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Landmark Precedent Set in Court of Appeal Relating to Information Barriers

LITIGATION INSIGHT: Appellant fails on all grounds to overturn HHJ Hacon’s decision not to injunct IP boutique law firm from acting for Opponents Glencairn IP Holdings Ltd & Anor v Product Specialities Inc (t/a Final Touch) & Anor [2020] EWCA Civ 609

By Lauren Waterman, Trainee Solicitor involved in this case.

This case concerns an appeal of a first instance decision relating to information barriers and clarifies the correct approach to be applied to “former opponent” cases. This case is now the leading authority in this regard. Cases such as this were rare, as demonstrated by the fact that this was the first such case in this jurisdiction since Adex 20 years ago.

This decision is important not just for the IP sector, but for any commercial litigators.

Link to the first instance judgment handed down on 5 July 2019 can be found here. This has been covered by us previously here.

On 7 May 2020, LJ Flaux (with agreement from LJ Richards and LJ Arnold) dismissed the appeal made by Glencairn IP Holdings Ltd and Glencairn Crystal Studio Ltd (Glencairn) who are the well-known Scottish glassware producer and represented by Stobbs IP. The Court of Appeal decision can be found here

 

Background

Glencairn had sought to prevent Virtuoso Legal (Virtuoso) from acting for Glencairn’s opponent, Product Specialities Inc. t/a Final Touch (“Final Touch”) in an IP infringement action. This injunction application was made on the basis that Virtuoso’s London Team had previously acted for Dartington Crystal in a very similar set of infringement proceedings brought by Glencairn, which resulted in a confidential settlement. Virtuoso’s Leeds Team continued to act for Final Touch after an information barrier had been implemented to prevent the spread of confidential information within the firm.

HHJ Hacon in the first instance held that former opponent cases are distinct from former client cases where a fiduciary duty exists, and also distinct from cases where solicitors had inadvertently come into the possession of information confidential to the opponent and no fiduciary duty exists (paragraphs [35]-[41] of the first instance judgment). In relation to former opponent cases, the judge created a third class of case, which lay somewhere between the two.

Due to this distinction made, the Judge held that in former opponent cases a fiduciary duty did not arise. As such, the House of Lords Bolkiah case did not apply in full and the burden of proof was not shifted onto Virtuoso to prove there was no risk of information crossing the information barrier. Instead, the burden of proof remained with Glencairn to show a threat of misuse of confidential information sufficient to justify the injunction. Glencairn was unable to do so and the application was dismissed.

On appeal, the Court heard three submissions made by Theo Barclay, Counsel for Glencairn, as to why HHJ Hacon had been wrong to not injunct Virtuoso.

 

First Ground of Appeal

Mr Barclay’s first ground of appeal was that HHJ Hacon had erred in not applying the strict tests in Bolkiah.

Stephanie Wickenden, Counsel for Final Touch, contended that applying Bolkiah jurisdiction to former opponent cases was “wrong in law” and reflected a “flawed understanding of the nature of the Bolkiah jurisdiction”. Instead, Bolkiah should only be applied to cases where there was a “true” fiduciary relationship. As such, she submitted that the general law of confidentiality should apply to former opponent cases – and the burden of proof should remain with the applicant.

LJ Flaux agreed with the submissions put forward by Ms Wickenden and the distinctions made by HHJ Hacon, stating that “the fallacy in Glencairn’s argument is that it seeks to equate the position of a solicitor who formerly acted against the applicant (the former opponent case) with that of a solicitor who was formerly acting for the applicant (the former client case).” He went on to agree that former opponent cases did create a third class of case lying somewhere “in the middle of the spectrum”. As such, the burden of proof remained with Glencairn to prove a risk of misuse of confidential information. It is then appropriate to conduct a balancing exercise between the prejudice caused to the opponent if an injunction is granted and prejudice caused to the applicant if it is not granted.

In these circumstances, the first ground of appeal was dismissed.

 

Second Ground of Appeal

Mr Barclay submitted that if HHJ Hacon had applied the correct test, Glencairn had shown there was a real risk of disclosure of confidential information and the judge came to the wrong conclusion in not granting an injunction.

Ms Wickenden set out in her submissions, that Glencairn was seeking to overturn the judge’s findings of fact and evaluation of the evidence – in this regard it is not for the Court of Appeal to interfere in these instances.

LJ Flaux was inclined to agree with Ms Wickenden and concluded that the judge’s balancing exercise had been carried out correctly and held that “his conclusion that the balance of justice was against the grant of an injunction was unimpeachable”.

Accordingly, the second ground of appeal was dismissed.

 

Our Insight

A party cannot rely on Bolkiah jurisdiction in former opponent cases to switch the burden of proof to the opponent’s solicitors. in this instance, Glencairn had insufficient evidence to prove on a balance of probabilities that Virtuoso’s information barrier was ineffective and there was a risk of misuse of confidential information. Indeed, in bringing this matter to court, Glencairn “let the cat out of the bag” in relation to some of the confidential terms it was trying to protect – indeed as LJ Arnold pointed out “Glencairn had impaled itself on the horns of a dilemma”.

This court of appeal case sets a new precedent in relation to the test to be applied to former opponent cases to protect confidential information. Again, it shows that parties can choose their own lawyers but not those of their opponents.​

Liz Ward, Principal and founder of Virtuoso Legal stated:

"This result represents a better map to follow in respect of the laws of conflict of interest and the implementation of information barriers in all law firms. A modern law firm such as ours who has embraced the latest technology can create a proper fortress around information even when working as a compact team of specialists. Agile, capable and forward-thinking law firms who embrace technology should take this as recognition that new ways of working not only result in better outcomes for their clients but also empower them in their practice in ways that more traditional firms are yet to grasp."

For more information on this judgment of for press quote please email Liz by clicking here or email Lauren by clicking this link.

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