| Date | 13 October 1999 |
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| Judgment | Re a firm of solicitors, TCC 16 July 1999 |
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| The Issue | Conflict of interest. |
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| Implication |
The courts may take a strict line in determining whether a conflict of interest exists where by previous proceedings, confidential and privileged information has been gained which may be, even inadvertently, transmitted to the other party in subsequent proceedings. |
printThe growing use of solicitors, accountants and other consultants is a feature of modern business in which the construction industry is no exception. It is a substantial and highly competitive market in which the question of conflict of interest frequently arises. In the case 're a firm of solicitors', the court was asked to determine whether a firm of solicitors should be prevented from continuing to act for a firm of architects against the allegation of conflict of interest. The court chose to protect the identity of all those firms and individuals involved. In the mid 1980's the architects in question were involved in design and contract management work on the refurbishment of some blocks of flats in London. In 1988, the purchaser of several of the newly refurbished leasehold flats brought an action against the developer who joined the architects as third party. It was alleged that the architects were at fault in relation to design and supervision, including questions arising out of fire precautions inherent in their design. At the end of February 1991 these matters were settled, the settlement being confirmed in an order of the court. The litigation process had lasted nearly two and a half years and throughout this time, the architects had engaged a small firm of solicitors of which Mr A was then a partner. Mr A had personally drafted pleadings on the architect's behalf in which issues were raised as to the scope of the duty they owed with regard to design , implementation and snagging, and the extent of defects. Mr A had attended conferences with the appointed barrister and had necessarily been involved in trying to identify the strengths and weaknesses of the architect's case and in making decisions accordingly on strategy and tactics. Reviewing this earlier litigation, the judge commented that Mr. A was likely to remember some eight years later which of the architects might be an impressive or unimpressive witness, whether their case had seemed likely at the time to succeed or fail, and whether he thought at the time that the settlement was or was not favourable to them. In January 1997, nearly six years after the earlier litigation had been settled, the block of flats suffered fire damage. This led to a new litigation being commenced against the architects by the present freeholders of each of the blocks of flats. In this new litigation, it was alleged that the architects had made failings in respect of fire precautions. Clearly, there would be a close relationship between the earlier litigation and the present proceedings. The freeholders bringing this action against the architects were represented by a firm of solicitors, Firm X. Initially, Firm X had no connection whatsoever with the earlier litigation but almost one year after commencement of these proceedings, Mr A joined the firm as a partner. On learning this, the architect's solicitors immediately became concerned that Mr A might reveal to his new partners confidential information concerning the earlier litigation. They asked for assurances, and unsatisfied with the rather predictably confrontational response, applied to the court for an injunction precluding Firm X from acting as solicitors for the freeholders. The case of Bolkiah -v- KPMG earlier this year was cited. In this case the House of Lords confirmed that whilst there is no absolute prohibition against solicitors acting in litigation against former clients, the court nevertheless has a discretionary power to restrain solicitors from doing so in circumstances where it is appropriate to protect the confidential information of the former clients. Lord Millet said "Anything less fails to give effect to the policy on which legal profession privilege is based. It is of overriding importance for the proper administration of justice that a client should be able to have complete confidence that what he tells his lawyer will remain secret. This is a matter of perception as well as substance. It is of the highest importance to the administration of justice that a solicitor or other person in possession of confidential and privileged information should not act in any way that might appear to put that information at risk of coming onto of the hands of someone with an adverse interest." Peter Susman QC sitting as a recorder in the Technology and Construction Court reviewed the present case. He was critical of both Firm X and Mr A. When asked to confirm whether Mr A had indeed acted for the architects in the earlier litigation, Mr A could have replied to his new employer simply 'yes'. Instead he chose to add that the earlier litigation was settled by insurers paying £50,000 inclusive of costs, and that the architects had paid an excess of £10,000. By this act alone, Mr Susman suggested that confidential information had already been revealed. Information that an excess on their insurance policy had already been paid by the architects was not only confidential but was relevant and might be interesting to an opponent wondering whether the architects still had a personal financial interest in the outcome of the new litigation. Mr Susman was equally critical that the files relating to the earlier litigation were not immediately delivered up to the architect's solicitors but instead had been kept by Mr A on his desk pending a decision upon what to do with them. Mr Susman concluded that Firm X and Mr A had not been nearly as scrupulously careful as might ideally have been required by the circumstances. Whilst Mr Susman stressed that he was completely satisfied that this was neither deliberate, nor morally, nor professionally disreputable, he concluded nevertheless that Firm X ought to be precluded from continuing to act for the freeholders against the architects in the current litigation.
CJ-9939
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