Case No. IP-2018-000183

of possible leak of information 16. In Young v Robson Rhodes [1999] 3 All ER 524 Laddie J held that there was no requirement placed on the former client to give examples of instances where a harmful inadvertent leak of information could take place. The former client may not know enough about the working patterns of the defendant firm to formulate examples (at 539a-c). Whether an established information barrier is necessary 17. In the same case Laddie J said that Lord Millett’s principle that an effective barrier needs to be part of the organisational structure of the firm was not to be taken too literally: “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 the Chinese walls 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.” (at 539e-f). The strength of the link between the two proceedings 18. In Re Solicitors’ Firm [2000] 1 Lloyd’s Rep 31, Timothy Walker J held that the strength or weakness of the link between the first set of proceedings involving the former client and the second set in which the former client seeks to restrain the solicitors acting is a matter to be taken into account when considering the existence of any real, as opposed to theoretical, disclosure adverse to the former client’s interest (at p.33 col 1). The size of the firm 19.In Halewood International Ltd v Addleshaw Booth & Co [2000] Lloyd’s Rep 298 Neuberger J observed (at p.306): “As pointed out by Mr Wyand, ABC’s IP department in Leeds is relatively small when one looks at the size of the relevant departments in the three very recently reported cases to which I have referred. However, it seems to me that, while one can see an argument for saying that makes it more likely that information will cross a barrier, I believe that it is unrealistic not to conclude that the fewer people are subject to the barrier the less likely the barrier is to be crossed. It appears to me to be self-evidently easier to police a system involving fewer people rather than more people. Statistically, the risk of someone doing something wrong by accident is greater the more people may be subject to the possibility of accident.” 20.On the other hand, in the guidance notes to Chapter 4 of the Solicitors Regulation Authority Handbook (v.21, Dec. 2018), note O(4.4) speaks of the need to put in place “effective safeguards including information barriers which comply with the common law” where the solicitors hold confidential information about one client with an adverse interest to another client. The notes at the end of that section of Chapter 4 state: “The following circumstances may make it difficult to implement effective safeguards and information barriers: (a)you are a small firm; (b)the physical structure or layout of the firm means that it will be difficult to preserve confidentiality; or (c)the clients are not sophisticated users of legal services.” 21.The Solicitor’s Handbook 2017, Hopper and Treverton-Jones, discusses the foregoing Code of Conduct (or its earlier equivalent), noting (at §4.38): “It is unsurprising in the circumstances that the guidance notes to Chapter 4 emphasise the difficulty of implementing effective safeguards and information barriers if the firm is small; if the physical structure or layout of the firm means that it will be difficult to preserve confidentiality; or if the clients are not sophisticated users of legal services. While this is not a ‘City firm only’ rule or ‘20+ partner only’ rule, in reality it is unlikely that any small firm would be able to achieve the necessary protections and effective barriers.” Whether the Bolkiah principles apply to the present case 22.The most important difference of fact between Bolkiah and the present case is that Virtuoso has never acted for Glencairn. The potential risk posited by Glencairn is the disclosure to Final Touch of information gleaned in the Dartington mediation and thus a breach of the obligation of confidence owed by Virtuoso to Glencairn arising from the mediation. In Bolkiah there was an additional risk in play: the possibility of a breach of the continuing fiduciary duty owed by a solicitor to a former client. 23.In Adex International (Ireland) Limited v IBM United Kingdom, judgment of 17 November 2000 (unrep.), a claimant (‘Time’) had brought proceedings against the defendant (‘IBM’) seeking damages for supply of defective chipsets contained in computers delivered. Following negotiations there was a settlement agreement containing a confidentiality clause. Later, another claimant (‘Adex’) started proceedings against IBM seeking damages for the delivery of PCs with similarly defective chipsets. The solicitor acting for Adex had earlier acted for Time. IBM sought an order that Adex should be represented by alternative solicitors. HH Judge Hallgarten QC accepted that in negotiations between Adex and IBM the solicitor would not be able to put out of his mind the financial terms on which IBM had been prepared to settle the case with Time, particularly when advising Adex whether to accept any offer that may be made by IBM. The judge concluded that the solicitor could not continue to act for Adex. However, it appears from the end of the judgment that subject to submissions from counsel, the judge might have been prepared to allow the solicitor’s firm to continue acting provided an adequate information barrier could be implemented. 