The Solicitor's Headache: Conflicting Duties of Confidentiality and Disclosure

The solicitor’s headache: conflicting duties of confidentiality and disclosure

Charles Phipps Simon Teasdale

4 New Square

Professional Liability & Regulatory Conference

4 February 2020

This material was provided for the 4 New Square Professional Liability & Regulatory Conference on 4 February 2020. It was not intended for use and must not be relied upon in relation to any particular matter and does not constitute legal advice. It has now been provided without responsibility by its authors.

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Charles Phipps Call: 1992 “He has a brilliant legal mind and looks at cases upside-down and back-to-front to absolutely get to grips with the issues.” “He combines formidable learning and technical expertise with an acute sense of how judges are likely to respond in practice.” – Legal 500 2019 & 2020

"Very measured, with a huge wealth of knowledge and case law at his fingertips." "He is one of the most user-friendly barristers I have dealt with and would be at the top of my list for a measured, strategic opinion on a technical professional negligence case." “His strategic advice was excellent; he’s very quick at turning around very detailed notes of advice.” – Chambers & Partners 2019 and 2020

Charles has a particular interest in disputes relating to obligations of confidentiality (including legal professional privilege) and is a co-author of the forthcoming 4th edition of Toulson & Phipps on Confidentiality (Sweet & Maxwell, 2020)

He specialises in professional liability claims involving lawyers, accountants and auditors, financial services professionals, insolvency practitioners, surveyors and valuers, and insurance brokers, and is also instructed in more general chancery and commercial litigation. Charles also has expertise in regulatory and disciplinary matters – acting in cases before the Disciplinary Tribunal of the ICAEW and frequently advising solicitors about the problems posed by SRA investigations.

Simon Teasdale Call: 2015 Simon Teasdale has a commercial practice, with a particular focus on costs litigation, professional liability and construction disputes. In addition to being led by Silks in chambers, he regularly appears as sole counsel at hearings and trials in both the High Court and County Court.

Simon is also a co-author of the forthcoming 4th edition of Toulson & Phipps on Confidentiality (Sweet & Maxwell, 2020), in which his writing has had a particular focus on legal professional privilege, issues of confidentiality which may arise in the conduct of litigation, and the relationship between lawyers and their clients.

Those issues arise frequently in costs disputes between solicitors and their former clients – a practice area in which Simon is developing a specialism. For example, Simon was recently led by Nicholas Bacon QC in a three-day preliminary issue trial in the SCCO which centred on the question of whether, during the course of settlement negotiations with a counterparty in litigation, a client had ‘approved’ £3.6m of their own solicitor’s costs for the purposes of CPR 46.9(3)(a) and (b). In addition, Simon was recently instructed in Commercial Court litigation between solicitors and former clients in which the question arose: when might a court be obliged to hold part of a hearing not only in private, but also in the absence of one of the defendants?

THE SOLICITOR’S HEADACHE: CONFLICTING DUTIES OF CONFIDENTIALITY AND DISCLOSURE

Charles Phipps and Simon Teasdale

Introduction 1. All professional advisers owe duties of confidentiality to their clients. In general these duties are subject to express or implied qualifications, as categorised by the Court of Appeal in Tournier v National Provincial and Union Bank1: 1.1. where disclosure is made with the express or implied consent of the client; 1.2. where disclosure is made under compulsion of law; 1.3. where there is a duty to the public to disclose; 1.4. where disclosure is required for the legitimate defence of the professional adviser’s own interests. 2. The majority of information held by lawyers about their clients is likely to be confidential, but much of it may also be privileged. Unlike confidentiality, the protection afforded by legal professional privilege is absolute: 2.1. the first Tournier category of exception remains applicable (e.g. the implied waiver when the client sues the solicitor2); 2.2. the second Tournier category of exception also remains applicable, but is much more narrowly confined (e.g. privileged material is generally immune from disclosure in litigation, but privilege may be overridden expressly by legislation); 2.3. the third and fourth Tournier categories of exception are generally inapplicable3. 3. Legal professional privilege accordingly presents particular problems for lawyers, of a kind which solicitors are well used to addressing. For example, on a cautious view, solicitors are unable, in the absence of an express waiver of privilege, to communicate freely with their insurers about potential claims by clients, or even actual claims by non-clients4. 4. A solicitor’s duty of confidentiality, whether in respect of privileged or non-privileged material, is not a fiduciary duty, but it can have the same consequence as a fiduciary duty, inasmuch as

1 [1924] 1 K.B. 461 at 473. Tournier was a bankers’ case, but the dicta of the Court of Appeal have generally been held to be of wider application: see Re C (A Child) (Application by Dr X and Y) [2015] EWFC 79 per Sir James Munby P. at [21]. 2 Paragon Finance plc v Freshfields [1999] 1 W.L.R. 1183. 3 R v Derby Magistrates’ Court, ex parte B [1996] AC 487. 4 Quinn Direct Insurance Ltd v Law Society of England and Wales [2011] 1 W.L.R. 308, a decision which may (one day) bear re-examination by the Court of Appeal or Supreme Court.

it may prevent a solicitor from accepting a retainer, or from continuing to act, in circumstances where confidentiality is under threat. We propose to examine in more detail two ways in which such a threat can arise. 4.1. The first stems from the legal and professional obligations of disclosure that solicitors owe to their (other) clients – as will be seen, these represent another idiosyncratic feature of the relationship between solicitor and client, of a kind which few other professional advisers have to worry about. 4.2. The second is ultimately a matter of practicality: even where a solicitor is not under a duty to disclose information to another client, the question arises whether an accidental leak of information can be reliably prevented. 5. Below we analyse these two problems in turn - addressing both the legal and the professional obligations of solicitors, because the contents of the two kinds of obligation are not entirely identical. We seek to offer some practical tips about how the difficulties can be mitigated, and we also offer a brief diversion into the arcane world of data subject access requests.

