SAME LAWYER ACTING AGAINST SAME COUNTERPARTY IN SUBSEQUENT PROCEEDINGS
If a lawyer acted for Party A against Party B in a previous set of proceedings, can the same lawyer act for Party C against Party B in subsequent proceedings?
In the recent decision of LVM Law Chambers LLC v Wan Hoe Keet and Anor [2020] SGCA 29 (“LVM v WHK”), the Singapore Court of Appeal set out important guidance on the limits on lawyers acting for a different party against the same counterparty in subsequent proceedings.
Background. The Appellant was a law firm who acted for Dr L, who sued the Respondents in 2016 in relation to an alleged Ponzi scheme. The suit was settled on the first day of trial, and a Settlement Agreement was signed between Dr L and the Respondents. ([5] LVM v WHK).
The Settlement Agreement contained a confidentiality clause which read “The circumstances of the Claims, all materials prepared in respect of [the Suit] (including but not limited to documents which have been filed on E-litigation) and/or disclosed in [the Suit], and any settlement between parties (including the terms of settlement)) shall be kept strictly confidential between parties, unless disclosure is (1) required by law, (2) by written consent between parties, (3) sanctioned by the High Court of Singapore, and (4) for enforcement of this Settlement Agreement.”
Subsequently, in August 2018, the Appellant represented Ms C in a similar suit against the Respondents. The Respondents did not object to the Appellant representing Ms C, until November 2018. The Appellant refused to discharge themselves, and the Respondents applied to the High Court for an injunction to restrain the Appellant from representing Ms C or any other party in connection with matters raised in the suit. ([4] – [7] LVM v WHK)
High Court granted injunction. The High Court agreed with the Respondents that there was a conflict of interests in the Appellant acting for Ms C, and there was a sufficient threat shown of misuse of confidential information to justify the injunction. An equitable duty of confidence arose as the Appellant conducted negotiations on the understanding that Dr L promised not to disclose confidential information obtained in the course of settlement negotiations except where contractually provided. The High Court was satisfied that the Respondents would be disadvantaged by the Appellant’s knowledge from participating in the negotiations due to the possibility of an accidental or subconscious breach of the obligation of confidence. ([8] – [11] LVM v WHK).
The Appellant thus appealed against the High Court’s decision.
Court of Appeal decision. The Appellant succeeded in its appeal to the Court of Appeal. The Court of Appeal set out the following legal principles.
1. If the lawyer had contractually agreed to be bound by a duty of confidentiality, the contract will determine whether the lawyer can act for the subsequent party against the same counterparty ([13] LVM v WHK).
2. Even if there was no contractual agreement of confidentiality, the lawyer may be bound by an equitable duty of confidence in certain circumstances, such that it would be inappropriate for the lawyer to act against the same counterparty. The counterparty would have to establish that “(a) the information concerned must have the necessary quality of confidence about it; (b) that information must have been received by the lawyer (or law firm) concerned in circumstances importing an obligation of confidence; and (c) there is a real and sensible possibility of the information being misused.” ([14] – [15] LVM v WHK)
3. Where both parties considered the terms of a settlement to be confidential as between them, the lawyers would not be able to disclose the terms in the absence of waiver by the parties. The lawyer cannot even request his client to grant permission to use that confidential information when the client is bound by the confidentiality obligation ([17] LVM v WHK).
4. As regards other details in a settlement context, such as the knowledge of the process of arriving at the terms, it depends on the nature and circumstances whether the lawyer is subject to an obligation of confidence, which may be inferred from the terms of the settlement agreement, or arise in equity. However, a party cannot seek relief based on mere assertions or vague generalisations ([18] LVM v WHK).
5. Where an adverse party seeks to prevent the lawyer from acting for the subsequent party, the adverse party must show a “real and sensible possibility” of the information being misused in the subsequent proceedings. Factors that may show a “real and sensible possibility” include the degree of similarity of the proceedings, and whether the client in the subsequent proceedings deliberately retained the lawyer due to his involvement in the previous proceedings ([19] – [22] LVM v WHK).
6. The legal burden of proof lies on the party seeking an injunction preventing the lawyer concerned from acting for the other party ([24] LVM v WHK).
On the facts of the case, the Court of Appeal held that the Appellant was bound to keep the terms of the Settlement Agreement confidential, but the Respondents had failed to prove that any other matters relating to the settlement negotiations in the previous suit (involving Dr L) were confidential ([29] LVM v WHK).
Thus, the Respondents also failed to show a “real and sensible possibility” of confidential information being misused to justify the grant of an injunction against the Appellant acting in the subsequent proceedings. While the High Court accepted that the Appellant could gain a tactical advantage by applying knowledge gleaned from the settlement negotiations, the Court of Appeal held that the Respondents failed to prove that such information was confidential. ([30] LVM v WHK).
The Court of Appeal thus allowed the Appellant to continue acting for Ms C against the Respondents, but on the condition that the Appellant could not disclose the terms of the Settlement Agreement between Dr L and the Respondents to Ms C or to anyone else unless required or permitted by law ([31] LVM v WHK).
Practical guidance from the Court of Appeal. In the closing paragraphs of the judgment, the Court of Appeal observed that “It might make practical sense – and obviate potential difficulties such as those that materialised in the present case – for a counterparty to a settlement to obtain a contractual undertaking of confidentiality from the lawyer and/or law firm concerned. That having been said, the scope of the undertaking will necessarily be governed by the precise language used.” ([32] LVM v WHK).
This is sensible advice for any party involved in settlement negotiations to keep in mind.
In addition, it is important to note [33] LVM v WHK: an allegation that there is a breach of the Riddick principle should, if seriously held, have been pursued separately.
Tags: Duty of confidentiality; Legal professional conduct
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