ADR and the Role of the Expert Witness
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What is this blog about?
If you are involved with Landlord & Tenant work, then you will no doubt have come across the role of the expert witness.
This is also essential knowledge for all RICS APC candidates in relation to the Conflict Avoidance, Management and Dispute Resolution mandatory competency.
What does 'third party' mean?
If a rent review or lease renewal cannot be agreed by negotiation, then the parties can refer the matter to a third party dispute resolver.
This is typically an arbitrator or an independent expert at a rent review, or the Professional Arbitration on Court Terms (PACT) scheme for lease renewals (which interestingly can either use an arbitrator or an independent expert, despite the name!).
This third party will award (arbitration) or determine (expert determination) the new rent (and lease terms at renewal).
What happens when negotiations break down?
In negotiations, the landlord and the tenant will usually have a surveyor acting on their behalf. They will each try to agree the new rent through making a series of offers and counter offers during negotiations. If the parties’ positions are just too far apart, then this is where the third party process comes into play.
What ADR options are available for a rent review or lease renewal?
At a rent review, the lease will usually set out whether the third party is to act as an arbitrator or expert, who can make the appointment and the cost position. At a lease renewal, the parties’ are recommended to consider PACT before litigating in Court.
It is fairly unusual for the parties to agree on the identity of the third party, so either the landlord or the tenant’s surveyor will submit a DRS 1 form to the RICS for the appointment of a third party.
Once appointed, the landlord and tenant will each need to appoint their surveyor in a new role, as an Expert Witness.
What is an Expert Witness?
Expert Witnesses are also found in other areas of surveying, including complex property valuations, boundary disputes, construction defects and quantum assessments.
Is that the same as an independent expert? (No!)
I often see candidates confuse the two terms; Independent Expert and Expert Witness. This is perhaps because both are sometimes referred to as an Expert in practice.
An Expert Witness is the role that the landlord or tenant's surveyor will adopt at third party. They submit their expert witness evidence to the appointed third party, who will either be acting as an Independent Expert or an Arbitrator.
An Independent Expert, in contrast, is the role that the appointed third party may act as during the dispute resolution process. They will determine the level of new rent.
Both roles will be fulfilled by Chartered Surveyors, with sufficient training, qualification, knowledge and experience to fulfil the requirements of the relevant role.
What RICS guidance do I need to be aware of?
Moving on, RICS have published a new 5th Edition of the Professional Standard Surveyors acting as expert witnesses. The aim is to maintain the integrity of the surveying profession and protect the public interest.
The new Professional Standard clarifies a number of issues, including instructions, terms of engagement, conflicts of interest, report format, roles of the expert vs advocate and the overriding duty of the expert witness.
During third party proceeding, the role of each surveyor representing the landlord and the tenant switches to being an Expert Witness. This means that they have a primary duty of care to the relevant tribunal and cannot act on an incentivised, success-based, ‘no win no fee’ or contingency fee basis. The only exception is under strict, narrow exemption criteria set out in Section 3.3.2 of the Professional Standard.
The terms of engagement must then set out the scope, hourly/daily rates, expenses and responsibility for payment. They must also confirm to the client that the firm’s Complaints Handling Procedure (CHP) will not apply to the expert witness engagement, because the surveyor’s primary duty is owed to the tribunal rather than the client.
Conflicts of interest
Expert witness must check that there are no actual or potential conflicts before they act in this role. Examples include a vested financial interest in the outcome, personal connections, competing commercial obligations or financial reliance on a single client. If a conflict of interest is identified, then the surveyor should decline the instruction or cease acting if it is identified mid-instruction. The surveyor should also disclose any significant financial dependence if a large proportion of their practice income is derived from a single instructing party.
Before agreeing to act, the surveyor should also check that they have the:
Ability to act impartially and independently.
Required technical competence, experience, knowledge and expertise.
Sufficient resources and time to meet procedural deadlines.
Adequate and appropriate Professional Indemnity Insurance (PII).
Expert Witness reports
Each expert witness must include a statement of truth with their Expert Witness evidence, which must be independent and unbiased and within their scope of experience and knowledge.
They also must state the main facts and assumptions they rely on, without omitting material facts relevant to their conclusions. Essentially, this means that their representations must be impartial and uninfluenced by their client.
Misleading a tribunal by silence, omission, selective presentation or failing to correct an error is treated as equivalent to making an explicitly false statement. This reflects the precedent set in the case of National Justice Compania Naviera SA v Prudential Assurance Co. Ltd (The Ikarian Reefer) [1993].
When acting as Expert Witnesses, the parties typically submit a joint Statement of Agreed Facts to the appointed Arbitrator or Independent Expert. This sets out the agreed facts relating to any key comparable evidence and lease terms, for example.
Each party then submits their representations to the third party. These are then swapped and each party writes a counter representation in response. Each parties' representations and replies are then considered by the third party who will then issue their final Award or Determination.
Declarations
At the end of each expert report, the surveyor must make the following declarations as per the RICS Professional Standard:
‘I confirm that my report has drawn attention to all material facts that are relevant to and have affected my professional opinion.
I confirm that I understand and have complied with my duty to the [specify the tribunal] to give my evidence impartially and objectively as an expert witness, which overrides any duty to those instructing or paying me.
I confirm that I am not instructed in this matter or any matter contingent upon it under any conditional fee or other success-based fee arrangement.
I confirm that I have no conflicts of interest of any kind other than those disclosed in this report, and those conflicts as set out do not affect my suitability as an expert witness on any issue on which evidence is to be given in these proceedings.
I confirm that I am aware of and have complied with the requirements of the rules, protocols and directions of the [specify the tribunal].
I confirm that my report complies with the requirements of RICS, as set down in the edition of RICS’ Surveyors acting as expert witnesses current at time of drafting this report.
I confirm that I have an ongoing duty to the tribunal and will forthwith advise the party instructing me if between the date of the report and the trial there is any change in circumstances that alters the above declarations or my affirmation of them.’
Costs and Calderbanks
There is then the issue of costs to be dealt with, which can be a complex area of advice. These can be put 'at risk' by either or both parties by a carefully considered Calderbank offer, which will be labelled 'without prejudice save as to costs'.
Expert Witness work and your RICS APC
Whilst APC candidates will not act directly in the role of an expert witness until qualified, they may assist a Chartered Surveyor acting in this role and help to draft expert reports. This requires an in-depth understanding of the third party process and role of the expert witness.
This provides excellent experience for Levels 2 & 3 Landlord & Tenant and/or Conflict Avoidance, Management and Dispute Resolution.
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N.b. Nothing in this article constitutes legal, professional or financial advice.