Exceptions to Solicitors’ Duty of Confidentiality

The exceptions to confidentiality can be broadly divided into two groups. The first group covers situations where lawyers are required by law or by conduct rules to break confidence.

A. Requirement to Break Confidence

i. Statutory Requirements to Report

Solicitors and others may be required by statute to breach client confidentiality where money laundering or terrorist activity is suspected.^[1658] In such cases information may still be protected by privilege.^[1659] This area is covered in more detail in chapter fourteen: ‘Collective Third Parties’.

ii. Request by Lawful Authority

Some public authorities, for example tax authorities, are empowered to require disclo­sure of confidential information. When lawyers hold this information, requests may be directed at them. Solicitors are advised to check the source of the legal authority for the request, seek the client’s specific consent and, if it is not given, to consider whether privileged information is protected from disclosure. They are advised to only provide such information as they are required by law to disclose.^[1660]

Solicitors presented with court orders to produce documents are advised to discuss making an application to have the order set aside with the client.^[1661] They should insist upon receiving a witness summons or subpoena if asked to give evidence, so that, where appropriate, privilege can be claimed.^[1662] In cases involving publicly funded clients solicitors may be required to convey confidential and privileged information concerning the client to the Legal Aid authorities.^[1663]

iii.

Problems may arise where a solicitor acts for two or more clients jointly, for example, for a husband and wife purchasing a property. Generally, the solicitor must share all information with both of the clients. Neither party can expect protection from the rules on confidentiality. There have been a number of cases confirming the duty of solicitors to inform a mortgagee of a change in the mortgagor’s circumstances where both are being represented by the same solicitor.

Therefore, if the wife tells the solicitor that she will start divorce proceedings after completion of a property purchase, the solicitor will tell the wife that he must inform the husband. The information is relevant to the purchase and the solicitor acts jointly for both. If the information is irrelevant to the purchase, the confidence should not be broken.

When two clients jointly instruct a solicitor, and one of them has done so in the past, the duty to disclose relevant material to both clients still applies. The past client cannot claim confidentiality in respect of the other.^[1664] Therefore, if a solicitor knows damaging information about the past client that may affect the new client’s view of a matter, they must be informed. Obviously, the existing client needs to be forewarned of this. Where there is a joint retainer, all joint clients must waive their rights before confidential information is given to a third party.^[1665]

iv. Insolvency and Bankruptcy

a. Insolvency

The task of identifying the client when instructed by an organisation becomes even more of a problem when a company goes into liquidation. The solicitor may perceive a problem when they have dealt with a particular director, particularly if the liquida­tor may be pursuing individual directors for breach of duty. It is not an exception to confidentiality, in theory at least, because liquidators assume the position of the company itself in relation to this information. They have extensive duties and powers to collect information about the company’s business dealings.

b. Bankruptcy

Where an individual client becomes bankrupt, there is an obligation to hand over all the bankrupt’s property, including papers and records relating to his estate and affairs, to the trustee in bankruptcy. This can apply to confidential or privileged communica­tions with a solicitor.^[1666] While the trustee in bankruptcy may be thought to be in a similar position to a liquidator, the analogy is imperfect. The bankrupt and the trustee rarely have identical interests. The rules in the Insolvency Act are therefore better thought of as producing an exception to confidentiality.

The combined impact of the principles of confidentiality on joint retainers and bankruptcy is illustrated in the case of Re Konigsberg.^[1667] Mr and Mrs Konigsberg jointly consulted a solicitor in order to transfer property from the husband to the wife. The husband subsequently became bankrupt and the trustee in bankruptcy sought to set aside the transfer as being a voluntary settlement. If this argument were upheld the transfer would be void as against the trustee under the Bankruptcy Act. Mrs Konigsberg objected to the solicitor giving evidence to the trustee on the ground that a communication between solicitor and client was covered by legal advice privilege.

