Confidentiality vs Disclosure – Which Prevails?

Confidentiality is an important principle for ensuring trust and confidence between a professional and their client. It is widely understood that information given to a professional during the course of an instruction should not be disclosed by the professional without the permission of the client.

Likewise, professionals are usually considered to be under a duty of disclosure to their clients. They are expected to tell their clients of any information that they might have in their possession and which might be relevant to the current instruction.

These duties of confidentiality and disclosure are explicitly stated in the codes of conduct for most professions. However, what is the duty of a professional when they hold information about one client, that might be considered useful to another client?

Harlequin Property (SVG) Ltd & Another v Wilkins Kennedy (a firm)

This situation has recently been considered by the High Court in Harlequin Property (SVG) Ltd & Another v Wilkins Kennedy (a firm) [2016] 3188 EWHC (TCC). The case concerned a firm of accountants (Wilkins Kennedy (“WK”)) who acted for both parties in a building project; Harlequin Property (SVG) Ltd (the developers) and ICE Group (SVG) Limited (the building contractor). Importantly, WK had accepted the responsibility of not only being the joint accountant for the project, but also the ‘business advisor’ for Harlequin.

Unfortunately, the project between Harlequin and ICE did not go well. It was later discovered that this was largely because of ICE embezzling a large portion of the funds that Harlequin had provided for the development. WK had been aware of this, but had not disclosed the information to Harlequin. Harlequin argued that this information should have been disclosed by WG as it fell within their duty of disclosure and that the duty of disclosure overrode their duty of confidentiality to ICE. Harlequin issued proceedings against WK for damages.

High Court’s decision

Unfortunately for Harlequin, Mr Justice Coulson disagreed. Harlequin had grounded their argument by drawing a direct analogy between the duty of an accountant and the duty imposed on solicitors by the Solicitors Regulation Authority Code of Conduct. However, after reviewing the available authorities, Coulson J concluded that the duty of auditors and accountants on this issue is very different from that of solicitors. A solicitor acts in a different professional, regulatory and ethical context to an accountant. Coulson J found that there is no authority that a professional is under a duty to disclose confidential information to another client. Indeed, the professional guidance for accountants seemed to explicitly support WK’s decision not to disclose the information to Harlequin.

Coulson J did however conclude that WK had clearly found themselves in a position of a conflict of interest. What WK should arguably have done is, once the evidence of ICE’s fraud came into their possession, ended their retainer with ICE and reported ICE to the Serious Fraud Office.

This case is a useful reminder that the duty of confidentially will usually prevail over the duty of disclosure. Such a situation will almost always, however, create a conflict of interest. If this happens, the professional should not delay in ending the retainer if that is the appropriate step. The case is also a useful guidance specifically for accountants.

Are you involved in a dispute with a professional? If so the experienced litigation team at Levi Solicitors can assist you.

confidentiality

James Gould

James Gould

Solicitor

Tel: 0113 297 3183
Email:jgould@levisolicitors.co.uk
James Gould