24.In Carter Holt Harvey Forests Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343 a plaintiff (‘Rua’) had issued proceedings against a defendant (‘CHHF’) arising out of the termination of certain contractual arrangements. There was a mediation attended by the parties’ lawyers which was subject to a comprehensive confidentiality agreement. The mediation was successful and the claim was settled. Later another plaintiff (‘Sunnex’) started an action along the same lines against CHHF. Sunnex instructed the solicitors and counsel who had acted for Rua against CHHF. At first instance the judge held that the lawyers could continue to act for Sunnex as long as they took no part in any settlement negotiations. The New Zealand Court of Appeal allowed CHHF’s appeal, restraining Sunnex from instructing the same solicitors or counsel or anyone from their respective offices. 25.Delivering the judgment of the court, Blanchard J (at [21]) distinguished the facts before the Court from those cases (like Bolkiah) concerned with whether lawyers or other advisors may act against a former client. The lawyers’ obligation in Carter Holt arose only from the contractual undertakings of confidence which they had given in the mediation. He noted that although the undertakings had been express, implied undertakings arising from a mediation would probably have been sufficient: “[24] The position may well have been much the same even without an express confidentiality clause. The very nature of a mediation requires that, in principle, it be conducted on a confidential basis, with the parties encouraged to ‘lay bare their souls’ for the purpose of facilitating a conciliation and resolution of the dispute. Understandably, the parties will be cautious about doing so if what they do and say can be used against them for a different purpose by lawyers who happen to be participating.” 26.The court did not accept that there was no risk of any relevant disclosure. Blanchard J went on to outline a shifting burden of proof akin to that in Bolkiah: “[26] … Certainly a party seeking the exclusion of the other side’s legal advisor must first show that there is an appearance of risk, going beyond the remote or merely fanciful, of conscious or unconscious use or disclosure by the lawyer of something relevant to the current dispute of which he lawyer gained knowledge as a result of participation in an earlier mediation But if that threshold is reached, it is then for the lawyer to demonstrate that in fact no such risk exists or that, if it does, no damage, other then de minimis, could possibly result from use or disclosure. [27] The initial threshold is appropriately a low one because of the nature of the obligation of confidentiality which the lawyers accepted in their written agreements when undertaking the mediations. Beyond pointing to the general circumstances of the particular case – here the apparently overlapping claims arising out of a similar factual background of purchases of machinery and equipment on the basis, as alleged, of representations of CHHF – it should not be required of a party seeking to ensure the protection of its confidential information that it must spell out particular matters of concern. To ask it to do so might be to ask it to reveal the very matter it is seeking to keep to itself. Moreover, it may not be able to be sure exactly what the lawyers may have learned from their observations during the mediation process. The disadvantage it is seeking to prevent may be as subtle as something which may have been observed by the lawyers in the body language of one of its representative. Even an observation of that kind might give the lawyers a tactical advantage in deciding how to pursue the claim of their other client.” 27.The Court (at [29]) was not much impressed by the argument that the order sought may unjustly deprive litigants of their lawyers of choice since, in the court’s view, it will be in a relatively small number of cases that the plaintiff will wish to instruct the same lawyers as were instructed by an earlier plaintiff in a similar case. Where this arises and the mediation in the earlier proceedings has not yet taken place, the lawyers can step aside from the mediation. 28.Both Adex International and Carter Holt were considered in Virgin Media Communications Ltd v British Sky Broadcasting Group plc [2008] EWCA Civ 612; [2008] 1 WLR 2854. The claimants (‘Virgin’) and the defendants (‘Sky’) competed in the UK market for pay TV. Three sets of proceedings were set running: an action in the High Court, a review by the Office of Communications (‘Ofcom’) and proceedings before the Competition Appeal Tribunal (‘the CAT’). Virgin instructed the same lawyers in all three proceedings. The team of lawyers instructed by Sky in the High Court was different to that instructed in the other two tribunals. In the High Court disclosure took place, including that of confidential documents that were disclosed to external lawyers only. Sky sought an order restricting the disclosure of their confidential documents to the Virgin lawyers who were not acting in the Ofcom and CAT proceedings. 