Your IndustryOct 9 2013

Role of the expert

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However, the courts are leaner and meaner following changes to the Civil Procedure Rules introduced this April in the wake of Lord Justice Jackson’s costs review. Disputes should be resolved more quickly, with less expense, and should focus on the things that matter; the court will be actively limiting the amount of evidence that it will permit the parties to adduce.

What do solicitors look for in an expert witness? Louise Gill, senior associate at law firm Pannone, said: “Style and personality, not just knowledge and ability, have always been key for us in selecting experts to ensure that definitive and persuasive evidence is given and to inspire a client’s confidence when they are understandably suspicious of all professionals in the financial sector.

“We seek an articulate expert who is confident (but not combative), clear, decisive and able to argue their view, but not blindly committed to it if a valid argument is made to the contrary. Inexperienced experts often appear aggressive, dogmatic and unreasonable. Not only does this damage the client’s confidence but it inevitably weakens the impact of the evidence.”

What does expert witness work consist of? First, there is a report to be written, maybe for one side only, but increasingly – as a single joint expert – for both sides. Reports must be court-compliant and robust. A well-written report is the strongest marketing tool available to experts and can lead to further instructions.

The dispute will normally then involve formal, minuted discussions between experts to narrow the issues in the case. Few matters go to full trial but experts may have to give evidence in the civil or (more rarely for financial advisers) criminal courts.

Experts are required to know their legal obligations and court procedures, to meet court-directed time limits, maintain independence, be credible under cross-examination and above all to give independent opinion based on fact – they are experts, not advocates. Paul Rex, managing director of GBRW Expert Witness said: “The expert has a direct responsibility to the court and can expect severe criticism if he is perceived as acting as a cheerleader for his instructing party.”

Training is not always obligatory for experts but is increasingly a requirement, and some agencies will no longer consider taking untrained experts onto their books.

One mechanism designed to save time and money is ‘hot-tubbing’ – giving evidence immediately before or after the other side’s witness, with the witnesses in each other’s presence, in a discussion chaired by the judge. This is more labour-intensive for judges but can be more effective as it allows for discussion between experts and judge in contrast to sequential cross-examination. Crucially, it allows experts to address the same issues and to engage with each other’s testimony if necessary.

Ms Gill said: “The concept of hot-tubbing in this arena is in its infancy. The experience in Australia, where it has been used for some time, suggests that this forum-style approach requires judges and counsel to be well-prepared and well-versed in the expert’s discipline, but what does it require of an expert? Surely, as an expert is more exposed, style and personality become even more fundamental. Perhaps hot-tubbing isn’t so much revolutionising what is required to be a good expert as highlighting what makes a bad expert.”

Remuneration is more uncertain post-Jackson, now that the court bears in mind its amended overriding objective to deal with cases at proportionate cost. Experts, who may charge hourly or daily rates, must now give detailed estimates of costs, including, for example, background reading for report-writing, travel and meetings, which can be unpredictable at best. The court now has the ability to reduce fees if they are believed to be disproportionate, which may leave solicitors or expert witness agencies offering experts a lower fee, despite what might have been agreed in the contract. It is up to the expert to consider fixed or capped fees, to accept a lower fee for the sake of the relationship, or indeed to sue for the agreed amount.

Timing is key: as a rule, the solicitor (or agency) will not want to pay the expert until paid by the client, whatever terms have been agreed. Many law firms who are instructed by PI insurers will have agreed to invoice only every two or three months, delaying payment still further. Slow payment by solicitors is a recurring theme whenever experts get together.

There is no question of an expert acting on a no-win no-fee basis. Mr Rex said: “The reason is obvious, since any expert will struggle in court to maintain that his advice is completely independent when all parties know that he will not be paid if his client loses. However, there is nothing to prevent the instructing lawyer meeting the expert’s fees under a contingency agreement and this is a situation we come across increasingly.”

In addition to fees, another matter concentrating the minds of expert witnesses is the judgment in Jones v Kaney, a case heard in the Supreme Court in 2011. Where experts had previously enjoyed immunity when giving evidence in court and at every other stage in the process, such as report-writing and answering questions, the judgment in this case removed experts’ immunity from civil action for professional negligence and breach of contract.

As a result of this judgment, experts should have appropriate professional indemnity insurance (which gives comfort to instructing solicitors that, in the event of a claim, experts will be able to pay damages).

What are disputes likely to involve? Mr Rex said: “Poor investment performance is not automatically a basis for a claim.” He lists the common areas for dispute: “There might be a mismatch to the investor’s requirements, on the assertion that the investor’s risk appetite was misunderstood, incorrectly recorded or ignored. The investment adviser or manager might have mis-classified or misunderstood the nature of the investment, which might in turn imply failures in its product approval process and/or its underlying due diligence or analysis.

“Another problem is unprofessional behaviour, such as mis-selling to inexperienced investors or misrepresentation of the nature of the investment product. Then, of course, there is outright fraud, from theft of assets or Ponzi schemes down to churning, self-dealing or front-running.

“In any event, the expert will probably be involved in evaluating the quantum of loss. Even when it can be established that an investment was mismanaged, ‘what if’ analyses for a number of scenarios are required to establish the loss for which the investor can actually claim. This loss will be set by reference to the position he or she would have been in if the investment had not taken place.”

A final piece of advice: be prepared. In fact, be over-prepared and obsessive about detail. For example, according to Mr Rex: “If witness statements attach copies of all the underlying documents to which they have referred, experts run the risk of being tripped up through lack of familiarity with these documents, especially where there is a high volume of disclosure.”

But if you are alert to the elephant traps, and feeling generally bullet-proof, being an expert witness can afford a great deal of quiet satisfaction.

Mark Solon is managing director of training organisation Bond Solon

Key points

- For some financial advisers, expert witness work creates a substantial secondary income.

- Experts are required to know their legal obligations and court procedures, to meet court-directed time limits, maintain independence, be credible under cross-examination and above all to give independent opinion based on fact.

- There is no question of an expert acting on a no-win no-fee basis.

The UK register of expert witnesses describes the need for financial experts as the following:

- Cases with a life assurance and pensions dimension may require an expert with actuarial expertise.

- Those involving corporate fraud, malpractice or mismanagement may be more appropriate for a qualified accountant, especially one with prior boardroom experience.

- Issues related to the marketing of investments and the suitability of a specific investment for a particular category of client, or indeed the valuation of a company, require expertise from a qualified accountant with practical experience of the investment scene and relevant investment analysis experience.