These reported cases are two stages of the same case heard in the last 12 months. The first was in the Technology and Construction Court (‘TCC‘), the second, the Secretariat Consulting case, in the Court of Appeal. The case concerns the duty, fiduciary or otherwise, that an expert owes to his instructing client and the question of conflict of interest which can arise when engaging multi-disciplinary companies. The application was brought in connection with two ongoing arbitrations, so the hearing was heard in private and the parties granted anonymity in the judgement.
Case Description
The case concerned the developer of a large petrochemical plant which in 2012 and 2013 appointed a consultant to provide engineering, procurement and construction management (‘EPCM‘) services in relation to that development project. The appointment was worth US$2 billion. A contractor was also appointed for the construction of certain facilities at the plant, the works totalling US$117 million. Disputes arose between the developer and the contractor who had incurred additional costs because of delays. Some of these delays were caused by the late release of issued-for-construction drawings by the EPCM contractor.
The contractor initiated an ICC arbitration against the developer in relation to those additional costs (the ‘Contractor Arbitration‘). In March 2019 the developer instructed a delay expert from the Asian subsidiary of Secretariat, an international firm offering litigation support services, to advise and act for it in connection with the arbitration. The parties signed a formal letter of engagement which, amongst other things, confirmed that Secretariat had no conflict of interest and would maintain that position for the duration of the engagement.
A few months later the EPCM contractor started its own ICC arbitration in London against the developer for non-payment of fees (the ‘EPCM Arbitration‘), and their solicitors also sought to engage an expert from Secretariat to provide quantum services to help with their arbitration. The developers counterclaimed against the EPCM consultant for delay and disruption to the project including any liability they might be found to have had in the Contractor Arbitration. Further they objected to the appointment of the expert on the grounds that they had already appointed an expert from Secretariat for the Contractor Arbitration, and that there would be a conflict of interest. Although the experts would come from different subsidiary companies of Secretariat, the issues being considered in the two arbitrations would overlap and concerned the same underlying dispute and that there would be a conflict of interest.
Confidentiality is a virtue of the loyal, as loyalty is the virtue of faithfulness.”
Edwin Louis Cole
The EPCM consultant and Secretariat argued that the experts were employed by separate parts of the Secretariat group, that they were based in different geographical regions, in different disciplines and that there were information barriers (electronic and physical) within the group to prevent the seepage of confidential material. The developer proceeded to apply to the TCC for an interim injunction preventing Secretariat from providing its expert to the EPCM consultant. This was based on two grounds: breach of fiduciary duty and breach of confidence. The TCC granted the injunction, reasoning that Secretariat’s original appointment on the Construction Arbitration carried with it a fiduciary duty of loyalty to the developer. The various parts and companies within the Secretariat group comprised a whole- they were marketed as one global group and the duty of loyalty was owed by all the corporate parts of Secretariat.
The Judgement
Secretariat took their case to the Court of Appeal which unanimously upheld the TCC’s judgement, though not on the grounds that Secretariat owed a fiduciary duty of loyalty. Indeed the Court expressed reservations on the implications of doing so, noting that the term was “freighted with a good deal of legal baggage“. There was an express clause in the contract for the Contractor Arbitration which prohibited conflicts of interest and Secretariat had “confirmed you have no conflict of interest in acting for (the developer) in this engagement” and that it would “maintain this position for the duration of your engagement“.
The Court found that this clause was agreed on behalf of all the companies within the group even though it had been addressed to, and specifically signed by, only one company. Secretariat “markets itself as one global firm, with numerous regional offices…. [not as] a variety of different companies who were free to act as if they were unconnected.” The EPCM Arbitration appointment would involve an overlap “of parties, role, project, and subject matter” and clearly there would be conflict of interest.
The Consequences
The decision has some important consequences for the way that expert services firms market and organize themselves internally. It is vital that expert firms consider any undertakings already made regarding conflicts of interest by subsidiary parts of a larger group, and also that potential overlaps are not ignored in previous and potential new instructions. In particular it is important that clients of firms providing expert witness services are aware that the expert does not need to owe any fiduciary duty of loyalty to them and this can be excluded in the terms and conditions of engagement.
Link: A v B [2020] EWHC 809 (TCC) (03 April 2020)
Link: Secretariat Consulting PTE Ltd & Ors v A Company [2021] EWCA Civ 6 (11 January 2021)
Expert Evidence prides itself on assisting throughout the legal process where required and is a professional firm concentrating on the four main areas of dispute resolution; acting as expert witnesses in financial litigation, mediation, arbitration and adjudication. The firm has a civil, criminal and international practice and has advised in many recent cases. Areas of specialisation include banking, lending, regulation, investment, and tax.
Ask a question about Expert Witness services. We are here to help!
Disclaimer: The above case summary is derived from publicly available information and is not intended to be anything more than a statement of the author’s views on the salient factors of the case. It is not intended and should not be understood to be legal advice of any sort. All views are solely those of the author and no use of the summary should be made without statements being checked against the source of information. Expert Evidence Limited takes no responsibility for the views expressed. The copyright of the summary is owned by Expert Evidence Limited but may be used with written permission which may be forthcoming on application through the contact us page. This news item is not intended to imply or suggest that Expert Evidence Limited was involved in the case, only that it is considered an interesting legal development.
