England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		HC11C02485 Royal Courts of Justice Strand, London, WC2A 2LL
		10/05/2012

Mr Justice Briggs :

Introduction

1. This is an appeal by the claimant Mr Surjit Singla against the order of Deputy Master Mark made on 28 October 2011 whereby he struck out the claimant's claim on the application of the defendants Mr William Stockler and his firm Stockler Brunton for summary judgment. Mr Singla is an insolvency practitioner and retained the defendants as his solicitors in litigation which he undertook as liquidator of 9 MD (UK) Limited ("9MD") against a former director of 9MD, for wrongful trading, and against Stonewood Communications BV and Gone to Hell Limited for declaratory and other relief arising out of breach 9MD's copyright in the screenplay for a film entitled Nine Miles Down ("the Film"). I shall refer to that litigation as the English proceedings.
2. Mr Singla claims that the defendants also provided legal advice and assistance to him, albeit falling short of a formal retainer, in connection with proceedings brought against 9MD and Mr Singla personally in California by a Nevada corporation known as Seven Arts Pictures Inc ("Seven Arts") ("the Californian proceedings"). The defendants deny that they acted for Mr Singla in any respect in relation to the Californian proceedings.
3. Mr Singla's conduct of the English proceedings was funded by a major creditor of 9MD, namely a South African company called One Step Beyond CC ("OSB"), which had previously retained the defendants as its solicitors in connection with the presentation of a winding up petition against 9MD.
4. With the benefit of advice from Californian attorneys, Mr Singla compromised the claim against him personally in the Californian proceedings on terms which OSB regard as having involved a misfeasance on his part as against 9MD. OSB is pursuing that complaint against Mr Singla by way of a misfeasance application in the liquidation of 9MD ("The Misfeasance application"). OSB has retained the defendants as its solicitors for the purpose of that application.
5. Mr Singla's present claim is for an injunction to restrain the defendants from acting as solicitors for OSB in any matter connected to or arising out of the liquidation of 9MD, an injunction to restrain them from disclosing to OSB or any other person any communications or other information received from him without his prior written authorisation, for an order for disclosure of that which has been communicated, for damages and other relief. The purpose of this appeal is to have those proceedings reinstated following Deputy Master Mark's strike out order.
6. Master Mark's conclusion, in a very brief extempore judgment, was that Mr Singla had no arguable case against the defendants for breach of confidence because, in relation both to the English and Californian proceedings, there was such a degree of common interest between Mr Singla and OSB, and such a degree of sharing between them of what would ordinarily have been confidential materials such as counsel's advice, that the defendants could not while acting in those proceedings for Mr Singla have acquired any information which they were obliged to keep confidential from OSB. The claim was therefore unarguable.
7. At the beginning of the hearing of this appeal, both sides sought to adduce further evidence, beyond that which had been deployed before the Deputy Master. The defendants sought to introduce over a thousand pages of copies of communications between the parties and OSB for the purpose of demonstrating, bell book and candle (rather than, as before the Deputy Master by a few examples), that nothing had been treated as confidential between Mr Singla and OSB. For his part Mr Singla sought to introduce a very modest amount of internal material generated by the defendants, illustrative so it was said of their understanding that their sole client during the English proceedings had been Mr Singla and not OSB.
8. To my initial surprise, (but perhaps because he also wished to adduce additional material), Mr Comiskey for Mr Singla did not oppose the large scale introduction of fresh evidence by the defendants, even though they admitted that there had been no reason why it could not have been adduced before the Deputy Master. Nonetheless, it seemed to me that to permit the introduction of so much material would risk turning an appeal against summary judgment into a trial of the case on the documents. Accordingly, I limited the defendants' permission to the introduction of no more than 25 documents of their choice as further and better examples of the unfettered disclosure to OSB of types of normally confidential litigation information, of which Mr Lilly for the defendants took full and, as it turned out, well-judged advantage.

