THE AUTHOR: Sagar Gupta is an associate at Linklaters LLP
In its recent decision in A Company v Secretariat Consulting Pte Ltd and others [2021] 4 WLR 20, the Court of Appeal found a conflict of interest where a litigation support services firm, Secretariat, provided expert witnesses for and against its client in two separate but concurrent commercial arbitrations. The Court of Appeal unanimously upheld the judgment at first instance and granted an injunction in favour of the claimant company (“Company A“).
Background
Parties
Company A was the developer of a large petrochemical plant, for which it engaged a third party (the “Third Party“) to provide engineering, procurement and construction management (“EPCM“) services. Separately, Company A engaged a sub-contractor (the “Sub-Contractor“) for the construction of certain facilities in relation to the plant.
The case revolves around three related entities in the Secretariat group: (i) Secretariat Consulting Pte Ltd (based in Singapore and led by expert K, “SCL“) acting as delay and quantum experts in Arbitration 1 for Company A, (ii) Secretariat International UK Limited (based in London and led by expert M, “SIUL“) acting as quantum experts in Arbitration 2 against Company A, and (iii) Secretariat Advisors LLC, which was involved in some correspondence.
Arbitrations
In 2013, the Sub-Contractor commenced an arbitration against Company A claiming additional costs due to delay and disruption allegedly caused by the delayed performance of certain EPCM services by the Third Party (“Arbitration 1“).
In 2019, the Third Party commenced a separate arbitration against Company A for unpaid fees under its management contract (“Arbitration 2“).
Engagement of SCL and SIUL as experts
In relation to both arbitrations, it was uncontested that SCL and SIUL had run conflict checks across all entities in the Secretariat group. Upon running a conflict check for Arbitration 2, SIUL became aware of the prior engagement of SCL in Arbitration 1.
SCL informed Company A that they did not consider this situation a “strict legal conflict” as the subject matters of enquiry in Arbitration 1 and 2 were different, and the engagements would be set up in a manner that required physical and electronic separation between the teams working on the arbitrations in different offices.
The current dispute arose when Company A’s solicitors sought to expand SCL’s scope of instructions to the delay and quantum claims in Arbitration 2.
The decision below
At first instance, O’Farrell J granted the injunction against SIUL from acting against Company A in Arbitration 2. In a first under English law, the judge found that SCL owes a fiduciary duty of loyalty to Company A, and this duty extended to other entities in the Secretariat group as well. Interestingly, the issue of breach of confidential information was not advanced as it was accepted that the information barriers prevented the risk of such disclosure.
Issues before the Court
In appeal from the judgment at first instance, the Court of Appeal dealt with the following issues:
- Did SCL owe a fiduciary duty of loyalty to Company A?
- If not, did SCL owe a contractual duty to Company A to avoid conflicts of interest?
- If so, was that duty also owed to Company A by other Secretariat entities?
- If so, was there a conflict of interest as a result of SCL’s engagement in Arbitration 1 and SIUL’s subsequent engagement in Arbitration 2?
Coulson LJ gave the lead judgment, with concurring opinions from Males LJ and Carr LJ. The Court of Appeal answered issues 2, 3 and 4 above in the affirmative and dismissed the appeal.
Fiduciary duty v contractual duty to clients
On the first issue, Coulson LJ stopped short of finding the existence of a freestanding duty of loyalty and held that the relationship between “a client and an expert witness does have at least some characteristics of a fiduciary relationship (in particular an obligation of loyalty), even if it is not itself a fiduciary relationship“. This would depend on the terms of the retainer. Males LJ, on the other hand, categorically held that as a general rule, “an expert witness is not a fiduciary and does not owe fiduciary duties to his client“. Therefore, there is still no clear authority on an expert’s standalone fiduciary duty of loyalty under common law.
Whilst the appeal did not turn on this issue, the Court of Appeal considered the question of whether the expert’s overriding duty to the court or tribunal would outweigh the fiduciary duty of loyalty to the client (if such a fiduciary duty was found to exist). Relying on the UK Supreme Court’s dictum in Jones v Kaney [2011] 2 AC 398, the Court held that the expert’s duty to the court does not conflict with the duty of loyalty to the client. To the contrary, the Court held that “complying with the overriding duty to the court is the best possible way in which an expert can satisfy his professional duty to his client” (Coulson LJ at para 62 and Carr LJ at para 125).
On the second issue, the contractual duty to avoid conflicts contained in the retainer between SCL and Company A’s solicitors in relation to Arbitration 1 proved to be determinative. The retainer stipulated under the heading “CONFLICTS OF INTEREST” that SCL had “confirmed [it had] no conflict of interest in acting for [Company A] in [the] engagement. [SCL would] maintain this position for the duration of [its] engagement“. In light of the express terms of the retainer, the Court held that SCL was bound not to create any conflict of interest for its duration.
On the third issue, the Court of Appeal extended the contractual duty in the retainer for Arbitration 1 to other Secretariat entities. There were several facts that led the Court to rule in this manner, including: (i) the Secretariat entities marketed themselves as one global firm (‘Secretariat International’) on its website, invoices, press releases and email addresses of its members, (ii) the conflict checks were run across the whole Secretariat group, and (iii) the different entities referred to themselves collectively as “our firm” in the correspondence in relation to the matter. The Secretariat group also unsuccessfully tried to argue that the extension of SCL’s undertaking to SIUL would have amounted to “piercing the corporate veil”.
Conflict of interest?
On the factual background of this case, the Court held that there was a clear conflict of interest between SCL acting for Company A and SIUL acting for the Third Party. The Court rejected the Secretariat group’s submissions that “(1) M was to be instructed in a separate arbitration, (2) he was an expert in a different discipline (quantum as distinct from delay), and (3) he was employed by a different company within the Secretariat group” (Males LJ at para 119). In the Court’s view, the overlaps in the case were “all-pervasive” in relation to the parties, role, project and subject matter.
In what may be called a version of the US Supreme Court’s “I know it when I see it” test, Coulson LJ relied on a practical test for conflicts from Hollander and Salzedo’s Conflicts of Interest, 6th ed (2020):
“It’s not difficult to work out what a conflict is. You put yourself in the client’s shoes, and ask yourself ‘would he like you doing what the other client has asked you to do?’ If the answer is ‘no’, you’ve probably got a conflict.“
Comment
This decision follows the UK Supreme Court’s recent judgment in Halliburton v Chubb [2020] 3 WLR 1474, where conflicts issues in appointments in separate but related arbitrations were considered (albeit in Halliburton, the issue was an arbitrator appointment).
While the Court did not find a fiduciary duty of loyalty in this case, it is possible that a different set of facts might lead to such a duty being found (even in the absence of a contractual duty). One determinative factor might be the organisation of litigation service providers as a united operation including conflicts processes and marketing strategy.
The Court of Appeal’s decision is almost entirely based on the contractual framework of the retainer and the expert’s conduct during the course of its engagement. Therefore, it is critical for global litigation services providers to scrutinise, among other things, conflicts provisions in engagement terms. In order to determine whether a fiduciary duty of loyalty has been complied with, courts will consider the entire contractual relationship between the parties. It is still possible for global expert organisations to limit the scope of their representations and undertakings in relation to conflicts of interest through exclusion clauses and subsequent conduct on the matter.
Sagar Gupta is an associate (India qualified) at Linklaters LLP, London. He can be contacted at sagar.sgupta@gmail.com.
The opinions expressed in this article are those of the author alone and do not reflect the opinions or views of Linklaters LLP.
