HKIA Feature Article

Case Study – Fiduciary Duty on Disclosure of Conflict of Interest

In the course of discharging professional duties, architects may from time to time encounter different conflict of interest (CoI) situations at work (i.e. when the private interests of an architect compete or conflict with the interests of his/her employers/clients or official duties).  CoI is not inherently a wrongdoing, however, mishandling or abusing such conflicts could have serious repercussions including criminal liability (e.g. fraud).  To help HKIA members avoid falling prey to the pitfalls of CoI and raise awareness of their fiduciary duty on disclosure of CoI, the following case study is compiled to illustrate the possible legal consequences of abuse of CoI and best practices of managing CoI declared.  Members should read in conjunction with the appropriate provisions of the Institute’s Code of Professional Conduct (the Code).

Case in Perspective

Albert was a project architect working in an architectural firm in Hong Kong and responsible for, among other duties, recommending building materials such as facade systems to clients.  Aside from his professional practice, Albert was a major shareholder in a manufacturing company that produced high-end, fire-rated glass curtain walls and building facades.  An overseas property developer, Company A, engaged Albert’s architectural firm to design a landmark luxury commercial skyscraper in Hong Kong.  Although many glass facade suppliers were available, Albert strongly recommended his own manufacturing company to Company A, which eventually awarded a contract to Albert’s company for design, supply and installation of glass curtain walls and building facades.  Despite the CoI, Albert failed to disclose his interest to the client with intent to induce the client to award the contract to his company so that he could a make huge profit.  Company A later discovered that other suppliers offered similar glass facades at more competitive prices.

Professional Conduct

HKIA has set out the principles and rules of conduct required for its members in the Code.  In respect of CoI, architects shall avoid any action or situation inconsistent with their professional obligations or likely to raise doubts about their integrity.  If architects find that their interests, whether professional or personal, conflict, they shall either withdraw from the situation, remove the source of conflict, or declare it and obtain the agreement of the parties concerned to the continuance of their engagement.

Legal Requirements

In accordance with section 16A(1) of the Theft Ordinance (Cap. 210), it is an offence if:

328. any person by any deceit (whether or not the deceit is the sole or main inducement) and with intent to defraud induces another person to commit an act or make an omission, which results either –

1. in benefit to any person other than the second-mentioned person; or
2. in prejudice or a substantial risk of prejudice to any person other than the first-mentioned person,

the first-mentioned person commits the offence of fraud and is liable on conviction upon indictment to imprisonment for 14 years.

Any registered architects, if being convicted of any offence in Hong Kong or elsewhere that may bring disrepute to the profession, will be subject to disciplinary actions stipulated in the Architects Registration Ordinance (Cap. 408), including removal from the register, reprimand by the Architects Registration Board, etc.

Integrity Risk Analysis

In the aforementioned case, Albert, as the architect, owes a fiduciary duty under the engagement agreement to his client, who has a reasonable expectation that the architectural firm would act honestly and in the client’s best interest (e.g. recommending a suitable materials supplier at a reasonable price).  Albert’s deliberate concealment of his financial interest in the manufacturing company could constitute a criminal offence under section 16A of the Theft Ordinance.  In addition, he may also be subject to disciplinary actions under the relevant regulations of HKIA and those stipulated in the Architects Registration Ordinance, if he is convicted.

Dos and Don’ts

As practitioners and professionals, architects should –

• abide by the Code issued by HKIA to handle CoI;
• strictly observe the CoI requirements set out by employers and/or clients (including the requirement to declare CoI to parties concerned);
• remain vigilant to the fiduciary duty that they owe to both their employers and clients;
• avoid CoI as far as practicable, and declare CoI, if unavoidable, to employers and/or clients even if such declaration requirements are not explicitly stated;
• not misuse their position or abuse their power for personal gains; and
• seek the instructions from employers and/or clients on the follow-up actions to mitigate the declared CoI.

Employers (e.g. architectural firm) should –

• devise a mechanism for handling the declaration and management of CoI from staff, including but not limited to the following –
  14. providing work-related examples and guidelines on managing CoI for reference by staff;
  14. issuing a form to facilitate written declaration by staff and record of the follow-up actions taken, where applicable; and
  14. setting out procedures and schedule of authorities for handling the declaration forms and determining the follow-up actions to be taken.
• ensure staff are well aware of the CoI declaration and management requirements (e.g. enshrining the requirements in a code of conduct or employment contract, circulating the requirements on a regular basis or when there are updates, and conducting periodic training).

Assistance from ICAC

The ICAC, through the Corruption Prevention Advisory Service (CPAS) of its Corruption Prevention Department (CPD), provides free, confidential and tailor-made corruption prevention services to private companies upon request.  For further information, please contact the CPAS at:

You are most welcome to visit our InNet, a platform that supports integrity management by individual companies/enterprises, including the construction industry.