James is a Partner and Head of the Dispute Resolution team and primarily handles commercial…View Profile View all
The High Court has recently considered whether professionals (in this case accountants/business advisors) have a duty to disclose confidential information about one of their clients to another client for whom they also act.
The Claimants were property developers who were claiming substantial damages against the Defendant accountants and business advisors for breach of contract and/or duty arising in connection with the development of a resort in the Caribbean.
The developer’s case was that as their business advisors, the accountants should have passed on confidential information belonging to the building contractors for whom the accountants also acted. The Claimants argued that the accountants had information which showed that the owner of the building contractor was stealing development funds. The developer’s case was that the accountants should have passed on that information. The accountants argued that they had no such duty.
The judge concluded that there was no binding authority upon him to support the proposition that accountants such as those in this case had a duty to disclose confidential information of one client to another. Indeed, as there was a House of Lords authority for the argument that a professional is not required to relay confidential information relating to one client to another so there could be no liability on the accountants for their failure to do so. The Judge also found that here was no authority for the proposition that accountants who found themselves with a conflict of interest had an obligation to tell the client that first engaged them information that was confidential to the client who later engaged them. The Judge said that such an argument was against common sense.
The answer would be the same even if the confidential information had indicated fraud on the part of the building contractors. If that was the position, the accountants should have resigned their retainer from the contractors and informed the Serious Fraud Office but they had no duty to tell the developer.
Please contact James Staton, Director of our Litigation Department, for further information.