REUTERS | David W Cerny

English Court of Appeal provides novel guidance on experts’ duties to clients

On 11 January 2021, the English Court of Appeal handed down its decision in Secretariat Consulting PTE Ltd v A Company, which considered the novel issue of whether expert witnesses owe fiduciary duties to their clients. Although this case stemmed from a construction arbitration, it is of general application to the users of experts in any type of dispute. Following a brief summary of the case, this post notes the practical points that arbitration practitioners can takeaway from the decision.

The case

The Secretariat Group offers expert services, including, in particular, with respect to issues of delay and quantum in construction disputes. It operates through entities in various jurisdictions, which carry on business under a common flag.

Party A appointed the Secretariat Group’s Singaporean entity (SCL) as its expert in a construction arbitration in which it was the claimant (the first arbitration).

Party A was subsequently a defendant in a separate arbitration in respect of the same project brought by a non-party to the first arbitration (the second arbitration). Party A’s case in the second arbitration raised issues that were in dispute in the first arbitration. The claimant in the second arbitration retained the Secretariat Group’s UK entity.

Party A sought an injunction from the High Court on the basis that the Secretariat Group had breached a fiduciary duty to avoid conflicts. This (novel) assertion was accepted by the court and the Secretariat Group was enjoined from acting against Party A in the second arbitration.

On appeal, the Court of Appeal did not consider it necessary or desirable to extend the categories of fiduciary relationships to include expert witnesses, given that Party A’s contract with SCL (taking the form of a letter of engagement) expressly provided that there were no extant conflicts and that it would “maintain this position for the duration of your engagement”. There was thus an express contractual duty of loyalty, which the court found SCL to have undertaken on behalf of all Secretariat Group entities. The Court of Appeal thus dismissed the appeal, while expressly declining to find that a fiduciary duty existed.

Considerations for arbitration practitioners

The most important takeaway is the importance of properly drafting expert retainers. Letters of engagement should set out the parties’ agreement as to conflicts. Where the relevant firm operates through various entities, the engagement should be clear as to whether the restriction applies to the group as a whole or just the specific entity being contracted with. As Males LJ noted at paragraph 23:

An expert witness group which operates on a global scale with separate subsidiaries in a variety of jurisdictions can, if it wishes, make clear that any conflicts search which it carries out and any undertaking which it gives is limited to the particular company being instructed and does not extend to other companies in the group, which remain free to act for parties opposed to the client in the same or related disputes.”

Given the multi-jurisdictional nature of firms of expert witnesses, engagement on these terms are not uncommon. The critical thing is for both parties to be alive to these issues and aware of the terms on which the expert is being engaged.

This decision also highlights the importance of specifying which entities are included in the conflict search being undertaken. The fact that the initial conflict search had been expressly carried out against the entire group (and not just the entity which was formally being engaged) was of particular, and perhaps paramount, importance to the court’s conclusion that the duty of loyalty extended to the whole of the Secretariat Group. While most firms will maintain a unified conflicts register across their group, this should be confirmed in writing.

Finally, where a conflict appears to arise, ask yourself the question suggested by Coulson LJ (quoting Hollander and Salzedo) at paragraph 95:

“It’s not difficult to work out what a conflict is. You put yourself in the client’s shoes and ask yourself ‘would you like you doing what the other client has asked you to do?’ If the answer is ‘no’, you’ve probably got a conflict.”

 

 

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