E-Clear (UK) Plc v Elia 7 ors [2012] EWHC 1195 (Ch)

Case No HC10C02405[2012] EWHC 1195 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue 7 Rolls Building, Fetter LaneDate Wednesday, 18 April 2012
London
EC4A 1NL
Before
HIS HONOUR JUDGE MACKIE QC(Sitting as a Judge of the High Court)
Between
E-CLEAR (UK) PLC (In liquidation)ClaimantELIAS ELIADefendantIAN DEFTYDefendant(as Trustee in Bankruptcy for the estate of Elias Elia)DefendantMILI PETROU ELIADefendant
Digital Transcript of Wordwave International, a Merrill Communications Company165 Fleet Street, 8th Floor, London, EC4A 2DYTel No: 020 7421 4046 Fax No: 020 7422 6134Web: www.merrillcorp.com/mls Email: mlstape@merrillcorp.com(Official Shorthand Writers to the Court)
MISS CATHERINE ADDY (Instructed by Messrs Field Fisher Waterhouse LLP) appeared for ClaimantMR CRYSTAL and MISS O'KANE appeared by Direct Access for Third Defendant for The First and Second Defendants did not attend and were not represented
Judgment
[1]This is an application by the defendant, Mrs Elia, dated 11 April 2012. She seeks an order directing that "FFW LLP cease acting for the claimants in the claim and that the claimant is not permitted to rely upon the witness statement of Kit Jarvis as he has previously acted for the first defendant, and this is a significant disclosure and misuse of confidential information belonging to its former client, the first defendant."[2]The application was listed before me today with an estimated time of two hours. It has taken up just over half a day. There has been no waste of words by anyone, but given the previous delay and adjournments, I am determined that we should complete what I am told is a two day application within its time limit, notwithstanding the unexpected arrival of this application.[3]The background to the action and the position of the parties is something I shall set out when I give a judgment on the substantive application for summary judgment. The application is supported by the second, third, fourth and fifth witness statements of Mrs Elia, the third defendant. The third defendant's evidence also includes a witness statement from the former first defendant, Mr Elia. There is evidence from Mr Jarvis of the claimant's solicitors and also from a colleague, Mr Tutty. The court has three or four large bundles of documents and some authorities.[4]The application of the third defendant is based on an alleged conflict of interest. The third defendant says that Field Fisher Waterhouse acted previously not just for E-Clear (UK) Plc, the claimant before it was in administration, but also for the first defendant, Mr Elia. The concern expressed by the third defendant is set out in detail in her statement in support of the application. But the question of a potential conflict of interest was apparently raised by Mr Elia the first defendant when he was actively involved in the proceedings last year. It came up again in January when Mrs Elia said in a witness statement:
"I am further advised by my son that the Claimant's solicitors previously advised both the Claimant and Mr Elia prior to the administration of the Claimant. I am concerned that such firm is acting on behalf of the Claimant against its former client, my son."
FFW were "getting very close to the process and advising my son for his new venture and FFW undertaking intense workload and exchanging information with the various transacting parties and their advisers, FFW became privileged to a lot of private and confidential information directly related to my son and it is for this effect that I am of the strong opinion that FFW violated its duties and abused its powers." She goes on to refer to information being collected by that firm in work involving a variety of corporate entities forming part of or being associated with the business of E-Clear.[5]The overall effect of what is now a substantial volume of documents, is said by Mr Crystal and by Miss O'Kane who represent the third defendant, to be broadly this. They say that the firm was not instructed by E-Clear, rather Mr Tutty of FFW first met Mr Elia in October 2007 and it was proposed that he be appointed as lawyer to Mr Elia's new venture as a consolidator in the travel and leisure industry. It is said that as a result a special purpose vehicle was incorporated, Phoenix Wings, owned wholly by Mr Elia with Mr Derek Tullett as chairman. Mr Elia identified targets in the travel and leisure industry to be wholly or partly acquired by Phoenix Wings Limited and which included a variety of companies.[6]The correspondence, mainly emails and draft documents circulating in July and August 2008, concerned with these and other deals, most of which did not come to fruition, is relied upon. The third defendant also alleges that the firm met a Mr Tullett when he was introduced as Chairman of Phoenix Wings and there was contact on a number of occasions. Reliance is placed on the fact that Mr Tullett's lawyer is said to be Mr Keith Oliver from Peters & Peters, the firm which also acts as solicitor for Mr Elia's trustee in bankruptcy. Reliance is placed on what is said to be the close and sometimes personal link between the two firms, one acting for the claimant and one for the trustee in bankruptcy. Mrs Elia is aggrieved that the wife of Mr Jarvis of FFW works for Peters and Peters. The fact that Field Fisher acted for Mr Elia and Phoenix Wings should have prevented it acting for the liquidators of E-Clear.