Lawyer and Client Confidences at Common Law

A. Context

The common law of lawyer and client confidence sits within the general framework protecting confidential information. Confidentiality is implied in situations where it is expected to be assumed by those involved.² In the case of both solicitors and barristers, confidence attaches to the relationship with clients as ‘a necessary and traditional incident’.³ Confidentiality in the lawyer and client relationship has some distinctive features because of the nature of the legal role.

Actions by clients against lawyers for breach of confidence are relatively rare. An exception arises when the confidentiality owed to past clients clashes with the loyalty owed to present clients. The right to act for a client in the present whose interest conflicts with those of a past client is not absolute. There are some arguments that it should be. Even if the nature of the two matters may be different, the solicitor’s knowledge of a former client could be relevant. The solicitor may know for example, that their former client is without resources, anxious and prone to panic. A person may be justified in thinking that the promise of loyalty is a little shallow when this knowledge could be turned upon them. That is, however, the position at common law.

B. The Right to Confidentiality of Former Clients

Out of a long line of antecedents, the case which provides a platform for the modern law was Rakusen v Munday, Ellis and Clarke.⁴ In that case, the defendants were solici­tors consulted by R, the claimant, who was considering launching proceedings against his former company. One of the defendant’s two partners, M, had several consultations with R, but R subsequently instructed other solicitors. M’s partner, C, was away at the time and knew nothing of the matter.

² Gotha v Sothebys [1988] 1 WLR 114.

³ Halsbury's Laws, vol 8(1) at paras 452-53.

⁴ Rakusen v Ellis Munday and Clarke [1912] 1 Ch 831.

R’s litigation against his former company went to arbitration and C was appointed to appear as representative of the company. R’s application for an injunction to restrain the defendant firm from acting in the arbitration was granted at first instance. The evidence was that M and C were in the habit of doing business separately and without any knowledge of each other’s clients. Nevertheless, the judge held that a solicitor, once appointed, could not act against his former client in the same matter.

The Court of Appeal unanimously reversed the judgment, holding that the prohibi­tion on acting was not absolute. A complete prohibition on acting in such circumstances might cause great difficulty in small towns where there was a limited choice of solicitor. Much was also made of the fact that M and C were ‘solicitors of the highest position whose honour and integrity are beyond any imputation’. C had no knowledge of any­thing that had happened and, as an officer of the court, could be held to the highest standards.

Cozens Hardy MR said that, before restricting a client’s freedom to instruct a solicitor ‘we must be satisfied that real mischief and real prejudice will in all human probability result if the solicitor is allowed to act’. Lord Justice Buckley said that the court had jurisdiction to restrain the solicitor from giving the new client any assistance against the old client by reason of knowledge acquired as solicitor for the old client. If, to achieve that result, it was necessary to restrain the employment of the solicitor by the new client the injunction would be granted, ‘but on no other ground could such an injunction be granted as against the client’.

C. Controlling Information: Walls, Barriers and Ethical Screens

Following the decision in Rakusen v Munday, Ellis and Clarke the preservation of a right to act against former clients became a problem of managing knowledge.

In Re A Firm of Solicitors,^[1544] guidance was provided on how impermeable the screen should be. A large firm of City solicitors wished to represent a client bringing an action against a company which, some years previously, had been a client of the firm. The solicitors went to some trouble to erect a screen between the staff working on the current case and those who had worked on the previous case.

The Court of Appeal upheld the grant of an injunction prohibiting the firm from representing the new client. It acknowledged that there was no absolute prohibition on acting against a former client. A lawyer could not do so, however, if a reasonable man would reasonably anticipate a breach of confidentiality or some likelihood of mischief. In this particular case, on the facts, an information barrier could not provide an effective guarantee against such a risk.

D. Bolkiah v KPMG: The Unqualified Importance of Confidentiality

Accepted practice for dealing with potential conflicts of interest between former and present clients was called into question by the landmark case, Bolkiah v KPMG.^[1545] Although the defendants were a firm of accountants it was held that the principles developed in the case applied to solicitors.

In Bolkiah, KPMG had acted as the auditors of an agency of the Government of Brunei. The agency was chaired by Prince Jefri. KPMG also acted for Prince Jefri in his own affairs.

