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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Georgian American Alloys, Inc & Or v White & Case LLP & Anor [2014] EWHC 94 (Comm) (31 January 2014) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2014/94.html Cite as: [2014] EWHC 94 (Comm)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		The Rolls Building Fetter Lane London EC4 1NL
		31/01/2014

Mr Justice Field :

Introduction

1. This is an application for a permanent injunction to restrain the Defendants ("White & Case") from acting for or advising Mr Victor Mikaylovich Pinchuk in proceedings brought in the Commercial Court against Mr Igor Kolomoisky and Mr Gennadiy Bogolyubov. Originally the application was for an order restraining White & Case from advising or acting not only in the Commercial Court action but also in LCIA arbitration proceedings brought by Mr Pinchuk against Mr Kolomoisky, Mr Bogolyubov and Mikhail Iosifovich Spektor. However, on 17 December 2013 White & Case announced through their solicitors, that they would cease acting for Mr Pinchuk in the LCIA arbitration and so notified the arbitral tribunal on 18 December 2013.
2. The hearing of the application was in private to protect the confidentiality of the information that it is at the heart of the case. Upon their undertakings to keep confidential certain evidence adduced by the each side, White & Case's counsel and the members of a "Neutral Team" established within White & Case had full access to all of the evidence.
3. Mr Pinchuk was refused permission to be joined as a party but he was allowed to adduce evidence as to the impact on him if the injunction sought were granted and was permitted to make representations thereon through his counsel, Ms Dinah Rose QC, at which point the court went into open session. Save as aforesaid, Mr Pinchuk and his legal team were not permitted to attend the hearing.

The background to the application

4. Mr Pinchuk, Mr Kolomoisky and Mr Bogolyubov are all businessmen of Ukrainian origin. Mr Kolomoisky and Mr Bogolyubov are the ultimate owners of the Claimant companies and own interests in OAO PrivatBank ("PrivatBank"), a commercial bank in Ukraine, and in closed joint stock company ZAO Privat Intertrading ("Privat Intertrading").
5. The 1^st Claimant ("GAA") manufactures and supplies ferroalloys that are used in the production of iron and steel. It is a Delaware company incorporated in February 2012; its principal office is in Miami, Florida. It conducts its business through the 2^nd to 7^th Claimants of which it is the ultimate parent company. Prior to the incorporation of GAA and the restructuring of the ferroalloy businesses of which it is now the parent, the ferroalloy businesses were held by Optima Group LLC, a Delaware company, and Haftseek Investments Ltd and GM Georgian Manganese Holdings Ltd, which were two Cypriot companies. Optima Group LLC was the immediate parent company of the 2^nd Claimant ("CC Metals and Alloys"). Haftseek Investments Ltd was the immediate parent company of the 3^rd and 4^th Claimants (respectively "Felman Production" and "Felman Trading"), and GM Georgian Manganese Holdings Ltd was the immediate parent company of the 5^th and 6^th Claimants (respectively "Georgian Manganese" and "Vartsikhe").
6. The 2^nd Claimant and the 3^rd, 4^th and 7^th Claimants are companies incorporated and based in the United States. The 5^th and 6^th Claimants are Georgian entities.
7. White & Case is a large international law firm comprising a number of different entities registered in the jurisdictions in which they operate. The 1^st Defendant is a Limited Liability Partnership registered in England and Wales; the 2^nd Defendant is a Limited Liability Partnership registered in the state of New York. White and Case has offices in New York, London, Washington, Miami, Moscow and elsewhere.

The first Eastone/Pinchuk engagement

8. In September 2010, Mr David Goldberg, a White & Case partner working out of the London and Moscow offices, began providing advice to Mr Pinchuk and his management company, Eastone Group ("Eastone"), in relation to a dispute between Mr Pinchuk on the one hand and Mr Kolomoisky and Mr Bogolyubov on the other, in respect of a ferroalloy joint venture. The matter was recorded in White and Case's conflicts system at the time as follows:

We are advising the client regarding a dispute with Mr Kolomoyski [sic] and his related entities in connection with a joint venture between our client and Mr Kolomoyski [sic] and in particular concerning the suspected syfoning [sic] of profits from the joint venture businesses.

