Solicitors were not barred from acting for an insurance company against a policyholder who, early in the same dispute, had instructed a consultant to the firm and a former partner of a legacy firm, a majority of the Inner House has ruled.

Lord Bracadale and Lord McGhie, Lord Malcolm dissenting, held that BLM Solicitors were not prevented from acting for Ecclesiastical Insurance Office plc in an action for reduction of an insurance policy on the ground of non-disclosure, where the defender, Lady Whitehouse-Grant-Christ, had once consulted George Moore, solicitor advocate, then a partner in HBM Sayers, which had since amalgamated with BLM, Mr Moore becomng a consultant.

The dispute began in 2000 when the defender made a claim under the policy. Later that year the pursuers raised their action. The defender consulted Mr Moore, who said he would act for her to the stage of applying for legal aid; he would not continue to act if the application was unsuccessful. When the summons called the action was sisted for the defender to apply for legal aid, which she did on her own behalf. The defender was aware, following written advice from Mr Moore, that he was no longer acting; he declined to act when she again approached him in 2002.

The pursuers were initially represented by Simpson & Marwick, which continued after that firm's merger with Clyde & Co, but in 2016 changed agents to BLM, which had merged with HBM Sayers in 2014. BLM took advice from senior counsel as to the propriety of accepting instructions, and were told that there was no legal bar to doing so.

For the pursuers it was argued that in terms of the House of Lords decision in Bolkiah v KPMG [1999] 2 AC 222 the real question was one of confidentiality, and it was only if there was a realistic risk of confidential information in the hands of Mr Moore being used to benefit the pursuers in the litigation that any difficulty might arise. It was for the defender to show what type of information Mr Moore might hold which might be used to her prejudice. 

Representing herself, the defender stressed her concern about disclosure of confidential information, and referred also to cases which supported not only the protection of such information but also a duty of loyalty and an overriding jurisdiction in the court to intervene to protect the due administration of justice.

Lord McGhie, Lord Bracadale delivering a supporting opinion, said that having considered cases from various countries, he was "satisfied that the protection of confidentiality is accepted as the dominant issue in most, if not all, jurisdictions and the main additional factors which have been examined can be characterised as those said to arise either from a continuing duty of loyalty or from the need for the court to intervene when necessary to protect public faith in the proper administration of justice".

He continued: "I have come to accept that there is no continuing obligation of loyalty in the present case and indeed that, unless there are special circumstances, there is no such duty on termination of a normal agency. Although I have come to the conclusion that dicta in Bolkiah need not be read as excluding consideration of the need to preserve public faith in the proper administration of justice, I do not think the circumstances of the present case call for intervention on that basis."

Considering whether there was any continuing effect of the duties previously owed to the defender, he observed that she had not pointed to any special features giving rise to a continuing duty. "Indeed, any special features in the present case seem to point in the opposite direction. Mr Moore’s involvement was extremely limited and it is not suggested that the defender has had any dealings with him for about 15 years. Apart from the question of confidential material there is no practical reason to prevent his new firm acting against the defender.

"Put shortly it can be said that the court was not directed to any clear authority for the proposition that there is any continuing legally enforceable obligation of loyalty in Scots law arising in the normal course after termination of the formal relationship." Bolkiah held that there was no such obligation in English law, and "I see no justification for any distinction between Scots and English law on this issue."

Regardingn public perception, he was "not persuaded that the particular circumstances of this case disclose a situation where right thinking members of the public would have any real concern about the continuing role of Mr Moore".  A firm in BLM's position required to exercise great care, and "I was surprised to find that the solicitors in this case had been aware of the difficulty and agreed to act in the circumstances of this case. On the other hand, I understood the explanation that the pursuers had a long established connection with the solicitors in question...

"On any view, I would have expected them to take steps to ensure that information barriers were in place to prevent any dissemination of confidential material rather than rely on their own bald assertion that the information held was not confidential. However, having considered the detail of Mr Moore’s role I am not persuaded that the present case is one where the interests of justice require the court to bar the employment of BLM. In other words, I consider that the issue does, indeed, turn simply on the possible use of confidential information."

Having looked at material in sealed envelopes produced by the defender, he stated: "I have found nothing of significance in it which could be regarded as going beyond the matters freely disclosed by the defender as part of the defence to the main action. Certainly there is nothing in it which Mr Moore would have felt in any way constrained about disclosing to the pursuers had he been instructed to continue to act for the defender in the litigation."

Dissenting, Lord Malcolm said: "to my mind the key factor in the present case is that it concerns a firm of solicitors changing sides in the course of one and the same litigation. A strict approach in such circumstances will not cause any material threat to the freedoms which have weighed against judicial interference. It was not suggested that anyone would suffer any real prejudice if the pursuers required to instruct other agents".

He concluded: "As to a present danger of misuse of confidential information, I am not persuaded that this can be wholly discounted. The pursuers do not claim that there has been no disclosure to their current lawyers, but rather that the defender has no good reason for alarm. Bolkiah disapproved of balancing exercises and adopted a relatively strict approach. In short, once the solicitors are in receipt of confidential information, or cannot guarantee that they will not receive it, they should not act for a party with an adverse interest to the firm’s former client. No doubt it is tempting to rely upon the somewhat semi‑detached position of Mr Moore, the long time gap since he acted, and the now more limited scope of the proceedings; but it will nearly always be possible to highlight and rely on special features of the particular case. For my part, I am not satisfied that the court can safely assume that all the information conveyed to Mr Moore was not, or is no longer, confidential."

Lord Bracadale ended by observing: "I do share the concerns expressed by all the judges who have considered the defender’s motion. On any view, this is an area in which great care must be taken by solicitors, particularly in the era of mergers of firms of solicitors. I note Lord Malcolm’s observation that the professional bodies may wish to reflect on their codes of conduct."

Lord Malcolm had commented: "Whatever else this case may prompt the professional bodies to reflect on their codes of conduct. For a model which is consistent with a relatively strict approach, they need look no further than the rules of the American Bar Association."

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