It's all in the mind… preventing the 'subconscious' use of privileged information

The High Court granted an injunction preventing an in-house lawyer from acting for a new client in proceedings against her former employer (Western Avenue Properties Ltd v Soni [2017] EWHC 2650 (QB)).

Many of you may have registered this decision focussing, as it does, so squarely on the position of an in-house lawyer. It is an important reminder of the professional obligations of in-house lawyers, around which there needs to be real awareness both on the part of the in-house lawyer and of the wider organisation.

The judge held that there was a risk the lawyer might subconsciously use confidential information about her former employer to its disadvantage. Although the court accepted that the lawyer was well aware of her continuing professional obligations of confidentiality, and was unlikely to have any conscious intention to breach them, that did not avoid or even reduce the risk of her subconsciously misusing confidential information.

Background

Between March 2015 and February 2016 the first defendant, Ms Soni, was employed by the claimant (WAPL) as an in-house lawyer. After her employment with WAPL ended, Ms Soni offered her services as a solicitor through a company of which she was the sole director and shareholder. That company was named as the second defendant in the proceedings.

In March 2017 Ms Soni was approached by the Thukrals, former business associates of WAPL, who asked her to act for them in litigation adverse to WAPL. Ms Soni sought guidance from the SRA on whether she could act. She was advised of the potential for conflict – on the one hand, under the Solicitors' Code of Conduct she would be obliged to disclose to the Thukrals all information relevant to their matter, including any information gained during her employment by WAPL, but on the other hand she could not do so because some of that information would be privileged and confidential to WAPL. Ms Soni told the SRA that she would not rely on any information which was confidential to WAPL and that she had obtained a 'waiver' from the Thukrals in which they consented to her not disclosing to them confidential information belonging to WAPL. The SRA said that Ms Soni could act for the Thukrals if she was satisfied that she would not use WAPL's confidential information, but cautioned that there was still a risk of Ms Soni subconsciously using that confidential information.

Ms Soni accepted the Thukrals' instructions. WAPL subsequently issued proceedings seeking an injunction to prevent Ms Soni from acting.

Decision

The judge summarised the relevant principles which informed whether an injunction should be granted:

1. WAPL must show that Ms Soni was, or had been, in possession of confidential information belonging to them, and that WAPL had not consented to its disclosure;
2. WAPL must show that the confidential information was, or may be, relevant to the matter in which the interests of the Thukrals was adverse to WAPL;
3. The burden of proof was on WAPL, but it was not a heavy burden; and
4. If WAPL established the points above, the burden shifted to Ms Soni to show that there was no risk of misuse or disclosure of the confidential information. That risk must be more than "fanciful or theoretical", but need not be substantial.

The judge held that Ms Soni was in possession of information confidential to WAPL and that this information was, or may be, relevant to WAPL's dispute with the Thukrals. The burden of proof then shifted to Ms Soni to show that there was no risk of the misuse or disclosure of this information. Since Ms Soni had both sought guidance from the SRA and obtained a waiver from the Thukrals, the judge accepted it was unlikely that she would intentionally breach her duties and use WAPL's confidential information to the Thukrals' advantage. However, in the judge's mind, none of that avoided or even reduced the risk that Ms Soni might subconsciously use the confidential information against WAPL.

Ms Soni attempted to avoid an injunction by arguing that it would deny the Thukrals their choice of legal representation. However, the judge said it would not be appropriate to balance the Thukrals' rights against the risk to WAPL's confidential information and that the impact of an injunction on the Thukrals was not a relevant consideration.

The court therefore granted an injunction preventing Ms Soni from acting for the Thukrals.

Conclusion

This decision demonstrates the court's strict approach, and highlights just how seriously the court regards a lawyer's ongoing duty to keep the information of both current and former clients confidential.

Though the initial burden of proof is on a client to show that their former solicitor is in possession of their confidential information and that the information may be relevant to the matter in which the solicitor is now acting against them, in most cases it will be straightforward to get over this hurdle. The nature of a solicitor-client relationship means that a solicitor will inevitably come into possession of a client's confidential information, and it is not difficult to establish that such information may be relevant in a dispute with a third party.

In contrast, it will often be difficult for a solicitor to show that there is no risk of the disclosure or misuse of such confidential information. A solicitor can take active steps to try and prevent this, as indeed Ms Soni did; however, there is little that can be done to guard against the risk of the subconscious use of confidential information. Solicitors should bear this in mind when considering instructions from new clients and, if in doubt, err on the side of caution and decline to act. It is important to remember that, as in this case, these principles apply in the in-house sphere. If a conversation is needed to raise a potential issue of this sort with the internal client, then don't shy away from it.

If you require further information on anything covered in this briefing please contact Ben Longworth, Lucy Penn or your usual contact at the firm on 020 3375 7000.

This publication is a general summary. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, December 2017