[7]Mr Crystal submits that FFW would have been privy to confidential information about Mr Elia, particularly in relation to Mr Elia's dealings with Mr Derek Tullett notably over NF Bank AG and his loans to Mr Elia in regards to it. Further information in relation to a shareholding in another company was discussed, and there are further claims made about transactions relating to other companies, including XL Holdings, Joint Race and Phoenix Wings Limited.[8]The emails and other documents relied upon show Mr Elia being copied in, as one would expect, on his E-Clear email account, with a substantial number of relatively routine solicitors exchanges about the corporate ventures being undertaken. It emerges from those that while the proposed company, Phoenix Wings, had more than one director, it was, at least by some point, known to FFW that Mr Elia was the beneficial owner of that particular venture.[9]Other documents relied upon include, just to take as an example, a draft guarantee to be signed by Mr Elia, prepared by Field Fisher Waterhouse and submitted to another gentleman to pass on to Mr Elia for Mr Elia to sign and return or take advice upon if he wished. It is said that this is an indication that Mr Tutty and FFW dealt at length with Mr Elia's financial affairs. It is said to be obvious from this that Mr Tutty, Mr Jarvis and others at the firm had access to privy confidential information in relation to Mr Elia's financial affairs as a direct result of acting for Mr Elia and his vehicle and not, it is said, for E-Clear.[10]The claimant's case is that the facts are quite different. Mr Jarvis said in a witness statement back in January:
"[It is] incorrect … that this firm has acted for Mr Elia and is therefore in some way conflicted for acting for the Claimant in this case. That assertion is wholly incorrect. It was raised in correspondence by Mr Elia in late March/early April 2011 at which stage this firm made it absolutely clear that this firm had acted for E-Clear (UK) Plc but at no stage had it acted for [him] personally… I should add that when Mr Elia was requested by me to provide the documents that he alleged he had which he said proved that this firm had acted for him personally, he failed to do so."
He then suggests that the reason for that is because such documents do not exist.[11]In response to the application which was made only on 11 April to be heard today, further evidence came in from Mr Jarvis and also from Mr Tutty, now a consultant at FFW and formerly a partner. Mr Tutty sets out at a little length the dealings between his firm and on E-Clear and related matters. He deals with the circumstances in which the firm came to act for E-Clear with restructuring issues, with the dispute over the sale and purchase of a business called Argo Holdings Limited, with an XL LG settlement and with advice to the CAA. Those all relate to another company, Albery. So far as E-Clear was concerned, he deals with Project Phoenix and various other matters and in each case asserts that E-Clear paid FFW's invoices in respect of this matter and that Mr Elia was not the client and his personal private financial affairs were neither relevant nor discussed.[12]Mr Tutty says that his Elite systems do not record "Phoenix Wings" or "Mr Elia" as a client at any stage and he says that FFW was only ever instructed in respect of commercial matters for Albery or E-Clear. He says that the firm has not acted for Mr Elia in his personal capacity at any time and he has not ever been privy to confidential or indeed any information relating to either his personal financial position or prior to acting for E-Clear in relation to the present claim, any information relating to payments from E-Clear to Mr Elia or vice versa.[13]Mr Jarvis also gives evidence about the circumstances in which he dealt with Mr Tullett and with Peters & Peters, a firm for which his wife works.[14]The claim put forward by Mr Crystal is vigorously resisted on a number of grounds by Miss Addy. She first draws attention to the circumstances in which this application was made. She points out that the allegation of conflict of interest was raised by Mr Elia in April 2011 without an application being made, and in a statement from Mrs Elia herself dated 23 January. She points out that Mr Jarvis answered the complaint and, in addition, sought from the third defendant and from Mr Crystal (who is acting under the Direct Access Scheme) details of any documents which the third defendant had or had access to, to support the allegation being made. These exchanges led to an email to Mr Crystal on 10 February in which Mr Jarvis said that no documents had been received and that the third defendant should disclose what they relied upon. There was an email response from Mr Crystal saying he would respond after he returned to chambers the following week. But there was then two months' silence from the third defendant, until last week when, on 11 April, this application was made.[15]Leaving aside the complaints by the claimant to the effect that this is a try-on to disrupt the hearing of the application for summary judgment, the timing entirely justifies the fact that the claimants have not, in their latest evidence, provided full and complete disclosure of all and every aspect of the circumstances in which they acted for E-Clear. The evidence of Mr Jarvis and Mr Tutty is clear and unequivocal. It seems to me inconceivable that solicitors would, in effect, fabricate evidence of who their clients were. I say this not because solicitors or barristers are any more honest than anybody else, but because of the devastating consequences which would follow once full disclosure was given from making a false statement to that effect. The justification put forward by Mr Crystal for the lateness of his application is misconceived. It could easily have been made earlier. The question of conflict of interest has been floating in the air for some considerable time. If indeed, Field Fisher Waterhouse had acted for Mr Elia, it would have been very straightforward for Mr Elia to be able to show that by producing the mandatory instructing letters from FFW, the bills and evidence of payment by him. There is no proper evidence that Mr Elia was a client of FFW and it is clear that he was not.