Aware of the potential conflict of interest, KPMG sought to isolate the staff undertaking the government work from the rest of the firm. They sought to prevent access to any information about Prince Jefri by those staff. Unsurprisingly, Prince Jefri sought an injunction to prevent KPMG acting for the Brunei Government. He argued that the information barrier around the investigation could not adequately protect his confidentiality or his interests.

Giving judgment for Prince Jefri, Lord Millett found that there was no absolute duty preventing a firm acting in cases in circumstances where the interests of former clients might be prejudiced. If, however, a former client showed that the adviser held relevant confidential information adverse to their interests, the client had to consent to them acting. An ad hoc information screen was insufficient to prevent the possible leakage of such information. Lord Millett said, ‘the duty to preserve confidential information is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so’.^{[1546] [1547]}

The case suggested that the courts expected much higher standards of protection for the information of former clients than had previously applied. This caused considerable concern among City firms. They considered that they had developed rigorous systems for dealing with the possibility of information leakage that threatened confidentiality.

E. The Interpretation and Application of Bolkiah

Despite the disquiet caused by Bolkiah, the courts limited its impact in subsequent cases. In Koch Shipping v Richards Builer⁶ for example, a solicitor employed by a firm representing the applicants to an arbitration left her employment and joined the law firm, Richards Butler, which was acting for the defendants.

It was material to the decision that the solicitor concerned was a woman of unchal­lenged integrity who had given an undertaking not to discuss the case with those handling it. She worked on a different floor of the firm’s building. She was the sole employee with the confidential information. The case was therefore distinguish­able from Bolkiah, which involved a team of accountants. Lord Justice Tuckey was anxious that clients should not be deprived of their chosen solicitors in the name of preserving confidentiality where ‘the risk is no more than fanciful or theoretical’.

In Marks & Spencer plc v Freshfields Bruckhaus Deringer,^[1548] the claimants applied to prevent a large law firm, Freshfields, from acting for a former director, G, in a hostile takeover bid. Freshfields had acted for Marks and Spencer (M&S) in a great deal of its contentious commercial and employment work, and in particular on the renegotia­tion of a particularly valuable and important contract. Freshfields alleged that there was no conflict in relation to the actual transaction, namely the takeover bid, but that in any case they had erected an information barrier to deal with any potential leakage of confidential information.

At first instance the court granted M&S an injunction. It found that Freshfields held considerable confidential information on M&S and that no effective internal information barriers could be put into place to prevent leakage. Freshfields also pleaded that it would be difficult for G to find another solicitor sufficiently expert in the field able to act for him. This argument was rejected by the trial judge.

Despite the ruling in favour of the claimant, Marks & Spencer plc v Freshfields Bruckhaus Deringer introduced a vital qualification to Bolkiah. At first instance, Collins J held that there had to be some reasonable relationship between the two matters for rules against conflict of interest to bite. The Court of Appeal agreed that a potential conflict arose between past and present clients only where there was a degree of relationship between the two matters. This limited the potential scope of the Bolkiah decision.

The position at common law had gradually returned to one where the courts looked at the substance of the situation. There was no blanket prohibition on acting; it all depended on the circumstances. In GUS Consulting v Leboeuf Lamb Greene, for example, it was decided that an ethical wall, put in place to isolate an arbitration team from knowledge its firm (L) held about a former client, was an effective device to prevent leakage of information.^[1549] There was unchallenged evidence of the members of L’s arbitration team about their ignorance of, and lack of access to, the former cli­ent’s information. There was an undertaking, offered by L, to instruct staff previously involved with the relevant matter not to discuss that work with members of the arbitration team or amongst themselves. There was also an undertaking to secure an information barrier. On the facts, the former client’s information was safe. The court held that there was no real risk of disclosure or misuse of confidential information and no need to grant an injunction.

Lawyers’ obligation to respect client confidences is reinforced by legal profes­sional privilege. The doctrine of privilege does, however, recognise some exceptions to confidentiality. It is therefore necessary to explore the effect of legal professional privilege before examining the regulation of the obligation of confidentiality by the legal profession.

III.