Experts in two minds – but within one firm

Multidisciplinary consultancies providing expert and litigation support services from offices around the world are increasingly common and there have, over the past few years, been a number of high-profile acquisitions that indicate consolidation is afoot. In what circumstances can they potentially provide expert services in claims for and against the same party?

The Court of Appeal addressed this in the recent case of Secretariat vs A Company, where they had to decide whether experts who worked for different companies in the same group could act for and against the same company in disputes arising out of the same project.

A developer of a large petrochemical plant (referred to in the judgment as “A Company” to protect the confidential nature of the underlying arbitrations) was facing an arbitration claim brought by its subcontractor for additional costs due to delay and disruption. Part of this claim was for costs arising out of the alleged late release of the IFC drawings. A Company appointed a delay expert who worked for Singapore-based Secretariat Consulting Pte Ltd (SCL) in that arbitration.

A few months later, the EPCM contractor appointed by A Company in relation to the petrochemical plant commenced a separate arbitration against A Company claiming unpaid fees under the EPCM contract. A Company counterclaimed for the failure to manage or supervise the subcontractor involved in the first arbitration, as well as for the alleged delay in issuing the IFC drawings to that subcontractor. The EPCM contractor appointed a quantum expert for this arbitration who was employed by Secretariat International UK Ltd (SIUL). Both SCL and SIUL were within the same group of companies, albeit located in different jurisdictions.

When A Company discovered that SIUL was acting against it in the second arbitration, it sought an injunction preventing SIUL from doing any further work in that second arbitration.

This injunction was granted by the Technology and Construction Court on the basis that SCL owed A Company a fiduciary duty extending to the Secretariat group of companies. Secretariat appealed against that decision.

The Court of Appeal unanimously agreed that the injunction should remain. However, all three judges declined to find that the expert owed a fiduciary duty to its client. Instead, they decided the case by reference to the terms of the retainer between A Company and SCL – in particular, that SCL was under a contractual duty to avoid any future conflict of interest and this bound all entities in the Secretariat Group.

The leading judgment by Lord Justice Coulson gave a number of reasons why he considered a conflict of interest arose. The first related to the scope of what each expert was being asked to undertake. SCL was advising A Company in relation to its commercial position in the first arbitration as well as giving expert evidence. If SIUL were appointed, it would be giving advice opposing A Company. In addition, SCL and SIUL would be engaged to give advice about the design and construction of the petrochemical plant and both arbitrations concerned the causes of delay in the design and construction of the plant.

Key to the existence of a fiduciary duty is that an expert must put the client’s interests first. The court noted that there was no tension between this and an expert’s overriding duty to the court or tribunal. Lord Justice Coulson said “there is no point in the client spending a good deal of money pursuing or defending a claim if his underlying position is hopeless but none of his advisers are prepared to tell him so”. The expert being prepared to stand up to a court or tribunal to justify their position is therefore ultimately to the benefit of the client. An expert having this dual loyalty does not prevent a fiduciary duty from existing.

However, the court was hesitant to conclude that there was such a fiduciary duty because there were potentially unseen ramifications and a fiduciary obligation is freighted with “legal baggage”. Ultimately, the court arrived at its decision without having to resort to expanding the circumstances where a fiduciary duty would be implied. Lord Justice Coulson concluded that “a fiduciary duty of loyalty would not add or enhance” the obligations already present in the contract between the parties.

The key here was the terms of the retainer, which clearly provided that, as well as confirming that there was no existing conflict, SCL would not in the future be involved in or create any conflict of interest. On the facts, the court found this covered other Secretariat entities that made up a “global firm”.

The court concluded that an expert witness group operating on a global scale with separate subsidiaries in a variety of jurisdictions can, if it wishes, make clear in its retainers that the conflicts were based solely on a specific entity and that other entities within the group remained free to act for parties opposed to the client in the same or related disputes.

However, this is unlikely to be at all attractive to those employing such experts and I would expect those instructing them to pay particular attention to the terms of the conflict provisions in the retainer going forward.

Steven Carey is head of the construction, engineering and projects team at Charles Russell Speechlys