29.At first instance Lewison J held that to accede to the application would be extremely disruptive of Virgin’s preparations for the High Court trial. It would be disproportionate to require Virgin to change their legal team and Sky was adequately protected by the Civil Procedure Rules limiting the use of documents to the purpose for which they had been disclosed and by the confidentiality undertakings entered into by Virgin’s lawyers. 30.The Court of Appeal dismissed the appeal primarily because the risk that information disclosed in the High Court proceedings would be improperly used in the CAT or in the Ofcom review was fanciful (at [24]-[27]). 31.Regarding matters of principle, Lord Phillips, giving the judgment of the Court, started with the proposition (at [20]) that it is desirable that a litigant should be free to instruct the lawyer of his choice. He rejected (at [21]) the submission that the duty under the CPR not to make ulterior use of disclosed documents is the same as the obligation of confidentiality which exists between a solicitor and his client, i.e. the circumstance in Bolkiah. Lord Phillips then said: “[22] The passage in the speech of Lord Millett in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 relied upon by Mr Glick 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. The Adex International case (unreported) 17 November 2000 was correctly decided, but it is a rare example of a situation where a solicitor was precluded from acting for a different claimant against the same defendant in respect of a similar claim as a result of confidential information obtained about the defendant in the earlier proceedings. The approach of the Court of Appeal of New Zealand in the Carter Holt Harvey Forests case [2001] 3 NZLR 343 was adopted in a case involving an express confidentiality agreement in mediation. It is not an approach that can be generally applied whenever information has been obtained by lawyers in a case as a result of disclosure.”32.The Court of Appeal thus approved both Adex International and Carter Holt. 33.After Virgin Media the New South Wales Court of Appeal gave judgment in Worth Recycling Pty Ltd v Waste Recycling and Processing Pty Ltd [2009] NSWCA 354. The facts were similar to those of Carter Holt: a first action was settled by mediation entered into under a written obligation of confidence. The solicitors acting for the claimant were retained to act for a different claimant in a second action against the same defendant. A difference was that the solicitors did not themselves enter into the confidentiality agreement. Hodgson JA, with whom Spigelman CJ and Campbell JA agreed, nonetheless found that the solicitors were bound by an implied duty of confidence. 34.The Court followed Carter Holt save for one matter, regarding the burden of proof, discussed further below. Classes of case 35.At least two classes of case can be discerned from the authorities. The first consists of actions like Bolkiah in which a former client seeks to restrain a solicitor (or equivalent professional advisor) from acting for a party with an interest adverse to the former client. In these circumstances there is a continuing fiduciary duty owed by the solicitor to the former client and a risk of disclosure of information which is both confidential to the former client and privileged. Lord Millett explained the policy behind the strict restrictions imposed on the solicitor in such circumstances (Bolkiah at 236F-H) “It is … difficult to discern any justification in principle for a rule which exposes a former client without his consent to any avoidable risk, however slight, that information which he has imparted in confidence in the course of a fiduciary relationship may come into the possession of a third party and be used to his disadvantage. Where in addition the information in question is not only confidential but also privileged, the case for a strict approach is unanswerable. Anything less fails to give effect to the policy on which legal professional privilege is based. It is of overriding importance for the proper administration of justice that a client should be able to have complete confidence that what he tells his lawyer will remain secret. This is a matter of perception as well as substance. It is of the highest importance to the administration of justice that a solicitor or other person in possession of confidential and privileged information should not act in any way that might appear to put that information at risk of coming into the hands of someone with an adverse interest.” 36.In the second class, information confidential to a party has come into the possession of solicitors who are acting for another party with an adverse interest to the first party. The solicitors have never acted for the first party and therefore owe him no fiduciary duty. An example of such a case was Stiedl v Enyo Law LLP [2011] EWHC; [2012] PNLR 4 in which Beatson J drew the distinction between the two classes: “[39] … I accept Mr Smith’s submission that a distinction is to be made 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. The distinction operates at the level of remedy: see Solicitors, Re [1997] Ch. 1; [1995] 3 All E.R. 482 at p.492 of the latter report. In that case, Lightman J. stated that in a ‘previous relationship’ case, in the ordinary course a court will grant an injunction restraining the solicitor acting, as it did in the earlier case with the same name; Solicitors (A Firm), Re [1992] Q.B. 959. 