9. The alleged joint venture involved a pooling of the ferroalloy assets owned by Mr Pinchuk and Mr Kolomoisky and Mr Bogolyubov to be vested in a holding company ("the Ferroalloy Holding") on terms that Mr Kolomoisky and Mr Bogolyubov would have a 50% share therein, Mr Pinchuk a 30% share, and a third party a 20% share on the basis that the profits of the Ferroalloy Holding would be distributed between the shareholders in the same proportions as their shareholdings. The dispute arose out of Mr Pinchuk's claim that he had not been paid his share of the profits of the Ferroalloy Holding and that Mr Kolomoisky and Mr Bogolyubov had depressed the profits of the Ferroalloy Holding by siphoning off assets through related party transactions.

The Optima Engagement

10. On 20 April 2011, the General Counsel of Optima Acquisitions LLC and Optima Industrial Management LLC (together "Optima"), Mr Robert Powell, emailed Mr Colin Diamond, a partner of White & Case based in New York, enquiring whether White & Case would act in implementing a corporate restructuring under which CC Metals and Alloys, Felman Production, Felman Trading, Georgian Manganese and Vartsikhe would be brought into the ownership of a new holding company to be known as Georgian American Alloys, Inc ("GAA") which would be the subject of an IPO. In this email, Mr Powell named Mr Kolomoisky and Mr Bogolyubov as two of the ultimate owners of the businesses involved, and requested that Mr Diamond run a conflicts check to see if White and Case would be free to accept the proposed engagement ("the Optima Engagement").
11. Mr Diamond proceeded to carry out a conflict search and learned from the resulting report that Mr Goldberg was listed as having opened a matter potentially adverse to Mr Kolomoisky and Mr Bogolyubov who were parties related to his (Mr Diamond's) potential client, Optima. Mr Diamond therefore emailed Mr Goldberg on 21 April 2011 to check whether he could take on the matter for Optima. He told Mr Goldberg in this email that the firm had been approached to represent a group of companies whose ultimate shareholders included Mr Bogolyubov and Mr Kolomoisky and informed him of the result of his conflict check; he also asked to be informed of the nature of the matter opened by Mr Goldberg and whether it was still active "in order to see if we need to do anything." Attached to this email was the conflict report that had been provided to Mr Diamond. Pages 1 and 5 of that report have been provided by White & Case but not pages 2, 3 and 4. On page 1 all of the Claimants and Mr Bogolyubov and Mr Kolomoisky are listed as parties searched, together with 3 other individuals, and on page 5 is set out the entry recorded in White & Case's conflict system recorded in paragraph 8 above.
12. Mr Goldberg received Mr Diamond's email on his Blackberry on a bank holiday weekend and does not recall having accessed or read the attached report.
13. On 24 April 2011, Mr Goldberg informed Mr Diamond that the potential dispute between Mr Pinchuk/Eastone and Messrs Kolomoisky and Bogolyubov had been settled and that there would therefore be no issue in Mr Diamond undertaking the work for Optima. At the time, Mr Goldberg had not heard from Eastone or Mr Pinchuk for a number of months and believed that the dispute with Messrs Kolomoisky and Bogolyubov had gone away following a payment made in December 2010 in the sum of $150 million to Mr Pinchuk by Mr Kolomoisky. Mr Goldberg did not, however, enquire of Eastone or Mr Pinchuk or anyone else for confirmation that the dispute had indeed been settled.
14. On 24 May 2011, there was a meeting attended by Mr Powell and Mr Mordechai Korf on behalf of Optima and Mr Diamond and Messrs Brahmst and Polonsky on behalf of White and Case at which Mr Diamond confirmed that there was no conflict of interest preventing White & Case acting on the proposed restructuring and IPO. In the course of this meeting there was discussion over the possible impact of Mr Bogolyubov and Mr Kolomoisky having significant further interests in the mining sector and the need to determine whether there was substantive or potential conflict where business opportunities could be diverted.
15. Following this meeting, White & Case were engaged to work on the proposed restructuring and IPO and Mr Powell on behalf of Optima signed an engagement letter tendered by White & Case dated 22 June 2011 setting out:

...the terms of the engagement of White & Case LLP ("White & Case" or the "the Firm") to act on behalf of a new entity ("HoldCo") to be formed to hold CC Metals & Alloy, LLC, Felman Trading, Inc., Felman Production, Inc. and "Georgia Manganese" (consisting of two entities in Georgia) in connection with (1) the reorganization to create HoldCo, (2) a proposed initial public offering in the United States of HoldCo, and (3) such other services as HoldCo shall from time to time request (collectively, the "Services").

