Recent Ruling Highlights Different Disclosure Requirements For Accountants And Solicitors

Question: what is the extent of solicitors' duty of disclosure, and in particular is there a duty to disclose information gained from acting for one client to another?

The decision in Harlequin Property (SVG) Limited v Wilkins Kennedy (a Firm) [2016] EWHC 3188 (TCC) held that accountants do not owe such a duty and in his finding the judge noted, "a solicitor acts in a different professional, regulatory and ethical context to an accountant." Before we turn to the solicitor's duty, let us briefly look at the facts of this suitably dramatic case.

The claimants, Harlequin Property (SVG) Limited and Harlequin Hotels and Resorts Limited, the developer and operator of luxury Caribbean resorts ("Harlequin"), engaged the defendant firm of accountants and business advisors, Wilkins Kennedy ("WK"), in relation to a new resort. Allegedly relying on WK's advice, Harlequin entered into a "very loose" arrangement with contractors, ICE Group ("ICE"), to complete the first phase of the project. It so happens that WK acted for both Harlequin and ICE, not only on other projects, but specifically in relation to the current project which in the judge's words, "ran completely out of control". Meanwhile, Harlequin was being investigated by the Serious Fraud Office, there were serious fraud findings against ICE's owner and a defamation suit was brought by Harlequin's director against a senior employee of WK who worked for Harlequin whilst being the chief financial advisor to ICE.

Harlequin ultimately sought US$60 million in damages against WK for failing to advise them to enter into a contract with ICE and for omitting to share with them confidential information that ICE's owner had misappropriated funds. The judge found for the claimants on the first point but on the second held there had not been a breach of disclosure duty as no such duty exists.

So what is the nature of the solicitor's duty and how does it differ to that of the accountant? The SRA Code of Conduct, the solicitor's ethical bible, states that the solicitor's duty of disclosure applies to "information of which the solicitor is aware and which is material to a client's matter". The duty is not absolute and must be weighed against the duty to maintain client confidentiality and the need to avoid conflicts of interest. Where duties of confidentiality and disclosure conflict, confidentiality will always trump disclosure.

Does this mean that a solicitor could be required to disclose...