Tropical Resources Development Co Ltd v Dalgro (SI) Limited [2003] SBHC 118; HC-CC 087 of 2003 (6 August 2003)

HIGH COURT OF SOLOMON ISLANDS

Civil Case Number 87 of 2003

TROPICAL RESOURCES DEVELOPMENT CO. LTD

v.

DAKGRO (S.I.) LTDd

High Court of Solomon Islands
(Palmer J.)

Hearing: 25^th July 2003
Judgement: 6^th August 2003

G. Suri for the Applicant/Plaintiff
Sol-Law for the Respondent/Defendant

Palmer J.: The Applicant/Plaintiff (“the Plaintiff”) by Amended Summons filed 17^th June 2003 seeks inter alia an order for Sol-Law to cease acting for the Respondent/Defendant (“the Defendant”) in this matter on the ground that their representation is in breach of rule 11(8)(a) of the Legal Practitioners (Professional Conduct) Rules [Cap. 16] (“the Rules”).

The Allegation

It is not in dispute that Sol-Law had previously acted for the Plaintiff in David Doko and Others v. Tropical Resources Development Coy. Limited CC 166 of 2000 and also in another case between Martin Mata and Others against the Plaintiff (hereinafter referred to as “Doko and Matas’ Cases”). By virtue of that representation it is alleged Sol-Law had acquired “confidential information” pertaining to the technology agreement executed on 4^th August 1999 (“the Agreement”) between Tropical Resources Development Coy. Ltd of the one part and Dalgro (S.I.) Limited of the other part. That same Agreement is now the subject of dispute in this case between the Plaintiff and the Defendant. The Plaintiff alleges inter alia, that the Defendant is guilty of unconscionable dealing in the execution of that document. Having acted for the Plaintiff in the previous cases and having acquired “confidential information” regarding the Agreement, they say there is a real risk that this information will be disclosed and used against the Plaintiff in this case. In particular the Plaintiff relies on the admission by the Defendant that one of its solicitors (Donald Marahare) had been directly involved in explaining the contents of that Agreement to one Joseph Maru (“Maru”) the main director in the Plaintiff Company.

Case authorities cited

Two case authorities have been cited for the consideration of this court. The first one is Rakusen v. Ellis, Mundy & Clarke^[1] (“Rakusen’s Case”). The brief facts are as follows. M and C were partners in a firm of solicitors named E M and C. They normally carried on their business separately. R had consulted M with reference to an action for wrongful dismissal, which he had sought to commence against a company. R then changed solicitors and issued his writ and the matter was referred to arbitration. The company then appointed C under the name of E M and C to act as solicitor for the company in the arbitration. R applied for an injunction to restrain E M and C from acting for the company.

The general proposition in law was that a solicitor could be restrained as a matter of absolute obligation and as a general principle from disclosing any secrets, which are confidentially reposed in him^[2]. Rakusen’s Case raised the issue whether there was a general principle that a solicitor who had acted in a particular matter, whether before or after litigation had commenced, cannot act for the opposite party under any circumstances^[3]. In dealing with that submission, Cozens-Hardy M.R. said at page 835:

“I do not doubt for a moment that the circumstances may be such that a solicitor ought not to be allowed to put himself in such a position that, human nature being what it is, he cannot clear his mind from the information which he has confidentially obtained form his former client; but in my view we must treat each of these cases, not as a matter of form, not as a matter to be decided on the mere proof of a former acting for a client, but as a matter of substance, before we allow the special jurisdiction over solicitors to be invoked, we must be satisfied that real mischief and real prejudice will in all human probability result if the solicitor is allowed to act.”

Cozens-Hardy M.R. declined to find in favour of any general principle that a solicitor who had acted for a client in a particular matter was prohibited from acting for the opposite party under any circumstances. He held instead that it had to be demonstrated that real mischief or real prejudice was more likely than not to happen if the solicitor was allowed to act.

The second Court of Appeal Judge, Fletcher Moulton L.J. also expressed the same sentiments.