The legal principles

9. The basis of the court's jurisdiction to restrain a solicitor from acting against a former client is founded not on the avoidance of any perception of possible impropriety, but on the protection of confidential information. Accordingly, the claimant who seeks to restrain his former solicitor from acting against him for another client must show:

(1) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented, and

(2) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own.

The burden of proof is throughout on the claimant, but may not be a heavy one. Point (1) may readily be inferred. Point (2) will often be obvious. See Prince Jefri Bolkiah v KPMG [1999] 2 AC 222, at 234-5 per Lord Millett.

10. Where a solicitor acts on a joint retainer by two or more clients in relation to the same matter then, subject to any agreement between them to the contrary, there will generally be no obligation on the solicitor to keep his communications with one of those clients confidential from the other. In that context, his obligation of confidence to his joint clients may only be released by all of them acting together.
11. By analogy, it occasionally happens that there exists such a community of interest between a litigant (A) and a third party to that litigation (B) that A's solicitor is under no obligation to keep confidential from B information arising in the performance of that retainer, even though B is not his client in that litigation. The solicitor's partial release from his ordinary obligation of confidence to A frequently arises from express written agreement between A and B. But it may also arise by way of necessary implication from the circumstances about the relationship between A and B in connection with the litigation. Furthermore, a conclusion (after the event) that the relationship necessarily involved such a release of the solicitor from any obligation of confidence to A as against B may arise by way of inference from evidence as to their mutual conduct.
12. I was shown two authorities relevant to the extension of what I shall call this common interest principle beyond cases of joint retainer. The first, CIA Barka de Panama SA v George Wimpey & Co. Limited [1980] 1 Lloyd's Law Rep 598 is an example of the establishment of the relevant common interest by written agreement. Barka and Wimpey had been 50/50 joint venturers through the medium of a company called DLW which had provided services to oil companies in the Middle East, including the Aramco Group. Wimpey agreed to buy out Barka's interest in DLW on terms which included detailed provision for the further conduct of claims against Aramco, including the provision as between Barka and Wimpey of mutual assistance, information, documents and evidence. Acting on DLW's behalf, Wimpey settled a claim in litigation between DLW and Aramco, and Barka challenged the reasonableness of Wimpey's settlement. In litigation between Barka and Wimpey, Wimpey claimed legal professional privilege as an answer to the production of documents about the negotiation of the settlement with Aramco. In rejecting the claim for privilege, the Court of Appeal held that the terms of the buy-out and cooperation agreement between Barka and Wimpey created such a common interest between those parties in relation to the conduct of the DLW v Aramco proceedings that there could be no confidence or privilege between Wimpey and Barka in relation to the settlement negotiations. The applicable legal principle was stated in slightly different terms by each of Stephenson and Bridge LJJ. At page 614 Stephenson LJ said:

"So here, it seems to me, however you define the relationship which their joint interest creates, it is enough to entitle the plaintiffs (Barka) whether as beneficiaries, cestui que trust, or as partners in a joint venture or as principals, to the same inspection of documents relating to the Aramco claims as the defendants themselves had."

At page 615 Bridge LJ put it this way:

"As regards the claim for legal, professional privilege, …. If A. and B. have a common interest in litigation against C. and if at that point there is no dispute between A. and B. then if subsequently A. and B. fall out and litigate between themselves and the litigation against C. is relevant to the disputes between A. and B. then in the litigation between A. and B. neither A. nor B. can claim legal professional privilege for documents which came into existence in relation to the earlier litigation against C."

