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Court of Appeal upholds ruling refusing to grant an order restraining a law firm from acting

  • Legal Development 14 May 2020 14 May 2020
  • Professional Practices

Glencairn IP Holdings Ltd v Product Specialities Inc (t/a Final Touch) [2020] EWCA Civ 609

Court of Appeal upholds ruling refusing to grant an order restraining a law firm from acting

The Court of Appeal has provided helpful guidance on the circumstances in which a law firm can be restrained from acting for a defendant where, in earlier similar litigation, the same firm has acted for another defendant against the same claimant and that earlier litigation was settled.

The somewhat unusual application was made on the basis that the law firm, Virtuoso Legal ("Virtuoso"), had obtained information confidential to Glencairn IP Holdings Ltd ("Glencairn") following its settlement of the earlier litigation, and that there was a risk this information would be passed to Virtuoso's client, Product Specialities Inc (t/a Final Touch) ("Final Touch"). We reported on the first instance decision in September 2019.

First instance decision

At first instance, the key issue was whether, and to what extent, the principles in Prince Jefri Bolkiah v KPMG (a firm) [1998] 2 AC 222 ("Bolkiah") applied where the law firm had never acted for the party seeking the injunction – Glencairn - but had acted for an unrelated party in litigation involving Glencairn. In summary, the English Court can restrain a law firm from acting for a new client with an interest adverse to that of a former client if the former client can establish that: (a) the law firm possesses information confidential to the former client; and (b) the information is or may be relevant to the new matter in which the interest of the new client is or may be adverse to the former client's. If the former client establishes that the law firm has relevant confidential information, there is no balancing exercise and the former client is entitled to an injunction, unless the law firm is able to demonstrate that there is no real risk of disclosure.

The Judge considered that, in the absence of a fiduciary relationship, the Bolkiah approach – i.e. the absence of a balancing exercise and the imposition of the burden of proof on the law firm - did not need to be applied with full force, and that the "balance of justice" was in favour of refusing to make the order.

Grounds of appeal

Glencairn appealed on two grounds:

  • The Judge should have applied the Bolkiah test and had he done so, he would inevitably have concluded that Glencairn was entitled to the order sought;
  • If the Judge was correct not to apply the Bolkiah test, then his conclusion that the balance of justice was in favour of refusing the application was unsustainable.

Decision of the Court of Appeal

The Court of Appeal refused to equate the position of a solicitor who had formerly acted against a party (a former opponent case) with that of a solicitor who had formerly acted for a party (a former client case). The Court of Appeal confirmed that there was a clear distinction between a duty of confidence and a "true fiduciary relationship" such as that arising under a solicitor-client retainer. The Court found that the existence of a duty of confidence was not sufficient to trigger the application of the special Bolkiah jurisdiction: the imposition of the burden of proof on the law firm to show that there is no risk of disclosure of the confidential information should be limited to cases where there is, or was, a true fiduciary relationship. In the present case, the burden of proof was on Glencairn to demonstrate that there was a real risk of prejudice to it from the other party’s solicitor having had access to confidential information. It was then appropriate to conduct a balancing exercise between the prejudice caused to each party if an injunction was, or was not, granted.

Glencairn also asserted that legal professional privilege and without prejudice privilege should be treated equally. The Court of Appeal disagreed. In circumstances where a former client has imparted privileged information to his solicitor during the course of a true fiduciary relationship, the strict Bolkiah test and the placing of the burden of proof on the solicitor were clearly justified. The Court distinguished this from the situation where a party has chosen to share privileged information with his opponent and the opponent's legal advisers during the course of a mediation. While the opponent and his legal advisers could not use the privileged information other than for the purposes of the mediation, they will not have received it in a fiduciary capacity and the remedy of restraining the opponent and his legal advisers from misusing the information would usually be adequate protection.

Accordingly, the Court of Appeal found that the Judge was right to conclude that the burden of proof was on Glencairn throughout to demonstrate that there was a risk of prejudice to Glencairn and that, as in any other case of alleged breach of confidence outside the scope of the Bolkiah jurisdiction, it was appropriate to carry out a balancing exercise, taking account of the prejudice to the opposing party if such an injunction were to be granted.

The second ground of appeal also failed. The Court of Appeal considered that this ground was seeking to overturn findings of fact, which were quintessentially matters for the Judge. The Judge's conclusion that the balance of justice was against the grant of an injunction was unimpeachable.

Comment

This judgment provides helpful clarification on the scope of application of the Bolkiah test. A "true fiduciary relationship", such as that between solicitor and client, justifies the imposition of the strict approach in Bolkiah, but a more limited relationship - such as a duty of confidence - does not. In the latter case, the burden of demonstrating a risk of misuse of confidential information will remain with the applicant, and the onus will not be on the law firm to show that there is no risk of prejudice.

End

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