It was held that the communication was properly available to both clients as the solicitor was jointly retained by them. The trustee in bankruptcy had to be treated as being in the same position as the bankrupt client and therefore no assertion of legal privilege could be made to prevent his receipt of the communication. A trustee in bankruptcy, said Peter Gibson J, ‘is no ordinary third party’. All the assets of the bankrupt are vested in him and, as a successor in title he ‘stands in the predecessor’s shoes’.^[1668]

The likelihood that bankrupts have adverse interest to their trustee in bankruptcy is recognised in the advice given to solicitors.

B. Permission to Break Confidence

i. Client Consent

It is rare that clients consent to lawyers breaching their confidence. In these cases, the client may sanction disclosure even though this may appear to be against their own interests. This occurred after Rupert Murdoch told the House of Commons Committee for Culture, Media and Sport that the solicitors acting for his company, News International, had made a ‘major mistake’ in advising the company’s internal investigation of allegations of telephone hacking by journalists.^[1670] The implication of Murdoch’s statement was that the opportunity to uncover criminal activity had been missed by the firm.

The firm, Harbottle & Lewis, contacted the committee alleging it had been errone­ously maligned. It was given permission by News International to give evidence to the committee and police about the instructions provided by the client. This, it transpired, involved reading some 2500 emails, looking for evidence implicating the editor of the paper in phone-hacking.^[1671] It did not therefore include looking for other kinds of criminal activity, such as making payments to police.

ii. Past and Present Clients

There is duty of complete disclosure to present clients of information known about their matter. This duty is potentially in conflict with the duty to preserve past cli­ent confidences, especially where the past client’s information relates to the present matter. There are a number of conditions that must be satisfied before a past client can consent to a solicitors’ acting for a present client in the same or a related matter.

Before a past client (B) can waive a right to prevent a firm acting for a proposed cli­ent (A), A must consent to the solicitor not making full disclosure.

Where a conflict between the duty of confidentiality and that of disclosure arises without consent, solicitors might still be able to act for B. The relevant outcome covers situations where it is ‘not possible’ to obtain consent. This presumably does not mean ‘it is not possible to obtain consent because the past client refuses it’. Rather, it envis­ages a situation where the past client cannot be contacted. Such a situation might occur where two firms merge and the client is either physically unable to consent or cannot be traced.

Finally, the outcome specifies that, even with consents and information barriers in place, it must be reasonable for the firm to act. There is no guidance on what this means. Possibly it is intended as a safeguard against a foolish client consenting against their own interests. In such circumstances, the solicitor must consider the degree of risk in any conflict between A and B’s interests.

It is anticipated that circumstances that meet the solicitors’ rules for acting in breach of past client confidentiality will be relatively rare. The potential client is unlikely to consent to their lawyer holding back information that could be useful, particularly when they cannot be given any clue what it is. If they do consent, their lawyer may have a hard job convincing a court that the client’s consent was truly informed.^[1672] The past client is unlikely to consent to the risk of leaks adversely affecting their interests. The expectation that the rule applies only to ‘sophisticated’ clients probably anticipates that commercial clients will take a long-term and reasonable view of clients switching lawyers.

iii. Prevention of Harm

Lawyers are usually allowed to disclose information that may prevent harm to third parties. This may anticipate the possibility that they could be sued for negligence if they failed to do so. This proposition is based on the US case, Tarasoff v Regents of the University of California)^[1673] In that case, a disturbed student stalked and killed a fellow student who had rejected his advances. A mental health professional, who was consulted by the killer and knew of the specific threat to the named victim, was held to have a duty to protect persons who were subject to a specific threat from their patients.

Provision for the possibility that solicitors might discover threats to third parties from clients was made previously in the solicitors’ codes and guidance. For example, the guidance to the 2007 Code stated that solicitors may reveal confidential informa­tion if they ‘believe it necessary to prevent the client or a third party from committing a crime that [they] reasonably believe is likely to result in serious bodily harm’.^[1674] It is notable that the exception is framed as a permission to break confidence. It was not a requirement that confidence is breached, even when serious harm is anticipated.