13. The second case Winters v Mishcon de Reya [2008] EWHC 2419 (Ch) is an example of the requisite common interest arising by necessary implication from the circumstances about the relationship between the parties. Mr Winters was the chief executive of the United Kingdom branch of a prominent Jewish charity ("the JNF"). Winters and the JNF retained Mishcons in relation to some five related matters. With three of them there was a joint retainer. With regard to one, Mishcons acted for the JNF alone. With regard to another Mishcons acted for Mr Winters alone. Subsequently, an employment dispute emerged between Mr Winters and the JNF, in relation to which the JNF retained Mishcons. An action to restrain Mishcons acting for the JNF against him failed at trial before Henderson J in September 2008. On the facts, he found that the matter in which Mishcons had acted for Mr Winters alone was so closely related to Mishcon's retainer by the JNF on other matters that:

"no question of privilege or confidence as between Mr Winters and the JNF could reasonably have been seen as arising at that stage, at any rate in relation to matters of common interest to Mr Winters and the JNF."(paragraph 80)

At paragraph 81 he continued:

"It is in my judgment clear that in circumstances where there is a joint retainer, or where the same solicitors act for two clients in related matters in which they have a common interest, neither client can claim legal professional privilege against the other in relation to documents which come into existence or communications which pass between them and the solicitors, within the scope of the joint retainer or matter of common interest concerned."

14. The editors of Phipson on Evidence at chapter 24 describe the circumstances to which I have referred above as permitting the use of common interest privilege as a sword rather than as a shield. At paragraph 24-15 they suggest that the true rationalisation of cases such as Barka v Wimpey requires the court to consider whether a claim for privilege between the relevant parties is consistent with the underlying contractual relationship. Earlier, at paragraph 24-14, they acknowledge that the relevant relationship may be otherwise than contractual. In my judgment the concept of using common interest privilege as a sword is less than ideal for present purposes. First, the question at issue is not privilege but confidence. A party may be entitled to require the recipient of confidential information to keep it confidential although this confidence may be overridden by the obligation to give disclosure in legal proceedings. In those circumstances the existence of the requisite common interest may disable the litigant otherwise obliged to give disclosure from refusing inspection on the grounds of privilege. Secondly, the concept suggests that in all circumstances where, as between two persons, there exists common interest privilege, such as to enable them to communicate with each other but claim privilege for those communications against the rest of the world, there can by the same token be no obligations of confidence owed by a common solicitor to both of them, in respect of the subject matter of the common interest. This might originally have been so, when the existence of a common interest depended upon the parties' interests being so closely aligned that they could both have used the same solicitor for the pursuit or defence of them. But the law on common interest privilege has, at least arguably, moved on so as to embrace circumstances where that stringent test is not satisfied: see generally Phipson (op. cit.) at paragraphs 24-05 and 06.
15. For present purposes, where the question is whether A may prevent his former solicitor from acting for B in litigation between A and B, I consider that the principle which emerges from the authorities requires the court to ask whether A's ordinary expectation that his former solicitor will treat their communications as confidential has been displaced by contract, or by the mutual conduct towards each other of A, B and the solicitor, so as to displace any obligation on the solicitor to keep his communications with A confidential from B. In circumstances falling short of a joint retainer the court will be slow to deprive A of that ordinary expectation of confidence, but circumstances may arise, or the parties may be shown to have conducted themselves in such a way, that the only realistic explanation is that the ordinary obligation of confidence has been wholly removed, as between the solicitor and B, even if it remains in place as between the solicitor and the rest of the world.
16. Such a situation is to be contrasted with the commonplace situation in which A permits his solicitor from time to time to disclose specific (otherwise confidential) matters to B, while retaining a general right to prohibit such disclosures (either of the same or other confidential information) to B in the future. In such a case A will be at liberty to restrain any further disclosure of confidential communications by his solicitor, and will ordinarily be taken to have done so if he terminates his solicitor's retainer. In such a case A may well be able to restrain the solicitor from acting thereafter for B against A, unless the solicitor can show that everything passing confidentially between him and A had already been disclosed to B before the retainer, or the ad hoc consent to disclosure, was terminated.

