Organisations which offer expert/advisory services may find themselves with a conflict of interest, where they have one office acting on behalf of a client and another acting for a party whose interests are adverse to that client. This risk can be mitigated by agreeing broader engagement terms with a client, and through the manner in which conflict searches are run. Clients of an expert/advisory services firm, for their part, ought to be aware of the terms of the retainer. Should any such client be reluctant to allow their expert advisor to act for a party whose interests are adverse to their own, then they should seek to agree stricter engagement terms in relation to conflicts.
Company A, the developer of a large petrochemical plant, was the respondent in two separate ICC arbitrations ("Arbitration 1" and "Arbitration 2"), both involving delays to a construction project.
Secretariat Consulting Pte Ltd ("SCL"), a Singaporean company within the 'Secretariat' group (the "Secretariat Group"), was providing litigation support and expert services on behalf of Company A in Arbitration 1.
Secretariat International UK Ltd ("SIUL"), a UK company also within the Secretariat Group, was providing litigation support and expert services to a party acting against Company A in Arbitration 2.
Company A applied for an injunction, seeking to prevent SIUL from doing any further work on Arbitration 2. This was on the basis that SCL owed a fiduciary duty of loyalty to Company A, which extended to the whole Secretariat Group - including SIUL. The Secretariat Group had breached this duty, by allowing SIUL to be engaged as an expert for a party acting against Company A in Arbitration 2. This injunction was granted. The Secretariat Group appealed.
The Court of Appeal rejected the appeal and upheld the injunction, albeit on different grounds. The Court found it unnecessary to uphold the finding that a fiduciary duty was owed by the Secretariat Group. Instead, the Court based its decision on there being a contractual duty, owed by the Secretariat Group, to avoid conflicts of interest. This was due to an express clause in the engagement letter between Company A and SCL, stating that (i) there was no conflict and (ii) this would be maintained throughout the engagement.
The Court found that, although the engagement letter was signed by SCL (one individual entity within the Secretariat Group), the conflict of interest clause was construed to be given on behalf of all entities within the Secretariat Group. Prior to signing the engagement letter, conflict checks had been run against all entities within the group, rather than only within SCL - and Company A was aware of this.
KEY LEGAL POINTS
- The Court held that fiduciary duties are usually found to arise in specific categories of relationship (for example, (i) between a client and its solicitor, or (ii) a trustee and a beneficiary) and that there is no existing English authority to indicate that an expert owes a fiduciary duty to its client. However, a fiduciary duty may be owed by default, between an expert and its client, though this could depend on the agreed terms of the engagement.
- How professional advisory firms market themselves may come under scrutiny as part of the analysis. The Court stated that, due to the Secretariat Group's marketing (in which all entities shared the same name, with their branding, email addresses and website being marketed as a single global firm operating in multiple jurisdictions), the impression provided was that the Secretariat Group acted as a single global firm, as opposed to distinct silos.
The Court acknowledged that it is often the case where expert/advisory services firms have a multinational presence that one office will act for a party and another office will act against that party. However, problems can arise where:
- (a) there is a clear conflict of interest (e.g. where there is an overlap between the services being provided and/or where the services relate to the same subject matter); and
- (b) the terms of the engagement/retainer address conflicts in a way which could bind other entities within the group.
Accordingly, in general, organisations with multiple entities should ensure that their conflicts procedures and engagement terms clearly express which entity/entities are bound and which are not, to avoid imposing a contractual duty (and to seek to avoid the implication of a fiduciary duty of loyalty) on the entire group.
Clients of expert/advisory services firms should be aware of the terms of the retainer to which they are signing up. If clients are reluctant to allow other entities within the advisor's group to act for any counterparties in the same or a similar action, then they should seek to agree stricter engagement terms to address that.