In our last issue of International Quarterly, we discussed a recent TCC decision concerning the extent of an expert's duties to their client. In January 2021, the Court of Appeal released its judgment on the appeal of that case.1 While the outcome of the decision was consistent with the TCC, there were several differences in reasoning that warrant discussion, including importantly a rollback on the TCC's view that an expert owed a fiduciary duty of loyalty to its client.
The case first came before the courts when the developer of a large petrochemical plant in Asia (the Developer) sought an injunction restraining a delay and quantum expert (the Expert) from acting as an expert witness for a third party in an ICC arbitration against the Developer. The injunction was sought because the Expert was also acting as an expert witness for the Developer against a different party (a subcontractor on the project) in a dispute that had arisen under the same project with many overlapping issues. Adding a layer of nuance to the matter is the fact that the Expert is an international organisation, with different companies in the broader group providing the services to the different parties.
At the time that the Expert was approached by the third party the Developer was told of the proposed engagement and was advised by the Expert that they did not view it as a "'strict' legal conflict". Conversely, the Developer's lawyers indicated to the Expert that they believed there was a conflict. As summarised by the Court of Appeal:
"Unhappily, it appears that, not only did [one entity within the Expert group] continue to work on behalf of the respondent in connection with [the arbitration against the subcontractor], but that also, without any further reference back to the respondent or its solicitors, [another entity within the Expert group] began to do the same for the third party in [the third party's arbitration against the Developer]."
The Court of Appeal tactfully describes this as "a risky decision".
The TCC granted the injunction sought by the Developer, concluding that:
- the Expert owed a fiduciary duty of loyalty to the claimant arising out of its engagement to provide expert services in connection with the first arbitration it was instructed on; and
- the Expert was in breach of that fiduciary duty of loyalty by accepting instructions to provide expert services in connection with the second arbitration.
Accordingly, the Developer was entitled to a continuation of the interim injunction to restrain the Expert from providing expert services to the third party.
The Expert appealed the TCC decision, with the Court of Appeal being asked to determine:
- whether the entity within the Expert group advising the Developer owed a fiduciary duty of loyalty;
- if not, whether that same entity owed a contractual duty to the respondent to avoid conflicts of interest;
- if so, whether that duty extended to all companies within the Expert group; and
- if the duty extended, did that mean there was a conflict of interest in respect of the engagement of the Expert entity by the third party of the second arbitration.
In the spotlight was the TCC's finding that a fiduciary duty of loyalty was owed. Fiduciary duties are one of the most sacrosanct relationships under law, and are typically confined to pre-existing categories. One of the main characteristics of fiduciary relationships is that they exist where one party is in the vulnerable position of relying wholly on the other party and therefore an exceptional level of trust and confidence in that party is required, the most famous examples being the relationship between a lawyer and a client, or a trustee and a beneficiary. It is safe to say that, as Coulson LJ put it, "the expression 'fiduciary' is freighted with a good deal of legal baggage..."
The finding that there was a fiduciary duty was of course open for the TCC to make, on the basis that the exact definition of an expert's relationship to its client had not been determined by the courts previously. However, the Court of Appeal in this case ultimately concluded that it might be inapt to import the aforementioned legal baggage into the client/expert relationship.
One of the main arguments advanced by the Expert against the imposition of a fiduciary relationship between expert and client was that this duty would impinge on the expert's overriding duty to the tribunal. This argument was dismissed by the Court of Appeal as it was settled law that while an advocate owes duties to the court this does not prevent them from fulfilling their obligations to their client; the same is true for experts. The Court of Appeal went further to note that complying with the overriding duty to the court is the best possible way in which an expert can satisfy his professional duty to his client.
Ultimately, the conclusion of the Court of Appeal (expressed by Coulson LJ) was that in the present case, there was no purpose in designating the relationship as a fiduciary one, given that there was a contract in place between the parties with a conflict of interest provision that dealt with the matter at issue. Coulson LJ's parting observations on the matter leave the door somewhat ajar for future attempts to be made to have aspects of the relationship recognised as fiduciary in certain circumstances, noting that:
"Depending on the terms of the retainer, the relationship between a provider of litigation support services/expert, on the one hand, and his or her client on the other, may have one of the characteristics of a fiduciary relationship, namely a duty of loyalty or, to put it another way, a duty to avoid conflicts of interest."
Regarding the second and third issues of whether a contractual duty to avoid conflicts of interest was owed by the Expert (in its entirety), the Court concluded that under the retainer the Expert owed a clear contractual duty to avoid conflicts of interest for the duration of their retainer. The Court also had no difficulty in finding that the distinctions between entities in the broader Expert international group were immaterial. On the Expert's assertion that one entity was not bound by the conflicts policy of the other, both entities could conceivably act for different sides of the same dispute, a conclusion that the Court labelled as a commercially unrealistic position.
In considering the fourth issue, whether there was a conflict of issue in this case, the Court of Appeal first identified the scope of the different Expert entities' works and then assessed whether there was a conflict in both these services being provided. The Court of Appeal concluded there was for four reasons:
- First, the entity advising the Developer was advising them in relation to its commercial position as well as specifically supporting the arbitration; by assisting the third party in its case it would be giving advice opposing the Developer.
- Second, the Court observed that the third party was the Developer's project manager, or the Developer's "alter ego" on the project. Coulson LJ observed that it was impossible to see how the same firm 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.
- Third, the Developer had engaged the Expert to give advice about the design and construction of the project. If they were engaged by the third party they would be advising on the same subject matter.
- Fourth, the causes of delay are critical issues and the Expert was advising the Developer about these. If the Expert was then engaged by the third party, they too would be giving advice about the causes of the same delays to the third party, and the extent to which such matters were or were not the third party's responsibility.
In the Court's opinion the overlaps were all-pervasive and a conflict of interest existed. However, it was also observed that none of this should be taken as saying that the same expert cannot act both for and against the same client. It is inevitable that large multinational companies often engage experts on one project and see them on the other side in relation to a dispute on another project. A conflict of interest is a matter of degree and in this case the overlaps were too significant. The Court of Appeal accordingly dismissed the appeal.
In some respects, the Court of Appeal declining to uphold the TCC's finding that the relationship between expert and client as fiduciary will assist in parties understanding their obligations towards each other as they do not have to worry about the "legal baggage" of a fiduciary relationship. However, that is not to say that the relationship requires less onerous obligations. The Court of Appeal's focus on the contractual relationship between the parties will in most cases (particularly where sophisticated multinational companies with detailed and prescriptive terms of service are involved) mean the relationship between the parties is comprehensively defined. It behoves parties to be very familiar with these terms, particularly where conflicts of interest are concerned.
The case should also assist multinational experts to manage conflicts of interest, as the Court provided clear guidance on the factors it will look to in determining whether a conflict exists. Importantly, parties will not be able to rely solely on the fact that a different legal entity is carrying out the work. They will have to carefully scrutinise their terms to determine if there is an overlap in the services that will be a conflict. Another lesson from this case would be that, when it comes to conflicts of interest, if faced with a "risky decision" it may pay to err on the side of caution.
1. Secretariat Consulting PTE Ltd & Ors v A Company  EWCA Civ 6
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