Expert witnesses and conflicts of interest

Expert witnesses and conflicts of interest


CategoryArticles, News Author Edwin Glasgow CBE QC, Paul Darling OBE QC, David Brynmor Thomas QC, David Bateson *, Vivek Kapoor, Karishma Vora, Ruth Keating Date

Hot on the heels of the Supreme Court’s recent judgment in Halliburton Company v Chubb Bermuda Insurance Ltd [2020] UKSC 48 on bias and impartiality, the Court of Appeal (on 11 January 2021) handed down judgment in Secretariat Consulting PTE Ltd & Ors v A Company [2021] EWCA Civ 6. The judgment provides yet more guidance from the courts on avoiding conflicts of interest, this time in the context of expert witnesses.

Factual background

The claimant in the proceedings before the TCC, and the respondent before the Court of Appeal, is the developer of a large petrochemical plant (‘the Project’). The cost of the plant is worth billions of dollars. The respondent engaged a project manager responsible for the engineering, procurement and construction management services for the project. Disputes ultimately arose between the respondent and sub-contractors (‘Arbitration 1’).

Secretariat Consulting Pte Ltd (‘SCL’) is an entity within the Secretariat group, all of which provide litigation support services and act as delay and quantum experts in construction arbitrations. Also part of the Secretariat group is Secretariat International UK Ltd (‘SIUL’) and Secretariat Advisors LLC (‘SAL’).

In March 2019, the respondent’s solicitors approached SCL to provide arbitration support and expert services in respect of an arbitration which had been commenced.

The first stage of the proposed retainer was the completion of a Confidentiality Agreement, entered into between the respondent’s solicitors and SCL. Given the fact specific nature of the Court of Appeal’s judgment, it is worth considering the wording of an important provision in that retainer (clause 4):

“Under no circumstances shall [SCL] at any time, without the prior written approval of [the respondent’s solicitors] acknowledge to any third party what is or is not a part of the Confidential Information, nor shall [SCL] acknowledge to any third party the execution of this Agreement, the terms and conditions contained herein or the underlying discussions with [the respondent’s solicitors]”.

The second stage was to complete a conflict check. A letter later sent in May 2019 to SCL confirmed the respondent’s understanding as follows that SCL had: “confirmed [SCL] have no conflict of interest in acting for [the respondent] in this engagement. You will maintain this position for the duration of your engagement”.

Subsequently, the project manager of the Project commenced ICC arbitration proceedings against the respondent in England (Arbitration 2). The project manager asked SIUL to provide quantum and delay expert services in connection with Arbitration 2. The respondent informed SCL that this engagement created a conflict of interest. The third appellant (SAL) denied that there was a conflict of interest.

The respondent issued an urgent ex parte application for an interim injunction against SCL, SIUL and SAL. The claim focused on two separate grounds, namely a breach of fiduciary duty and a breach of confidence.

The judgment of the High Court

Before the High Court O’Farrell J found that SCL, owed its client a fiduciary duty of loyalty. O’Farrell J held that this in turn meant that SIUL could not provide similar expert services to a third party, who was making a claim in another arbitration against the same respondent arising out of the same project and concerned with the same or similar subject matter. The remaining defendant, SAL, was involved in some of the correspondence. This was the first time in the English jurisdiction that an expert had been found to owe a fiduciary duty to its client.

The defendants appealed the decision to the Court of Appeal.

The judgment of the Court of Appeal

The appeal was dismissed by the Court of Appeal. The judgment was delivered by Coulson LJ (with Males and Carr LLJ agreeing), in summary the court held that depending on the terms of a retainer, the relationship between a provider of litigation support/expert services and their client might have one of the characteristics of a fiduciary relationship. However, the court also outlined that where the parties had entered into a confidentiality agreement which included an express clause dealing with conflicts of interest, no purpose was served by designating the relationship as a fiduciary one.

The issues were summarised by Coulson LJ at [31] as follows:

  • Issue 1: Did SCL owe a fiduciary duty of loyalty to the respondent? (‘Fiduciary duty of loyalty’.)
  • Issue 2: If not, did SCL owe a contractual duty to the respondent to avoid conflicts of interest? (‘Contractual duty’.)
  • Issue 3: If so, was that duty also owed to the respondent by other Secretariat entities? (‘Duty owed by other entities’.)
  • Issue 4: 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? (‘A conflict of interest’.)

The key points to take from the judgment are as follows:

