18 August 2021 | IMPORTANT NOTICE

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He waka eke noa.

By Belinda Green.

Experts may look to amend their terms of engagement, as the English Court of Appeal finds a conflict of interest clause applied to a global brand, despite involving separate experts in different locations, contracting via separate legal entities.

Secretariat v A Company

In Secretariat Consulting Pte Ltd v A Company,[1] the English Court of Appeal has prevented an international consulting firm from providing expert witness services to opposing parties in two separate, but related, international arbitrations because of a no conflicts clause in the terms of engagement.  This, despite the fact that the experts were based in different locations and contracted via separate legal entities.

Facts

Two parties entered into a contract relating to the development of a large petrochemical plant: the developer (Company A) and a project manager. The project manager was appointed under an EPCM contract to provide engineering, procurement, and construction management services for the project. One of the project manager’s obligations was to deliver certain design drawings. The cost of the development as a whole was measured in the billions, and the value of the project management contract was itself almost $2 billion.

Company A also engaged a sub-contractor to carry out around $117 million of construction of facilities at the plant. Disputes arose around the construction, and the sub-contractor brought an ICC arbitration claim against Company A.  The main claim was that the sub-contractor should be paid additional costs due to delay and disruption that arose because of the late provision of design drawings.

To assist with the construction arbitration, Company A engaged Secretariat Consulting Pte Ltd (SCL). Based in Singapore, SCL’s terms of engagement included a typical conflict of interest clause that confirmed that SCL had no conflict of interest in acting for Company A and that SCL would maintain this position for the duration of [the] engagement.  SCL completed a conflict check before accepting the engagement, checking conflicts across all entities within its global brand.

Months later, a dispute arose between Company A and its project manager.  An ICC arbitration was commenced. The project manager made a claim for unpaid fees, and Company A counterclaimed.  At the heart of the dispute was the late delivery of the design drawings – the same drawings that had led to the dispute with the sub-contractor.

Around 2 months after the second arbitration had commenced, Secretariat International UK Limited (SIUL) approached the project manager, offering to provide arbitration support and expert services.  When Company A found out about SIUL’s involvement, it applied for an injunction from the courts, seeking to restrain SIUL from accepting the engagement on the basis that Company A had already engaged another entity within the Secretariat group in relation to a related dispute. 

Conflict of interest

Company A was successful in getting an injunction in the Technology and Construction Court (TCC), and the Court of Appeal upheld the injunction.  Interestingly, the reasoning of each court was different.  The TCC had found that the Secretariat group had fiduciary duties of loyalty to Company A, and as a result, was unable to act for the project manager.  However, the Court of Appeal focussed on the conflict of interest clause in the terms of engagement. 

The Court considered whether the clause should be interpreted widely, to extend to the Secretariat global brand.  Taking into account what the parties would have intended at the time the contract was entered into, and noting that the conflict of interest checks were completed across the international entities, the Court of Appeal ultimately found that the clause captured conflicts by any company within the Secretariat brand. Therefore, SIUL was unable to act for the project manager when the project management arbitration was so closely connected to the other arbitration in which SCL was acting for Company A.

A change to contracting practices going forward?

The TCC’s focus on fiduciary duties had been alarming to some, as fiduciary duties extend beyond a simple duty of loyalty.  So the Court of Appeal’s decision will be a welcome to relief in that respect.  However, it may still have wide-ranging implications.  Even though the decision was reached based on the specific contractual clause and contracting circumstances, the Court’s reasoning suggests that conflict of interest clauses of this nature are likely to be interpreted to apply globally across an international group.  Will we see a change in the terms of engagement offered by expert services firms, or a push back to such amendments by their clients?  Only time will tell. 

 

[1] Secretariat Consulting Pte Ltd v A Company [2021] EWCA Civ 6.

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