Legal obligation to disclose 6. In the Bermudian case of Kelly v Cooper5 the defendant estate agent acted separately for the respective vendors of two adjacent houses. The purchaser agreed to buy one of the houses and then negotiated also to buy the other. The vendor of the second house complained that, if they had been informed of the sale of the first house, they would have been able to extract an enhanced price from the purchaser. They alleged that the estate agent’s failure to inform them of the sale of the first house represented a breach of the fiduciary and contractual duties which were owed to them. 7. On appeal, the Privy Council dismissed the claim. It held that there was an implied term of the estate agent’s retainer that he was entitled to act for other principals selling competing properties and to keep confidential the information obtained from each of his principals. Similarly, the scope of the fiduciary duties owed by the estate agent to his principals was to defined by the terms of the contract of agency: “…their Lordships are of the view that since the plaintiff was well aware that the defendants would be acting also for other vendors of comparable properties and in so doing would receive confidential information from those other vendors, the agency contract between the plaintiff and the defendants cannot have included either (a) a term requiring the defendants to disclose such confidential information

5 [1993] A.C. 205.

to the plaintiff or (b) a term precluding the defendants acting for rival vendors or (c) a term precluding the defendants from seeking to earn commission on the sale of the property of a rival vendor.”6 8. The Privy Council said in passing7 that the same position as to confidentiality was “even clearer in the case of stockbrokers who cannot be contractually bound to disclose to their private clients inside information disclosed to the brokers in confidence by a company for which they also act.” 9. In Hilton v Barker Booth & Eastwood8 a firm of solicitors acted in breach of professional duty for both the claimant and another client, B, in a property development transaction. Unknown to the claimant, but known to the solicitors (who had acted for B in the relevant criminal proceedings), B had recently been released from prison after serving a sentence for offences of fraudulent trading and obtaining credit while an undischarged bankrupt. 10. It was held by the House of Lords that the solicitors owed to the claimant a contractual duty of full disclosure, which was rooted in the fiduciary relationship between solicitor and client. Accordingly, the solicitors were required to disclose the discreditable facts about B to the claimant, and it was no excuse that in so doing they would have breached their duty to B. The solicitors’ retainer contained no implied term of the kind found to have existed in the estate agent’s retainer in Kelly v Cooper; through their own fault, they had placed themselves in a situation where they were bound to be in breach of their duty to one client or the other, whatever they did. 11. The speeches in the House of Lords9 effectively relegated to a special category of their own a number of solicitor’s negligence cases which suggested that the duty of confidence owed by solicitors to mortgage borrowers might override their duty of disclosure to mortgage lenders. The decision instead amounted to a reaffirmation of the general principle enunciated by Megarry J in Spector v Ageda10: “A solicitor must put at his client’s disposal not only his skill but also his knowledge, so far as is relevant; and if he is unwilling to reveal his knowledge to his client, he should not act for him. What he cannot do is act for the client and at the same time withhold from him any relevant knowledge that he has.”

6 [1993] A.C. 205 at 215D. 7 [1993] A.C. 205 at 214E. 8 [2005] 1 W.L.R. 567. 9 [1993] A.C. 205 at [28] and [45]. 10 [1973] Ch.30 at 48.

12. In Harlequin Property (SVG) Ltd v Wilkins Kennedy11 the defendant accountants acted in relation to a luxury Caribbean resort development for both the owners and the contractor who constructed one phase of the development. The owners subsequently sued the accountants for failing to disclose to them alleged misappropriations of funds by the contractor’s owner. 13. Coulson J dismissed most of the claim, following Kelly v Cooper and distinguishing Hilton v Barker Booth & Eastwood. He said: (a) Hilton v Barker Booth is a case about a solicitors' duty of single-minded loyalty to his client. It was also a situation, unlike the present case, where the professional was in possession of the relevant information at the outset; he did not acquire it during his work for his client. (b) In my view, a solicitor acts in a different professional, regulatory and ethical context to an accountant … (c) To that extent, I consider that an accountant is in a situation more akin to that of the estate agent in Kelly v Cooper, which is authority for the proposition that a professional is not required to relay confidential information relating to one principal to another, so there could be no liability for his failure so to do. 14. Coulson J’s distinction of Hilton based on the chronology of the defendants’ acquisition of the relevant information is not easy to follow, but the important point for present purposes is that accountants and auditors appear to join stockbrokers and estate agents on one side of a line which separates them from solicitors and, presumably, other lawyers. Whether other professional advisers will join the lawyers on their side of the line is uncertain; it may be that lawyers are unusual in being subject to the burdens imposed by the decision in Hilton12. 15. How does the Hilton duty apply in the case of larger firms? Suppose that a firm whose Manchester office is retained by client A also has a Bristol office, and suppose that someone in that Bristol office has knowledge which the Manchester office does not have, but which would be relevant to client A’s case. Does the firm as a whole come under a Hilton duty to disclose the relevant information to client A? 16. It seems to us that the answer to that must depend on whether the Bristol office’s knowledge is, for these purposes, to be attributed to the firm as a whole. The rules for attribution of knowledge are notoriously vexed, but in Bolkiah v KPMG13 Lord Millett said:

11 [2017] 4 W.L.R. 30. 12 Commercial agents will generally also be subject to the stricter approach applied in Hilton: see Rossetti Marketing Ltd v Diamond Sofa Co Ltd [2013] Bus. L.R. 543. 13 [1999] 2 A.C. 222 at 235.

“…it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case. In this respect also we ought not in my opinion to follow the jurisprudence of the United States.” [Emphasis added] 17. That suggests strongly that, in our example, the knowledge of the Bristol office should not be automatically attributed to the Manchester office, so as to place the firm, through its Manchester office, under a duty to disclose to client A the information which is in fact known only to the Bristol office. In Bolkiah v KPMG Lord Hoffmann was discussing the attribution of knowledge between traditional partners, but similar principles should apply in the case of a limited liability partnership, or a limited company14. That still leaves a problem (returned to further below) where: 17.1. some or all of the knowledge held by the Bristol and Manchester offices is acquired centrally by the firm, for example by the firm’s General Counsel function ; or 17.2. the Manchester office knows that the Bristol office is likely to hold information which it would be relevant for client A to know, even if the Manchester office does not know precisely what that information might be. 18. Since the duty of disclosure is based upon an implied contractual term, under the general law it is possible for a solicitor (as for any professional adviser) to contract out of it. In Minkin v Landsberg15 Jackson LJ summarised the relevant principles as follows: “(i) A solicitor's contractual duty is to carry out the tasks which the client has instructed and the solicitor has agreed to undertake.

14 See the discussion of this issue in Hollander & Salzedo’s Conflicts of Interest (5th edition, 2016), at paragraphs 6-024 to 6-028. 15 [2016] 1 WLR 1489, at [38]

(ii) It is implicit in the solicitor's retainer that he/she will proffer advice which is reasonably incidental to the work that he/she is carrying out. (iii) In determining what advice is reasonably incidental, it is necessary to have regard to all the circumstances of the case, including the character and experience of the client. (iv) In relation to (iii), it is not possible to give definitive guidance, but one can give fairly bland illustrations. An experienced businessman will not wish to pay for being told that which he/she already knows. An impoverished client will not wish to pay for advice which he/she cannot afford. An inexperienced client will expect to be warned of risks which are (or should be) apparent to the solicitor but not to the client. (v) The solicitor and client may, by agreement, limit the duties which would otherwise form part of the solicitor's retainer. As a matter of good practice the solicitor should confirm such agreement in writing. If the solicitor does not do so, the court may not accept that any such restriction was agreed.” 19. However, it is (probably) impossible for a solicitor to contract out of the solicitor’s duty to act in the best interests of the client, so the potential interaction between this duty and the obligation of disclosure can sometimes require some careful consideration. How can an individual solicitor who has knowledge relevant to a client’s retainer both keep that information secret and advise the client properly? Very often, the solicitor can’t – another factor which emphasises the potential importance of information barriers (a topic to which we return below).

