Court Of Appeal Upholds Ruling Refusing To Grant An Order Restraining A Law Firm From Acting

• Published date: 19 May 2020
• Author: Ms Helen Rowlands
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Clyde & Co

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

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...