Bolkiah v. KPMG

The House of Lords held that a firm of accountants who provided litigation support services to a former client is subject to the same equitable duty as a solicitor to preserve the confidentiality of information acquired in the course of the former retainer. Intervention by injunction to restrain the firm acting for an adverse client is founded on the protection of confidential information: the former client must show that the firm possesses information confidential to him which is or may be relevant to the matter in which the firm proposes to act for the adverse party.

The appropriate test for intervention is that the court should restrain the firm unless it is satisfied that there is no risk of disclosure of the confidential information; the risk must be real but need not be substantial. Once the former client establishes possession of relevant confidential information, the evidential burden shifts to the firm to show, by clear and convincing evidence, that special and effective measures (for example, an effective information barrier) eliminate any risk of disclosure. Applied to the facts, K.P.M.G. failed to discharge that burden and an injunction was granted to protect the former client's confidential information.

This case concerned whether a large firm of accountants which had provided extensive litigation support services to Prince Jefri (the former client) could accept instructions from the Brunei Investment Agency (the B.I.A.) to investigate the destination and current location of funds previously withdrawn from the B.I.A.'s core funds (Project Gemma), when the firm held confidential information about Prince Jefri obtained while acting for him on earlier work including Project Lucy.

• Nature of the claim: Prince Jefri sought an injunction to restrain K.P.M.G. from continuing work on Project Gemma on the ground that K.P.M.G. possessed confidential information acquired for him which might be used to his prejudice.
• Procedural posture: At first instance Pumfrey J granted an injunction restraining K.P.M.G. from continuing work on Project Gemma; the Court of Appeal (majority: Lord Woolf M.R. and Otton L.J.) discharged the injunction; the matter was then appealed to the House of Lords, which allowed the appeal.
• Issues framed: (i) whether accountants providing litigation support should be treated like solicitors for the purposes of protecting former clients' confidential information; (ii) what is the proper basis and test for the court to intervene by injunction where a firm proposes to act for a client with an interest adverse to that of a former client; and (iii) whether K.P.M.G.'s protective measures (a Chinese Wall and related steps) were sufficient to eliminate any risk of disclosure.

Reasoning: The House of Lords affirmed that the jurisdiction to restrain stems from the need to protect confidential information of a former client and that accountants who provide litigation support services fall within the same concern as solicitors. The court rejected a balancing approach which would dilute the duty of confidentiality and held that the correct test is that the court should intervene unless it is satisfied there is no risk of disclosure. The burden then shifts to the defendant firm to demonstrate by clear and convincing evidence that special measures are effective to prevent disclosure. On the facts, the Lords concluded the Chinese Wall arrangements in this case were ad hoc, erected within a single department with many personnel moving between projects, and therefore not shown to be effective; accordingly the injunction was granted to protect the former client's confidential information.

Appeal allowed. The House of Lords held that (i) accountants who provide litigation support services are subject to the same duty as solicitors to preserve the confidentiality of information obtained from a former client; (ii) the court will grant injunctive relief to protect a former client's confidential information unless it is satisfied there is no risk of disclosure; and (iii) K.P.M.G. had not shown that their ad hoc internal arrangements eliminated the risk of inadvertent or negligent disclosure, so an injunction to restrain the work was appropriate.

First instance: Pumfrey J (High Court) granted an injunction restraining K.P.M.G. from continuing Project Gemma (the judge's injunction followed work up to 15 September 1998). Court of Appeal: majority (Lord Woolf M.R. and Otton L.J.) discharged the injunction. House of Lords: appeal allowed [1998] UKHL 52.