Gus Consulting GmbH v Leboeuf Lamb Greene & Macrae

In an application to restrain solicitors from acting for an opponent of a former client, the former client must establish that the solicitors possess confidential information which is or might be relevant and which may be disclosed or used without consent. The burden then shifts to the solicitors to show that there is no real risk of disclosure; a fanciful or merely theoretical risk is insufficient. The court must not conduct a balancing exercise. Each case depends on its facts. An ethical wall, physical separation, enforceable undertakings and evidence of the individuals’ conduct may together discharge the burden, particularly where the information is old and relates mainly to transactional work rather than current litigation.

CAIB applied for an injunction under section 44 of the Arbitration Act 1996 restraining Leboeuf from representing DCL in an LCIA arbitration. Leboeuf had previously acted for CAIB and related companies in Russian transactions during the 1990s. The arbitration concerned those transactions and included allegations relating to the corporate relationship between CAIB and its affiliates.

The central issues were whether Leboeuf possessed confidential information that was or might be relevant to the arbitration, and whether Leboeuf had shown that there was no real risk of disclosure or misuse.

1. The court applied the principles summarised by Clarke LJ in Koch v Richards Butler [2002] EWCA Civ 1280. The jurisdiction protects the former client’s confidential information. The continuing duty is one of confidentiality. Once relevant confidential information is established, the solicitors must show that there is no real risk of disclosure. The risk need not be substantial, but must be more than fanciful or theoretical. The court must not balance competing interests.

2. CAIB established that Leboeuf possessed confidential information which was or might be relevant. The work included advice on transactions, the formation of subsidiaries and affiliates, powers of attorney, guarantees and related matters. The information was centrally relevant to the allegations concerning the corporate structure and the corporate veil.

3. Leboeuf bore the heavy burden of showing that disclosure would not occur. The firm’s ethical wall was adequate in principle. The relevant factors included the age and transactional character of most of the work, the evidence of the lawyers concerned, the restricted access to files and electronic material, and the absence of evidence that the arbitration team had learned anything about CAIB’s information.

4. The initial failure to identify CAIB as a former client and the delay in responding were unsatisfactory, but did not establish an existing or continuing real risk. The absence of physical separation was a concern, particularly in relation to inadvertent disclosure, but could be addressed by enforceable undertakings. The undertakings required instructions preventing discussion of the former work and changes to office arrangements separating the arbitration team from relevant former CAIB lawyers.

5. Applying the factual circumstances and the guidance in Prince Jefri Bolkiah v KPMG and Halewood v Addleshaw Booth, the court concluded that the risk was on the theoretical side of the line once the undertakings were given. Injunctions were therefore refused, subject to the court being satisfied with the detail of the undertakings.

Not stated in the judgment.