“In my opinion the fundamental principle remains the same as in other cases of confidential employment, and I accept with regard to this the dictum (because it was not embodied in a formal judgment) of Jessel M.R. when he says ‘that, although there was no law that, because a solicitor had acted for a person, he might not afterwards act against him, it was not to be supposed that he was at liberty to disclose the secrets of his former client to his opponent in the subsequent proceedings, and that the Court could always, on general principles, restrain a solicitor who threatened to disclose secrets.’ That is the law with regard to all confidential employment, and it applies therefore to confidential employment of a solicitor by a client.” ^[4]

His Lordship then went on to identify the general principle as follows:

“As a general rule the Court will not interfere unless there be a case where mischief is rightly anticipated. I do not say that it is necessary to prove that there will be mischief, because that is a thing which you cannot prove, but where there is such a probability of mischief that the Court feels that, in its duty as holding the balance between the high standard of behaviour which it requires of its officers and the practical necessities of life, it ought to interfere and say that a solicitor shall not act.”^[5] (Emphasis added)

The third Court of Appeal Judge Buckley L.J. also expressed the same views.

“There is no general rule that a solicitor who has acted in a particular matter for one party shall not under any circumstances subsequently act in that matter for his opponent. Whether he will be restrained from so acting or not depends on the particular circumstances. Of course he will be restrained from communicating confidential information, but the respondents contend that when there is no danger of this happening the solicitor will still be restrained from acting.”

His Lordship held that because a solicitor had acted for a person he is not prohibited from acting against him in the same matter provided there is no real risk of disclosure of confidential information. At page 843 his Lordship said:

“The cases I think have established this, that as between the Court and the solicitor who is the officer of the Court there is the most ample jurisdiction to restrain any mischief resulting from the communication of confidential information obtained in the employment of one man to his detriment in the employment of another man.”

He concluded at page 845 as follows:

“The whole basis of the jurisdiction to grant the injunction is that there exists, or, I will add, may exist, or may be reasonably anticipated to exist, a danger of a breach of that which is a duty, an enforceable duty, namely, the duty not to communicate confidential information; ....”

The views of the three Court of Appeal Judges can be summarized as follows. Cozens-Hardy M.R. refers to the likelihood of real mischief and real prejudice occurring as the basis for any restraining orders. Fletcher Moulton L.J. refers to the situation where mischief is rightly anticipated, or where there is a real probability of mischief occurring. And Buckley L.J. describes the exercise of such power where it is to be reasonably anticipated that a breach of that duty of disclosure is likely to happen.

The second case relied on was In re a Firm of Solicitors^[6]. The facts briefly were as follows. The Plaintiffs had instructed a firm (“Firm A”) which specialized in intellectual property law to act for them in a very substantial international patent litigation. The first Defendant was a partner in the intellectual property department of Firm A, but was not directly involved in the Plaintiff’s litigation. The evidence adduced was to the effect that although confidential information relating to the Plaintiff’s litigation was available to him through general office conversation, none was in fact communicated to him. After 11 months the first Defendant left Firm A to become head of the intellectual property department of another firm of solicitors (“Firm B”). Some 2½ years later one of the defendants in the patent litigation retained Firm B to act as its solicitors. The Plaintiffs did not challenge the first Defendant’s integrity and good faith but were concerned that, although he had no present recollection of any relevant confidential information, he might in fact have received some and its recollection could be triggered by future events, thereby giving rise to a real risk of unfair prejudice to the plaintiffs.

The issue raised for the consideration of the court was whether an ex-partner in the position of the former partner in this case is free to act for an opposing party where he denies being in possession of any confidential information. At page 22 of his judgment, Lightman J. states:

“The law regulating the freedom of a solicitor who, or whose firm, has at one time acted for a client subsequently to act against that client reflects the need to balance two public interests. First there is the interest in the entitlement of that client to the fullest confidence in the solicitor whom he instructs and for this purpose that there shall be no risk or perception of a risk that confidential information relating to the client or his affairs acquired by the solicitor will be disclosed to anyone else. Confidential information includes not merely information acquired by the solicitor on behalf of his client, e.g. on consulting experts, as well as advice communicated in confidence by the solicitor to the client. Second there is the interest in the freedom of the solicitor to obtain instructions from any member of the public, and of all members of the public to instruct such solicitor, in all cases where there is no real need for constraint: there must be good and sufficient reason to deprive the client of the solicitor or the solicitor of the client of his choice.”