The formulation of the physical harm exception to confidentiality had three appar­ently essential requirements; activity constituting a crime, the likelihood of serious bodily harm to a third party and a reasonable belief on the part of the solicitor that this would occur. The guidance to the old rules was not totally clear on what degree of risk and what level of harm would justify breaking confidentiality. Would it be sufficient, for example, if bodily injury was not the purpose of a crime, for example armed robbery, but an incidental risk? What was fairly clear was that solicitors could not break confidence and reveal anticipated crimes which did not involve serious bodily harm.

The very specific conditions in which solicitors could breach confidentiality created a complex but consistent position. Solicitors were bound by confidentiality where the client revealed details about a criminal offence, however heinous, and about relevant past offences. Solicitors could not reveal material covered by legal privilege, even if it would prevent serious harm to another, such as an innocent person serving a term of imprisonment. This privilege does not, however, exist when withholding information amounts to furthering a criminal purpose.

The current SRA Handbook does not mention a prevention of harm exception in the chapter on confidentiality. It is, however, very likely to be accepted by regulators and tribunals as a ‘live’ exception. In fact, it is a surprise that it has only ever applied to prospective criminal activity. This is at odds with the rules in some other jurisdic­tions. The US Model Rules, for example, also cover ‘substantial injury to the financial interests or property of another’.^[1675] It is possible however, that wider types of harm such as these could be covered by disclosure in the public interest, considered below.

iv. Children under Threat

Many jurisdictions in the United States have ‘reporting’ statutes in relation to child abuse which require professionals, including lawyers, to break confidence and inform the authorities where they have reason to suspect child abuse. There are no such statutory provisions in this country. The 1999 guidance to solicitors stated that, ‘[o] nly in cases where the solicitor believes that the public interest in protecting children outweighs the public interest in maintaining the duty of confidentiality could the solicitor have a discretion to disclose confidential information’.

The Solicitors’ Code of Conduct 2007 anticipated situations where child clients revealed continuing sexual or other physical abuse but refused to allow disclosure of such information. A report could, but did not have to, be made to Social Services or the police in these circumstances. The advice provided under the Code suggested that solicitors should ‘consider whether the threat to the child’s life or health, both mental and physical, is sufficiently serious to justify a breach of the duty of confidentiality’.^[1676] The balancing of ‘sufficiently serious abuse’ with a duty of confidence is very difficult. It suggests that even some ‘serious’ abuse is accepted. The formula may therefore suggest a presumption against reporting.

v. Disclosure in the Public Interest

Professional codes sometimes contain a public interest exception to a duty of con­fidentiality. Doctors, for example, can breach confidentiality under this head where secrecy would cause serious harm to anyone.^[1677] There is academic support for extending this type of obligation.^[1678] The possible impact of such an exception can be deduced from W v Egdell,^[1679] where protecting public safety prevailed over the public interest in confidentiality.

Doctor Egdell was instructed by solicitors for W, a patient detained under mental health legislation, to prepare a report on W This was to be used by W’s solicitor as evidence in a hearing before a Mental Health Review Tribunal (MHRT) considering W’s release. The report opposed W’s release from a mental hospital on the ground that he was a danger to the public. W abandoned his application to the MHRT in the light of this report and it was not revealed to the tribunal.

The doctor was concerned that the decision not to pursue the application for release mean that the relevant authorities were not aware how dangerous he considered W to be. He was particularly concerned that there was a process of automatic review under which the hospital might release W voluntarily. He therefore sent a copy of the report to the hospital and to the Secretary of State.

W applied for an injunction to restrain further disclosure of the report and also for damages for breach of confidence. It was accepted by counsel that legal professional privilege did not arise.^[1680] The question had been argued in the court below and Scott J had found that expert evidence is evidence of fact and therefore not subject to legal professional privilege.^[1681] The Court held that the public interest required disclosure of Egdell’s report.