Professional obligation of disclosure 20. The SRA’s new rules on confidentiality and disclosure are set out in the Codes of Conduct for Solicitors and for Firms, in each case in section 6. Beyond the generally expressed obligation to preserve client confidentiality, there are two other relevant rules, the first imposing a duty of disclosure and the second inhibiting solicitors from acting in matters where there is a risk of an unauthorised disclosure of confidential information. 21. As for the duty of disclosure, the Code of Conduct for Solicitors provides that: 6.4 Where you are acting for a client on a matter, you make the client aware of all information material to the matter of which you have knowledge, except when: (a) the disclosure of the information is prohibited by legal restrictions imposed in the interests of national security or the prevention of crime;

(b) your client gives informed consent, given or evidenced in writing, to the information not being disclosed to them; (c) you have reason to believe that serious physical or mental injury will be caused to your client or another if the information is disclosed; or (d) the information is contained in a privileged document that you have knowledge of only because it has been mistakenly disclosed. 22. The Code of Conduct for Firms is in the same terms and provides the same exceptions, but the general rule for a firm is expressed in terms that “any individual who is acting for a client on a matter makes the client aware of all information material to the matter of which the individual has knowledge”. 23. The SRA’s old Code of Conduct 2011 (section 4) contained similar but different rules. Several of the changes which came into effect on 25 November 2019 amount to mere “tidying up”, but they include the following three rather more significant developments to the disclosure obligation: 23.1. The old rule was expressed to apply to “any individual who is advising a client”. The new rule’s broader reference to “acting for” a client closes off any arguable loop- hole for solicitors who attempt to justify the non-provision of information to clients on the basis that they are not actually advising those clients. 23.2. Gone is the old Outcome 4.3: “you ensure that where your duty of confidentiality to one client comes into conflict with your duty of disclosure to another client, your duty of confidentiality takes precedence”. The removal of that rule effectively acknowledges both that there is no way in which a solicitor with conflicting duties of confidentiality and disclosure is able to reconcile them (as held in Hilton) and that, in the unhappy situation where a solicitor must break the duty owed to one client or the other, the path of least damage is probably best left for the solicitor to attempt to identify in the light of the individual circumstances of the case. 23.3. The former exception for consent (previously set out in Indicative Behaviour 4.4) was: “the client gives specific informed consent to non-disclosure or a different standard of disclosure arises”. The obscure reference to “a different standard of disclosure arising” has now been removed, whatever it may once have meant. Otherwise the new rule is tightened in one direction, but relaxed in another: 23.3.1. consent must now be given or evidenced in writing; but

23.3.2. the requirement that informed consent must be “specific” has been removed, which presumably means that consent can now be “general”, a point to which we return below. 24. So much for recent developments in the regulatory regime. How does the regime as it presently stands fit with the general law? 25. The professional obligation to disclose relevant information to one’s client reflects the implied contractual obligation to the same effect (as established in Hilton). As for the exceptions provided by rule 6.4: 25.1. Legal restrictions in the interests of national security or crime prevention (6.4(a)) clearly have effect in law, just as they do under the Code of Conduct. 25.2. There is no requirement in law that a client’s consent to non-disclosure should be recorded in writing (6.4(b)), but there are clearly sensible reasons why the SRA should impose such a requirement in the interests of certainty and good governance. 25.3. The extreme and rare scenario where disclosure will cause serious physical or mental injury (6.4(c)) probably reflects the legal position: in such a scenario, there will be an implied contractual qualification on the implied contractual duty of disclosure. 25.4. The exception for privileged documents which have been mistakenly disclosed (6.4(d)) raises a number of issues. One is whether the exception is mandatory: a solicitor may not be obliged professionally to provide mistakenly disclosed privileged information to the client, but is the solicitor under a positive obligation not to provide it to the client? 25.4.1. Under the law as it has tortuously evolved, legal privilege in a document mistakenly made available for inspection during the disclosure process will be lost unless the mistake either was appreciated or should have been appreciated before the document was used16, in which case the court will usually restrain the recipient from subsequent use of the document. 25.4.2. Preventing a litigant from using a privileged document is one thing; inhibiting the litigant’s solicitor from communicating frankly with the litigant is another (much stronger) thing. 25.4.3. One can see that a solicitor who realises or ought to realise that information is privileged, but nevertheless sets out deliberately to acquire that information, can appropriately be restrained from

16 Atlantisrealm Ltd v Intelligent Land Investments (Renewable Energy) Ltd [2018] 4 W.L.R. 6.

afterwards sharing the improperly acquired information with the client. But why should a solicitor who reasonably does not realise that a document is privileged until after reading it be prevented from discussing it with the client? In our view, to impose such a restriction on the solicitor in order to protect the other party from the consequences of its own carelessness would be to go too far, bearing in mind the damage which the restriction would inflict on the relationship between lawyer and client17. 25.4.4. It therefore seems to us that the exception at 6.4(d) should be read as permissive, rather than mandatory in all cases: it is professionally open to solicitors in appropriate circumstances to conclude that they should not provide to their client privileged information which has been mistakenly disclosed by the other side. 26. The reference in Rule 6.4 of the Code of Conduct for Firms to individuals with knowledge and individuals acting for clients reflects what we have suggested should be the approach which the law takes in relation to the attribution of knowledge between a firm’s individual fee earners. 27. The rule requires solicitors to “make the client aware” of any relevant information “of which [the solicitors] have knowledge”. Is that a broader requirement than a requirement to impart to the clients any relevant information which the solicitors actually have? It appears that the professional issues which arise for a solicitor in the Manchester office who is aware that a solicitor in the Bristol office is likely to have knowledge relevant to client A are similar to the legal issues (already mentioned above).

Obligations of disclosure: practical measures 28. Solicitors will always have to remain alert to the possibility that unexpected conflicts of interest/duty may arise. There is no silver bullet which kills the risk. However, there are some practical steps which are worth considering and which may serve to mitigate the risk - or at least the ill-effects of the risk: 28.1. Consider including as a term in the retainer the client’s agreement that the firm is entitled to disclose information on terms of strict confidentiality (and without any waiver of the client’s privilege) to its own legal advisers and to its insurers.

17 See R v G [2004] 1 W.L.R. 2932 (CA) and Somerville v Scottish Ministers [2007] 1 W.L.R. 2734 per Lord Rodger at [152]-[153] and Lord Mance at [203].