The Facts

17. Mr Singla was appointed liquidator of 9MD on 11 February 2008 at the request of OSB. He commenced the English proceedings in October 2008, for which OSB provided the whole of the funding, being the only substantial creditor of 9MD known to Mr Singla at the time.
18. The English proceedings were successful, in that Mr Singla obtained for the benefit of the creditors (under section 214 of the Insolvency Act 1986) and otherwise for the benefit of 9MD a judgment from Peter Smith J on 28 April 2010, including both the setting aside of certain transactions by which 9MD had purported to transfer its rights in the screenplay to the Film, declarations as to 9MD's continuing rights in relation to the Film and an order for an enquiry as to damages. Thereafter, OSB continued to fund Mr Singla in what counsel were content to label the enforcement stage of the English proceedings, until Mr Singla's retainer of the defendants as his solicitors was terminated in October 2010. OSB was not a party to the English proceedings, so that there was not a formal litigation retainer between it and the defendants in connection with them. Internal documents within the defendants show an appreciation of the fact that Mr Singla rather than OSB was their client for the purposes of those proceedings.
19. Nonetheless it is evident, mainly from the examples of the newly produced documents which Mr Lilly selected pursuant to my limited permission to do so, that during the period from October 2008 until October 2010 the defendants kept OSB informed of their detailed conduct of the English proceedings, and that process of reporting to OSB included sending examples of all the typical kinds of ordinarily confidential (and indeed privileged) documentation created by the defendants and otherwise passing between them and Mr Singla in connection with the proceedings.
20. This process included sending to OSB the defendants' instructions to counsel to advise on Mr Singla's behalf, sending OSB draft witness statements and a draft skeleton argument for their information and comment before they were finalised and providing their own written advice about the conduct and merits of the English proceedings to OSB. In each case this was carried out in full view of Mr Singla in the sense that emails to OSB containing or attaching the ordinarily confidential or privileged materials were copied to Mr Singla, or similar emails to Mr Singla were copied (rather than blind copied) to OSB, so that Mr Singla could in every case see that OSB was being copied in on those materials. More generally, those examples taken as a whole demonstrate a high degree of co-operation between Mr Singla, OSB and the defendants in the successful prosecution of the English proceedings, and in the enforcement of the judgment obtained.
21. In relation to none of the examples relied upon by Mr Lilly did the documents disclose or suggest any prior request by the defendants for Mr Singla's consent for their disclosure to OSB, nor any prior request or invitation by Mr Singla to the defendant that they should do so. The clear impression created by those documents, both individually and all the more so in the aggregate, is that the defendants did not think they needed any such consent or request, and nor did Mr Singla himself, who appeared to be content to stand by and watch the disclosure to OSB of typically confidential and privileged documents without any prior notice to him that this was to be done.
22. Mr Singla's response in these proceedings was that he and not OSB was the defendants' client in relation to the English proceedings and that there had been no written or oral agreement in which the ordinary confidence which he was entitled to expect from his solicitors had been set aside. Thus, while he acknowledged that a substantial body of ordinarily confidential material had been disclosed by the defendants to OSB during the English proceedings, he was entitled to bring that process of disclosure to an end when terminating the defendants' retainer in October 2010.
