CJ finds law firm breached confidentiality

| 30/07/2019 | 55 Comments
Cayman News Service
Walkers building, George Town

(CNS): One of Cayman’s leading law firms was found by the chief justice to have breached the confidentiality of one of its own clients to another in what was described as an “exceptionally complex cross-border case”. According to lawyers from Etienne Blake, who defended the various aggrieved parties, their information was given to another Walkers client, Dr Braga, who was a Brazilian court-appointed trustee in bankruptcy, that resulted in what was said to be “catastrophic consequences”.

In his ruling Chief Justice Anthony Smellie found that the case was marred by allegations of abuse and that Walkers lawyers, if not intentionally, breached their obligations of the attorney-client confidentiality, opening the doors for a $400 million claim against the local leading offshore law firm.

The case took more than a year to go through the courts, though it actually began some five years ago and involved a number of parties, including two Brazilian bankers as well as Cayman-registered firms Arnage Holdings Ltd, Brooklands Holdings Ltd and East Farthing Holdings Ltd.

The chief justice dismissed claims by Walkers, the defendants, that despite a 25-year multi-generational relationship and invoices to the contrary, the plaintiffs were not their clients. CJ Smellie said in his ruling that “the Defendant (Walkers) should not have accepted the Dr Braga Retainer, as the defendant has itself come to belatedly acknowledge”.

He said that in acting for Braga against the plaintiffs, their other clients, Walkers breached its duties and obligations of trust, confidence and loyalty, which it owed to the plaintiffs.

“While I do not need to find and do not find that the Defendant acted knowingly and deliberately in breach, the breaches are nonetheless serious and clear,” the CJ wrote. “No explanation has been offered by the Defendant. There was, for instance, no explanation whatsoever why the managing partner who had direct responsibility for the then still ongoing August 2009 Retainer …decided that the Defendant could act for D. Braga when he was approached by Martin Kenney & Co to do so on 28 April 2010.”

The senior judge said there was no explanation from Walkers how it found itself acting for both these parties through the same litigation department, which was at the time made up of a compact team of just ten people. The court said this called into question Walkers’ due diligence and conflict-checking systems and procedures.

The case also considered a law firm’s disclosure obligations and the need for care and caution where a firm was aware that funding, in this case from the adverse party, was the product of a champertous relationship which is still an offence under Cayman Islands law.

Walkers had claimed that as any other competent attorney would have accepted the instructions, it should be absolved from liability. But the chief justice took a different view, stating it was an abuse of process. “No hypothetical reasonably competent attorney can be assumed to have been willing to act in an abuse of process of the Court, and certainly not without full and frank disclosure being made,” he said.

Anthony Akiwumi, who acted for the plaintiffs, said the decision was an “important professional liability judgment”.

He added, “The judgment is notable in that all of the Defendant’s defences on liability were rejected. In particular, the Honourable Chief Justice dismissed the Defendant’s proposition that despite a twenty-five year multi-generational legal services/private client relationship, the Plaintiffs were not clients of the firm.”

Meanwhile, it is understood that Walkers will be appealing the chief justice’s decision.

Arnage, Brooklands et al v Walkers – press release

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Category: Business, Court, Financial Services

Comments (55)

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  1. Mikey says:

    Paul Walker would be very disappointed if he was still alive 🙁

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  2. Anonymous says:

    And the irony of this conflict decision? You have Fountain Court Chambers silks acting for both sides during the trial – common but absolutely outrageous that the QC’s seem to be above conflict law/issues. The first Judge to stop that in my mind will be a hero.

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    • Anonymous says:

      Silks are not partners are have nothing to do with each other financially except for the payment of tenancy and mutual fees. Those Silks would not be “on each other’s side,” if anything two Silks in Chambers are usually competing for fees.

      A Silk’s entire career is based on their own reputation as a person and their own work as a lawyer unlike lawyers in firms who band together so to speak. Their clients in this case were lawyers, who were obviously comfortable with any conflict. No conflict could be said to exist, without any other evidence.

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      • Anonymous says:

        So they don’t talk amongst themselves in chambers – you’re delusional, it’s a joke.

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        • Anonymous says:

          Maybe they did, but this does not a conflict create. They had separate clients. They are not partners.

          Do not forget who the guilty part is in this case. Where I practice law you will be disbarred and made to pay restitution if a client can prove that you used their confidential information against them, to their detriment or indeed at all, or even just acted where there was a conflict, without informing them of the conflict first and asking them to waive it. This firm did both of those things.

