Arnage Holdings Ltd and Four Others v Walkers (A Firm)

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 24 July 2019
• Court: Grand Court (Cayman Islands)
• Date: 24 July 2019

ARNAGE HOLDINGS LIMITED and FOUR OTHERS

and

WALKERS (a firm)

(Smellie, C.J.)

Grand Court, Financial Services Division (Cayman Islands)

Attorneys-at-Law — obligations towards client — lawyer–client relationship — on application for summary judgment against attorney on liability for breach of contractual and fiduciary duties of confidence, trust and loyalty, client must establish existence of lawyer–client relationship, existence of attendant duties, actionable breaches of duties and proof of causation of some loss

Held, granting summary judgment for the plaintiffs on liability:

(1) The evidence showed that there was a longstanding lawyer–client relationship between the defendant and the Rabellos including Katia Rabello and, through Fernando Toledo’s dealings with the defendant on his own behalf and on behalf of the Rabellos, with him as well. This conclusion emerged from an examination of many retainers and engagements undertaken by the defendant over the course of a quarter of a century (paras. 39–40; paras. 139–140).

(2) The plaintiffs’ arguments—that, had they been given notice of the defendant’s applications to the Grand Court on behalf of Dr. Braga, they could at least have applied for protective measures to contain the unwarranted misuse of the information in Brazil, or to have persuaded the court to refuse or revoke the orders for disclosure—were well grounded in probability. In essence, the claim of the plaintiffs was for loss of opportunity to seek remedial relief as a result of the defendant’s actions in obtaining the ex parte orders on behalf of Dr. Braga. It was established for the purposes of summary judgment on liability that, at a minimum, there was as pleaded a loss of the earliest opportunity for the plaintiffs to defend themselves in the context of the proceedings before the Grand Court. Theloss of opportunity arose from the defendant’s actions on behalf of Dr. Braga. The denial of opportunity buttressed the plaintiffs’ claims for breach of duty and consequential damages. Ultimately the plaintiffs would also need to establish to the civil standard of proof the various alleged losses as the result of the averred loss of opportunity (paras. 173–175; paras. 195–200).

(3) For the grant of summary judgment, the plaintiffs had to establish the existence of the lawyer–client relationship, the existence of the attendant duties, actionable breaches of those duties and proof of causation of some loss.

(4) Whether there was a lawyer–client relationship in respect of each plaintiff was an exercise to be undertaken by an examination of all the circumstances of the case. The lawyer–client relationship was based on general concepts of contract and the specific contract of a retainer. Whether a relationship existed was a question of fact. There was no need for a person to formally retain a lawyer by way of a letter or other document, nor for an account to be rendered or a bill paid. The court must look to a number of factors to ascertain whether such a relationship existed. The relevant indicia were: (i) a contract or retainer; (ii) a file opened by the lawyer; (iii) meetings between the lawyer and the party; (iv) correspondence between the lawyer and the party; (v) a bill rendered by the lawyer to the party; (vi) a bill paid by the party; (vii) instructions given by the party to the lawyer; (viii) the lawyer acting on the instructions given; (ix) statements made by the lawyer that the lawyer was acting for the party; (x) a reasonable expectation by the party about the lawyer’s role; (xi) legal advice given; and (xii) any legal documents created for the party. Not all indicia needed to be present, rather the question was whether a reasonable person in the position of a party with the knowledge of all the facts would reasonably have formed the belief that the lawyer was acting for a particular party. Further, the indicia were not exhaustive. Other indicia could include a situation where a lawyer acted for a company knowing that its interests were identical or closely aligned with the interests of its beneficial owners who themselves came to depend on the lawyer–client relationship. In the present case it was obvious that, when applied to the facts, the indicia served to identify each of the plaintiffs as clients of the defendant. The circumstances of the present case required the lifting of the corporate veil to prevent the defendant from denying the existence of the relationship of trust and confidence which had clearly developed, not merely between the incorporated plaintiffs and the defendant, but also between the individual plaintiffs (Katia Rabello and Fernando Toledo) and the defendant. The fiduciary nature of the lawyer–client relationship imposed duties on the fiduciary beyond the duty not to disclose confidential information. It included a duty of loyalty and good faith not to act against the interests of the client (paras. 300–305; paras. 312–316).