28.2. Consider including as a term in the retainer the client’s agreement that confidential information obtained in the course of the firm’s retainers by other clients need not be disclosed to the client. 28.3. As and when the circumstances make it appropriate to do so, consider getting express confirmation of the client’s agreement to non-disclosure in relation to specific other retainers of which the client is, or can properly be made, aware. 28.4. When a concern arises about a potential conflict between the duties owed by the firm to two different clients of two different fee-earners (or of two different teams, or of two different offices), ensure that all communications about that conflict are carried on through general counsel (or an equivalent central function of the firm), rather than directly between the lawyers involved. Try to ensure that the fee-earners acting for the client to whom other clients’ confidential information might be relevant do not themselves inadvertently acquire that information. 28.5. When a concern arises about a potential conflict between the duties owed by the firm to two different clients, try to analyse whether the conflict arises simply out of the firm’s possession of confidential information, or whether the conflict arises out of a more fundamental conflict between the clients’ interests. The former type of conflict may well be manageable with a combination of information barrier and client consent; the latter is much less likely to be amenable to such arrangements. 28.6. If you receive mistaken/accidental communications of confidential/privileged documents, try to resolve any potential issues before taking steps to acquire/disseminate/use the information contained in those communications.

Subject access requests 29. One specific and relatively new cloud on the conscientious solicitor’s horizon is the data protection regime. The UK may be leaving/recently have left the European Union but, for the time being at least, the European data protection regime remains in place, having been adopted into UK domestic law by ever-shifting legislative provisions of great complexity18. 30. A prominent part of the regime is the right of individuals to access their personal data. Under Article 15 of the GDPR: 1. The data subject shall have the right to obtain from the controller confirmation as to whether or not personal data concerning him or her are being processed,

18 See, for example and in particular, the Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019/419.

and where that is the case, access to the personal data and the following information: (a) the purposes of the processing; (b) the categories of personal data concerned; (c) the recipients or categories of recipient to whom the personal data have been or will be disclosed, in particular recipients in third countries or international organisations; (d) where possible, the envisaged period for which the personal data will be stored, or, if not possible, the criteria used to determine that period; (e) the existence of the right to request from the controller rectification or erasure of personal data or restriction of processing of personal data concerning the data subject or to object to such processing; (f) the right to lodge a complaint with a supervisory authority; (g) where the personal data are not collected from the data subject, any available information as to their source; (h) the existence of automated decision-making, including profiling, referred to in Article 22(1) and (4) and, at least in those cases, meaningful information about the logic involved, as well as the significance and the envisaged consequences of such processing for the data subject. 31. The making of data subject access requests became a popular litigation tactic, especially among litigants in person. Such requests placed an immense burden on those, especially solicitors, who owed conflicting duties of confidentiality to their clients (who may or may not also be individuals). The leading cases are Dawson-Damer v Taylor Wessing LLP19 and Ittihadieh v 5-11 Cheyne Gardens RTM Co Ltd20. The latter was a conjoined appeal, which also involved a dispute between the University of Oxford and a Dr Deer. The University had reviewed over 500,000 documents in response to Dr Deer’s request, at a cost of £116,116, but Dr Deer complained that its response was inadequate. Lewison LJ observed21 that: “I cannot help thinking… that both the Directive and the DPA have, as an underlying assumption, the assumption that personal data can be sufficiently retrieved and made ready for disclosure to the data subject at the touch of a few buttons. Experience shows that this assumption is fundamentally unsound.”

19 [2017] 1 W.L.R. 3255. 20 [2018] Q.B. 256. 21 At [95]; the other members of the Court agreed with Lewison LJ’s judgment.

32. The Court of Appeal held in favour of the University, but the terms of Lewison LJ’s judgment provided little comfort for litigation solicitors who hoped that they could simply dismiss subject access requests by their clients’ opponents as plainly abusive. Although legally privileged communications were exempt from the subject access provisions, Lewison LJ said22: “If some personal data are covered by legal professional privilege and others are not, the data controller will have to carry out a proportionate search to separate the two.” 33. However, both Dawson-Damer and Ittihadieh were authorities dealing with the 1998 Data Protection Act. The Data Protection Act 2018 not only retained the exemption for legal professional privilege at paragraph 19 of Part 4 of Schedule 2 to the Act, but added another, under paragraph 19(b): “personal data that consists of… (b) information in respect of which a duty of confidentiality is owed by a professional legal adviser to a client of the adviser” 34. That might not protect documents which have already been seen by the data subject (eg inter- party communications), but the exemption would otherwise appear to extend to the entirety of a solicitor’s file. It may be therefore that tactical subject access requests will now more frequently be directed to the solicitor’s client, rather than to the solicitor itself.

Legal inhibitions on acting 35. Even if a new client expressly agrees that a solicitor need not provide it with the confidential information of another current or former client, the solicitor may still not be able to act if there remains a risk that the other client’s confidential information might be leaked inadvertently to the new client. A former or current client who is concerned about that risk may wish to seek injunctive relief restraining the solicitor from acting for the new client. Objections by a former client 36. It is necessary to consider separately the confidential information of former clients and the confidential information of current clients. The leading authority in relation to the former remains Lord Millett’s speech in Bolkiah v KPMG23: “…it is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in

22 At [102]. 23 [1999] 2 A.C. 222.

which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think that it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters.” 37. Lord Millett suggested that the court will intervene only if the former client has an interest in the new matter which is adverse to the interest of the new client. We would suggest that this qualification represents a potential trap for the unwary solicitor. The former client may have no interest at all in the new matter, or may have interests which are aligned with the new client’s interests. But it would surely be wrong to suggest that the former client is not entitled in such circumstances to keep their privileged communications confidential from the new client24. As Lord Hoffmann said in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax25: “It is not the case that LPP does no more than entitle the client to require his lawyer to withhold privileged documents in judicial or quasi-judicial proceedings, leaving the question of whether he may disclose them on other occasions to the implied duty of confidence. The policy of LPP requires that the client should be secure in the knowledge that protected documents and information will not be disclosed at all.” [emphasis added] 38. Once the firm’s possession of relevant confidential information is established, then the burden is on the firm to show that there is no real risk that the confidential information will leak. As Lord Millet made clear in Bolkiah26, the duty on a solicitor is to keep the information confidential, not merely to take all reasonable steps to do so. Information barriers 39. Lord Millett treated the protection afforded by information barriers with considerable caution. He noted that there was no rule of law that information barriers or other arrangements were necessarily insufficient to eliminate the risk of disclosure, but “the starting point must be that, unless special measures are taken, information moves within a firm”. Lord Millett suggested that an information barrier would probably need to be part of the organisational structure of a firm in order for it to be effective. 40. There have been many subsequent decisions on the adequacy or inadequacy of information barriers, and each case will inevitably depend on its own fact. However:

24 See Hollander & Salzedo, Conflicts of Interest (5th edition, 2016), at para.7-003. 25 [2003] 1 A.C. 563, at [30]. 26 [1999] 2 A.C. 222 at 235-236.