16. One of the paragraphs of the letter stated:

We represent a large number of clients in many offices throughout the world. It is possible that during the course of this or any other representation by us, other clients or new clients may seek to assert or protect interests which are adverse to or different from yours. These may constitute conflicts of interest which could prevent or otherwise inhibit our ability to represent those clients or new clients or you. Given that possibility and in order to be fair to those others and you, as a condition to our undertaking this representation, it is agreed that we may continue to represent or undertake to represent existing or new clients even if those clients' interests are directly adverse to or different from yours or your affiliates, related entities or persons, including litigation or arbitration and any other related matter regardless of its magnitude or other importance. No attorney or staff member working on this engagement shall be involved in such an adverse representation.

17. Realistically, it has not been contended on behalf of White & Case that the waiver contained in this paragraph would defeat the Claimants' application for an injunction if, as a matter of English law, the Claimants would otherwise be entitled to the relief they seek.
18. The work done by White & Case pursuant to the letter of engagement was carried out from May 2011 to May 2013, most of it being done in the period May to September 2011. The work done in 2012 was concerned with the reorganisation of the various companies that would become subsidiaries of the 1^st Claimant, work on the IPO having ceased in October 2011. Between May and August of 2012 work was done in relation to an antitrust filing in respect of the corporate reorganisation that was made on 20 August 2012. The pace of the work then slowed down in the period up to April 2013, this work being in relation to the various corporate reorganisations which turned out to be more protracted than had been expected. (During the course of 2012 the proposed structure was changed on several occasions as a result of advice given by KPMG).
19. The fees earned by White & Case on the Optima Engagement totalled $903,433.61.
20. In the course of the engagement, particularly in 2011, White & Case carried out far-reaching investigations into GAA and its ferroalloy businesses and thereby became privy to a substantial amount of information concerning the identity of the Claimants' assets, their location and the identity and structure of the corporate vehicles used to hold such assets. In particular, White & Case conducted extensive due diligence, undertaking all the necessary corporate formalities associated with the formation of GAA, including an extensive investigation into related party transactions, amongst which were transactions to which companies controlled by Mr Bogolyubov and Mr Kolomoisky were parties, including OAO Nikopol Ferroalloys Plant ("Nikopol").
21. From 30 June 2011, White & Case was granted access to a data-room maintained by MerrillCorp which contained hundreds of documents relating to the Claimants and around June 2011 White & Case also established a file transfer protocol ("FTP") site which uploaded all of the due diligence files it received relating to Georgian matters.
22. As part of the Optima Engagement, White & Case drafted a Form S-1 for GAA which it was intended should be filed to enable GAA to register its securities with the United States Securities & Exchange Commission ("SEC"). The draft Form S-1 contained a significant amount of information and data about GAA and its ferroalloy subsidiaries, including information about the 'risk factors' affecting GAA's operations, related party transactions, tax issues for owners, and the company's future business strategies. In order to draft this document, White & Case reviewed privileged communications, detailed financial and accounting documentation, related-party transactions and agreements for the procurement of raw materials. White & Case also reviewed reports prepared by Price Waterhouse Coopers, liaised with KPMG in relation to the Georgian Manganese acquisition and scrutinised valuation reports.
23. White & Case lawyers also attended site visits and conducted confidential interviews with local management teams of GAA and its subsidiaries, including local plant managers, plant controllers, production managers and internal sales advisors. These interviews gave White & Case further detailed knowledge of the workings of the Claimants' businesses.
24. GAA was incorporated on 14 February 2012, but the IPO was postponed to allow GAA to explore alternative financial options and the draft Form S-1 was never filed. Georgian Manganese and Vartsikhe became part of GAA in April 2013 and White & Case continued to work on matters relating to the structuring of the Georgian operations into May 2013, including attending to shareholder and board resolutions, tax matters and transfer pricing studies.

