commercial pressure to do so, but this can force a timetable that is challenging, which may manifest itself in a statement of claim and factual and expert witness evidence that is not completely aligned.
Equally, it may also result in a claimant adopting the findings of its experts’ opinion reports as its claim (in terms of claimed sums or extensions of time). This can create issues later.
A claimant’s expert, in a memorial process, has to issue his or her opinion based solely on the claimant’s evidence or statement of claim. Once the respondent issues its statement of defence with its accompanying factual witness and expert evidence, it may be that the claimant’s expert finds that this new information and evidence amends its opinions in its reply report or has to undertake further analysis (particularly if alternative factual scenarios are advanced) and provide alternative opinions. Where the claimant’s expert does amend his or her opinion and the claimant had adopted the expert’s original report as its pleaded case, the claimant will need to consider whether it should re-plead its claim.
Therefore, the amendment of an opinion by an expert to take account of new evidence (which it will need to do to comply with its declaration) may have additional consequences. In the case of delay analysis, if a respondent serves conflicting as-built data (or a claimant has withheld a less favourable body of data from its own expert), this may involve a claimant’s expert having to either re-do his or her analysis or undertake an alternative analysis.
Where an expert discipline has several alternative methodologies that could be utilised, early agreement between experts (if both are appointed) as to whether they can subscribe to a common methodology in advance of costs being expended is to be encouraged. Reaching agreement is less likely at the outset of a memorial process as often the choice of methodology may be determined by the quantity and quality of the available data and evidence. That may not be known at that point or until after the claimant’s expert has selected his or her methodology (often on the basis of the evidence made available to it by the claimant) and then expended costs on that methodology – at which point he or she may be entrenched or not have the budget to undertake an analysis on an alternative methodology.
Through the prism of an expert lens, memorial pleadings can present challenges if the objective of expert evidence is to present a full range of independent opinion to a tribunal and to have the greatest opportunity to narrow issues in dispute.
There is also a sense (to an expert from a common law background) that memorial pleadings engender more of an environment whereby expert opinion becomes aligned with or, in fact, is the client’s case. In those circumstances there may be a tendency for an expert to become entrenched and reaching agreement in joint meetings may become problematic.
For a claimant’s expert there is also the increased prospect that re-work and reanalysis will need to be undertaken as further evidence comes to light, either through document disclosure processes or the evolution of the case, after the expert has completed his or her main analysis in the first round of pleadings. There is a view that, from an expert perspective, memorial pleadings are more expensive and time consuming than the common law pleading approach.
This is by definition a self-centred view, and there may be other imperatives that determine that a memorial approach is, in overall terms, to be preferred in certain circumstances, but in a large and complex ‘expert-heavy’ arbitration, those imperatives should come under some scrutiny.
Early expert advice
It is a fallacy that the late appointment of an expert saves costs. Often the best value advice that can be obtained is either pre-action advice or advice at the point of strategising a statement of claim or defence. Care will need to be taken to ensure that all involved understand what the status of that expert advice should be. If it is intended to appoint an expert to act in due course as an expert witness, it is important to ensure that the advice received is objective and impartial and would not cause the integrity of that expert to be later challenged or called into doubt.
It is at this stage, more than any other, that an expert should tell a party what it needs to know and not what that party wants to hear. Should a party dislike or disagree with that advice, it can select an alternative expert. However, it needs to bear in mind that if it engages in ‘expert shopping’ it may encounter a potential range of opinion that may ultimately prove hostile to its position.
Early expert advice need not be expensive or lengthy. It is an opportunity for a party to understand the principles and methodologies that an expert would or would not support (and why). Similarly, in terms of the evidence that would be required to support or test the veracity of a claim, an expert can provide advice on the nature, granularity and robustness of factual evidence that will be required to support a position. The expert may also provide insight as to the types of difficulties and challenges that a claim may need to overcome or that are commonly encountered within that expert’s area of expertise. This can often provide a reality check to a party as to the tasks that will face them and the resources that they may need to locate and deploy to assemble their case, and assist them in understanding the likely costs they may need to expend.
What do tribunals need?