40.1. A good example of the difficulties inherent in erecting a satisfactory barrier, despite laborious efforts and significant expense, is the decision of Field J. in Georgian American Alloys Inc v White and Case LLP27. In that case, the teams on either side of the barrier were in different departments, on difference continents, but the separation had not been watertight from ‘Day 1’, and neither the ‘ethical screens’ nor the physical separation had entirely prevented the risk of disclosures being made orally. As a result, Field J found that White & Case had failed to discharge the evidential burden on them to show there was no real risk that information had already leaked between teams (such that it was not even necessary to consider the future effectiveness of the tighter barriers which had since been erected). 40.2. Solicitors’ firms, on the other hand, often cite the dicta of Tuckey L.J. in Koch Shipping v Richards Butler28: “…I think there is a danger inherent in the intensity of the adversarial process of courts being persuaded that a risk exists when, if one stands back a little, that risk is no more than fanciful or theoretical. I advocate a robust view with this in mind, so as to ensure that the line is sensibly drawn.” 41. In Glencairn IP Holdings v Product Specialities Inc (t/a Final Touch)29, HHJ Hacon returned to the principles laid down by Lord Millett in Bolkiah, and provided a useful and up-to-date summary of the approach which court’s should take to assessing the adequacy of an information barrier. Citing Laddie J’s comments in Young v Robson Rhodes (A Firm)30 he said: “The crucial question is ‘will the barriers work?’. If they do, it does not matter whether they were created before the problem arose or are erected afterwards. It seems to me that all Lord Millett was saying was that the [information barriers] which have become part of the fabric of the institution are more likely to work than those artificially put in place to meet a one-off problem.”

Objections by a current client 42. When the confidential information in question is that of, not a former client, but a current client, the firm owes that client not only a duty of confidentiality but also fiduciary duties and it becomes necessary to take into account also the conflicts rules which govern the conduct of fiduciaries.

27 [2014] 1 C.L.C. 86. 28 [2003] P.N.L.R. 11 at [53]. 29 [2019] EWHC 1733 (IPEC) at [14]. 30 [1999] 3 All ER 524 at [42].

43. If the interests of the two clients potentially conflict and there is a “reasonable relationship” between the two retainers, then it will be a breach of fiduciary duty for the solicitor to accept the new retainer without the informed consent of both clients31. What constitutes a “reasonable relationship” between retainers remains open to debate, but in broad terms the category should presumably be defined by reference to the likelihood or risk that the clients’ (actually or potentially) conflicting interests will give rise to (actually or potentially) conflicting duties on the part of the solicitor. One relevant question in this context will be: how likely is it that confidential information provided by a client under one retainer could be used (in the absence of any information barrier) against the client’s interest under the other retainer? 44. Even if the interests of the current client are not adverse to the interests of the new client, the firm’s duty of confidentiality to the current client and duty of disclosure to the new client are likely to create at least a potential conflict between the firm’s duties unless properly addressed (by informed consent and the erection of information barriers).

Professional inhibitions on acting 45. When considering the professional restrictions imposed by the SRA’s new Code of Conduct, it is again necessary to distinguish between the confidential information of a former client and the confidential information of a current client. 46. In the case of both, it is necessary to have regard to Rule 6.5 of the new Code of Conduct for Firms32, which provides that: You do not act for a client in a matter where that client has an interest adverse to the interest of another current or former client for whom you hold confidential information which is material to that matter, unless: (a) effective measures have been taken which result in there being no real risk of disclosure of the confidential information; or (b) the current or former client whose information you hold has given informed consent, given or evidenced in writing, to you acting, including to any measures taken to protect their information. 47. This rule departs in some respects from the old Code of Conduct 2011. In particular: 47.1. The old requirement (formerly set out at Outcome 4.4(a)) that the new client should give informed consent to the use of information barriers has been removed. That is

31 Marks & Spencer plc v Freshfields Bruckhaus Deringer [2004] 1 WLR 2331 (Lawrence Collins J); [2005] PNLR 4 (Court of Appeal). NB that the informed consent of the clients may not satisfy the SRA: see further below. 32 Rule 6.5 of the new Code of Conduct for Solicitors is in similar terms.

presumably because that requirement is already contained in Rule 6.4(b) (discussed above) and its repetition here would be superfluous. 47.2. The old rule (formerly set out at Outcome 4.4(b)) appeared to suggest that the consent of the existing or former client should also be obtained, except “where this is not possible”. The presumption that the “consent route” should be adopted whenever available no longer applies. 47.3. Unlike the old rule, the new rule again requires that if the solicitor is to rely on any client consent, then that consent must be given or evidenced in writing. 48. Following Lord Millett in Bolkiah v KPMG the rule is expressed to apply only where the former or current client has an interest which is adverse to the interest of the new client. In that respect it is (unusually) probably less rigorous than the requirements of the general law. 49. If the firm relies on its client’s consent, that consent must encompass not only the firm’s new retainer, but also the specific measures taken to protect the client’s information. 50. When the confidential information is held by a current client, the solicitors have to have regard, not only to Rule 6.5, but also to Rule 6.2: You do not act in relation to a matter or particular aspect of it if you have a conflict of interest or a significant risk of such a conflict in relation to that matter or aspect of it, unless: (a) the clients have a substantially common interest in relation to the matter or the aspect of it, as appropriate; or (b) the clients are competing for the same objective, and the conditions below are met, namely that: (i) all the clients have given informed consent, given or evidenced in writing, to you acting; (ii) where appropriate, you put in place effective safeguards to protect your clients' confidential information; and (iii) you are satisfied it is reasonable for you to act for all the clients. [emphasis added] 51. “Conflict of interest” in Rule 6.2 is a defined term: “a situation where your separate duties to act in the best interests of two or more clients in relation to the same or a related matter conflict.” 52. As discussed above, even in the absence of a prior adverse interest, a solicitor’s separate duties of confidentiality and disclosure are capable of giving rise to a conflict of duties, unless the client’s consent to the non-disclosure of other clients’ confidential information is

obtained. Moreover, although under the general law a solicitor can act in a position of conflict with the informed consent of both clients, the two exceptions under Rules 6.2(a) and 6.2(b) are significantly more restrictive.

