In the dock: Expert witness accountants face new risk

EXPERT WITNESSES who participate in civil litigation have long been immune from claims in negligence. Recently, however, the Supreme Court reviewed this immunity and handed down a judgment that will be of interest to all accountants who act as expert witnesses. The judgment, in the case of Jones v Kaney, abolished expert immunity and allowed clients to sue negligent experts who have caused them to suffer loss.

The case raises important issues of principle and changes fundamentally the risk landscape for experts who give evidence in civil proceedings. As a result of the Supreme Court's decision, expert witnesses would be well advised to reconsider the adequacy of their professional indemnity insurance and include in their terms of engagement appropriate limits on their potential liability.

Damage control

The dispute in Jones v Kaney arose out of an ordinary road traffic accident in 2001. Mr Jones was hit by a car and issued proceedings against the defendant driver. Jones' solicitors engaged an expert, Ms Kaney, to help assess the extent of his injuries. Originally, Kaney supported Jones' claims: following a telephone discussion with the defendant's expert, however, Kaney signed a joint report that was highly damaging to her client's case. Ms Kaney subsequently stated that the joint report did not reflect what she had agreed in the telephone conversation but that she had felt under some pressure in agreeing it.

The road traffic accident claim was eventually settled but Jones alleged that he was forced to accept reduced compensation because Kaney had been negligent in agreeing to sign the joint report. Consequently, Jones launched a claim against Ms Kaney. Responding to that claim, Kaney argued that she enjoyed "immunity from suit" in her capacity as an expert witness. Such immunity had traditionally been justified by reference to public interest in experts giving truthful and fair evidence to the court, without fear of being sued by a disgruntled client. Kaney also argued that immunity should be continued because experts might, in the absence of immunity, be deterred from volunteering their services.

Rejection of Immunity

The Supreme Court rejected Kaney's arguments and abolished the previous immunity granted to expert witnesses. The majority of the Supreme Court considered that the abolition of immunity would not significantly deter experts from offering their services; other professionals at risk of litigation continued to provide their services but did so with the benefit of appropriate insurance or by limiting their liability by contract. Nor was the Supreme Court overly concerned with the suggestion that the abolition of immunity might inhibit experts from giving full and frank evidence to the court. It was considered that an expert witness of integrity would have no difficulty giving an honest opinion even if it was adverse to his client's interests.

In rejecting expert immunity, Lord Dyson noted that where there is a wrong there should be a remedy. It is this general principle that appears to have been behind the Supreme Court's recent decision. Indeed, the point was made that an expert witness owes a duty of care towards his client and that a breach of that duty should, in the normal course, give rise to a remedy.

Risks + 1

Prior to the decision in Jones v Kaney, experts involved in civil litigation faced certain defined risks. For example, experts could be sued for pre-litigation work undertaken in advising a client whether or not they had a case worthy of pursuit. Experts could also be forced to pay wasted costs when they have acted recklessly or in flagrant disregard of their duties to the Court. Indeed, experts may be liable to disciplinary proceedings for professional misconduct in connection with their participation in civil litigation. These risks continue to exist. The Supreme Court's decision in Jones v Kaney is important, however, because it adds to these risks and could lead to instances in which experts are sued by clients unhappy with the outcome of litigation.

Will there be a large number of negligence claims in the wake of Jones v Kaney? At present this looks unlikely, largely because negligence is not easy to prove against an expert witness. For example, claimants wishing to bring successful proceedings will need to find an alternative credible expert to support the relevant allegation of negligence. It is also likely that the courts will scrutinise claims carefully to ensure that Jones v Kaney does not lead to experts facing vexatious claims.

Limit your liability

It is important for expert witnesses to be aware that they now face potential liability to their clients for negligence, even where the conduct complained of relates to involvement in legal proceedings. In order to help manage the new risks presented by Jones v Kaney, expert witnesses would be well advised to reconsider the adequacy of their professional indemnity insurance and couple such cover with an appropriate limitation of liability in their terms of engagement.

Andrew Wanambwa is a senior associate at Norton Rose