His Lordship then went on to identify 5 principles of law^[7] as follows:

(1) The basis of the courts’ intervention is not a possible perception of impropriety: it is the protection of confidential information.

(2) In view of the special importance of the relationship of confidence between solicitor and client and of the fact that the solicitor is an officer of the court, the court is particularly sensitive to the need to afford the fullest and, where required, special protection to such confidential information.

(3) The law is concerned with the protection of information which (a) was originally communicated in confidence, (b) at the date of the later proposed retainer is still confidential and may reasonably be considered remembered or capable, on the memory being triggered, of being recalled and (c) relevant to the subject matter of the subsequent proposed retainer; that is information that is “relevant confidential information”.

(4) (a) A solicitor at one time retained by a client, but not in possession of relevant confidential information, is not by reason of the fact of such past retainer precluded from subsequently acting against him – Rakusen’s Case.

(b) A solicitor possessed of relevant confidential information is precluded from acting against his former client – see In re A Firm of Solicitors [1992] Q.B. 959.

(c) In the case of a firm previously retained by a client: (i) the members of the firm, whether partners or employees, who are in possession of relevant confidential information are likewise subject to such constraint, whether they remain with the firm or practice elsewhere; (ii) the members who are not in possession of such information (a) are free from such restraint once they have left the firm and are practicing elsewhere, (b) so long as they remain with the firm are undoubtedly precluded from so acting if the court considers there is a real, as opposed to fanciful, risk of a communication to them of any such relevant confidential information by those within the firm possessed of it.

(5) (a) It is in general not sufficient for the client to make a general allegation that the solicitor is in possession of relevant confidential information if this is in issue: some particularity as to the confidential information is required.

Application

Rule 11(8)(a) of the Rules in my respectful view reflects the rule of law as expressed in Rakusen’s Case and In re A Firm of Solicitors^[8], that where a legal practitioner has represented a client and acquired “relevant confidential information” he shall not be permitted to act for the opposite party in that same case or any other case whereby that information may be used to the detriment of his former client or for the benefit of any other person (obviously if it was used for the benefit of another person then most likely it would be to the disadvantage of the former client). Rule 11(8)(a) does not prohibit a legal practitioner who has represented a client from acting for the opposing party even in the same matter or any other matter, where he has not acquired any relevant confidential information or where there is no real risk of the disclosure of such information. The burden of proof that Sol-Law has not acquired any confidential information in this case lies with the firm.

Having considered the submissions of the parties I am satisfied the application for an order for Sol-Law to cease to act for the Defendant in this matter must be dismissed on the following grounds.

(i) There is no evidence of confidential information having been acquired by Sol-Law in its representation of the Plaintiff in Doko and Matas’ Cases. In the case of In re A Firm of Solicitors (ibid) Lightman J. stated at page 23 of his judgment that some particularity as to the confidential information was required.

“But the degree of particularity required must depend upon the facts of the particular case, and in many cases of identification of the nature of the matter on which the solicitor was instructed, the length of the period of original retainer and the date of the proposed fresh retainer and the nature of the subject matter for practical purposes will be sufficient to establish the possession by the solicitor of relevant confidential information. (b) It may readily be inferred that confidential information is imparted to members of the firm having the conduct of the client’s matter. Such information may, however, be imparted to other members in the course of partnership meetings or social meetings of members of the firm. ... (c) The court attaches weight to the evidence of the solicitor as to his state of knowledge and whether he has received confidential information, in particular where there is no challenge to his integrity and credibility ....”.

