Question: what is the extent of solicitors' duty of
disclosure, and in particular is there a duty to disclose
information gained from acting for one client to another?
The decision in Harlequin Property (SVG) Limited v Wilkins
Kennedy (a Firm)  EWHC 3188 (TCC) held that accountants
do not owe such a duty and in his finding the judge noted,
"a solicitor acts in a different professional, regulatory
and ethical context to an accountant." Before we turn to
the solicitor's duty, let us briefly look at the facts of this
suitably dramatic case.
The claimants, Harlequin Property (SVG) Limited and Harlequin
Hotels and Resorts Limited, the developer and operator of luxury
Caribbean resorts ("Harlequin"), engaged the defendant
firm of accountants and business advisors, Wilkins Kennedy
("WK"), in relation to a new resort. Allegedly relying on
WK's advice, Harlequin entered into a "very loose"
arrangement with contractors, ICE Group ("ICE"), to
complete the first phase of the project. It so happens that WK
acted for both Harlequin and ICE, not only on other projects, but
specifically in relation to the current project which in the
judge's words, "ran completely out of control".
Meanwhile, Harlequin was being investigated by the Serious Fraud
Office, there were serious fraud findings against ICE's owner
and a defamation suit was brought by Harlequin's director
against a senior employee of WK who worked for Harlequin whilst
being the chief financial advisor to ICE.
Harlequin ultimately sought US$60 million in damages against WK
for failing to advise them to enter into a contract with ICE and
for omitting to share with them confidential information that
ICE's owner had misappropriated funds. The judge found for the
claimants on the first point but on the second held there had not
been a breach of disclosure duty as no such duty exists.
So what is the nature of the solicitor's duty and how does
it differ to that of the accountant? The SRA Code of Conduct, the
solicitor's ethical bible, states that the solicitor's duty
of disclosure applies to "information of which the
solicitor is aware and which is material to a client's
matter". The duty is not absolute and must be weighed
against the duty to maintain client confidentiality and the need to
avoid conflicts of interest. Where duties of confidentiality and
disclosure conflict, confidentiality will always trump
Does this mean that a solicitor could be required to disclose
confidential information he holds about one client to another?
Generally not, as the duty to maintain confidentiality will
normally displace the duty to disclose but it does not eliminate
the duty altogether. This is key.
In setting out the accountant's duty, the judge in Harlequin
compared the cases of Kelly v Cooper  AC 206, which
involves defendant estate agents, and Hilton v Barker, Booth
& Eastwood  UKHL 8, where the defendants were
solicitors. The judge concludes that the accountant's duty of
disclosure is akin to that of an estate agent who in the normal
course of business is privy to confidential information from a
variety of sellers and would not be expected to disclose that
information to a buyer. In Hilton, the House of Lords held that a
solicitor who puts himself in a position of having "two
irreconcilable duties" (of confidentiality and disclosure),
will be required to perform both duties as best he can and that
this might involve performing one duty fully and paying
compensation for failure to perform the other.
The lesson from Harlequin (and Hilton) is that a solicitor who
acts for two clients with a conflict of interest, despite the
regulatory prohibition on doing so (the only exceptions being where
clients have a "substantially common interest" or are
"competing for the same objective"), cannot escape his
disclosure duty to one client by arguing it conflicts with his duty
to protect the other client's confidentiality. Hopefully by
following the Code and maintaining robust due diligence procedures
law firms should be able to identify potential conflict situations
before accepting instructions and in so doing avoid unpleasant and
potentially embarrassing face-offs between confidentiality and
disclosure down the line.
Goodman Derrick's employment team will be hosting a workshop on HR horrors and how to deal with them. This practical session, on Wednesday 10 May 2017, will use case studies to deal with some of the tricky HR situations often faced by employers.
On 26 October 2016, the Court of Appeal delivered its judgment in Kazakhstan Kagazy Plc & 6 others v (1) Baglan Abdullayevich Zhunus (2) Maksat Askaruly Arip (3) Shynar Dikhanbayeva  EWCA Civ 1036.
With high cost and inefficiency top of the list of party concerns about the arbitral process, institutions, arbitrators, practitioners and indeed legislators are keen to find ways to address those concerns.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).