23. The Californian proceedings began on 26 May 2010, shortly after Mr Singla had sent letters enclosing copies of Peter Smith J's Order of 28 April 2010 to all known distributors of the Film. Seven Arts claimed both against 9MD and Mr Singla in his individual capacity a declaration as to the ownership of copyright in the Film, and damages for wrongful interference with contract. After a letter before action, the Californian proceedings were served on Mr Singla and 9MD on 10 June 2010. The claim for damages for interference with contract was set at $15m. For a short period, which did not continue beyond the end of June, Mr Singla sought the defendants' advice and assistance, both for himself and 9MD, in relation to the Californian proceedings. It rapidly emerged first, that Mr Singla's professional indemnity insurance excluded cover for proceedings against him in the USA and secondly, that OSB was not prepared to fund his defence, although it continued to fund the on-going enforcement of the English proceedings. The result was that, by the end of June, Mr Singla had identified Californian attorneys of his own, other than those originally proposed for his assistance by the defendants, and therefore the defendants ceased to provide any legal advice or assistance to him in connection with the Californian proceedings thereafter.
24. The small number of documents passing between Mr Singla, the defendants and OSB in relation to the Californian proceedings during the short period between their service and the end of June 2010 suggest that they all continued to co-operate and exchange what would otherwise be confidential information between each other, just as they had been doing for over a year in connection with the English proceedings, and they all regarded the Californian proceedings as an unwelcome aspect of the ongoing realisation for 9MD and its creditors, including OSB, of the benefits of the judgment obtained from Peter Smith J.
25. There was nonetheless nothing like as close a coincidence between Mr Singla's duties and interests and OSB's interests in relation to the Californian proceedings as there was in relation to the English proceedings. This was primarily because, for the first time, Mr Singla faced a very large potential damages claim against him personally in the Californian proceedings, whereas his role in the English proceedings had merely been to discharge his duties as liquidator for the benefit of 9MD and OSB as its main creditor, on a full indemnity from OSB as to costs. Thus, whatever may have been the parties' instinctive inclination to continue their mutual co-operation in the face of the Californian proceedings, Mr Singla's exposure for the first time to a large personal claim to which he could not be certain to have a legal, still less practical means of indemnity from 9MD's assets, necessitated a re-consideration of questions of confidentiality and privilege as between Mr Singla, the defendants and OSB. In the event no such reassessment took place during the short period in June 2010 before Mr Singla obtained his own separate legal advice and representation with the Californian proceedings.
26. Little of substance about the merits and tactics to be adopted in relation to the Californian proceedings appears to have been discussed between Mr Singla and the defendants during the short period while they were assisting him in June. Thus, for example, there was no communication to the defendants, let alone to OSB, of the advice Mr Singla obtained which led eventually to his settling the Californian proceedings as against him personally, nor were the confidential terms of that settlement disclosed by Mr Singla to the defendants or OSB before the latter obtained an order that he should do so from Chief Registrar Baister on 8 April 2011.