The principle underpinning Egdell is that a doctor who fears that a decision to release a prisoner will be made on the basis of inadequate information is justified in breaking a confidential relationship.^[1682] Whether such a principle applies also to lawyers, at least in quite the same way, is doubtful. First, in Egdell, the patient had a solicitor who strenuously opposed the doctor’s right of disclosure, without criticism or comment from the court. What distinguishes the doctor and the lawyer in the situation is not, as has been argued, that the lawyer’s ethics are more self-interested than the doctors’ ethics.^[1683] It lies in the nature of the roles of the professionals in the particular situation, and specifically, the duty of loyalty of the lawyer.

The public interest is not mentioned in the 10 mandatory principles providing the framework of the present SRA Handbook. It is however mentioned in the notes to the Principles. Here, it says that ‘[w]here two or more Principles come into conflict, the Principle which takes precedence is the one which best serves the public interest in the particular circumstances’.^[1684] It is doubtful that public interest disclosure falls within duties to uphold the rule of law or the proper administration of justice. At the high level of generality at which the principles operate, it is more likely that avoiding third party harm is integral to acting with integrity or not allowing one’s independence to be compromised.

It may be fanciful to read an obligation to avoid third party harm into the principles. If it were so, invoking the public interest would provide a considerable counterweight to client loyalty. It would open up a public interest exception going beyond the harm caused by commission of a crime. Imagine a situation where a client tells a solicitor that his litigation adversary’s occupied building is seriously unsafe, but asks the solici­tor not to reveal the information for tactical reasons. The Derby Magistrates case, with its robust ‘no exceptions’ approach to legal privilege, suggests that the solicitor must stay silent. A public interest exception may suggest the opposite.

If the case of Egdell were applied to solicitors, then the courts might well accept the argument that,

as a matter of public policy... the solicitor ought to be entitled, without either being liable to action by his client or to a charge of professional misconduct, to take the necessary steps in the public interest to prevent death or serious injury.^[1685]

This, it seems, is an unlikely development for reasons already canvassed. Were it pos­sible, of course, it assumes that a solicitor would wish to break his client’s confidence in the public interest. It would be a significantly bigger step if they were under a positive obligation of disclosure in such circumstances.

The implications can be seen in the investigation of the allegations of ‘phone­hacking’ by News of the World journalists. A solicitor with Farrer and Co, well known as acting for the Queen, had represented Rupert Murdoch’s company, News International, the parent company of the newspaper. He admitted to the House of Commons Select Committee for Culture, Media and Sport that he had realised that Parliament had been misled when told that telephone hacking was the act of a ‘rogue reporter’.^[1686] He had not spoken out, he said, because of client confidentiality.

Had the evidence been given in court, the solicitor would have had to counsel his client against perjury and withdraw from the case if the issue was not rectified.^[1687] It is arguable that misleading Parliament is at least analogous. A clearer case for public interest disclosure may not be obvious, but, given the nature of the legal role, it is still debatable that respecting client confidentiality was the wrong decision.

C. Client Litigation against Solicitors

When clients sue their solicitors, complain or bring proceedings to the Solicitors Disciplinary Tribunal, confidentiality vanishes.^[1688] The solicitor can, but can choose not to, reveal confidential information from the client in order to establish a defence. The technical explanation is not that this is an exception to confidentiality or privi­lege, but that the client has impliedly waived both.^[1689] Confidentiality is not therefore waived where the solicitor initiated the proceedings against the client, as in an action for fees.

An example of the operation of these rules is Lillicrap v Nalder & Son.^[1690] The claimants were property developers for whom the defendant solicitors had acted in a number of purchases. In relation to one purchase, the claimant alleged that the solici­tors had negligently failed to tell them of a right of way over the land. The solicitors admitted negligence but maintained that this did not cause loss. The claimants would have gone ahead with the purchase anyway.

The solicitors produced evidence that, in six other transactions in which they had acted, the claimants had bought property despite having been told of various risks. The claimants considered that this evidence was covered by legal privilege. On appeal it was held that, once the client had instituted proceedings against the solicitors, they had impliedly waived privilege in relation to all documents relevant to the suit.

VIII.