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’, as it did in English and American Insurance Co Ltd v Herbert Smith [1998] F.S.R. 232 and Goddard v Nationwide Building Society [1987] Q.B. 670.” 37.Virgin Media also falls into the second class, with the additional factor that if the confidential information were to be disclosed, such disclosure would also have been in breach of the rules of the court limiting the use of any disclosed document to the purpose of the proceedings in which it is disclosed (CPR 31.22(1)). 38.Two questions arise. First, does the present case falls into either class or alternatively into a third and distinct class? Secondly, if there is a third class, which if any of the approaches set out in Bolkiah should be applied to the present case? 39.The relevant class for this case must also accommodate Adex International, Carter Holt and Worth Recycling. In Carter Holt the Court said that the present type of case should not be analysed in terms of authorities (like Bolkiah) in which the lawyers sought to be restrained are acting against a former client (at [21). 40.That said, there are clearly parallels in the policy underlying the ruling in Bolkiah and that behind the decision in Carter Holt. This was underlined by the New Zealand Court of Appeal (at [24], quoted above). The policy in both cases is that parties must retain the freedom to be candid, in the one circumstance to their solicitors and in the other, in a mediation. Those freedoms should not be eroded. However, it seems to me that the two freedoms are not identical. Candour in a mediation will take the form of disclosing information to an adversary or potential adversary. Candour on the part of a client to his lawyer, whose duty and interest lies in promoting the cause of his client, is likely to be the product of little or no inhibition and a complete assumption that the information disclosed will go no further without the client’s consent. It would follow that higher safeguards against the wrongful disclosure of information are proportionate in the Bolkiah type of case when compared to a case of the present type. 41.As to the second class, in Virgin Media the Court distinguished Adex International and Carter Holt from cases in which the risk was the ulterior use of disclosed documents. Cases like those and the present one differ from the second class in that the solicitors are subject to a confidentiality agreement, arising out of a mediation, by which they are bound not to disclose the information in question. The correct approach42.Mr Barclay submitted that Bolkiah and the cases with similar facts provided the guiding light to the assessment of whether there should be an order restraining Virtuoso from acting. Ms Wickenden argued that I should follow the approach in Stiedl. 43.In my view the correct approach lies somewhere between the two. The present case, along with Adex International, Carter Holt and Worth Recycling belongs to a third, intermediate class of cases. 44.I would add 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 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. 45.For the foregoing reasons, in my view the Bolkiah approach should not be applied with full force to the present case. Equally, I do not believe that the relief can in no circumstances go further than an injunction restraining the solicitor from making use of the confidential information (as in Stiedl). Neither of those two approaches would be proportionate. In effect, therefore, I must decide which aspects of Bolkiah should be applied to the present case. Balancing exercise 46.Lord Millett ruled in Bolkiah that the assessment was not a balancing exercise. The impact on the solicitor’s current client of an order restraining the solicitor from acting was not relevant (see above). This was referred to by Sir Robin Jacob in Generics (UK) Ltd v Yeda Research & Development Co Ltd [2012] EWCA Civ 726; [2013] FSR 13, in a passage to which my attention was drawn: “[15] It is clear that if Bolkiah principles apply there is no question of any balancing, see per Lord Millett at p.237B. The interests of the former client prevail. But if interlocutory injunction principles apply, then the potential harm to the defendant if an injunction is ‘wrongly’ granted may potentially come into play. [16] In the end this point did not matter, for even on interlocutory injunction applications (and it should not be forgotten that Bolkiah itself was an interlocutory injunction case) the balance of convenience matters little if the reality is that the decision will determine the matter finally. So I say no more about ‘balancing’.” 