Jonathan Pickworth on conflicts of interest.

Jonathan Pickworth is a solicitor at Linklaters.

The professional world received a shot across the bows in the recent House of Lords decision in Prince Jefri v KPMG [1999] 2 WLR 215.

It was held that the erection of a "Chinese Wall" would not necessarily protect a litigant from the risk of inadvertent leakage of confidential information. It was made clear that if there was a risk, the firm in question may not be able to act against a former or existing client.

The increasing number of mergers in both legal and accounting professions over recent years is likely to lead to more conflicts arising.

Concern among clients about this risk was taken to an extreme in the recent case of Young & ors v Robson Rhodes (Laddie J, 30 March 1999). In that case, members of a Lloyd's syndicate sought an injunction to restrain the proposed merger between Pannell Kerr Forster and Robson Rhodes.

The plaintiffs sued Pannell Kerr in the mid-1990s for negligence and kept Robson Rhodes to provide forensic accounting for them. Robson Rhodes offered to put up a "Chinese Wall" to protect information post-merger. Mr Justice Laddie refused to grant an injunction.

The case is of interest because of the way the plaintiffs tried to rely on the Prince Jefri decision. This was not a case about preventing an adviser from acting in a particular piece of litigation, but it was to stop the merger taking place at all, so that the plaintiffs could keep their forensic adviser.

Mr Justice Laddie recognised the risk of an inadvertent leakage of confidential information, but this did not justify an injunction in the terms sought. To have prevented the merger would have been like using a sledgehammer to crack a nut.

The Robson Rhodes decision is interesting for another reason: Mr Justice Laddie set out the basis on which the court would accept the defendant's proposals to safeguard against disclosure of the confidential information.

There would have to be physical separation of the employees of Robson Rhodes involved in the forensic accounting work and those from Pannell Kerr Forster, which was involved in the matters giving rise to the negligence claim. Separation would only need to extend to work-related matters, though.

It is becoming clear that wherever a potential conflict of interest arises for a professional firm, there is a risk that clients will try to rely on Prince Jefri. However, the Robson Rhodes judgment sets a limit on how far the court will go to guard against a risk of inadvertent disclosure.