  • Lack of previous decisions: As stated at [3], one of the features of this case was that, although plenty of authorities were cited to the court, very few of them were “of any real assistance”. No English case had addressed head-on a dispute in which there are two existing litigation support/expert retainers, which each client wished to maintain, relating to two live arbitrations, the respondent submitted that in this case the same expert organisation would be supporting, advising and giving evidence for and against the same client about the same project and the same or similar subject matter.
  • Fiduciary duty of loyalty: Coulson LJ noted that he would be reluctant to conclude that an expert witness owed a fiduciary duty of loyalty. To categorise the relationship as a fiduciary one could have unintended ramifications. The expression fiduciary has various legal implications, not all of which may be appropriate for the relationship between a client and an expert. However, in response to the argument that an expert’s overriding duty to the court or arbitral tribunal would negate any fiduciary duty of loyalty, Coulson LJdid clarify that there was no tension between those two obligations, since “complying with the overriding duty of the court is the best possible way in which an expert can satisfy his professional duty to his client” (at [62]). In response to whether SCL owed a fiduciary duty of loyalty to the respondent it was not necessary or appropriate, in this case, to find the existence of a freestanding duty of loyalty (at [65]-[66]). There was a contract here with an express clause dealing with conflicts of interest. Therefore the court’s view was that a fiduciary duty of loyalty would not add to or enhance the obligations arising from that clause. Considering the issue further was therefore unnecessary for the disposition of the appeal.
  • Contractual duty: In response to the question of whether SCL owed a contractual duty to the respondent to avoid conflicts of interest the court answered yes. SCL owed the respondent a clear contractual duty to avoid conflicts of interest for the duration of their retainer (at [69]). The conflicts clause in SCL’s retainer had two consequences. By this provision, SCL confirmed that there was no conflict of interest at the time of the agreement, and they also undertook that they would not create any such conflict of interest in the future.
  • Duty owed by other entities: In response to whether that duty also owed to the respondent by other Secretariat entities, the conflict check had been carried out across the Secretariat group and the undertaking given by SCL in its retainer bound all the companies in the group (at [81]).
  • Coulson LJ highlighted that from a factual perspective, this was a highly restricted Confidentiality Agreement. Moreover, the clause itself was based on what was known to have been a conflict check carried out in respect of all the Secretariat entities – on the face of it, therefore, SCL was giving the undertaking on behalf of all the Secretariat entities (at [74]). There was a good deal of other evidence which confirmed that the entities within the Secretariat group market themselves under that brand name, including that: (i) it was “Secretariat International” who were regarded by its clients as their expert, not an individual entity in the Secretariat structure; (ii) it was ‘Secretariat International’ that appeared on all their email addresses, irrespective of which company in the group the individual worked for. (iii) Secretariat International markets itself as one global firm. (iv) The emphasis in all the Secretariat material is on one international group or company with different offices round the world, not a variety of different companies who were free to act as if they were unconnected one with another. (v) The expression “our firm” was used in correspondence (at [75]).
  • Coulson LJ found it ‘commercially unrealistic’ to suppose the undertaking to avoid conflicts only bound one particular ‘office’ rather than the Secretariat ‘global firm’ as a whole (at [76]-[77]).
  • In respect of the submission that in some way, to find that SCL’s undertaking bound SIUL and SAL amounted to ‘piercing the corporate veil’ Coulson LJ did not agree. Coulson LJ emphasised that it is a question of contract construction, informed by the factual background and it also reflects the reality of the scope of the conflict check actually undertaken (at [78]).
  • A conflict of interest: Coulson LJ rejected the artificial distinction of the role of the ‘testifying expert’ from that of a ‘roving expert’ who provides a wider advisory role (at [83]). In his concurring judgment, Males LJ also held that it was wrong to draw a sharp dividing line between an ‘independent’ expert witness and a ‘consulting’ expert – ‘testifying expert’ from that of a ‘roving expert’, as the role of a professional expert witness generally falls “into both of those categories” (at [113]).

As to the question of whether there was a conflict of interest as a result of SCL’s engagement in Arbitration 1 and SIUL’s subsequent engagement in Arbitration 2 the court held there had been a clear conflict of interest (at [87]). SCL was advising the respondent in relation to its commercial position in Arbitration 1 as well as giving expert evidence to support that position to the extent that it could. If SIUL was then engaged by the project manager in Arbitration 2 it would mean that it would be giving advice opposing the respondent (at [88]). Coulson LJ held that it was impossible to see how the same firm (no matter how many global offices it had) could act for the employer and simultaneously against the employer’s representative/agent/alter ego in respect of the same or similar disputes on the same project (at [89]). The overlaps in this case were, in the circumstances, “all-pervasive” (at [92]).

Commentary

The judgment particularly highlights the risks for professional services firms that undertake to avoid conflicts of interests as these will be interpreted to apply to all its entities, globally. Given the rise of professional services firms operating and marketing globally under a common brand, this decision is likely to have wide-ranging consequences on the manner in which clients procure their services.

The impact of the judgment is perhaps best put at [2] of the judgment as Coulson LJ states: “[t]he issues that arise on this appeal are, in one sense, novel and potentially significant, although – as will become apparent – I have concluded that they fall to be resolved on their own particular fact, and by reference to the terms of the relevant retainer.”

The case focused on two separate grounds, namely a breach of fiduciary duty and a breach of confidence (at [24]). It is of interest that at [25] of the judgment Coulson LJ outlined that it was important to note that the respondent’s particulars of claim pleaded a separate claim, “albeit to the same ultimate effect”, that SCL owed the respondent a contractual obligation to avoid conflicts of interest. Coulson LJ noted that this argument did not form the focus of the debate before the judge – however, it loomed rather larger on appeal. Certainly that contractual backdrop is essential to interpreting the outcome in this case.

The wording of the clause was important. The appellant argued that, in this case, this was not the sort of wide-ranging clause that arose Akai Holdings Limited v RSM Robson Rhodes LLP [2007] EWHC 1641 (Ch) (at [51] and [70]). However, Coulson LJ held that although he accepted that the clauses in this case were “less wordy”, he considered that they had broadly the same meaning and effect as the provision under consideration in the contract in Akai. It is a reminder to parties that they cannot simply stand behind broad wording in an attempt to negate the contractual substance of what they have agreed to.

Further, between the guidance of the Court of Appeal in this case and the Supreme Court’s guidance in Halliburton parties may wonder where this leaves them in areas of law which may be niche and where there may be a limited pool of appropriately qualified experts available. As Coulson LJ highlighted at [98], none of this should be taken as saying that the same expert cannot act both for and against the same client. Of course, an expert can do so. Large multinational companies often engage experts on one project and see them on the other side in relation to a dispute on another project. That is inevitable. However, like Halliburton, Coulson LJ highlighted that “a conflict of interest is a matter of degree”. In Coulson LJ’s judgment, the overlaps in this case “of parties, of role, of project, of subject matter” make it plain that in the present case, there was a conflict of interest.

Parties will need to be live moving forward to when that crucial tipping point has been passed.


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