Loyalty and your expert

The Court of Appeal recently considered for the first time whether experts owed a fiduciary duty to their clients. In deciding this, writes Senior Claims Manager Alexandra Bailey, the Court studied the experts’ duties to the Court, as well as their contractual duties to avoid any conflicts of interest.

What is a fiduciary duty?

There is a myriad of fiduciary duties owed by a fiduciary to a beneficiary, depending on how the fiduciary/beneficiary relationship arises. Typical examples of such relationships are those that exist between company directors and their company (now codified in statute), between lawyers and their clients, or agents and their principals. However, the common law and equity fiduciary duties in all of these relationships include a duty of confidentiality, loyalty, of no conflict and a duty not to profit from the position. Is an expert a fiduciary though? Given that a fiduciary is a person in whom power or property is entrusted for the benefit of another, the position is not clear-cut.  The Court considered the expert’s duties in Secretariat Consulting Pte Ltd & others v. A Company [2021] EWCA Civ 6.

Factual background

A COMPANY (name not disclosed) was the developer of a large multi-billion-dollar petrochemical plant. A COMPANY engaged a Project Manager to deal with the EPC services of the project. Among its responsibilities, the Project Manager provided IFC drawings, which tell contractors what to build. In 2013, A COMPANY let two sub-contracts relating to the project, known as Package A and Package B.

Arbitration 1

Disputes arose between A COMPANY and the Sub-Contractor responsible for both Packages A and B. Consequently, the Sub-Contractor brought its claims in ICC arbitration against A COMPANY (“Arbitration 1”). The Sub-Contractor’s claims in Arbitration 1 centred on the additional costs due to delay and disruption allegedly caused by the late release of the IFC drawings. In March 2019 A COMPANY approached Secretariat Consulting Pte. Ltd. (“SCL”) to provide expert services in support of Arbitration 1. Specifically, these expert services were to provide expert guidance on the causes of delay and disruption in Packages A and B. A COMPANY’s lawyers consequently entered into a Confidentiality Agreement with SCL, and SCL cleared conflict across the entire Secretariat Group.

Arbitration 2

In August 2019, the Project Manager commenced arbitration (“Arbitration 2”) against A COMPANY claiming unpaid fees under the terms of its management contract. A COMPANY counterclaimed primarily for the cost consequences of the Project Manager’s delay in issuing the IPC drawings and their failure to manage/supervise the Sub-Contractor. In October 2019 the Project Manager approached Secretariat International UK Ltd. (“SIUL”) within the Secretariat Group to provide expert services in support of Arbitration 2. After consultation with SIUL, SCL informed A COMPANY’s lawyers that no conflict existed because the two different branches of the Secretariat Group would be working on separate disputes, albeit on the same project. Despite A COMPANY’s lawyers advising that a conflict did indeed exist, SIUL commenced work for the Project Manager in connection with Arbitration 2. It was not until March 2020 when A COMPANY sought to expand the role of SCL to encompass Arbitration 2, that the conflict came to light again, at which point A COMPANY issued an urgent ex parte application before the Court of First Instance for an interim injunction against the Secretariat Group. The presiding O’Farrell J agreed with A COMPANY and continued the injunction, preventing SIUL from working on Arbitration 2.

Court of First Instance

In the Court of First Instance case, O’Farrell J had found the Secretariat Group in breach of the fiduciary duty of loyalty. She distinguished the issue of confidential information and said that “the fiduciary obligation of loyalty is not satisfied simply by putting in place measures to preserve confidentiality and privilege. Such a fiduciary must not place himself in a position where his duty and his interest may conflict.” Further, that the arbitrations were concerned with the same delays, and that there was a significant overlap in the issues leading plainly to a conflict of interest for the Secretariat Group in acting for A COMPANY in Arbitration 1, and against A COMPANY in Arbitration 2.

Court of Appeal - Secretariat Consulting PTE Ltd & Ors v A Company [2021] EWCA Civ 6

In deciding the appeal by the Secretariat Group, four issues were considered by the Court:

  1. Whether SCL owed a fiduciary duty of loyalty to A COMPANY;

The Court decided that the close nature of a fiduciary with the other party and the need for the fiduciary to be “on his side” was not the most accurate way to describe the relationship between an expert and his/her client. In this case, there was a contractual clause dealing with conflicts of interest and the Court found that addressing the obligations arising out of that clause would be sufficient for the purposes of the appeal.

  1. Whether SCL owed A COMPANY a contractual duty to avoid conflicts of interest;

The wording of the retainer between SCL and A COMPANY’s lawyers was clear. That SCL would not in the future be involved in or create any conflict of interest until the retainer came to an end. Therefore, the Court found that SCL did owe A COMPANY a contractual duty to avoid conflicts of interest.

  1. Whether that duty was also owed by the other Secretariat entities;

Significant factual evidence was available that the Secretariat Group marketed themselves under one brand name, “Secretariat International”. Further, SCL and SIUL were owned by the same company, fees were shared across offices and information was shared between different branches. By way of example, the conflict check was carried out across all entities within the Secretariat Group.

  1. Whether there was a conflict of interest.

The Court found that the overlapping parties, role, project and subject matter in Arbitration 1 and 2 were all-pervasive and amounted to a breach of the conflict of interest obligations by the Secretariat Group. While it was accepted that the same expert can act both for and against a client, such scenarios, the Court considered, could only be in relation to a dispute on another project.

Accordingly, the Court of Appeal dismissed the appeal of the Secretariat Group after the Group conceded that a finding of a conflict of interest would be sufficient to dispose of the appeal.

Implications of this judgment for experts and their clients

While the decision of the Court of Appeal does not define the relationship of an expert and his/her client as a fiduciary one (leaving that particular door open for future cases) the judgment offers clarity as to what is and is not a conflict of interest. While there is always commercial pressure to take every case offered, experts cannot take cases from different parties bound by the same dispute and then either hide behind their duty of independence before the Court or view their task in isolation to the wider dispute. For example, in this case, the Secretariat Group attempted to define the expert employed in Arbitration 1 as a “testifying expert” and the expert employed in Arbitration 2 as a “roving expert”. It is also of utmost importance that strong procedures are in place for running conflict checks across multiple offices. This is particularly relevant to the maritime sector where there is often a rush to appoint a small number of experts and similarly for those experts to confirm as soon as possible that they will accept the case.

As for those wishing to engage the services of an expert, they should continue to ensure that:

  1. experts are appointed as quickly as possible, in writing;
  2. experts confirm in writing that their entire organisation has cleared conflict and is free to act;
  3. any terms of engagement include confidentiality and conflicts of interest provisions; and
  4. that these are signed by an authorised signatory within the expert organisation as soon as possible.