Case No. IP-2018-000183

13.Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 provides the most authoritative guidance to date in relation to the potential for a conflict of interest arising when professional advisors act for different parties. This was in a particular context: the professional advisors had acted for a first party, had ceased to act, and subsequently wished to act for a second party in litigation against their former client, the first party. The professional advisors were forensic accountants but it was common ground that on the facts of the case their position was to be equated with that of solicitors. 14.In summary, Lord Millett, with whom the remainder of their Lordships agreed, held: (a)The basis of the court’s jurisdiction to intervene on behalf of a former client of a solicitor to restrain the solicitor from acting for a current client is the protection of information confidential to the former client (at 234G-H). The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence (at 235D). (b)The former client must 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 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 (at 235D-E). (c)The burden of proof on the former client is not a heavy one. Matter (i) may readily be inferred. Matter (ii) will often be obvious. Whether a particular individual is in possession of confidential information is question of fact which must be proved or inferred from the circumstances of the case (at 235EF). (d)The solicitor’s duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so. Moreover, it is not merely a duty not to communicate the information to a third party. It is a duty not to misuse it, that is to say, without the consent of the former client to make any use of it or to cause any use to be made of it by others otherwise than for his benefit (at 235G-H). (e)The former client is entitled to prevent his former solicitor from exposing him to any avoidable risk; and this includes the increased risk of the use of the information to his prejudice arising from the acceptance of instructions to act for another client with an adverse interest in a matter to which the information is or may be relevant (at 235H-236A), (f)The court should intervene unless it is satisfied that the risk of disclosure of confidential information is no more than fanciful or theoretical (at 237A). (g)It is not appropriate to conduct a balancing exercise. Considerations such as (i) the knowledge of the former client that the solicitor acted for the later client and (ii) the inconvenience and expense to which the later client would be put if he were prevented from employing the solicitor’s services are not relevant (at 237B-F). (h)Once the former client has established that the defendant firm is 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 even so there is no risk that the information will come into the possession of those now acting for the other party (at 237G). (i)There is no rule of law that Chinese walls are insufficient to eliminate the risk. But the starting point is that unless special measures are taken, information moves within a firm (at 237H). (j)Notwithstanding the implementation of a Chinese wall, the court should restrain the firm from acting for the second client unless satisfied on the basis of clear and convincing evidence that effective measures have been taken to ensure that no disclosure will occur (at 237H-238A). (k)Effective measures in the form a Chinese wall will normally involve some combination of the following organisational arrangements: (i) the physical separation of the various departments in order to insulate them from each other – this often extends to such matters of detail as dining arrangements; (ii) an educational programme, normally recurring, to emphasise the importance of not improperly or inadvertently divulging confidential information; (iii) strict and carefully defined procedures for dealing with a situation where it is felt that the wall should be crossed and the maintaining of proper records where this occurs; (iv) monitoring by compliance officers of the effectiveness of the wall; (v) disciplinary sanctions where there has been a breach of the wall (at 238C-E). (l)An effective Chinese wall needs to be an established part of the organisational structure of the firm, not created ad hoc and dependent on the acceptance of evidence sworn for the purpose by members of staff engaged on the relevant work (at 239D-E). 15.The judgment of the House of Lords in Bolkiah has been explained and developed in several cases since. Concrete examples 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.”