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What happens when experts go wrong?

29th June 2020

What happens when experts go wrong?

As lawyers engaged in litigation we frequently rely on experts to help resolve disputes. But what happens if the expert gets it horribly wrong?

Jones v Kaney [2011] UKSC 13 decided that experts appointed by a party engaged in litigation to provide expert evidence were not immune from suit. The rationale for that was that if advocates could be liable for what they said and did in Court, as decided by the House of Lords in Arthur JS Hall & Co v Simons [2002] 1 AC 615, then there was no reason why experts could not also be liable. There was no conflict, the Supreme Court said, between an expert’s duty to the Court and his duty to his client, any more than there is conflict between a solicitor or barrister’s duty to the Court and to his client. Thus in the underlying personal injury case the defendant expert could be sued by the client for negligence in putting his name to a very damaging joint report which suggested that the claimant had been exaggerating his symptoms.

But what happens in the different scenario where experts are appointed by the parties to decide a dispute? Expert determination is very appealing in principle – it should be quick, easy and relatively expensive alternative to litigation. But there is a catch: expert determination clauses almost invariably provide that the determination will be binding “in the absence of manifest error or fraud”.

What counts as a manifest error? The best definition is that provided by Simon Brown LJ in Veba Oil Supply & Trading GmbH v Petrotrade Inc [2001] EWCA Civ 1832 at [33]:

“… I would extend the ‘definition’ of manifest errors as follows: ‘oversights and blunders so obvious and obviously capable of affecting the determination as to admit of no difference of opinion’. (emphasis added).”

Thus the error has to be (i) obvious and (ii) obviously capable of affecting the determination. That is a very high hurdle for a dissatisfied party to surmount. In the case of Walton Homes Ltd v Staffordshire CC [2013] EWHC 2554 (Ch) Peter Smith J said by way of example it was “something like an arithmetical error, or a reference to a non existent building” (para. 46).

I should add straightaway that if an expert materially departs from his instructions then that is altogether a different situation – in that event, the determination will be set aside. Veba is also the authority for this principle, and indeed the expert determination was set aside in that case.

All is not however irretrievably lost. Our dissatisfied litigant may have an action in negligence against the expert. Consider the hypothetical example of a surveyor asked to value a property for the purpose of assessing whether an overage is payable by one party to another. The expert values the property at £2.75m but there is credible evidence that the true value is £3.4m. If that is correct then the surveyor has exceeded the margin of error of 10% – 15% allowed to him by the Court. Assuming that the valuation was negligent, can he be sued?

In Arenson v Casson Beckman Rutley & Co [1977] AC 405 the House of Lords had to consider the position of an auditor who had, by an agreement entered into as part of a contract of employment, valued his shares in a company. The defendant auditor valued the plaintiff’s shares as £4,916; shortly afterwards the company went public and it appeared that the shares were in fact worth six times that. The House of Lords held that the immunity of judges and arbitrators was exceptional to the general rule of liability for negligence and there was no reason of public policy making it necessary to treat a mutually appointed valuer as an exception to that rule. Therefore the plaintiff’s claim could proceed to trial.

That suggests that starting point is that our hypothetical expert is in difficult position since he is neither judge nor arbitrator. However, one has to exercise a degree of caution here. If the expert is acting in a quasi-judicial capacity in relation to a formulated dispute between the two parties then he may be entitled to immunity from suit. As it was put by Lord Wheatley at p428 when considering whether a mutually appointed auditor or expert might be entitled to immunity from suit:

“The indicia are as follows: (a) there is a dispute or difference between the parties which has been formulated in some way or another; (b) the dispute or difference has been remitted by the parties to the person to resolve in such a manner that he is called upon to exercise a judicial function; (c) where appropriate, the parties must have been provided with an opportunity to present evidence and/or submissions in support of their respective claims in the dispute; and (d) the parties have agreed to accept his decision.”

In the instant case there was no ‘dispute or difference’ between the parties, the auditor was simply tasked to value the shares. He fell firmly on the ‘non judicial’ side of the line.

The decision in Arenson has been discussed and applied in a number of cases. Two (relatively) recent ones are of interest. In N v C (Property Adjustment Order; Surveyor’s Negligence [1998] 1 F.L.R. 63 there was a dispute between a divorcing husband and wife about valuation of the matrimonial home.. There was an agreement that, absent agreement between them, a valuer would be appointed by the President of RICS. The husband thought the value was too low and sued the expert. His claim was ultimately struck out because he was found to be attempting to relitigate matters decided in the matrimonial proceedings. However the Court of Appeal confirmed that the valuer, C, was not an ‘arbitrator’ as defined in Arenson so – had it not been for this abuse of process point – the claim could have proceeded.

In the Scottish case of A.G.E. Ltd v Kwik Save Stores Ltd [2001] S.C. 144 the Court of Session (Outer House) had to determine a dispute between landlord and tenant arising out of a rent review. The matter was referred to an independent surveyor and the issue for the Court was whether, despite being described as an expert, the surveyor was really an arbiter (arbitrator). The Court found that despite inviting and receiving written submissions the expert was not acting as an arbiter in a judicial capacity.

Bringing this all together, it seems to me that the distinction between an expert acting as expert who can be liable in negligence if his decision is wrong and an expert acting in a quasi-judicial capacity who cannot be sued is not an easy one to make. What I can say, categorically and paradoxically, is that if you want to appoint an independent expert and wish to preserve your right to sue him (i) do not agree that he should receive written submissions and evidence from the parties and of course (ii) make sure his T&Cs do not exclude liability for negligence.

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Sally Wollaston
Sally Wollaston
Business Development and Marketing Director
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