Information Barrier Guidelines* (‘Chinese Walls’)
*('Information barrier' is the term used in the Australian Solicitors Conduct Rules 2012 (‘ASCR’) for what have been known as 'Chinese Walls').
Information Barrier Guidelines for use by members have been approved by the Council of the Queensland Law Society (‘the Guidelines’).
One of the relevant conduct rules which refer to information barriers is Rule 10 (acting against a former client). The Guidelines need to be read in conjunction with this rule and the law relating to confidentiality.
The Guidelines are for law practices which need to quarantine information to avoid a breach of confidentiality in cases where the law practice wishes to act in a matter where it has information relevant to the matter but which is confidential to a former client. The Guidelines aim to assist law practices with measures to guard against a breach of the duty of confidentiality owed to the former client. In the absence of an effective information barrier the law practice would normally not be able to act due to the conflict of interest. The conflict is between the duty of confidentiality to the former client and the duty to the current client to disclose and / or use all information at the law practice’s disposal for the benefit of the current client’s matter. The law practice may be able to act where it can establish that there is no unacceptable risk of breach of confidentiality. This may be possible by compliance with the Guidelines. The burden of establishing that there is no unacceptable risk will fall on the law practice.
The Guidelines may also be used to address similar issues created by ‘migratory lawyers’; that is, lawyers moving between law practices who have had some involvement with a relevant matter at their previous practice. Refer also to Non-Binding Ethics Ruling (2018) 3.
The Guidelines may also be used to rebut the presumption of imputed knowledge, that all solicitors in a law practice are presumed to have the knowledge of all other solicitors in the practice.
The Guidelines state that they are not intended to apply to 'concurrent retainers' where a law practice acts concurrently for two or more clients with conflicting interests, as different considerations apply. A barrier is not, of itself, a solution to a situation where there is a conflict between current clients. It does not remove the duty of undivided loyalty owed to each current client. However, in such situations a law practice may be able to act with the fully informed consent of each client. Consent may be obtained on the basis that confidentiality is to be preserved by an effective information barrier. Alternatively, there would need to be waivers of confidentiality, but these may not be appropriate or forthcoming. Refer to Rule 11 ASCR (Conflict of duties concerning current clients) and the article by Ross Perrett (see below) at pp 46-48.
The Guidelines assist practitioners in assessing whether an information barrier can be used effectively and give guidance on what measures the courts have found to be effective.
In summary, the Guideline measures are:
- established, documented protocols for maintaining information barriers;
- a compliance officer to oversee the process;
- the current client’s consent to non-disclosure of the former client’s confidential information;
- identification of all ‘screened persons’ (the persons in possession of the confidential information which is to be protected by the arrangements);
- undertakings that there will be no contact between the screened persons and those acting in the current matter;
- securing of all confidential information, paper or electronic;
- sanctions for any breach of the arrangements;
- an ongoing education program about information barriers for all staff.
The first of these measures refers to established protocols. A barrier established ad hoc to meet a particular problem rather than one which is built on established institutional arrangements is unlikely to be seen as effective by the courts. The procedures and practices underpinning information barriers must be part of the culture and organisational structure of the law practice.
An effective barrier must prevent not only deliberate disclosure of confidential information but also accidental or inadvertent dissemination, and as illustrated in Asia Pacific Telecommunications Ltd v Optus Networks Pty Ltd, even any inadvertent involvement in a matter by a ‘screened person’.
Whilst acknowledging that they are intended for all law practices, the Guidelines state, in ‘Common Questions’, that it may be extremely difficult for small practices to demonstrate compliance with the Guidelines as a question of fact, particularly the requirements to keep staff and files physically separate. In fact, it has been said in one case that it will be 'almost impossible' for a small firm to construct an effective information barrier (see Ross Perrett's article (below) p.53). Almost all of the reported cases have involved large firms.
Whether an information barrier will be effective depends on the facts of each case and ultimately is a question for the court. The Guidelines have not been endorsed by the courts, but they do refer extensively to, and are based upon, relevant case law.
The Guidelines refer to solicitors having a 'duty of loyalty' to former clients in Victoria. In his article (see below) Ross Perrett deals with this question (at p.49) and concludes, on the basis of the decision in Flanagan v Pioneer Building Society Ltd, that there is unlikely to be such a duty in Queensland.
For guidance on these issues contact the QLS Ethics and Practice Centre on 07 3842 5843 or firstname.lastname@example.org .
Further resources can be found here:
- Neil Watt, ‘Sshhh! The (Chinese) walls have ears…’ (2007) June Proctor 37.
- Ross Perrett, ‘Chinese Walls’ (2007) 2 The Verdict 46.This was published in March 2007 and so predates both the APT v Optus case, the Solicitors Rule 2007 and the current Australian Solicitors Conduct Rules 2012.
  NSWSC 350 (‘APT v Optus’).