Georgian American Alloys Inc. and Others v White & Case LLP [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Field J. |
| Judgment Date | 31 January 2014 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 31 January 2014 |
Queen's Bench Division (Commercial Court).
Field J.
Daniel Jowell QC and Richard Eschwege (instructed by Enyo Law LLP) for the claimants.
Bankim Thanki QC and Tamara Oppenheimer (instructed by Olswang LLP) for the defendants.
The following cases were referred to in the judgment:
Bolkiah v KPMG[1999] CLC 175; [1999] 2 AC 222.
Russell McVeagh McKenzie Bartleet & Co v Tower Corp[1998] 3 NZLR 641.
Solicitors Conflict of interest Confidential information Injunction Solicitors acting in restructuring of claimant companies Solicitors acting in claim against majority shareholders of claimant companies Solicitors deciding that they were not prevented from acting by conflict of interest Solicitors putting in place ethical screens between client teams Claimants entitled to injunction to restrain solicitors acting in Commercial Court proceedings against majority shareholders Real risk of unauthorised use of confidential information.
This was an application for a permanent injunction to restrain the defendant solicitors (White & Case) from acting for or advising Mr Victor Mikaylovich Pinchuk (P) in proceedings brought in the Commercial Court against Mr Igor Kolomoisky (K) and Mr Gennadiy Bogolyubov (B).
P, K and B were all businessmen of Ukrainian origin. K and B were the ultimate owners of the claimant companies which were in the ferroalloys business.
In September 2010, the London and Moscow offices of White & Case began providing advice to P and his management company (E) in relation to a dispute between P on the one hand and K and B on the other, in respect of a ferroalloy joint venture, which involved the pooling of their ferroalloy assets. The dispute arose out of P's claim that he had not been paid his share of the JV profits and that K and B had depressed the profits by siphoning off assets through related party transactions.
In May 2011 White & Case's New York office became involved in the restructuring of K and B's companies with a view to an IPO in the US. The work done by White & Case was carried out from May 2011 to May 2013, most of it being done in the period May to September 2011. The work done in 2012 was concerned with the reorganisation of the various companies that would become subsidiaries of the first claimant (GAA), work on the IPO having ceased in October 2011.
In the course of the engagement, particularly in 2011, White & Case carried out far-reaching investigations into GAA and its ferroalloy businesses and thereby became privy to a substantial amount of information concerning the identity of the claimants' assets, their location and the identity and structure of the corporate vehicles used to hold such assets. In particular, White& Case conducted extensive due diligence, undertaking all the necessary corporate formalities associated with the formation of GAA, including an extensive investigation into related party transactions, amongst which were transactions to which companies controlled by B and K were parties.
Meanwhile, in May 2012, pursuant to instructions received from P and E, a White & Case team, based in London and Moscow, began evaluating potential claims against B and K. The team decided that there was a potential claim and that the appropriate claimant was P, rather than a corporate entity.
At that point White & Case considered whether there would be a conflict between acting in the restructuring of the claimants and acting for P in the claim against B and K, and decided that there would not.
Subsequently White & Case put in place ethical screens separating its handling of the two matters. No notice of the establishment of ethical screens was given to the claimants.
In March 2013, particulars of claim in Commercial Court proceedings were served on B and K.
In August 2013, P successfully applied ex parte to the Florida court to obtain documents and information from some of the claimant companies. When GAA was served with the order, the claimants were concerned to learn that White & Case was acting for P, because the application was seeking detailed financial and business information about GAA and its subsidiaries which was the type of information which White & Case had obtained during the course of the restructuring.
The claimants then sought an injunction restraining White & Case from acting in the Commercial Court proceedings.
Held, granting an injunction:
1. It was hard to see any good justification for White & Case's original decision that there was no conflict, or for its decision not to inform the parties that ethical screens had been put in place.
2. An injunction was a discretionary remedy, but it did not follow that the court had to weigh the interests of the other client against the interests of the client who had otherwise satisfied the requirements for the grant of an injunction against his former solicitors to protect his confidential information. The impact of the claimed injunction on P was not a relevant consideration when deciding whether to grant the claimants' application(Bolkiah v KPMG[1999] CLC 175; [1999] 2 AC 222applied.)
3. The information imparted to White & Case during the restructuring was confidential information which White & Case was under a duty not to disclose. In the circumstances the fact that the claimants were White & Case's clients on the restructuring, rather than B and K personally, was not decisive. The Bolkiah test was satisfied if, inter alia, the interest of the other client in the new matter was, or might be, adverse to the client seeking the injunction, and the burden of proof on the claimant was not a heavy one. Thus, bearing in mind that the duty on White & Case was an unqualified one to keep the information confidential and not, without the consent of the claimants, to make any use of it or to cause any use to be made of it by others otherwise than for the claimants' benefit, the claimants' interests were adversely affected for the purposes of the Bolkiah test by reason of their joint majority shareholders being adversely affected by the action. If that was wrong, White & Case owed to B and K the same duty to keep the information confidential as it owed to the claimants and, for the purposes of the Bolkiah principles, they were to be treated as White & Case's clients in respect of the restructuring together with the claimants. The confidential information in issue was sufficiently relevant to the Commercial Court action to satisfy the Bolkiah test.