[16]That is not an end of the matter. Although Mr Crystal appeared to accept that, if Mr Elia had not been a client of the firm that would be the end of the application, he went on to point out a few minutes ago that it cannot be right that what would otherwise be an actionable breach of confidence, could be left unrectified by reason of the fact that there was not a direct client relationship. So his submissions about breach of confidence need to be addressed.[17]Miss Addy submits that FFW have no personal information confidential to Mr Elia which contains the necessary quality of confidence. She says that, even if the case was otherwise made out, any rights of action available are now vested in the trustee and should be the subject of an application under section 303 and not through this application. That may be right but I decline to decide this application on that basis. Finally, she points out the burden of proof is on Mrs Elia, the third defendant. That is correct, albeit that the burden is not a heavy one.[18]The relevant law is not in dispute. It is summarised in paragraph 20 of Miss Addy's skeleton argument as follows:
"If it proves necessary, the Claimant will refer to and rely upon the following authorities…"
Which she says establish that there is no absolute rule preventing a solicitor from acting against a former client. "… a solicitor may be restrained from doing [this] if such a restriction is necessary to avoid a significant risk of the disclosure or misuse of confidential information belonging to the former client … it is incumbent on a person who seeks to restrain his former solicitor from acting in a matter for another client to establish that (i) the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) such confidential information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own..." Those propositions are taken from the decision of the House of Lords in Bolkiah, helpfully illustrated by the judge in the case of Winters.[19]So far as the law is concerned, Mr Crystal places particular reliance on observations by Lord Millett in Bolkiah, one being that the burden of proof, although on the plaintiff is not a heavy one, but Lord Millett also said this:
"It is of the highest importance to the administration of justice that a solicitor … 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. … the court should intervene unless it is satisfied that there is no risk of disclosure."
[20]There does, however, remain a burden of proof on the third defendant. The generalities in the witness statement do not show the existence of information which is confidential and which may be relevant to the matter in which the dispute has arisen. When I asked Mr Crystal to explain to me in summary terms what that information was, he referred to the way that the business was being run, to how Mr Elia was involved in the business, to the circumstances in which Elia became indebted to E-Clear and facts to show in some way why what Mr Elia asserts was the case should or should not be believed. Given what any firm instructed by the Administrators would learn from the available material that list is not convincing.[21]The passages in the correspondence to which Mr Crystal took me do not begin to show that FFW have information of a confidential nature relating to Mr Elia which could effect at all on this claim. The main application before the court concerns issues surrounding the source and timing of payments for a property. The material put forward by the solicitors appears to be controversial but straightforward. No passages in the claimant's evidence have been identified as revealing a potential breach of the duty of confidence. So it seems to me that there is no basis for this limb of the application either.[22]It seems to me summing up, firstly that Mr Elia was never a client and that is obviously demonstrable from the materials available to the solicitors. If he was a client he would have been in a position to show that and the files of the solicitors would have revealed it. It seems to me that confusion has arisen in the mind of the third defendant, or those advising her, between solicitors giving advice in a corporate context about corporate matters, where they have to deal with human beings who represent or own the company and those dealing with the private financial affairs of a particular party. There is a great difference between the two which is sometimes bridged, but not on the evidence of this case, when a corporate transaction requires disclosure of an individual's personal affairs. So even if the necessary link between solicitor and client had been established, there is no basis for a claim that the test in Bolkiah has been met.[23]There is, of course, a difference between the wisdom of continuing to act in particular circumstances and the legal right to do so when asked by a client. It seems to me clear that FFW were entitled to act for the claimant in this action. The application fails.

Cited in 1 later judgment