A Court of Appeal decision earlier this week has upheld an injunction granted by the TCC preventing an international expert services firm from acting for more than one party to an international construction dispute, despite involving separate experts in different locations contracting via separate legal entities. Although not supporting the TCC’s finding that fiduciary duties applied, the Court found that contractual undertakings to avoid conflicts of interest had been given on behalf of all companies within the international practice. Given the rise of globalisation in the expert services industry, and for professional services more generally, this decision is likely to have considerable ramifications for the marketing of such services and the basis on which they are procured.
Secretariat v A Company: a recap
The developer of a petrochemical plant appointed a consultant to provide engineering, procurement and construction management (“EPCM”) services in relation to the project. The developer also engaged a contractor for the construction of certain aspects of the project. The contractor claimed against the developer in respect of additional costs incurred due to delays arising from the late release of certain designs. These were designs which the EPCM consultant was required to produce under its appointment. The developer’s position was that it would seek to pass on to the EPCM consultant any liability it might have to the contractor.
The contractor commenced an ICC arbitration against the developer in relation to its claim (the “Contractor Arbitration”). The developer engaged a delay expert from Secretariat, an international expert services practice, to advise and act in connection with the arbitration. Some months later the EPCM consultant commenced its own arbitration against the developer for non-payment of fees (the “EPCM Arbitration”). The developer counterclaimed against the EPCM consultant in respect of delay and disruption to the project, including any liability it had to the contractor in the Contractor Arbitration.
Solicitors acting for the EPCM consultant subsequently notified the developer’s solicitors that they were proposing to retain an expert from Secretariat to assist the EPCM consultant in the EPCM Arbitration. The developer objected on the basis that the Firm had already been appointed by it in the Contractor Arbitration to consider many of the same issues which would arise on its counterclaim in the EPCM Arbitration.
The EPCM consultant and Secretariat sought to justify the acceptance of both retainers on the basis that the experts were appointed in different disciplines, based in different geographic regions and engaged through different companies within the Secretariat group. Information barriers had also been put in place to avoid any transfer of confidential information.
The developer successfully obtained an injunction from the Technology and Construction Court restraining Secretariat from providing expert services to the EPCM consultant in connection with the EPCM Arbitration. The TCC concluded that Secretariat’s appointment in the Contractor Arbitration carried with it a fiduciary duty of loyalty to the developer. Given the companies in the Secretariat group were marketed together as one global firm, and there was a common approach to the identification and management of any conflicts of interests, the duty of loyalty was owed by all of the corporate entities within the Secretariat group. For a more detailed review of the TCC’s decision, please see our original Law-Now on this case here.
The Court of Appeal
The Court of Appeal rejected Secretariat’s appeal and maintained the injunction. The Court found it unnecessary, however, to uphold the TCC’s finding as to fiduciary duties and expressed reservations as to the implications of such a finding. Instead, the Court based its decision on an express clause of the appointment in the Contractor Arbitration which prohibited conflicts of interests. The clause recorded that Secretariat had “confirmed you have no conflict of interest in acting for [the developer] in this engagement” and that it would “maintain this position for the duration of your engagement”.
Although the appointment was addressed to and signed by a specific company within the Secretariat group, the Court found that the conflict of interest clause was agreed on behalf of all companies within the group. One reason for this was that the conflict check said to be confirmed in the appointment had been carried out across all companies in the Secretariat group. Also of importance was the way in which the Secretariat business was managed and marketed:
“In considering what the parties would reasonably have understood, it is significant that companies within the group share the same name and are managed and marketed as a single global firm. They have a single website for the group as a whole, treating it as a single business in various jurisdictions, working as a team. It seems to me to be obvious that if an issue had arisen in the arbitration on which an employee in another company in the group had particular experience or expertise, both parties would naturally have expected that experience or expertise to be available to A Co as the client. … In these circumstances the undertaking given by Secretariat Consulting not to accept instructions which would give rise to a conflict of interest can readily – and in my judgment must – be understood as having been given on behalf of the group as a whole.”
The Court agreed with the TCC that Secretariat had placed itself in a position of conflict by accepting an appointment for the consultant in the EPCM Arbitration. Whilst the Court acknowledged the question was a matter of degree, and that expert witnesses might readily act for and against the same company in disputes involvement separate projects or transactions, it considered this to be a clear case. The appointment in the EPCM Arbitration involved an overlap “of parties, role, project, and subject matter”. The interests of the consultant in the EPCM Arbitration were opposed to the developer’s interests such that the two Secretariat experts could easily find themselves supporting opposite positions on the same or similar issues.
Conclusions and implications
As noted in our original Law-Now, this decision has particular relevance to the increasing trend of globalisation among expert services firms and to professional services firms more generally. Such a trend is particularly notable in the construction and engineering sphere to which Secretariat belongs. Expansion is often the result of mergers between existing local practices, bringing with it the very real potential for instructions from multiple parties to an international dispute. As in the present case, such merged entities are typically marketed as a single firm with a unified management structure and a “global presence”.
The Court of Appeal’s reasoning poses a clear risk for such a business that undertakings to avoid conflicts of interests will be interpreted to apply globally across all of its companies. The Court acknowledged that appointments could be drafted to avoid this result, with such undertakings being limited to a specific company only. However, as the Court also noted: “Whether, if it does so, it will secure the instruction, is another matter.”
The Court’s reluctance to extend fiduciary obligations into expert witness appointments will be welcomed by many. The TCC’s reasoning on this point was potentially applicable across the board to expert appointments of a general nature to assist a party in court or arbitration proceedings. Fiduciary obligations extend beyond mere duties of loyalty and, if upheld by the Court of Appeal, this is likely to have been an area of uncertainty productive of further disputes.
By contrast, the Court of Appeal’s decision is firmly rooted in the individual circumstances of the Secretariat appointment and the terms agreed with the developer. In substance, the Court of Appeal’s decision seems to be that when the express terms of the appointment were read against the factual matrix of Secretariat’s marketing the proper construction and interpretation of the appointment was (i) the conflicts undertaking was given in respect of the entire group and (ii) that the signatory was acting as agent for the entire group. Such circumstances may, of course, differ in future cases. The basis of the Court of Appeal’s decision means that it is open to international professional services firms to ensure that the express terms of their engagement avoid the conclusions reached in this case. In doing so there are two issues to address, first, whether any conflicts warranty or undertaking, is given in respect of the signatory or the entire group, and second, whether the signatory executes the terms of engagement for the entire group. Companies and firms wishing to avoid a similar result will need to deal with both of these issues, as the first might give rise to a liability for the signatory (even for conflicts generated by non-signatories) and the second a liability for non-signatories.
Secretariat Consulting PTE Ltd & Ors v A Company  EWCA Civ 6.
A v B  EWHC 809 (TCC).