UK Court of Appeal considers expert’s duty to avoid conflicts
A recent decision of the Court of Appeal of England and Wales considered the scope of an international expert services firm’s contractual undertaking to avoid conflicts of interest in relation to entities within the same group.
In Secretariat Consulting Pte Ltd v A Company  EWCA Civ 6, the developer of a large petrochemical plant engaged a project manager to perform engineering, procurement and construction management services. The project manager’s responsibilities included the procurement and provision of “Issued For Construction” drawings.
The developer also engaged a subcontractor to undertake the construction of certain facilities at the plant. A dispute arose between the developer and the subcontractor regarding additional costs incurred as a result of delay and disruption arising from the late delivery of the IFC drawings. The subcontractor commenced an arbitration against the developer (Arbitration 1) in relation to these matters.
For the purposes of Arbitration 1, the developer engaged a delay expert from Secretariat Consulting Pte Ltd (SCL), a Singaporean entity within the global Secretariat group. The developer’s retainer with SCL included a confidentiality provision which stated that:
“[SCL] have no conflict of interest in acting for [the respondent] in this engagement. [SCL] will maintain this position for the duration of [its] engagement.”
Following the commencement of Arbitration 1, the project manager commenced a separate arbitration against the developer for unpaid fees under its management contract, and sought to retain a quantum expert from Secretariat International UK Ltd (SIUL), the UK entity within the Secretariat group. The developer objected to the appointment on the basis that SCL, a separate entity within the Secretariat group, was engaged in Arbitration 1 to consider similar issues.
The developer brought proceedings in the High Court of England and Wales seeking injunctive relief to restrain such an appointment. At first instance, the developer obtained an injunction restraining SIUL from providing expert services to the project manager on the basis that SCL’s appointment in Arbitration 1 carried a fiduciary duty of loyalty owed by both SCL and SIUL (as entities within the Secretariat group) to the developer.
The Court of Appeal upheld the injunction restraining SIUL from acting for the project manager on the basis that SCL owed the developer a clear contractual duty to avoid conflicts of interest for the duration of its retainer. The court held that this contractual duty applied to all corporate entities within the Secretariat group. In reaching such a view, the Court of Appeal stated that no purpose would be served by designating the relationship as a fiduciary one, in circumstances where the agreement between the developer and SCL contained an express clause regarding conflicts of interest.
Instead, the Court of Appeal relied on the following reasons in reaching its view:
when accepting the developer’s appointment, SCL confirmed that it had no conflict of interest and expressly agreed to maintain this position for the duration of SCL’s engagement;
SCL conducted a conflict check across all corporate entities within the Secretariat group prior to accepting its retainer;
the Secretariat group marketed itself as a single entity, ‘Secretariat International’ and staff in all locations were issued with Secretariat International email addresses;
SCL and SIUL had directors in common and were owned by the same company, Secretariat International Inc; and
there was an overlap of the project, parties, roles and subject matter in the two arbitrations such that SCL and SIUL would be giving advice about the causes of the same delays to the developer and the project manager respectively, which indicated that SIUL had a conflict of interest in advising the project manager.
The full decision can be found here.