Objections by third parties to a solicitor acting for a new client 53. It is not just former or current clients who might object to a solicitor acting for a new client. 53.1. Where a particular solicitor has previously acted for Party A against Party B, they may have acquired information confidential to Party B in doing so. If that solicitor then intends to act in other proceedings against Party B, Party B may have concerns over whether its confidential information will be misused by the solicitor in those other proceedings. 53.2. In British Sky Broadcasting Group Plc v Virgin Media Communications Ltd33, the Court of Appeal held that there was no need for the solicitor to be injuncted from acting against Party B, at least where the new litigation was between the same parties as the previous litigation (ie, the solicitor was acting for Party A again): “…The passage in the speech of Lord Millett in Bolkiah v KPMG … cannot be applied to a solicitor who has obtained information from an opponent by the process of disclosure. It is usually enough to rely upon the recognition by a solicitor of the duty not to make any ulterior use of information obtained by disclosure.” 34 53.3. Similarly, in Stiedl v Enyo Law LLP35 (where there had been inadvertent disclosure of privileged material) Beatson J drew a distinction between two classes of case: “The first class consists of cases in which there has been a previous relationship of solicitor and client in which confidential or privileged information is acquired by the solicitor and that solicitor now acts or wishes to act for another person who is in dispute with the former client. The second class consists of cases where, without any such previous relationship, a solicitor becomes possessed of confidential or privileged information belonging to the other party to the dispute… in a ‘previous relationship’ case, in the ordinary course a court will grant an injunction restraining the solicitor acting... In cases where there has been no previous solicitor-client relationship, however, in the ordinary course the court will merely grant an injunction restraining the solicitor making use of that information...”

33 [2008] EWCA Civ 612. 34 [2008] EWCA Civ 612 at [21]–[22]. 35 [2011] EWHC 2649 (Comm); [2012] P.N.L.R. 4 at [39].

53.4. However, the Court of Appeal in British Sky Broadcasting Group Plc v Virgin Media Communications Ltd left open the question of whether the solicitor could be restrained by Party B where they intended to act, not for Party A again, but for a third party: “In a rare case, the fact the documents have been disclosed to solicitors acting for a party in one set of proceedings might conceivably preclude those solicitors from acting for a different party in another set of proceedings.”36 54. Those were the facts of Glencairn IP Holdings Ltd v Product Specialities Inc. The claimants (“Glencairn”), manufacturers and sellers of glassware, brought an action against the defendants (“Final Touch”) for allegedly infringing the registered design of a whisky glass. The claimants had previously brought an action in relation to an alleged infringement of the same design by a different defendant, Dartington Crystal (Torrington) Ltd (“Dartington”). The proceedings against Dartington had settled following a mediation at which confidential position statements had been exchanged. Final Touch sought, in the claim against them, to instruct the same solicitors that had acted for Dartington (“Virtuoso”). Glencairn objected, on the ground that there was a risk that information confidential to Glencairn and known to solicitors within Virtuoso (including Glencairn’s negotiating position and the terms on which it was prepared to settle) would be inadvertently disclosed to Final Touch. Glencairn contended that such disclosure would provide Final Touch with an advantage in the proceedings, particularly in any settlement negotiations that might take place. 55. Virtuoso had purported to implement an internal information barrier, but Glencairn argued that it was inadequate, and disputed whether any such barrier could be effective. 56. Glencairn argued that, although Virtuoso had not previously acted for them, the Bolkiah class of case provided the most appropriate guidance for whether there should be an order restraining Virtuoso from acting. Final Touch contended that it was a Stiedl-type case, such that any injunction should be limited to a restraint on Virtuoso from making use of Glencairn’s confidential information. 57. HHJ Hacon considered that the correct approach lay “somewhere between the two”, with the case belonging to “… a third, intermediate class of cases”37. Ultimately, however, the judge noted that: “while it is convenient to divide cases into classes for the purpose of explaining why the relief in one class would not be proportionate if granted in relation to another

36 [2008] EWCA Civ 612 at [30]. 37 [2019] EWHC 1733 (IPEC) at [43].

class, it may be that the simpler and more accurate point is that each case must turn on its facts and the proportionate approach to granting relief is liable to vary accordingly.”38 58. The judge considered that since there had never been any relevant fiduciary relationship between Glencairn and Virtuoso (unlike a former client case), it was appropriate to consider the potential impact of a restraining order on Final Touch and to conduct a form of ‘balancing exercise’,39 in which the overall burden of proof remained with the applicant. On balance, and particularly in light of the low likelihood of any confidential information crossing Virtuoso’s internal information barrier, the judge concluded that he should not grant an order restraining Virtuoso from acting for Final Touch.40

Information barriers: practical measures 59. Avoiding the inadvertent dissemination of confidential information within a firm is ultimately a practical problem, and it helps to adopt a practical approach. You may find the following suggestions of some assistance: 59.1. Think about how your information barriers can be implemented within your firm, department or team before the need arises. Ideally, have options which are inbuilt into your firm’s IT systems and infrastructure, and which can then be activated quickly and effectively in order to avoid the situation which occurred in Georgian American Alloys Inc v White and Case LLP. 59.2. Do not erect barriers only when there is the risk to the confidential information of a former or current client. Be careful to avoid leaks of confidential information belonging to your clients’ opponents against whom your firm has acted previously. It can be easy for people to miss the risk when the information in question is that of an opponent, and there is an apparent tactical advantage to be gained. 59.3. Remember that, while Rule 6.5 of the new SRA Code of Conduct refers to a prohibition on acting for a new client only when they have an interest which is adverse to another current or former client, your general legal obligations are probably more strict.

38 [2019] EWHC 1733 (IPEC) at [44]. 39 Conversely, in Georgian American Alloys Inc v White & Case LLP [2014] EWHC 94 (Comm) at [78] Field J held that it would be inappropriate to take the interests of the defendant firm’s current clients into account in applying Bolkiah principles. 40 HHJ Hacon granted permission to appeal to the Court of Appeal.

59.4. When considering the confidential information of a current client, be wary of seeing informed consent and information barriers as the solution to more fundamental conflicts of interests between clients. The full conditions of Rule 6.2 need careful consideration. And give thought not just to the clients’ current positions, but to the risk that their objectives/interests may diverge in the future. 59.5. Where client consent and information barriers do provide an adequate solution to otherwise conflicting obligations of confidentiality and disclosure, ensure that the clients are properly informed about, and consent to, the specific protective measures taken by the firm.

Charles Phipps and Simon Teasdale 4 New Square Professional Liability & Regulatory Conference

4 February 2020

The Solicitor’s Headache: Conflicting duties of confidentiality and disclosure

Charles Phipps Simon Teasdale

4 New Square Professional Liability & Regulatory Conference 2020

Introduction

• All professional advisers owe duties of confidentiality to their clients. Generally subject to four categories of qualifications – Tournier v National Provincial and Union Bank [1924] 1 K.B. 461 at 473.

• Particular considerations for lawyers:

o Legal professional privilege.

o Conflicting obligations to different clients.

Legal & professional obligations of disclosure

1 4 February 2020

Legal obligation to disclose

“…their Lordships are of the view that since the plaintiff was well aware that the defendants would be acting also for other vendors of comparable properties and in so doing would Kelly v Cooper receive confidential information from those other vendors, the agency contract between the plaintiff and the defendants [1993] A.C. cannot have included either (a) a term requiring the 205, at 215D defendants to disclose such confidential information to the plaintiff or (b) a term precluding the defendants acting for rival vendors or (c) a term precluding the defendants from seeking to earn commission on the sale of the property of a rival vendor.”

