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15 October 2013
The High Court decision in Proton Energy Group SA v Orlen Lietuva(1) is a warning to all litigators to choose their expert witnesses wisely. This update examines why it is important to know your expert witness well, but not too well.
The claimant, Proton Energy Group SA, is an international trader of oil and gas products. The defendant, Orlen Lietuva, is a Lithuanian petroleum refining company. Through a series of email exchanges in June 2012, Proton and Orlen negotiated a contract for Proton to sell a crude oil mix to Orlen. The parties discussed only key terms of the contract. The email exchange ended when Proton adjusted a few terms and Orlen replied "confirmed". Proton, acting on this email, sent Orlen a detailed written contract. There followed further communications on the terms of the contractual document, but before all of the terms were agreed, Orlen pulled out of the negotiations.
Proton maintained that the contract had been concluded as a result of the email exchange and it arranged for the product to be shipped. Orlen informed Proton that it would not accept delivery and denied that a contract had come into being. Proton brought proceedings against Orlen. Proton asserted that Orlen was in breach of contract and claimed damages. The central issue was whether a contract had been agreed, or whether, as Orlen stated, the contract had not been concluded because certain terms had not been agreed.
Evidence was given by industry experts on the normal process for agreeing a contract in that particular business. The crucial aspect of the case was whether such contracts were common in the oil industry and whether it was common practice for certain terms to be agreed after the contract was concluded.
At trial, the judge found that a contract had been concluded. The judge followed recent decisions, such as RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co,(2) which affirmed the proposition that a contract may have come into existence even if the terms were not all agreed, provided that the parties' intention was to enter into a legal relationship. In Müller the Supreme Court found that the parties' subjective state of mind did not matter, because the court will objectively assess the parties' actions to decide if there was intention to create a legal relationship. Orlen's one-word email was deemed to be an acceptance. Further, Orlen had breached the contract by failing to comply with its obligations.
The judge also made two observations about the expert witnesses that serve as a reminder to practitioners in relation to costs and best practice.
The parties each called an expert witness. An expert witness's function is to provide an independent expert opinion to the court based on the facts. This opinion increases the court's knowledge and understanding of the situation. The expert witness's overriding duty is to the court, and not to those instructing him. It is crucial that the expert witness is well informed about the relevant sector and impartial.
In this case, both parties were criticised for their choice of expert witnesses, but for very different reasons.
Orlen's expert witness had many years' experience advising companies in the oil and gas industry on 'strategic corporate decisions' within the market. However, crucially for this case, he had no experience of trading within the industry. In fact, he had never been involved in any trading in any industry. Although the judge commended the witness for his honest and straightforward manner, he was unable to offer any more insight as to whether the contract had been concluded than the lawyers could. As the judge aptly put it: "[W]hat he did say of relevance was within the experience of most Commercial judges." Any opinion that the witness offered as to whether a contract was concluded was purely hypothetical. Despite his knowledge of the industry, he did not have experience relating to the central question – whether, in the oil industry, a reasonable party would have understood that a contract had been concluded.
The judge concluded that "in this case I draw no relevant conclusions from the expert evidence".
Knowing your expert witness too well
Proton's expert witness also came under fire in the judgment. He had a strong business relationship with the partner of the claimant's solicitors firm. The partner lectured at conferences that the witness's company arranged and was remunerated for his work. The judge accepted that lawyers often use the same expert witness more than once; however, he noted that in this case the relationship was especially close because of the ongoing professional connection between the lawyer and the witness. The judge observed that it would be prudent in such a situation for the party to disclose the relationship to the court, so that the court could decide whether it would be appropriate for the individual to act as an expert or whether, to avoid any conflict, an alternative expert should be instructed. Such a warning was given in Toth v Jarman.(3) As to whether a person is a suitable expert, this is a matter for the court.
Expert evidence can often be critical to the outcome of a case. This case provides a dual lesson to litigators of the dangers of both not knowing the expert well enough and knowing the expert too well.
For further information on this topic please contact Geraldine Elliott or Leonora Howard at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email (email@example.com or firstname.lastname@example.org).
(1)  EWHC 2872.
(2)  1 WLR 753.
(3)  EWCA Civ 1028.
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