Further instructions from Eastone and Mr Pinchuk

25. Meanwhile, in May 2012, pursuant to instructions then received from Eastone and Mr Pinchuk, Mr Goldberg and the White & Case "Pinchuk Team", who were largely based in London and Moscow began evaluating potential claims against Mr Bogolyubov and Mr Kolomoisky. Surprisingly, Mr Goldberg carried out no further conflicts check at this time. I say "surprisingly" because it is a fair inference that Mr Goldberg must have appreciated that White & Case might have won the Optima Engagement that was being pitched for when he was asked by Mr Diamond in April 2011 if there would be a conflict if White & Case acted on the Optima Engagement.
26. In June 2012, the Pinchuk team began work on identifying the assets of Mr Bogolyubov and Mr Kolomoisky and in November 2012 it was decided that there was a potential claim against Mr Bogolyubov and Mr Kolomoisky and that the appropriate claimant was Mr Pinchuk, rather than a corporate entity. At this latter point in time, Mr Goldberg carried out a conflicts search as part of the process of opening a new matter in the name of Mr Pinchuk which resulted in the identification of Messrs Kolomoisky and Bogolyubov as interested parties in the Optima matter. There followed an internal discussion with White & Case's General Counsel, Mr Philip Schaeffer, and the decision was reached that the Optima Engagement posed no conflict of interest problem if Mr. Goldberg undertook the representation of Eastone/Mr. Pinchuk in claims against Mr Bogolyubov and Mr Kolomoisky. Mr Goldberg and the Pinchuk Team accordingly continued to prepare to issue proceedings against Messrs Kolomoisky and Bogolyubov. The reasons for this decision that there was no conflict of interest have not been disclosed to the Court and I am bound to say that I find it hard to see any good justification for it.

The establishment of "ethical screens" between the Pinchuk Team and the Optima Team

27. At the beginning of March 2013, as the Pinchuk Team was preparing to issue proceedings on Mr Pinchuk's behalf, further internal discussions took place with White & Case's General Counsel as a result of which he decided that formal "ethical screens" should be established between White & Case's representation of Optima and its representation of Mr Pinchuk. These "ethical screens" were put in place by the White & Case's conflicts team on 13 March 2013 and comprised a "screen" between White & Case's representation of Optima and its representation of Eastone/Mr Pinchuk and a "screen" between White & Case's representation of Optima and its representation of Mr Pinchuk. "Ethical screens" are designed to separate White & Case's representation of one client from its representation of another client and to ensure that, if a member of White & Case's legal or support staff works for a client on one side of a screen, that individual is not able to work for or access information relating to a client on the other side of that screen.
28. White & Case's ethical screens are policed and monitored by a global compliance team of more than 30 individuals reporting directly to the General Counsel's office. This team makes use of industry-standard software known as IntApp Wallbuilder which is integrated with White & Case's electronic document management and time recording systems with a view to ensuring that if an individual at White & Case accesses a document relating to a client or works on a client's matter, that individual will automatically be added to the relevant side of any ethical screen in respect of that client. The software is also integrated with White & Case's personnel management systems to ensure that, if a lawyer is added to a particular ethical screen, his or her secretary will also be added to that screen.
29. All individuals added to the ethical screens received an email notification informing them of the clients affected by the screen, the individuals on the relevant client teams and of White & Case's Ethical Screen Procedures and Guidelines (the "Policy"). Training is provided globally to relevant members of White & Case's legal and support staff informing them of the Policy and notifying them that severe disciplinary sanctions apply to any breach of an ethical screen.
30. Once an individual has been added to an ethical screen, he or she is automatically prevented by the screening software from accessing any documents on White & Case's electronic document management system that are associated with a client on the other side of the screen. Additionally, individuals on one side of an ethical screen cannot record time in White & Case's time recording system in relation to clients on the other side of the screen. The screening software is also integrated with White & Case's system used to manage its physical archives so that individuals on one side of an ethical screen cannot access archived documents that relate to the client on the other side of that ethical screen.
31. In respect of physical files held at individuals' desks, the Policy informs such individuals that: "Staff who maintain active files at their desk or office are responsible for securing those files, clearly marking them as confidential and noting the restricted staffing on those files."
32. If a potential breach occurs (for instance, if an individual attempts to access a document on a matter from which they are screened) a notification email is automatically sent to the team charged with managing White & Case's ethical screens in order for further investigation to be carried out. There has been no notification of any breach of either of the ethical screens erected on 13 March 2013.
33. The Policy stipulates that if ethical screens are established, both clients should be notified unless White & Case's General Counsel rules otherwise. No notice of the establishment of ethical screens was given to the Claimants. There is no evidence whether White & Case's General Counsel advised that no such notice should be given or, if he did so advise, his reasons therefor. For myself, I can see no good reason for not notifying Mr Pinchuk and the Optima companies that ethical screens had been put in place.