(5) As the court found the defendant’s assertion that Katia Rabello and Fernando Toledo were never its clients to be wrong, the defence had no prospect of success as against those plaintiffs’ claims for breaches of duty. That conclusion was unavoidable in light of the continuing nature of the duty of confidence. That a duty of confidence had arisen as owed by the defendant to the plaintiffs when their confidential information was imparted to the defendant was indisputable. A duty of confidence arose when confidential information came to the knowledge of a person in circumstances where he had notice, or was held to have agreed, that the information was confidential, with the effect that it would be just in all the circumstances that he should be precluded from disclosing the information to others. In light of the existence of the lawyer–client relationship with the plaintiffs and the patent conflict of interest in acting for Dr. Braga, the defendant’s denial of the breach of duty was completely untenable. Irrespective of the existence of a formal or express contractual retainer, a lawyer would owe and continue to owe the fiduciary duties and obligations of trust, confidence and loyalty if the circumstances of his relationship with his client gave rise to those duties. In the present case, there were two express contractual retainers: the May 2007 retainer (to contain the impact of the CIMA disclosure to the BCB) and the August 2009 retainer (to protect the Brazilian defendants). The other retainers also incontrovertibly existed, as evidenced by their circumstances, including correspondence between the defendant and Fernando Toledo or Mr. Macaulay. Each retainer gave rise to the lawyer–client relationship and to the attendant duties and obligations of trust, confidence and loyalty, which survived the expiry of any retainer which had in fact expired. In light of the court’s conclusions that the August 2009 retainer obviously covered all those persons known to the defendant to have been in jeopardy in Brazil, especially Katia Rabello and Fernando Toledo, and that it continued until well after the Braga retainer, it must be concluded that the defendant placed itself into an irreconcilable conflict of duty and interest when it accepted the Braga retainer. In so doing, the defendant acted in breach of its duties owed to Katia Rabello and Fernando Toledo. The defendant throughout remained under a continuing duty of trust and confidence in respect of all retainers not to disclose, nor take steps contrary to its clients’ interests to disclose, their confidential information. It followed that the defendant should not have accepted the Braga retainer. In acting for Dr. Braga against the plaintiffs and their interests, the defendant had breached the duties and obligations of trust, confidence and loyalty owed to the plaintiffs. While the court did not find that the defendant had acted knowingly and deliberately in breach, the breaches were nonetheless serious and clear. No explanation had been offered by the defendant (paras. 321–341).

(6) As the conduct of the defendant in acting for Dr. Braga was the subject of the plaintiffs’ claim, the position of a hypothetical “reasonably competent” attorney was not relevant to the outcome. The defendant’s proposition that it should be excused from liability for its own breaches ofduty because some other attorney not owing those duties would have achieved the same results for Dr. Braga was untenable. The court was satisfied that the defendant did owe to each plaintiff the contractual and fiduciary duties of care, confidence and loyalty and that these duties were breached by the defendant. The breach was, for present purposes, proven not just by the obtaining and disclosure of the Cayman disclosure, but also by enabling or facilitating its adverse use against the plaintiffs (paras. 342–359).

(7) The defendant argued that whatever breaches it might have committed, there was a break in the chain of causation of loss when Katia Rabello’s lie was revealed resulting in the STJ’s final dismissal of Securinvest’s appeal. The defendant’s argument went only to the question of Katia Rabello’s duty of disclosure to the STJ and her failure to meet that duty. The argument did not address the case in relation to the loss of opportunity to appear before this court and to prevent the wider abuse of the Cayman disclosure in Brazil against Katia Rabello and Fernando Toledo and the consequences arising from that wider abuse. This argument of the defendant on causation could be relevant, if at all, only to the loss of Securinvest’s assets as that was the issue affected by the duty of disclosure to the STJ. That was so notwithstanding the defendant’s further argument that had Securinvest been released from the Petroforte bankruptcy, so would Katia Rabello have been released. The converse situation had to be considered as well: had she not been taken into the Petroforte bankruptcy in the first place as a result of the abuse of the Cayman...