Legal obligation to disclose

• Solicitors acted for both the claimant and another client, B, Hilton v in a property development transaction. Barker Booth • Unknown to the claimant, but known to the solicitors, B had & Eastwood recently been released from prison after serving a sentence for offences of fraudulent trading and obtaining credit while an undischarged bankrupt. [2005] 1 W.L.R 567 • The solicitors were required to disclose the discreditable facts about B to the claimant, and it was no excuse that in so doing they would have breached their duty to B.

• Reaffirmation of general principle enunciated by Megarry J in Spector v Ageda [1973] Ch.30 at 48.

Legal obligation to disclose

“(a) Hilton v Barker Booth is a case about a solicitors' duty Harlequin of single-minded loyalty to his client. It was also a situation, Property (SVG) unlike the present case, where the professional was in Ltd v Wilkins possession of the relevant information at the outset; he did not Kennedy acquire it during his work for his client. (b) In my view, a solicitor acts in a different professional, regulatory and ethical [2017] 4 context to an accountant … (c) To that extent, I consider that W.L.R. 30 an accountant is in a situation more akin to that of the estate agent in Kelly v Cooper...”

2 4 February 2020

Applying Hilton v Barker Booth & Eastwood

• A firm, whose Manchester office is retained by client A, also has a Bristol office. Someone in the Bristol office has knowledge which the Manchester office does not have, but which would be relevant to client A’s case. Does the firm as a whole come under a Hilton duty to disclose the relevant information to client A?

• Lord Millett in Bolkiah v KPMG [1999] 2 A.C. 222, at 235:

“…given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case.”

Contracting out of duties?

• Duty to disclose based on implied contractual term. Jackson LJ in Minkin v Landsberg [2016] 1 W.L.R. 1489, at [38]:

“(i) A solicitor's contractual duty is to carry out the tasks which the client has instructed and the solicitor has agreed to undertake. (ii) It is implicit in the solicitor's retainer that he/she will proffer advice which is reasonably incidental to the work that he/she is carrying out. (iii) In determining what advice is reasonably incidental, it is necessary to have regard to all the circumstances of the case, including the character and experience of the client. (iv) In relation to (iii), it is not possible to give definitive guidance, but one can give fairly bland illustrations. An experienced businessman will not wish to pay for being told that which he/she already knows. An impoverished client will not wish to pay for advice which he/she cannot afford. An inexperienced client will expect to be warned of risks which are (or should be) apparent to the solicitor but not to the client. (v) The solicitor and client may, by agreement, limit the duties which would otherwise form part of the solicitor's retainer. As a matter of good practice the solicitor should confirm such agreement in writing. If the solicitor does not do so, the court may not accept that any such restriction was agreed.”

Professional obligation to disclose

Where you are acting for a client on a matter, you make the client aware of all information material to the matter of which you have knowledge, except when: SRA Code of (a) the disclosure of the information is prohibited by legal Conduct for restrictions imposed in the interests of national security or the prevention of crime; Solicitors 2019 (b) your client gives informed consent, given or evidenced in Rule 6.4 writing, to the information not being disclosed to them; (c) you have reason to believe that serious physical or mental injury will be caused to your client or another if the information is disclosed; or

(d) the information is contained in a privileged document that you have knowledge of only because it has been mistakenly disclosed.

3 4 February 2020

Practical measures

• Consider including terms in the retainer:

o Permitting disclosure of information on terms of strict confidentiality (and without any waiver of the client’s privilege) to the firm’s own legal advisers and insurers.

o Agreeing that confidential information obtained in the course of the firm’s retainers by other clients need not be disclosed to the client.

• Consider getting express confirmation of the client’s agreement to non-disclosure in relation to specific other retainers of which the client is, or can properly be made, aware.

• When a concern arises about a potential conflict between the duties owed by the firm to two different clients of two different fee-earners, ensure that all communications about that conflict are carried on through general counsel (or an equivalent central function of the firm), rather than directly between the lawyers involved. Try to ensure that the fee-earners acting for the client to whom other clients’ confidential information might be relevant do not themselves inadvertently acquire that information.

• When a concern arises about a potential conflict between the duties owed by the firm to two different clients, analyse whether the conflict arises simply out of the firm’s possession of confidential information, or whether the conflict arises out of a more fundamental conflict between the clients’ interests. The former type of conflict may well be manageable with a combination of information barrier and client consent; the latter is much less likely to be amenable to such arrangements.

• If you receive mistaken/accidental communications of confidential/privileged documents, try to resolve any potential issues before taking steps to acquire/disseminate/use the information contained in those communications.

Subject Access Requests

Data Protection Regime

1. The data subject shall have the right to obtain from the controller confirmation as to whether or not personal data concerning him or her are being processed, and where that is the case, access to the personal data and the following information: (a) the purposes of the processing; (b) the categories of personal data concerned; (c) the recipients or categories of recipient to whom the personal data have been or will be disclosed, in particular recipients in third countries or international GDPR organisations; (d) where possible, the envisaged period for which the personal data will be Art. 15 stored, or, if not possible, the criteria used to determine that period; (e) the existence of the right to request from the controller rectification or erasure of personal data or restriction of processing of personal data concerning the data subject or to object to such processing; (f) the right to lodge a complaint with a supervisory authority; (g) where the personal data are not collected from the data subject, any available information as to their source; (h) the existence of automated decision-making, including profiling, referred to in Article 22(1) and (4) and, at least in those cases, meaningful information about the logic involved, as well as the significance and the envisaged consequences of such processing for the data subject.

4 4 February 2020

The Cases

• Ittihadieh v 5-11 Cheyne Gardens RTM Co Ltd [2018] QB 256, per Lewison LJ:

“I cannot help thinking… that both the Directive and the DPA have, as an underlying assumption, the assumption that personal data can be sufficiently retrieved and made ready for disclosure to the data subject at the touch of a few buttons. Experience shows that this assumption is fundamentally unsound.”

“If some personal data are covered by legal professional privilege and others are not, the data controller will have to carry out a proportionate search to separate the two.”

• Data Protection Act 2018:

o Retained exemption for legal professional privilege at paragraph 19 of Part 4 of Schedule 2.

o Added exemption at paragraph 19(b):

“personal data that consists of…

(b) information in respect of which a duty of confidentiality is owed by a professional legal adviser to a client of the adviser”

Legal and professional inhibitions on acting

Former clients

[emphasis added]

5 4 February 2020

Information barriers

• Lord Millettin Bolkiah v KPMG:

o No rule of law that information barriers or other arrangements were necessarily insufficient to eliminate the risk of disclosure, but “the starting point must be that, unless special measures are taken,informationmoves within a firm”.

o An information barrier would probably need to be part of the organisational structure of a firm in order for it to be sufficientlyeffective.

