Risk Update

Expert Witness Conflicts Considerations — More Analysis (Accounting Edition)

Clyde and Co continue their analysis of Secretariat v A Company [2021] EWCA Civ 6, with a focus on “implications for all accounting firms offering dispute support and/or expert services”: “Navigating stormy waters: experts’ duties and conflicts of interest” —

  • “The recent Court of Appeal decision in Secretariat PTE Ltd & Ors v A Company [2021] EWCA Civ 6, upholding an injunction against a global expert services firm on the grounds of conflict of interest, has implications for all accounting firms offering dispute support and/or expert services.”
  • “This judgment underscores the risk for professional firms offering expert and/or litigation support services of accepting instructions which place them in conflict of interest. Such a conflict can exist even where (as here) the relevant instructions were accepted by separate legal entities within an organisation in completely different parts of the world. While in some cases it might in theory be remedied by both clients’ consent, this was not a situation which could be addressed or mitigated by the firm implementing Chinese walls (which can assist particularly with so-called “former client conflicts” where the concern is the protection of a former client’s confidential information but not where, as here, there is an “existing client conflict”).”
  • “Such a conflict may breach a contractual duty to the first client, which as this judgment demonstrates may be construed as binding not just the contracting expert entity but – depending on how the expert organisation conducts its conflicts procedures and presents its services – also other or all entities within the organisation. Absent a contractual duty, this judgment has left open the possibility that it may still breach a fiduciary duty of loyalty to the first client – and of course an accounting firm will have its regulatory duties to avoid conflicts too.”
  • “As a result, firms – particularly those operating through multiple legal entities and in multiple jurisdictions – need robust/joined-up conflicts procedures and clear terms of engagement with their clients. Such terms might, for example, expressly provide that any commitment relating to conflicts is limited to the entity being instructed and does not bind any other entity in the group – though as the judgment observes, if a firm seeks to limit client protection in this way ‘whether … it will secure the instruction, is another matter.'”