English Court of Appeal rejects Glencairn in Chinese wall dispute
The English Court of Appeal has rejected glassware maker Glencairn’s appeal in a case involving a so-called Chinese wall, providing some guidance on the implementation of information barriers in law firms of all sizes.
On May 7, the English Court of Appeal handed down its decision in Glencairn IP v Product Specialities, dismissing an appeal brought by Glencairn and concluding that it was for Glencairn to prove that the information barrier didn’t work.
In July last year, the English High Court denied the glassware maker’s request for an injunction to restrain IP boutique Virtuoso Legal from representing the company’s competitors, Final Touch, in litigation.
Glencairn IP and its sister company Glencairn Crystal had sued Dartington Crystal over a whisky glass which it said infringed its registered design back in September 2018.
That same month, Glencain sued a Canadian glassware maker and a party that was importing this glassware into the UK, over another glass, claiming infringement of a registered design and an EU trademark, in addition to passing off. In the ruling, the parties were referred to as Final Touch.
Both Dartington Crystal and Final Touch were represented by Virtuoso.
Dartington Crystal subsequently agreed to attempt to settle the dispute. In December 2018, the parties exchanged confidential position statements before settling the dispute in January 2019.
At the time, Virtuoso implemented a Chinese wall, after taking the view that it would not be appropriate for its Dartington team to be involved in the ongoing Final Touch litigation.
But Glencairn didn’t think the Chinese wall was adequate, claiming that there was a risk that confidential information from the settlement agreement would become known to Final Touch, providing it with an advantage in proceedings.
While Presiding Judge Richard Hacon assumed that the Dartington team would be aware of “at least some” of Glencairn’s confidential information, the risk of the information being shared with Final Touch was low.
“I believe that to be very unlikely, to the point of being fanciful,” he concluded.
Glencairn appealed against the decision, arguing that Hacon had erred in not applying the Bolkiah test and thereby not granting the injunction.
In Bolkiah, the professional advisors had acted for a first party, had ceased to act, and subsequently wished to act for a second party in litigation against their former client, the first party.
Under Bolkiah, where a former client has established the firm is in possession of a information given in confidence and the firm is proposing to act for another party with an adverse interest, the burden is on the firm to show that there’s no real risk that the information will come into the possession of those acting for the adverse party.
Back in July 2019, Hacon concluded that the Bolkiah approach should “not be applied with full force to the present case”.
Last week, the Court of Appeal affirmed Hacon’s judgment and rejected Glencairn’s appeal.
Lord Justice Flaux, on behalf of the court, said: “Attractively though Theo Barclay's [of Hailsham Chambers] submissions on the first ground of appeal were presented I cannot accept them. The fallacy in Glencairn's argument is that it seeks to equate the position of a solicitor who formerly acted against the applicant (the former opponent case) with that of a solicitor who was formerly acting for the applicant (the former client case).”
Flaux added that the Bolkiah jurisdiction should be limited to cases where there is or was a true fiduciary relationship.
“In my judgment, even if in one sense a duty of confidence (whether by express or implied agreement or in equity) is a fiduciary one, its existence is not sufficient as a matter of English law to bring into play the Bolkiah jurisdiction imposing the burden of proof on the solicitor for the opposing party to show that there is no risk of disclosure or prejudice,” he added.
As Virtuoso didn’t owe a true fiduciary duty, it didn’t have to prove its Chinese wall worked, with the burden on Glencairn to show there was a misuse of privileged confidential information and that the barrier was ineffective.
After rejecting the first argument, the court turned to Glencairn’s second argument, which claimed that the judge had erred in not concluding that the glassmaker had established the risk of disclosure of privileged confidential information and of prejudice to it was sufficiently great that the injunction should be granted.
Flaux agreed with Stephanie Wickenden, barrister at Serle Court and Final Touch’s representative, who had argued that Glencairn’s ground was “seeking to attack and overturn findings of fact, inferences and evaluative assessments which are quintessentially matters for the judge at first instance with which this court will be reluctant to interfere”.
Barclay relied on a phone conversation between Glencairn’s US attorney Mark Miller and Final Touch’s US attorney Peter Shapiro to show there was a risk that there had been a breach of confidence.
“As Lord Justice Arnold pointed out to Barclay in the course of argument, by serving the evidence of Miller openly, Glencairn had impaled itself on the horns of a dilemma,” said Flaux.
Miller's evidence in his witness statement is that Shapiro called him and said that he had become aware of details of the Dartington settlement and that, as part of the settlement, Dartington had obtained payment from Glencairn for redesigning its glass.
He added: “From all this it follows that by serving its evidence, Glencairn has ‘let the cat out of the bag’ as to what confidential information was contained in the settlement agreement. I agree with Wickenden that this is a very important factor militating against the grant of an injunction.”
In concluding the case, Flaux said that Hacon’s finding that the balance of justice was against the grant of an injunction was “unimpeachable”.
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