Bank of Ireland v Watts Group PLC [2017] EWHC 1667 (TCC)

Most litigators agree that experts who are experienced, responsive, thorough and communicative can be worth their weight in gold. However, an expert who is so eager to assist their client that they overlook their professional obligations and duties to the Court will jeopardise their own independence and could put their client’s entire case at risk, as the recent decision of Coulson J in (1) The Governors and Company of the Bank of Ireland (2) Bank of Ireland (UK) PLC v Watts Group PLC [2017] EWHC 1667 (TCC) illustrates.

The claimant Bank proposed to advance funds to a developer for the refurbishment of a residential development in York. The Bank appointed Watts to act as independent quantity surveyors to check the developer’s costings and approve requests for drawings from the Bank’s facility, which was a precondition to the developer’s drawdown. Watts provided the bank with an Initial Appraisal Report (the IAR) which addressed those points. Regarding its conditions precedent as having been met, the Bank permitted the developer to draw down funds. In due course the developer defaulted on the loan, leaving the Bank with a shortfall. The Bank then pursued Watts, claiming that the IAR was negligent and if it had been properly prepared, the Bank would not have permitted the drawdown of the loan, and would not therefore have suffered any loss.

The Bank’s claim and the decision on liability

The Bank alleged that Watts was in breach of its contractual and/or tortious duties by failing to advise on differences in a proposed planning scheme, as well as the borrower’s supposedly over-optimistic construction programme and inadequate cashflow information. However, the Bank’s central allegation was that Watts had negligently endorsed the developer’s estimated cost figure of £999,099.

Coulson J’s decision addresses, in detail, whether Watts was in breach of its duties to the Bank (no, on all counts), whether Watts’ advice was causative of the Bank’s loss in any event (it was not), and whether the Bank’s own actions in permitting the drawdown before its own conditions precedent had been fulfilled justified a significant discount for contributory negligence (yes, 75%). One particular point of interest was Coulson J’s willingness to regard Watts’ fee as indicative of the lengths to which Watts was required to go to verify the developer’s figures in order to discharge its duty to the Bank. The Bank’s expert, Mr Vosser, was of the opinion that Watts should have done its own calculations from scratch in order to verify the developer’s figures, whereas Watts’ expert, Mr Whitehead, maintained that in an ordinary case a monitoring surveyor was not obliged to carry out his or her own detailed cost calculations. Coulson J sided with Watts’ expert, noting that Watts’ fee was only £1,500, which reflected the fact that Watts was expected merely to check the calculations and proposals which had been undertaken by the developer. By contrast, Mr Vosser’s report cost more than £24,000, which Coulson J regarded as “a clear indication that the criticisms which have been generated are based on an entirely unrealistic expectation of what it was that Watts were required to do” [paragraph 62].

The duties of an independent expert

Possibly the most interesting aspect of this decision is the trenchant criticism which Coulson J directed towards Mr Vosser, the Bank’s expert. Coulson J made it abundantly clear that it was Mr Vosser’s lack of impartiality and disregard for his obligations to the Court which led Coulson J to prefer the evidence of Watts’ expert. Coulson J’s criticisms of Mr Vosser's involvement in this case and the evidence he gave to the Court included the following:

  • Coulson J doubted Mr Vosser’s independence, noting that the Bank was his principal client and had generated the vast majority of his work and fees. Coulson J also referred to Mr Vosser’s propensity to make criticisms of Watts in his written and oral evidence in respect of matters which the Bank had not sought to plead.
  • Mr Vosser’s evidence lacked “realism”. The detailed two-stage calculations which Mr Vosser said Watts should have carried out for their fee of £1,500 were wholly unrealistic
  • Mr Vosser had selectively quoted from RICS guidance in order to “present a criticism on a false basis”, which contravened his duty to the Court
  • Mr Vosser applied the wrong test. Instead of explaining what a reasonably competent monitoring surveyor would have done in the circumstances so that Watts’ performance could be tested against that benchmark, Mr Vosser simply set out the analysis which he said he would have carried out for the Bank, were he in Watts’ position. His failure to acknowledge that there could be a range of non-negligent analyses (the “margin of error”) caused Coulson J to question whether his evidence went to the right issue.

Coulson J affirmed the guidance laid down by Cresswell J in The Ikarian Reefer[1], which is widely cited as a leading case on the duties and responsibilities of expert witnesses in civil cases. That guidance also forms the basis for the RICS practice statement on this issue[2], and serves as a useful reminder to both independent experts and their instructing solicitors of the high standards which a Court expects, which are as follows:

  • Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation
  • Assistance should be provided by way of objective unbiased opinion in relation to matters within his or her expertise. An expert witness should never assume the role of an advocate
  • An expert witness should state the facts or assumption on which his opinion is based, and should consider material facts which could detract from his or her concluded opinion
  • An expert witness should make it clear when a particular question or issue falls outside his or her expertise
  • If an expert's opinion is not properly researched, is subject to qualifications, or is provisional, that should be made clear
  • If an expert changes his view, that should be communicated (through legal representatives) to the other side without delay and when appropriate to the Court
  • Where expert evidence refers to photographs, plans, calculations, analyses, measurements, survey reports or other similar documents, these must accompany the report when it is provided to the opposite party.

Having affirmed The Ikarian Reefer principles, Coulson J’s ascerbic conclusion was that “Mr Vosser did not comply with those duties and I was not confident that he was aware of them or had had them explained. For him, it might be said that The Ikarian Reefer was a ship that passed in the night.” Indeed so.

To avoid your expert inadvertently sabotaging your claim, those looking to instruct an independent expert ought to be prepared to look further than an expert’s CV and his or her fee estimate. It would also be prudent to make enquiries which are directed towards your expert’s impartiality (including any significant single sources of instruction), as well as their working methodology and familiarity with relevant professional guidance, and satisfy yourself that your expert knows and understands their duties to the Court.