Mr. Kama, who is a partner in Sol-Law has deposed in his affidavit filed 24^th July 2003 that the nature of the claims in the present action are entirely separate to the claims in Doko and Matas’ Cases. Mr. Kama pointed out that the claims in Doko’s Case pertained to the issue of trespass by Tropical Resources Development Co. Ltd over customary land claimed by Doko’s group. The land, which formed the subject of dispute, in that case was not the same land in this action. Mr. Kama also pointed out that in respect of Mata’s Case, no action was ever taken against the Plaintiff; Mr. Mata merely acted as spokesman for the plaintiffs in action 166 of 2000. The nature of the matter on which Mr. Kama had been instructed in those previous cases and the nature of the subject matter in that case were different to this case.

There has been no challenge to the integrity and credibility of Mr. Kama as the solicitor acting for the Plaintiff in Doko and Matas’ Cases, accordingly his evidence as to the state of knowledge and denial of receipt of any confidential information must be accepted by this court.

Further, the solicitor acting in this case is Mr. Katahanas and not Mr. Kama. Again there is no evidence to suggest that in the course of his work as a partner in Sol-Law that Mr. Katahanas had access to or acquired any confidential information that Mr. Kama might have acquired when representing the Plaintiff in Doko and Matas’ Cases. I am satisfied Sol-Law had discharged the onus of proving that no confidential information was acquired.

(ii) The Agreement, which forms the subject of the allegations of confidential information in this action is not a confidential document. Mr. Kama had access to it in Doko and Matas’ Cases but that document did not form the subject matter of the dispute. The issue was one of trespass. The Plaintiff’s rights to enter into those land areas would have been dependent on the licence it held which in turn would have been dependent on the validity of the timber rights agreement it had entered into with the landowners. The issue for determination in this case pertains to the terms of the Agreement entered into between the parties in this case.

(iii) There is nothing confidential about what Donald Marahare did on 14^th January 2000 when he gave a copy of the Agreement to Maru and explained it to him in pidgin. What he did and says are matters of evidence to be tested at the appropriate time at trial. I fail to see how this can be the subject of any restraining orders either on the basis of disclosure of confidential information or on the basis of a real risk that confidential information will be disclosed. Further it is pertinent to note that what he did on 14^th January 2000, occurred well after the date of execution of the Agreement, which was executed on 4^th August 1999. What Donald Marahare did on 14^th January 2000 therefore would have made little difference to the claims of unconscionable bargaining and dealings pleaded in the Statement of Claim of the Plaintiff! In other words any suggestions that there may be conflict of interest through the disclosure of confidential information is without basis.

(iv) The test propounded by the case authorities cited and which in my respectful view should also be applied to rule 11(8)(a) of the Rules as to the question whether a legal practitioner who has acted for a client can be restrained from acting for an opposing party in the same matter or in another matter, is whether there is the possibility of a real risk of subsequent communication of relevant confidential information by Sol-Law to Dalgro (S.I.) Ltd in this matter. It presumes of-course that Sol-Law would have acquired confidential information in the first place and that there is a real risk that it would be disclosed to Dalgro (S.I.) Ltd in this matter. Respectfully there is simply no evidence that such a risk exists, or that real mischief and real prejudice is likely to occur, to use the words of Cozens-Hardy M.R., or, that the situation prevailing in this case is such that mischief is rightly anticipated, to use the words of Fletcher Moulton L.J., or, that it may be reasonably anticipated that a breach of that duty of disclosure is likely to happen, to use the words of Buckley L.J.

Decision

For those reasons, the application seeking an order to have Sol-Law prohibited from acting for the Defendant in this matter must be dismissed with costs.

ORDERS OF THE COURT:

1. Refuse application in paragraph 1 of the Amended Summons seeking an order for Sol-Law to be prohibited from acting for the Defendant in this matter.
   
2. Plaintiff to bear the costs of the Defendant under this application.
   

The Court.

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^[1] [1912] 1 Ch. D. 831
^[2] (ibid) at page 835.
^[3] (ibid) at page 835.
^[4] (ibid) at page 840
^[5] (ibid) at page 841
^[6] [1996] 3 W.L.R 16
^[7] (ibid) at pages 22-23
^[8] [1996] 3 W.L.R. 16