47.As Sir Robin Jacob said, the effect of a Bolkiah order (and indeed the one sought here) is final. It can be likened to a quia timet action for breach of confidence. In such an action, where a risk of breach of confidence is shown the court will grant a final injunction without being concerned with its effect on the defendant. The defendant is threatening to act unlawfully and must take the consequences. 48.However, the final injunction following such an action would go no further than restraining the defendant from acting in breach of confidence, possibly also prohibiting specific acts which would be in breach. A Bolkiah order (and the order sought here) is not the same in that it may in addition have a significant and negative impact on a party who is not obviously threatening to do anything unlawful: the current client of the solicitor. 49.Lord Millett’s reason for rejecting a balancing exercise was different (at 237B-F): “I would also reject the approach taken by the New Zealand Court of Appeal in Russell McVeagh McKenzie Bartleet & Co. v. Tower Corporation, 25 August 1998 and adopted by the Court of Appeal in the present case. In my opinion the balancing exercise which was undertaken was inappropriate. This is not because the considerations which were thought to militate against the granting of injunctive relief were irrelevant: far from it. It is clearly relevant that Prince Jefri retained KPMG in the knowledge that they were the B.I.A.'s auditors, and that the B.I.A. would be put to inconvenience and expense if his retainer were to prevent it from employing KPMG's services in future. But such considerations are relevant to a different question: whether in the circumstances Prince Jefri must be taken to have consented to KPMG's undertaking the further assignment for the B.I.A. For the reasons I have given, he must be taken to have consented to the acceptance by KPMG of the instructions given to Mr. Harrison in June, for these were a natural extension of the audit. But Project Gemma was a very different matter. Absent such consent, the considerations which the Court of Appeal took into account cannot in my opinion affect the nature and extent of KPMG's duty to protect confidentiality or convert it into a duty to do no more than take reasonable steps to protect it. This would run counter to the fundamental principle of equity that a fiduciary may not put his own interest or those of another client before those of his principal. In my view no solicitor should, without the consent of his former client, accept instructions unless, viewed objectively, his doing so will not increase the risk that information which is confidential to the former client may come into the possession of a party with an adverse interest.” 50.Thus, there were two strands to Lord Millett’s reasoning. First, the impact on the new client of an order restraining the solicitor from acting is relevant only to whether the former client consented to the acceptance by the solicitor of the relevant instructions from the new client. Secondly, a fiduciary, the solicitor, must not put either his own interests or those of another client before the interests of his former client. 51.It seems to me that where there is no relevant fiduciary relationship, Lord Millett’s reason for not taking into account the impact of the order on the current client no longer applies. In the present case I must therefore consider any likely impact of the order sought on the current client. Burden of proof 52.In Adex International Judge Hallgarten QC does not seem to have adopted the twostage approach to the burden of proof adopted in Bolkiah, namely that once the former client has established that the solicitors are in possession of information which was imparted in confidence and that the firm is proposing to act for another party with an interest adverse to his in a matter to which the information may be relevant, the evidential burden shifts to the defendant firm to show that there is no risk that the information will cross the information barrier and come into the possession of those now acting for the other party. In Carter Holt a shift of burden was adopted by the New Zealand Court of Appeal (at [28]) similar to that in Bolkiah. But the New South Wales Court of Appeal in Worth Recycling, although largely following Carter Holt, did not agree that there should be a shift in the burden of proof. Hodgson JA, with whom Spigelman CJ and Campbell JA agreed, said: “[42] In my opinion, whatever may be the position where solicitors owe a fiduciary duty to the party seeking an injunction, or where (as in Carter Holt) they owe an explicit contractual duty, in a case such as the present the onus does lie on the party seeking the injunction to show a threat of misuse sufficient to justify the injunction; and I do not think the existence of a common factual element is sufficient to shift the onus of proof. However, proof of a real and sensible possibility of misuse may be sufficient to justify an injunction.” 53.I respectfully agree. In the present case the overall burden of proof remains with Glencairn. Concrete examples 54. I take the view that for the reasons given by Laddie J in Young v Robson Rhodes, likewise in the present type of case there is no requirement placed on Glencairn to give concrete examples of instances where a harmful inadvertent leak of information could take place.