4. White & Case failed to discharge the evidential burden on the question of risk: there was a real risk that the confidential information in issue had come into the possession of some of the team working for P in the period April 2011 to 13 March 2013 and accordingly that such information (at least inadvertently) had been or would be used in the Commercial Court action.
Field J: Introduction
1. This is an application for a permanent injunction to restrain the defendants (White & Case) from acting for or advising Mr Victor Mikaylovich Pinchuk in proceedings brought in the Commercial Court against Mr Igor Kolomoisky and Mr Gennadiy Bogolyubov. Originally the application was for an order restraining White & Case from advising or acting not only in the Commercial Court action but also in LCIA arbitration proceedings brought by Mr Pinchuk against Mr Kolomoisky, Mr Bogolyubov and Mikhail Iosifovich Spektor. However, on 17 December 2013 White & Case announced through their solicitors that they would cease acting for Mr Pinchuk in the LCIA arbitration and so notified the arbitral tribunal on 18 December 2013.
2. The hearing of the application was in private to protect the confidentiality of the information that it is at the heart of the case. Upon their undertakings to keep confidential certain evidence adduced by the each side, White & Case's counsel and the members of a Neutral Team established within White & Case had full access to all of the evidence.
3. Mr Pinchuk was refused permission to be joined as a party but he was allowed to adduce evidence as to the impact on him if the injunction sought were granted and was permitted to make representations thereon through his counsel, Ms Dinah Rose QC, at which point the court went into open session. Save as aforesaid, Mr Pinchuk and his legal team were not permitted to attend the hearing.
4. Mr Pinchuk, Mr Kolomoisky and Mr Bogolyubov are all businessmen of Ukrainian origin. Mr Kolomoisky and Mr Bogolyubov are the ultimate owners of the claimant companies and own interests in OAO PrivatBank (PrivatBank), a commercial bank in Ukraine, and in closed joint stock company ZAO Privat Intertrading (Privat Intertrading).
5. The first claimant (GAA) manufactures and supplies ferroalloys that are used in the production of iron and steel. It is a Delaware company incorporated in February 2012; its principal office is in Miami, Florida. It conducts its business through the second to seventh claimants of which it is the ultimate parent company. Prior to the incorporation of GAA and the restructuring of the ferroalloy businesses of which it is now the parent, the ferroalloy businesses were held by Optima Group LLC, a Delaware company, and Haftseek Investments Ltd and GM Georgian Manganese Holdings Ltd, which were two Cypriot companies. Optima Group LLC was the immediate parent company of the second claimant (CC Metals and Alloys). Haftseek Investments Ltd was the immediate parent company of the third and fourth claimants (respectively Felman Production and Felman Trading), and GM Georgian Manganese Holdings Ltd was the immediate parent company of the fifth and sixth claimants (respectively Georgian Manganese and Vartsikhe).
6. The second claimant and the third, fourth and seventh claimants are companies incorporated and based in the United States. The fifth and sixth claimants are Georgian entities.
7. White & Case is a large international law...
To continue reading
Request your trial
-
Murray v Turcan Connell WS
...v Whitehouse-Grant-Christ [2017] CSIH 33; 2017 SC 684; 2017 SLT 697 Georgian American Alloys Inc v White and Case LLP [2014] EWHC 94; [2014] 1 CLC 86 Koch Shipping Inc v Richards Butler (A Firm) [2002] EWCA Civ 1280; [2002] 2 All ER (Comm) 957; [2003] CP Rep 10; [2002] Lloyd's Rep PN 604; [......
-
Petition: Kae Alexandra Tinto Or Murray For Interdict
...plc v Freshfields Bruckhaus Deringer6; Koch Shipping Inc v Richards Butler7. 2 at paragraph 11 3 [1999] 2 AC 222 4 at page 235 D/E 5 [2014] 1 CLC 86 6 [2005] PNLR 4 7 [2003] PNLR 11 7 Petitioner’s argument at first hearing [9] The petitioner argued that in relation to confidential informati......
-
Western Avenue Properties Ltd and Another v Sadhana Soni and Another
...236F to 237B and 337G to 238A, and reviewed and restated by Field J in the case of Georgian American Alloys Inc v White and Case LLP [2014] 1 CLC 86 at [67] and [74] as follows. '74 Lord Millett's formulation of the applicable legal principles is well known. He said at pp. 235 – 238: "[It] ......