Court of Appeal rules on conflicts of interest clause

The Court of Appeal decision in Secretariat Consulting PTE Ltd & Ors v A Company [2021] EWCA Civ 6 showed the English Court of Appeal taking a broad approach to a clause that prohibited conflicts of interest in a contract appointing an expert witness, ruling that the clause operated as a promise to work exclusively for the client and that it extended to related companies within the expert’s group that were not parties to the contract. However, the Court of Appeal decided that the expert did not owe a fiduciary duty of loyalty to the client.

Background facts

In early 2019, Secretariat Consulting Pte Ltd (“SCL”), an expert witness firm in Singapore, was approached by an employer in a multi-billion dollar petrochemical project to provide expert delay analysis in an arbitration between the employer and a sub-contractor. SCL entered into a retainer letter with the employer in which it agreed that it had no conflict of interest in acting for the employer and that it would maintain this position for the duration of its engagement. The retainer also specified, by reference to the CIArb Expert Witness Protocol, that SCL would remain independent of the employer.

SCL is part of an expert witness group that includes related companies in several other countries. In the UK, there is a related company called Secretariat International UK Ltd (“SIUL”) that also provides expert witness services. In late 2019, the project manager of the petrochemical project started another arbitration against the employer claiming unpaid fees. The project manager approached SIUL to provide expert quantum analysis in that arbitration.

Application to the English High Court

The employer objected to the appointment of SIUL in the second arbitration and applied to the English High Court for an injunction against SCL and SIUL, as well as against Secretariat Advisers LLC (“SAL”), a related Secretariat company in the USA. The employer argued that SCL and SIUL had breached a fiduciary duty of loyalty, owed to the employer (arising under English law after the employer instructed SCL in the first arbitration) when SIUL was instructed by the employer’s opponent in the second arbitration. 

The English High Court issued an injunction against SCL, SIUL and SAL. This was a significant decision because it was the first time under English law that an independent expert had been found to owe a fiduciary duty of loyalty to its client. SCL, SIUL and SAL appealed this decision.

Appeal to the Court of Appeal

The Court of Appeal rejected the High Court’s analysis that SCL, SIUL and SAL owed a fiduciary duty of loyalty to the employer generally under English law. Lord Justice Males stated, “Save perhaps in circumstances far removed from the present case, an expert witness is not a fiduciary and does not owe fiduciary duties to his client.”

However, the Court of Appeal upheld the injunction on the different ground that there had been a breach of the ‘no conflicts’ clause in the specific contract in this case (the SCL retainer letter). It said that this clause covered appointments in arbitrations arising from the same project, even where the experts were independent, there was no risk of breach of confidentiality, and the parties to the arbitration and the expert disciplines involved were different. It also said that the clause covered the appointments of other companies in the Secretariat group, even though they were not party to the SCL retainer letter.

Comment

The Court of Appeal’s decision is a welcome clarification of the possibility that experts owe a fiduciary duty of loyalty generally to their clients. The Court of Appeal explained that, while such a duty might arise in theory, there would have to be very exceptional circumstances for such a duty to be established in practice.

On the other hand, this judgment is a clear warning to professional services firms (and those involved in construction projects, in particular) to take great care over the wording of their retainer letters because the English courts may interpret ‘no conflicts’ clauses broadly, treating them as a promise to work exclusively for a client, at least in relation to the same project, and as a promise binding on all related companies. The drafting of such clauses should receive much greater attention in the future.

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