Court of Appeal refuses injunction against defendant's solicitors who received claimant's confidential information when acting for previous opponent

The Court of Appeal has upheld a decision refusing to grant an injunction to restrain a firm of solicitors acting for a defendant in circumstances where they had previously obtained relevant confidential information belonging to the claimant: Glencairn IP Holdings Ltd v Product Specialities Inc (t/a Final Touch) [2020] EWCA Civ 609.

The solicitors had obtained information in the course of settlement negotiations where they had acted for a separate defendant in a similar claim brought by the claimant. Significantly, the solicitors had never acted for the claimant.

The decision is of interest because it confirms the court's approach in considering whether to grant an injunction to restrain solicitors from acting for an opponent where they have received a party's confidential and privileged information. Where the solicitors obtained the information in the course of acting for the party in question, ie where the relationship is that of former client, the court will grant an injunction unless the solicitors can show there is no real risk of disclosure - in effect reversing the ordinary burden of proof. That was established by the House of Lords in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222.

As the present decision shows, however, the Bolkiah approach is limited to the former client situation. It does not apply where the solicitor received the relevant information as a result of acting for an opponent in previous litigation. In those circumstances, the burden remains on the applicant to justify the grant of an injunction.

Background

The claimant and defendant are glassware companies. The claimant alleges infringement of trade mark and registered design in relation to a whisky glass manufactured by the defendant. The defendant is represented by Virtuoso, a small specialist IP firm.

The claimant previously brought a similar action against a third party, Dartington, which was settled following a mediation. Virtuoso also represented Dartington in that case.

The claimant applied for an injunction to prevent Virtuoso continuing to act for the defendant in the present case. It cited concerns that Virtuoso had become aware of information disclosed by the claimant during the mediation and subsequent negotiations, including the claimant's negotiating position and the terms on which it was prepared to settle, and might pass that information on to the defendant.

The High Court refused the injunction. The judge declined to apply the approach established in Bolkiah, in which an injunction was granted to prevent accountants acting for an opponent where they had previously provided extensive litigation support services to the applicant and therefore received his privileged and confidential information. (Although the case involved accountants, it was accepted that they should be treated in the same way as solicitors for these purposes, in light of the services they had provided.) The House of Lords in Bolkiah held that, where a solicitor was in possession of a former client's confidential information, an injunction would be granted unless the solicitor could show there was no real risk of disclosure.

The judge in the present case held that Bolkiah should not be applied because Virtuoso had not received the claimant's confidential information in the course of acting for the claimant. The burden therefore remained with the claimant to show a threat of misuse of its information sufficient to justify the injunction. On the facts of the present case, including the information barrier established by Virtuoso, the judge concluded that the likelihood of any confidential information being passed to the defendant was low and the balance of justice was in favour of refusing the injunction.

The claimant appealed, arguing that (i) the judge should have applied the Bolkiah test and, if he had done so, he would inevitably have granted the injunction, and (ii) even if he had applied the correct test, his conclusion that the balance of justice was in favour of dismissing the application was unsustainable.

Decision

The Court of Appeal (David Richards, Flaux and Arnold LJJ) dismissed the appeal.

Flaux LJ, who gave the lead judgment, said that the fallacy in the claimant's argument was that it sought to equate the position of a solicitor who formerly acted against the applicant (the "former opponent case") with that of a solicitor who formerly acted for the applicant (the "former client case"). The former client case, he said, is "essentially at one end of the spectrum", given that the privileged and confidential information was imparted to the solicitor when there was a fiduciary relationship of trust and confidence. Although the fiduciary relationship has come to an end, the solicitor remains subject to a strict duty of confidentiality which justifies the approach in Bolkiah.

At the "other end of the spectrum", Flaux LJ said, is where the solicitor has not previously acted either for or against the applicant, but has come into possession of its privileged information in the course of the litigation in question, usually because of inadvertent disclosure. In this sort of case, the court will normally only grant an injunction restraining the use of the information, rather than prohibiting the solicitor continuing to act. The burden of proof remains on the applicant.

Flaux LJ described the present sort of case, where solicitors have received the opponent's privileged and confidential information in a mediation or settlement discussions in previous litigation, in which the firm acted against the applicant, as lying "somewhere in the middle of the spectrum". In such a case there is a duty of confidentiality, which may be contractual or equitable depending on the circumstances. However, Flaux LJ said, that is not sufficient to bring into play the Bolkiah jurisdiction imposing the burden of proof on the solicitor to show that there is no risk of disclosure or prejudice.

Accordingly, the Court of Appeal held:

"The Bolkiah jurisdiction should be limited to cases where there is or was a true fiduciary relationship, of which a paradigm example will be the case of a solicitor who formerly acted for the applicant and who came into possession of the relevant privileged confidential information during the course of the retainer."

In the present case, therefore, the judge was right to conclude that the burden of proof was on the claimant to show there was a risk of misuse of the privileged and confidential information and of prejudice to the claimant.

With that test in mind, the critical question was whether the claimant could show that the information barrier put in place by Virtuoso did not work. On the judge's findings, which could not be criticised, the only relevant confidential information was in the settlement agreement - the claimant had not established that there was confidential information in the other material produced for the mediation or in what occurred at the mediation. Further, the claimant had itself given evidence of details of the Dartington settlement that it alleged the defendant's solicitor at Virtuoso had said he had become aware of (evidence which the defendant disputed). By serving the evidence, the claimant had itself "let the cat out of the bag" as to what confidential information was contained in the Settlement Agreement. This was, Flaux LJ said, a very important factor militating against the grant of an injunction.

In the Court of Appeal's judgment, the judge's evaluation of the evidence was not open to criticism and he carried out the balancing exercise correctly. His conclusion that the balance of justice was against the grant of an injunction was therefore unimpeachable.