Ideally, tribunals want experts:
- to be appointed with parity of instructions and scope;
- to be provided access to the same information and evidence;
- to provide comparable and concise opinion evidence such that the tribunal can assess their opinion evidence on a common basis;
- who will separate statements of fact, assumptions and opinion in their written report;
- who provide straightforward opinions and who will explain their reasoning;
- who limit their opinions and comments to those issues that are not within the expertise of the tribunal and that are within the experts’ own expertise;
- who provide a tribunal with the appropriate range of opinion evidence and provide alternative opinions where there are alternative factual and liability positions;
- who can simply explain the nub of any differences they may have with their counterpart; and
- who will concede issues where appropriate and understand that it is not about ‘winning’ against the other expert.
Costs and proportionality
As set out above, expert evidence in a construction arbitration can be a significant part of the total cost of an arbitration. There is naturally and correctly a need for the costs of expert evidence to be under control and to ensure that activities and evidence remains focused, relevant and proportionate.
Experts can be appointed on the following bases:
- time (an hourly rate);
- milestone payments (lump sums or budget estimates);
- capped fees;
- lump sums; and
- any combination of the above.
Experts should not be appointed on a contingency or success fee basis or with their fees in any way conditional on the outcome of the case as this will mean they have a financial interest in the case, which could imply that their evidence is not impartial and should be discarded.
Some procedural rules or professional codes of conduct forbid an expert to be appointed on any sort of conditional fee basis.
The costs of expert evidence can be affected by a number of factors such as:
- the procedure of the arbitration (memorial or pleading);
- the number and timing of expert reports:
- joint schedules and meetings;
- reply; and
- the number and timing of hearings or bifurcation;
- the quality of evidence both in terms of substance and form, for example, whether it can be searched electronically or manually or whether native copies of data are available or have to be recreated;
- whether various forms of evidence are consistent or contain inconsistencies that need to be reconciled before they can be processed;
- the quantity of evidence (e.g., whether that evidence is logically structured or is just many gigabytes of ‘data dump’);
- the timing of the issue of evidence;
- the number of items in dispute (both claim and counterclaim);
- the number of alternative factual scenarios and liability positions on which the expert may need to opine;
- the quality and professionalism of the opposing expert;
- the degree to which an opposing expert will agree joint activities such as data sampling and audits;
- whether the parties employ ‘tactics’ in the conduct of the arbitration and the ability of the tribunal to control those tactics; and
- changes to the timetable that result in delays (to evidence) or compression of periods within which expert evidence can be prepared.
Most of the above issues are usually not foreseeable by an expert at the outset of an arbitral process nor are risks that are within the control or management of an expert. Several of the above are within the control of the parties or their legal advisers. However, experts are frequently requested to commit to lump sum or capped fee arrangements and to take the risk of issues that are often beyond the experts’ control or influence.
Every case is different and there may be some of the above that an expert may be given the opportunity to inspect or quantify, but some reasonableness needs to be attached to this. Providing an expert with a hard drive containing 80GB of raw project data and expecting a lump sum agreement forthwith may not be realistic.
Early expert advice, however, may be suitable to be conducted on a lump sum basis as the extent of the work involved may be quantifiable.
Most experts should, however, be able to provide some sort of range of fees, broken down into the various stages of the arbitral process, and while every case may differ, if the fee is based on previous cases it should account for most of the variabilities that can be encountered.
Some sort of staged fee arrangement may be also overcome some of the above risk, namely, a budget estimate that is firmed up or converted to a different fee arrangement as and when risks and issues are overcome or become tangible.
For most experts, an area of continual difficulty is the availability and quality of evidence. Occasionally this is the result of tactical games or because the parties and their advisers have been distracted by other issues or are uncertain what to provide and so err on the side of caution.
A party and its advisers should think long and hard about advancing high-value claims that are defective or that are ‘sympathy’ claims where they involve significant expert costs. This is even more relevant in jurisdictions where the loser pays costs.
While claimants will want to reach the end of the process as quickly as possible, bifurcation (where permissible) of liability from quantum with the with quantum expert process taking place after liability hearings may have a significant effect on reducing expert costs, particularly where there are starkly different liability positions, albeit this may be offset by the need for two hearings.
Experts will welcome a hands-on tribunal that takes early control of evidence disclosure and provides guidance to the parties as to what they expect to receive from the experts. This can often have the effect of limiting tactic and scope for disagreement and will allow the experts to focus on identifying and then narrowing the issues of difference within their expertise.
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