The Commercial Court Action

34. On 12 March 2013, Particulars of Claim in proceedings in this Court were served on Mr Bogolyubov and Mr Kolomoisky. In this pleading, Mr Pinchuk claims that there was an oral agreement made in Yalta in July 2004 between himself and Mr Bogolyubov and Mr Kolomoisky that he would provide the funding for the acquisition by them of a 93.07% stake in the shareholding of KZhRK, a Ukrainian mining company, to be held by them on his behalf until its transfer to him, and further that in pursuance of this agreement Mr Kolomoisky and Mr Bogolyubov acquired such a stake in KZhRK but in breach of the agreement have refused to transfer it to Mr Pinchuk having since March 2005 exercised exclusive control over KZhRK.
35. Mr Pinchuk also claims that in Geneva in September 2006 he, Mr Bogolyubov and Mr Kolomoisky, and Messrs Voevodin, Spektor and Babakov (together "the Third Party") entered into an agreement (called "the Constitution") under which the first three parties would merge their respective ferroalloy interests to be held by "the Ferroalloy Holding" which would be owned as to 50% by Mr Pinchuk, as to 30% by Mr Bogolyubov and Mr Kolomoisky, and as to the remaining 20%, by the Third Party. Included in the ferroalloy assets agreed to be contributed by Mr Bogolyubov and Mr Kolomoisky was a 25.6% stake in Nikopol and the assets agreed to be contributed by Mr Pinchuk included a 22.9 % stake in Nikopol and 100% of a company which owned a 50% + 1 share stake in Nikopol.
36. Mr Pinchuk further alleges that it was agreed as part of the Constitution that: (1) each of the parties would enter into a Shareholders' Agreement with respect to their joint participation in the Ferroalloy Holding including the payment of dividends; (2) there would be a reckoning of mutual debts including, inter alia, sums arising from Mr Pinchuk's obligation regarding dividends for Mr Bogolyubov's and Mr Kolomoisky's 25.6% stake in Nikopol for the period from January 2003 to April 2006 and sums arising from Mr Bogolyubov's and Mr Kolomoisky's obligation regarding dividends from Nikopol's activities from 15 April 2006 to the commencement of dividend distribution by the Ferroalloy Holding, with the balance due on such a reckoning to be paid within 10 days of the conclusion of the reckoning; (3) if the reckoning disclosed that Mr Pinchuk was not indebted to Mr Bogolyubov and Mr Kolomoisky, or if any balance due from Mr Pinchuk, was settled within 15 days, Mr Bogolyubov and Mr Kolomoisky were to transfer legal title to the shares they held in KZhRK.
37. Mr Pinchuk pleads various acts of part performance of the Constitution including the conclusion by the parties of a "Beneficiaries Agreement" which defined more specifically the terms of their joint participation in the Ferroalloy Holding. Mr Pinchuk further pleads that Mr Bogolyubov and Mr Kolomoisky have acted in breach of the Constitution and the Beneficiaries Agreement but only claims in the instant Commercial Court proceedings in respect of breaches of the former agreement on the basis that the parties' rights under the Beneficiaries Agreement are subject to an agreement to arbitrate in accordance with the rules of the LCIA.
38. The breaches of the Constitution alleged by Mr Pinchuk include: (i) failure to quantify or pay over revenues due in respect of KZhRK; and (ii) failure to co-operate and do all things necessary to ensure that the reckoning of mutual debts was completed within a reasonable time thereby preventing the satisfaction of the condition precedent to Mr Pinchuk's entitlement to have the shares in KZhRK transferred to him. Mr Pinchuk also asserts a breach of trust claim alleging that Mr Bogolyubov and Mr Kolomoisky held the shares in KZhRK on trust and have acted in breach thereof in failing to transfer the shares to him and in transferring 50% of the shares to a Mr Akhmetov.
39. The relief claimed by Mr Pinchuk primarily relates to his claim in trust in respect of the KZhRK shares, but it includes a claim for a declaration as to what sums are payable as between him and Mr Bogolyubov and Mr Kolomoisky pursuant to the agreement that there be a reckoning of mutual debts, including the entitlement to dividends generated by the activities of Nikopol.
40. In their Defences both Mr Bogolyubov and Mr Kolomoisky deny the alleged Constitution Agreement contending that no agreement was concluded on 4 September 2006 regarding the creation of the Ferroalloy Holding or the transfer of shares in KZhRK to Mr Pinchuk. Mr Kolomoisky also alleges in paragraph 50 (f) (viii) of his Defence that Mr Pinchuk procured that companies owned or controlled by Mr Pinchuk contracted with Nikopol using arrangements to divert profits from Nikopol to those companies by procuring that such companies sold services and goods to Nikopol at a premium to their true value, or bought goods from Nikopol at a discounted price.

