High Court prevents in-house lawyer acting against former employer due to risk of subconscious use of confidential information

The High Court has granted an injunction preventing an in-house lawyer from acting in proceedings adverse to her former employer: Western Avenue Properties Ltd v Soni [2017] EWHC 2650 (QB).

The judge accepted that the defendant was well aware of her professional responsibility of continuing confidentiality and was unlikely to have any conscious intention to breach it. However, that did not avoid or reduce the risk of her subconsciously using the claimants’ confidential information. An injunction was therefore appropriate.

It was common ground between the parties that the principles established in Prince Jefri Bolkiah v KPMG [1999] 2 AC 222 apply to in-house lawyers as well as those in private practice. Accordingly, where an in-house lawyer was in possession of material confidential information of a former employer, an injunction would be granted unless he or she could establish that there was no real risk of disclosure or misuse.

This is in contrast to Generics (UK) Limited v Yeda Research & Development Co Ltd [2012] EWCA Civ 726 (considered here) in which the Court of Appeal expressed uncertainty as to whether the Bolkiah principles applied in the in-house context, or whether it was up to the former employer to satisfy the court that an injunction was appropriate – though it did not have to decide the point as on the facts of that case there was no real risk of disclosure. Yeda was not referred to in the judgment in the present case.

Background

The first defendant, Ms Soni, had been employed as an in-house lawyer for the claimants from March 2015 until she resigned in February 2016. The second defendant was a company through which Ms Soni subsequently practiced as a solicitor.

In March 2017, the defendants were approached by former business associates of the claimants (the “Thukrals”) with a request to act for them in litigation adverse to the claimants.

Before accepting instructions, Ms Soni contacted the SRA seeking guidance on whether she could act. The SRA advised her of the obvious difficulty, in that the Solicitors’ Code of Conduct would require her to disclose to the Thukrals all information material to their matter, including any gained while acting for the claimants, but she could not disclose such information because it was confidential to the claimants. Ms Soni indicated that she would not be relying on any information that was confidential to the claimants, and that she had obtained a “waiver” from the Thukrals consenting to non-disclosure. The SRA advised that if Ms Soni was satisfied she would not have recourse to the claimants’ confidential information then she could act, but there remained a risk that she would subconsciously use such information.

The defendants accepted the instructions and the claimants sought an injunction restraining them from acting.

Decision

The court (HHJ Curran QC sitting as a High Court judge) granted the injunction.

It was common ground between the parties that the principles to be applied were those stated in Bolkiah, and subsequently reviewed and restated in Georgian American Alloys Inc v White and Case LLP [2014] EWHC 94 (Comm). HHJ Curran summarised the key principles, including the following:

  • The claimants must show that the defendants were, or had been, in possession of information that is confidential to the claimants, and that the claimants had not consented to its disclosure.
  • The claimants must then show that the information is or may be relevant to the matters in which the interest of the Thukrals is, or may be, adverse to that of the claimants. The burden of proof is on the claimants, but it is not a heavy one.
  • If the above is established, the burden of proof shifts to the defendants to show that there is no risk of misuse or disclosure. The risk must be more than “fanciful or theoretical”, but need not be “substantial.

HHJ Curran accepted that the claimants had established that the defendants were in possession of their confidential information. It was not necessary for the claimants to particularise each and every item of confidential information in order to establish the point. Given that Ms Soni had spent some 11 months as the claimants’ in-house full-time legal adviser, “the inference is irresistible that she would have acquired a very extensive familiarity with every aspect of their legal and financial affairs.”

As to whether the information was or may be relevant to the dispute, the judge noted that this was not a heavy burden and, in his view, it was obvious in the present case.

The burden of proof therefore shifted to the defendants to establish that there was no risk of disclosure. The defendants submitted that the fact the first defendant had contacted the SRA for guidance, and then obtained a waiver from the Thukrals, was evidence that she was aware of her duty not to use confidential information against her former employer. While HHJ Curran accepted that this meant it was inherently less likely the first defendant would consciously breach her duties, that did not avoid or even reduce the risk of subconscious use of confidential information.

Finally, the court addressed the defendant’s submission that relief should not extend to preventing the defendants from acting for the Thukrals, as to do so would deny them their right to have the legal representation of their choice. HHJ Curran J disagreed that this was a relevant factor; the court would not undertake a balancing exercise of this sort, and the impact of the injunction upon the Thukrals was therefore irrelevant.

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