The Issues

27. The defendants' case in relation to the English proceedings was that the common interest between Mr Singla as the claimant and OSB as the funder and principal financial beneficiary was so close as to dis-apply any obligation of confidence by the defendants to Mr Singla, to the extent that it might otherwise have inhibited full disclosure to OSB. Furthermore, the defendants' case (in evidence) was that everything material about the English proceedings, whether ordinarily confidential or privileged, had been disclosed to OSB by the defendants with Mr Singla's full consent.
28. In the absence of an agreement (express or by conduct) permitting such disclosure, I am not persuaded that the undoubtedly close correlation between a liquidator's duties in the pursuit of the claims made in the English proceedings, and the interests of the funder and principal creditor likely to benefit from their successful outcome is sufficient of itself to displace any obligation of confidence by the defendants to Mr Singla in relation to those proceedings. Nonetheless, that close alignment between Mr Singla's duties and OSB's interests was fertile ground for such a displacement of confidence to arise, either by agreement or conduct.
29. Although there is no evidence of an express agreement (whether orally or in writing) to that effect, I consider that the routine transmission by the defendants to OSB, with Mr Singla's full knowledge but with no prior request or consent on his part, of all types of ordinarily confidential and privileged materials gives rise to the strongest inference that such a displacement of the ordinary obligation of confidence did occur on the basis of the parties' mutual conduct towards each other. It is an inference which, if the evidence before the trial judge was the same as the evidence which I have been shown, I would expect the trial judge to draw without hesitation. The question for the purposes of summary judgment is whether Mr Singla has a real rather than fanciful prospect of persuading a judge at trial not to draw that inference.
30. In my judgment Mr Singla has no such real prospect. It is clear that in relation to each of the examples of disclosure of ordinarily confidential material relied upon by Mr Lilly there was no prior request for or consent to disclosure by Mr Singla but that, in every case, the disclosure took place, as it were, in his full view, by him being routinely copied into the emails by which the disclosure was made. This is not therefore a case of ad hoc specific disclosure of particular materials, leaving the residue confidential as between Mr Singla and the defendants, but rather it is conduct explicable only in terms of a (possibly tacit) recognition on Mr Singla's part that in the defendants' prosecution of the English proceedings there simply was to be no confidence as between him and OSB.
31. In relation to the Californian proceedings the defendants' primary case was that they never acted for Mr Singla at all. Alternatively, their case was that everything material which passed between them and Mr Singla in relation to the Californian proceedings during the short period in which they provided initial assistance was shared with OSB.
32. I have already concluded that, for a short period, the defendants did provide initial legal assistance and advice to Mr Singla in relation to the Californian proceedings. So far as concerns the provision of that assistance and advice by documents, it is evident (and Mr Comiskey did not challenge this) that everything which passed between Mr Singla and the defendants was indeed shared with OSB.
33. Mr Comiskey's submission was that the same could not with any confidence be said in relation to what may have passed between Mr Singla and the defendants orally, whether face to face or by telephone. But he could point to no specific occasion or piece of confidential information or advice which might have passed between them orally, in relation to which Mr Singla ought now to be protected. Mr Lilly submitted that a realistic (rather than fanciful) case for the protection by injunction of speculative possibilities of that kind could not be conjured from the known facts.
34. After some hesitation, I have concluded that Mr Lilly's submission in relation to the Californian proceedings is to be preferred. My reasons follow. First, I accept that during the conduct of a lengthy or substantial litigation retainer there will almost inevitably be confidential oral exchanges of which the solicitor retains some recollection, but which the client cannot necessarily recall, in relation to which, in principle, the client is entitled to be protected from misuse against him by the solicitor when acting later for a hostile party. But in the present case the legal assistance provided to Mr Singla by the defendants in relation to the Californian proceedings lasted for only three weeks and was, on the face of the documents, confined to initial generalities largely connected with the finding of suitable local lawyers and the obtaining of funding. It is inherently improbable (and Mr Singla evidently cannot recall otherwise) that those exchanges descended into any detailed consideration of the merits and tactical conduct of those proceedings let alone their settlement. Secondly, the documents suggest that, whatever was discussed between Mr Singla and the defendants, took place under exactly the same umbrella of full disclosure and co-operation to and with OSB that had until then prevailed in relation to the English proceedings and continued to prevail for a short period thereafter. In summary, the clear inference, which Mr Singla has been unable to advance any evidence to displace, is that nothing which went on between him and the defendants during that short period in relation to the Californian proceedings was required to be kept confidential from OSB. This is not a case in which Mr Singla has a recollection to the contrary which he is entitled to have considered in evidence by the trial judge.
35. The result is that, albeit by a much more detailed route, and with the assistance of more documentation than was deployed before the Deputy Master, I have come to the same conclusion, in relation to both the English and Californian proceedings, that Mr Singla has no real prospect of establishing a claim that there now is confidential information in the possession of the defendants (or even in the mind of Mr Stockler and his assistants within the firm) that Mr Singla could at trial be entitled to restrain being disclosed to OSB, or that there is disclosed any real basis for restraining the defendants from acting for OSB in relation to the Misfeasance claim against Mr Singla.
36. The present proceedings also include a claim for an injunction to restrain the defendants from disclosing such material to anyone other than OSB. That clearly remains Mr Singla's entitlement, because material within shared confidence can only be released by the consent of both (or all) the parties to that confidence. There is however disclosed no threat on the part of the defendants to make any wider disclosure than to OSB, so that the mere assertion of a right that it should not happen cannot be a basis for permitting the present claim to go to trial.
37. The result is that this appeal must be dismissed.