The LCIA proceedings

41. On 2 August 2013, a Request for Arbitration brought by Mr Pinchuk was served on Mr Bogolyubov and Mr Kolomoisky and Mr Spector. This pleading sets out the background and lead up to the Beneficiaries Agreement, including the agreement to merge the parties' ferroalloy assets pleaded in the Commercial Court action, and pleads that the Respondents are in breach of the Beneficiaries Agreement in that Mr Bogolyubov and Mr Kolomoisky have acquired ferroalloy assets (including assets held by them through Georgian Manganese) without offering Mr Pinchuk the chance to participate therein. Mr Pinchuk also asserts that: (i) the effect of an oral agreement made by Mr Bogolyubov and Mr Kolomoisky in October and November 2006 ("the Profit Sharing Covenant") was that they would procure that Mr Pinchuk was paid an annual sum equivalent to his share (50%) of the Free Cash Flow of the Ferroalloy Holding that would have been available for distribution but for any self-dealing transactions or other transactions by which the profits of the Ferroalloy Holding were depressed, appropriated or diverted to the benefit of Mr Bogolyubov and Mr Kolomoisky; and (ii) in breach of this oral agreement Mr Bogolyubov and Mr Kolomoisky have misappropriated the profits of the Ferroalloy Holding through self-dealing transactions, inter alia, by procuring entities within the Ferroalloy Holding, including GAA and its subsidiaries (including Felman Production, Felman Trading and Georgian Manganese) to buy raw materials at above-market prices and/or to sell products at below-market prices in non arm's-length transactions.
42. It appears that the amounts in dispute in the Commercial Court action and the LCIA arbitration total not less than US $2 billion.

The 1782 Application in Miami

43. On 9 August 2013, Mr Pinchuk issued ex parte applications in the US District Court, Southern District of Florida, against the 1^st, 2^nd, 3^rd and 4^th Claimants, together with the 1^st Claimant's president, Mr Mordechai Korf, under 28 U.S.C. §1782 (the "1782 Application") to obtain documents and information relevant to the proceedings in the LCIA Arbitration.
44. The 1782 Application was filed on behalf of Mr Pinchuk by Kenny Nachwalter PA, a Miami-based law firm acting for Mr Pinchuk, although two individuals on the Pinchuk Team in White & Case's New York office had some involvement in the preparation of the application. Kenny Nachwalter PA was instructed in light of the establishment of ethical screens between the Pinchuk and Optima teams.
45. The information sought in the 1782 Application from each of GAA, Felman Production, Felman Trading, and CC Metals and Alloys consisted of a large amount of corporate information including board minutes, organisational charts, financial statements, sales and purchase ledgers, valuations, and trading and distribution records.
46. The evidence adduced to this court by White & Case in support of its opposition to the Claimants' injunction consists principally of witness statements giving hearsay evidence made by Mr Jason Yardley, a partner in the London office, and who was not involved in either the Eastone/Pinchuk Engagement or the Optima Engagement who has headed a "Neutral Team" tasked with investigating the Claimants' allegations of conflict of interest. In his first witness statement, Mr Yardley states that he is, "able to confirm by speaking to Mr Goldberg and others involved in the 1782 Application that the [1782] application was not triggered by, or in any respect based upon any information supplied by the Optima Team" but upon publicly available information obtained from numerous databases.
47. On 20 September 2013, the 1782 Application was granted by the Florida Court and an order for discovery was granted against the respondents to the application. The order was served on the 1^st, 3^rd and 4^th Claimants on 24 September 2013 and on the 2^nd Claimant on 25 September 2013. Since then, following the filing of a number of motions, the order has been stayed pending further consideration by the LCIA tribunal, which tribunal has concluded that it does not presently seek the assistance of the US courts on the basis that the Claimants will give control of the documents sought to Mr Bogolyubov and Mr Kolomoisky so that they will be discoverable in the LCIA proceedings if the tribunal so orders.