• The importance of getting it right from the outset – Georgian American Alloys Inc v White and Case LLP [2014] 1 C.L.C. 86.

• Not all doom and gloom – Koch Shippingv RichardsButler [2003] P.N.L.R. 11:

“…I think there is a danger inherent in the intensity of the adversarial process of courts being persuaded that a risk exists when, if one stands back a little, that risk is no more than fanciful or theoretical. I advocate a robust view with this in mind, so as to ensure that the line is sensibly drawn.”

Information barriers

• HHJ Hacon in Glencairn IP Holdings v Product Specialities Inc (t/a Final Touch) [2019] EWHC 1733 (IPEC). Citing Laddie J’s comments in Young v Robson Rhodes (A Firm) [1999] 3 All ER 524, he said:

“The crucial question is ‘will the barriers work?’. If they do, it does not matter whether they were created before the problem arose or are erected afterwards. It seems to me that all Lord Millett was saying was that the [information barriers] which have become part of the fabric of the institution are more likely to work than those artificially put in place to meet a one-off problem.”

Current clients

• Not only a duty of confidentiality, but also fiduciary duties.

• If the interests of the two clients potentially conflict and there is a “reasonable relationship” between the two retainers, then it will be a breach of fiduciary duty for the solicitor to accept the new retainer without the informed consent of both clients (Marks & Spencer plc v Freshfields Bruckhaus Deringer [2004] 1 WLR 2331).

• What constitutes a “reasonable relationship”?

6 4 February 2020

Professional inhibitions on acting

You do not act for a client in a matter where that client has an interest adverse to the interest of another current or former client for whom you hold confidential information which is SRA Code of material to that matter, unless:

Conduct for (a) effective measures have been taken which result Firms in there being no real risk of disclosure of the confidential information; or

Rule 6.5 (b) the current or former client whose information you hold has given informed consent, given or evidenced in writing, to you acting, including to any measures taken to protect their information.

[emphasis added]

Professional inhibitions on acting (current clients only)

You do not act in relation to a matter or particular aspect of it if you have a conflict of interest or a significant risk of such a conflict in relation to that matteror aspect of it, unless:

(a) the clients have a substantially common interest in relation to the SRA Code of matter or the aspect of it, as appropriate; or

Conduct for (b) the clients are competing for the same objective, Firms and the conditions below are met, namely that:

Rule 6.2 (i) all the clients have given informed consent, given or evidenced in writing, to you acting;

(ii) where appropriate, you put in place effective safeguards to protect your clients' confidential information; and

(iii) you are satisfiedit is reasonable for you to act for all the clients.

[emphasis added]

Objections by third parties

• Where a particular solicitor has previously acted for Party A against Party B, they may have acquired information confidential to Party B in doing so.

• If the solicitor then intends to act in other proceedings against Party B, Party B may have concerns over whether its confidential information will be misused by the solicitor in those other proceedings.

7 4 February 2020

Objections by third parties

• BSkyB Group Plc v Virgin Media Communications Ltd [2008] EWCA Civ 612 at [21]:

“…The passage in the speech of Lord Millett in Bolkiah v KPMG … cannot be applied to a solicitor who has obtained information from an opponent by the process of disclosure. It is usually enough to rely upon the recognition by a solicitor of the duty not to make any ulterior use of information obtained by disclosure.”

• Stiedl v Enyo Law LLP [2011] EWHC 2649 (Comm) at [39]:

“The first class consists of cases in which there has been a previous relationship of solicitor and client in which confidential or privileged information is acquired by the solicitor and that solicitor now acts or wishes to act for another person who is in dispute with the former client. The second class consists of cases where, without any such previous relationship, a solicitor becomes possessed of confidential or privileged information belonging to the other party to the dispute… in a ‘previous relationship’ case, in the ordinary course a court will grant an injunction restraining the solicitor acting... In cases where there has been no previous solicitor-client relationship, however, in the ordinary course the court will merely grant an injunction restraining the solicitor making use of that information...”

• But, door left open in BSkyB v Virgin Media at [30]:

“In a rare case, the fact the documents have been disclosed to solicitors acting for a party in one set of proceedings might conceivably preclude those solicitors from acting for a different party in another set of proceedings.”

Objections by third parties

• Glencairn IP Holdings Ltd v Product Specialities Inc [2019] EWHC 1733 (IPEC):

o Glencairn bringing an action against Final Touch.

o Glencairn had previously brought an action against Dartington, which settled following a mediation.

o Final Touch sought to instruct Dartington’s former solicitors.

o Glencairn objected, on the ground that there was a risk that information confidential to Glencairn and known to solicitors within Virtuoso (including Glencairn’s negotiating position and the terms on which it was prepared to settle) would be inadvertently disclosed to Final Touch, and would provide Final Touch with an advantage in the proceedings, particularly in any settlement negotiations that might take place.

• Bolkiah or Stiedl-type case?... “somewhere between the two”…:

“while it is convenient to divide cases into classes for the purpose of explaining why the relief in one class would not be proportionate if granted in relation to another class, it may be that the simpler and more accurate point is that each case must turn on its facts and the proportionate approach to granting relief is liable to vary accordingly.”

• ‘Balancing exercise’ – in light of the low likelihood of any confidential information crossing Virtuoso’s internal information barrier, HHJ Hacon concluded that he should not grant an order restraining Virtuoso from acting for Final Touch.

Practical measures

• Think ahead. Ideally, have options which are inbuilt into your firm’s IT systems and infrastructure, and which can then be activated quickly and effectively in order to avoid the situation which occurred in Georgian American Alloys Inc v White andCase LLP.

• Do not erect barriers only when there is the risk to the confidential information of a former or current client. Be careful to avoid leaks of confidential information belonging to your clients’ opponents against whom your firm has acted previously. It can be easy for people to miss the risk when the information in question is that of an opponent, and there is an apparent tactical advantageto be gained.

• Remember that, while Rule 6.5 of the new SRA Code of Conduct refers to a prohibition on acting for a new client only when they have an interest which is adverse to another current or former client, your general legal obligations are probably more strict.

• When considering the confidential information of a current client, be wary of seeing informed consent and information barriers as the solution to more fundamental conflicts of interests between clients. The full conditions of Rule 6.2 need careful consideration. And give thought not just to the clients’ current positions, but to the risk that their objectives/interests may diverge in the future.

• Where client consent and information barriers do provide an adequate solution to otherwise conflicting obligations of confidentiality and disclosure, ensure that the clients are properly informed about, and consent to, the specific protective measures taken by the firm.

8 4 February 2020

Thank you

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