Marks and Spencer Plc v Freshfields Bruckhaus Deringer (A Firm)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PILL,LORD JUSTICE KAY |
| Judgment Date | 03 June 2004 |
| Neutral Citation | [2004] EWCA Civ 741 |
| Docket Number | 2004/1187 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 June 2004 |
[2004] EWCA Civ 741
Lord Justice Pill
Lord Justice Kay
2004/1187
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION ADMINISTRATIVE COURT
(MR JUSTICE LAWRENCE COLLINS)
Royal Courts of Justice
The Strand
London, WC2A 2LL
MR M BRINDLE QC AND MR M BOVEY (instructed by Freshfields Bruckhaus Deringer, London EC4Y 1HS) appeared on behalf of the Applicants
MR K MacLEAN QC (instructed by Slaughter and May, London EC1Y 8YY) Appeared on behalf of the Proposed Respondents
Thursday, 3 June 2004
This is an application for permission to appeal against an order made yesterday by Lawrence Collins J as vacation judge. Having regard to the circumstances, I give judgment this afternoon. I do not propose to recite the facts in detail, adopting as I gratefully do, the statement of the background in the judgment of Lawrence Collins J. We do not have a transcript approved by him but we do have a draft note which has been the subject of discussion between the parties and, if I may say so, it is a careful note and I would be surprised if the learned judge had any significant corrections which he needed to make to it.
This is a dispute between Marks and Spencer Group Plc and Freshfields Bruckhaus Deringer, a firm of City solicitors. They seek to act for a group of organisations who are making an offer for Marks and Spencer, that offer to be made on behalf of a consortium. Those who heard the 8.00 news this morning will have heard that an offer has now been made. It was not made at the time when Lawrence Collins J heard submissions on the day before yesterday. I understand he heard further submissions yesterday and then gave the judgment to which I have referred. His order was that:
"The Defendant [Freshfields], be restrained whether acting by its partners, employees or agents or otherwise howsoever from acting for or advising or otherwise assisting in Revival Acquisitions Limited and/or Philip Green and/or any other person or entity owned and/or controlled by them and/or acting in concert with them in connection with any acquisition or potential acquisition of the shares, assets or business of the Claimants [Marks and Spencer].
2. The injunction referred to in paragraph 1 above be stayed until 10.30 am on 3 June 2004."
The judge ordered Freshfields to pay the costs of Marks and Spencer and refused permission to appeal.
The papers arrived with Kay LJ and I as vacation duty judges in the Court of Appeal this morning and we agreed to hear at 2.00 pm the application for permission to appeal with the appeal to follow if permission was granted. We have over a period of something over two hours heard helpful submissions from Mr Brindle QC on behalf of the applicants and on some of the points Mr MacLean QC on behalf of the proposed respondents. As I have indicated, I take the judgment of Lawrence Collins J, as stated in the note agreed between the parties, as read and refer to the submissions which have been made this afternoon.
Mr Brindle refers to the two points, on both of which Freshfields lost yesterday, first as to whether there was a conflict of interest by reason of the fact that in certain matters they had acted for Marks and Spencer, and secondly, whether they were in possession of information confidential as between them and Marks and Spencer as a result of their having acted in a number of matters for Marks and Spencer which meant that, quite apart from the question of conflict of interest, whether they could not properly act for the consortium referred to in the order made by the judge.
The judge pointed out that Freshfields, by reason of their acting in previous years for Marks and Spencer, have charged £1 million to £1.5 million in fees. Mr Brindle points out that most of the cases in this area of the law are on the confidential information aspect. There are many fewer cases on that of conflict of interest. He has referred to the double employment rule and submits that the cases there, by reference to the leading textbook on the subject, that of Messrs Hollander and Salzedo, "Conflicts of Interest & Chinese Walls" (2000), deal with single transaction cases. He challenges the application of the rule to cases such as the present where it is in a different matter that the solicitors have acted for the client who is challenging their ability to act in the disputed matter.
The leading case in this branch of the law is now the decision of the House of Lords in Bolkiah v KPMG [1999] 2 AC 222, the main speech being given by Lord Millett. Parts of the judgment were cited by Lawrence Collins J. The entire passage from page 234–238 is relevant in present circumstances, but I will limit the amount of citation I make. At page 234H:
"My Lords, I would affirm this as the basis of the court's jurisdiction to intervene on behalf of a former client. It is otherwise where the court's intervention is sought by an existing client, for a fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the situation."
Under the heading "The extent of the solicitor's duty" and "Degree of risk", Lord Millett considered Rakusen's case [1912] 1 Ch 831, and continued at page 236E:
"My Lords, I regard the criticisms which have been made of the test supposed to have been laid down in Rakusen's case [1912] 1 Ch 831 as well founded. It imposes an unfair burden on the former client, exposes him to a potential and avoidable risk to which he has not consented, and fails to give him a sufficient assurance that his confidence will be respected. It also exposes the solicitor to a degree of uncertainty which could inhibit him in his dealings with the second client when he cannot be sure that he has correctly identified the source of his information.
It is in any case difficult to discern any justification in principle for a rule which exposes a former client without his consent to any avoidable risk, however slight, that information which he has imparted in confidence in the course of a fiduciary relationship may come into the possession of a third party and be used to his disadvantage. Where in addition the information in question is not only confidential but also privileged, the case for a strict approach is unanswerable. Anything less fails to give effect to the policy on which legal professional privilege is based. It is of overriding importance for the proper administration of justice that a client should be able to have complete confidence that what he tells his lawyer will remain secret. This is a matter of perception as well as substance. It is of the highest importance to the administration of justice that a solicitor or other person in possession of confidential and privileged information should not act in any way that might appear to put that information at risk of coming into the hands of someone with an adverse interest."
Having considered possible ways of putting the test, Lord Millett added at page 237A:
"I prefer simply to say that the court should intervene unless it is satisfied that there is no risk of disclosure. It goes without saying that the risk must be a real one, and not merely fanciful or theoretical. But it need not be substantial."
Having considered a decision of the New Zealand Court of Appeal, Lord Millett stated at page 237F:
"This would run counter to the fundamental principle of equity that a fiduciary may not put his own interest or those of another client before those of his principal. In my view no solicitor should, without the consent of his former client, accept instructions unless, viewed objectively, his doing so will not increase the risk that information which is confidential to the former client may come into the possession of a party with an adverse interest."
Mr Brindle submits that Bolkiah, despite the generality of Lord Millett's terminology, was a "same transaction" case, as was an earlier case Bristol and West Building Society v Mothew [1998] Ch 1 where Millett LJ (as he then was) had made a general statement to the same effect as that I have cited from Bolkiah at 234H.
Mr Brindle submits that the principle cannot extend beyond the same transaction situation. He gave examples which indicate situations with no possible conflict of interest arising from the fact that a solicitor's firm, which may of course have a number of branches spread around the country and abroad, is in one transaction acting contrary to a client for whom it acts on another. I would accept that there must be a degree of relationship between the two transactions, but I am quite unable to accept the submission that the language used by Lord Millett in Bolkiah and the comparative strictness, with respect, with which he has stated the principles in this area of the law is confined to same transaction cases.
Moreover, while there must be limits upon the application of the principle, it is, in my judgment, a sound one and I accept the submission of Mr MacLean on that point. The court must consider what the relationship is between the two transactions concerned. As stated in the judgment of Lawrence Collins J, the transaction, which was the subject of submissions before...
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