Georgian American Alloys, Inc & Or v White & Case LLP & Anor

Where a former client seeks to restrain solicitors from acting for an adverse client, it must show confidential information in the solicitor’s possession and that the information is or may be relevant to the new matter. The evidential burden then shifts to the solicitors to establish that there is no real, rather than fanciful or theoretical, risk of disclosure. The court should not balance the prejudice to the new client against the former client’s right to protect confidential information. An ad hoc information screen may fail to discharge that burden.

The claimants sought a permanent injunction preventing White & Case from acting for Mr Victor Pinchuk in Commercial Court proceedings against their joint majority shareholders, and initially also in related LCIA arbitration proceedings. White & Case had previously advised entities connected with the claimants and had obtained extensive confidential information concerning their assets, corporate structures and related-party transactions.

White & Case later erected ethical screens between the two teams. It argued that the information was not sufficiently relevant, that the screens and internal investigation eliminated any real risk of disclosure, and that delay and prejudice to Mr Pinchuk made an injunction inappropriate. The central issues concerned the application of the principles in Bolkiah v KPMG and whether those requirements were satisfied.

1. Injunction granted. White & Case was enjoined from acting for Mr Pinchuk in the Commercial Court action. The arbitration aspect had fallen away when White & Case agreed to cease acting in the LCIA proceedings.

2. Applying Bolkiah v KPMG [1999] 2 AC 222, the claimants established that White & Case possessed confidential information, imparted without consent, which was or might be relevant to the new matter.

3. The claimants’ interests were sufficiently adverse even though they were not parties to the Commercial Court action. Their joint majority shareholders were defendants in that action. Alternatively, those shareholders were to be treated as clients on the original engagement for confidentiality purposes.

4. The information was relevant because it could assist enforcement and credibility issues, was relevant to allegations concerning diverted Nikopol profits and the reckoning of mutual debts, and might be relevant to allegations concerning dilution of profits through related-party transactions.

5. Once the claimants established the relevant confidential information and adverse matter, White & Case had to show that there was no real risk of disclosure. That burden was not discharged. The screens were introduced only after the confidential information had been supplied and did not eliminate the possibility of oral or inadvertent disclosure. The investigation was incomplete, and geographical and departmental separation was insufficient.

6. The court observed that the screens did not meet the description in Bolkiah v KPMG of an effective Chinese wall as an established part of the firm’s organisational structure. It was unnecessary to decide the future-risk issue because past risk was sufficient.

7. The discretionary nature of a final injunction did not require the court to balance the prejudice to Mr Pinchuk against the claimants’ right to protection. The impact on the new client was not a relevant consideration once the confidentiality requirements were satisfied.

8. Delay did not bar relief. The connection between the confidential information and the proceedings was not reasonably apparent earlier, and White & Case’s failure to notify the claimants that screens had been established weakened its reliance on delay.