          The proper course is to refuse the new retainer without even approaching the existing client. I cannot wait until the Privy Council confirms this judgment.

          • Anonymous says:

            I don’t understand how one silk talking to another about the case, telling the other side what they’re going to argue about is not a conflict. Who cares if they’re not partners, conflicts aren’t just about retainers and cash.

    • Anonymous says:

      As it happens local attorney, Anthony Akiwumi led and argued the substantive case for the successful Plaintiffs not a Fountain Court Silk!

  3. Anonymous says:

    I love the comment from Walkers, reported in another publication, that this was an “interim decision”. Takes some big ones to call a CJ decision “interim”!!!

    Also gives away their strategy (which isn’t that hard to figure out anyway). Drag this out for years until they bleed the plaintiffs dry. And who makes all the money in the meantime? Yup, lawyers!

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  4. Anonymous says:

    Something tells me the CJ won’t be as celebrated by the “top brass” this week as he was a few months ago in a previous controversial ruling.

    Smellie, prepare to return to the lowly gallows of regard in the eyes of the newcomers.

    Don’t cry, you had a nice, swift stint up there.

    Oh, the irony!

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    • Anonymous says:

      The CJ is the top brass. His office doesn’t draw its power from the opinions of expat law firm partners. It’s a constitutional office running one of the three branches of government. Give me a break.

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  5. Anonymous says:

    Does this mean we can finally knock down that monstrosity of a building?

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  6. Anonymous says:

    Are champertous fees the proceeds of crime?

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    • Anonymous says:

      No, they cannot be. If they were then multiple SAR’s would be filed and our robust law enforcement agencies would have stepped in long ago.

  7. Anonymous says:

    Bye bye Walkers.

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  8. Anonymous says:

    excellent verdict…to set precedence..good job cj

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  9. Anonymous says:

    Too bad they are only know introducing regulatory systems for law firms or else they would face additional breach of rules charges. This should be considered by the newly formed regulatory body in determining the firm’s fitness for membership…………………………..

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  10. Anonymous says:

    The love of money is the root of all evil, especially at offshore law firms.

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    • Anonymous says:

      Actually, the failure by incompetent agencies to enforce even rudimentary standards is the root of all evil. Money can be used for good.

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  11. Anonymous says:

    Guessing their staff Christmas party will be held at Champion House 2 this year instead of The Kimpton.

    LOL.

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  12. Anonymous says:

    There goes the annual bonus and promotion

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    • Anonymous says:

      $400 million is a lot of money. Also, now that the decision is public, all of their existing clients know what they are about and have a decision to make.That could mean the end of the firm.

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      • Right ya so says:

        A drop in the bucket for them. Not a chance this will end the firm.

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        • Anonymous says:

          This is the kind of thing that makes referrals dry up completely. Trying to play hardball was stupid in such a lawyerly way.

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        • Anonymous says:

          It’s a huge sum for a comparatively small partnership, especially where insurance cover may not be effective given the circumstances. However it’s also a headline number. The court has established liability – not amount – and the plaintiffs are going to struggle to argue that Walkers actions were solely responsible for the entirety of their losses in Brazil, especially since they seem to be the result of their own actions. Suing your lawyer because you get caught is not an attractive proposition for a court. The bigger problem for Walkers is reputational – If clients think their lawyers will work with people who are hostile to their interests they are going to change lawyers and the court doesn’t seem too impressed by the way in which they represented the Brazilian trustee either. A very bad day at the office indeed.

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          • Anonymous says:

            If the guilty knowledge goes all the way up, you can kiss that insurance goodbye. It’s guaranteed that there are partners now considering their options elsewhere.

        • Anonymous says:

          They’ll just borrow the money from even richer friends.

  13. Anonymous says:

    Anyone know who the managing partner at Walkers was in 2010?

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  14. Anonymous says:

    Glad a court saw how weak the argument “these are bad guys” was and held this firm accountable. Sadly the firm refuses to admit their sloppiness and greed led to breach of one of the basic principal of the industry they are in.

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  15. Anonymous says:

    Great judgment since conflict checks were computerised well before 2010, at least in other firms. This was not an easy mistake to make, it was an impossible mistake to make. Greed is not good for lawyers. Other professionals can get away with it but lawyers tend not to. Frightening and hilarious at the same time.

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