The Claimants demand that White & Case cease to act for Mr Pinchuk

48. Upon GAA being served with the order granting the 1782 Application and the associated subpoena, Mr Powell (who it will be remembered is General Counsel for the 1^st to 4^th Claimants) was concerned to learn that White & Case was acting for Mr Pinchuk because the 1782 Application was seeking detailed financial and business information about GAA and its subsidiaries which was the type of information which White & Case had obtained during the course of the Optima Engagement.
49. On 18 October 2013, Mr Powell wrote to various White & Case partnerships outlining his concerns as to the protection of GAA's confidential information, asking for a detailed account of the nature of any information barriers erected, and demanding that White & Case cease to act for Mr Pinchuk in both the Commercial Court and LCIA proceedings.
50. Mr Powell's letter elicited a reply on 21 October 2013 from Mr Goldberg in which he stated that he "was confident that no conflict of interest exists as a matter of fact or law" and that White & Case's General Counsel would respond in greater detail.
51. By letter dated 24 October 2013, White & Case's General Counsel, Mr Schaeffer, implied that Mr Powell had raised a "frivolous issue" and stated White & Case had reviewed Mr Powell's concerns and would not withdraw from the Commercial Court proceedings. He further stated that "no confidences, secrets or other confidential information relevant to the proceeding has been disclosed to [White & Case] by reason of its former representation of Optima and its affiliates". Mr Schaeffer made no mention of the LCIA arbitration in this letter.
52. Correspondence then ensued between the Claimants' London solicitors, Enyo Law, and White & Case and on 6 November 2013 White & Case informed Enyo Law that all correspondence should be addressed to Mr Goldberg.
53. On 10 November 2013, Enyo Law received a letter from Mr Yardley stating that he had been appointed to investigate the Claimants' allegations and that all future correspondence should be addressed to him and not to Mr Goldberg. Three days later, on 13 November 2013, the Claimants issued the proceedings now before the court seeking an injunction restraining White & Case from acting in both the Commercial Court and the LCIA proceedings.

The Neutral Team's investigations

54. The Neutral Team consists of Mr Yardley, White & Case's General Counsel and Deputy General Counsel, respectively Mr Schaeffer and Ms Julia Walker, and three lawyers, Messrs Rory Hishon, David Hunt and (later), Charles Balmain (a partner), none of whom has been involved in either the Optima Engagement or the Eastone/Pinchuk engagement.
55. All new documents created (or external documents received) and stored on White and Case's document system, rather than locally on a PC or laptop, are given an electronic profile which includes the client number. Each time a document is accessed, opened or printed, its metadata is altered and it is possible to review the details of such access. The Neutral Team caused a review to be carried out of every document stored on White & Case's electronic document system under the Optima client number, amounting to 382 documents. This showed that no document saved on White and Case's document system under the Optima client number has been accessed, opened or printed by any member of the Pinchuk Team. While this would not cover documents stored locally on a PC or laptop, Mr Yardley states that it is not possible for someone other than the user of the PC or laptop to access the documents without the user's consent.
56. Mr Yardley has also been informed by White & Case's IT Department that no-one has accessed the FTP Site since 12 September 2011 and that that site has now been shut down. In addition, White & Case's Records Department has confirmed that none of the hard copy files relating to Optima in the firm's physical archives have been accessed since being archived. These files were archived in stages between 2011 and March 2013.
57. Members of the Neutral Team have also interviewed every individual -- both lawyers and support staff (totalling 129 people of whom 73 were lawyers) -- who is shown on the Firm's time recording and/or conflicts management systems as at 15 November 2013 as having done any work at all for Mr Pinchuk or Eastone and who is still at White & Case, or who has left White & Case and could still be contacted. Nineteen members of the team who had left the firm could not be contacted, of whom one had billed more than 30 hours in relation to Pinchuk matters, all of which was in connection with an unrelated employment matter. Save for the information provided by Mr Diamond to Mr Goldberg on 21 April 2011^[1], all of the individuals interviewed confirmed that: (i) they have not discussed any aspect of White & Case's representation of Optima with any member of the Optima Team; (ii) they have not obtained or accessed any documents or information provided to White & Case during its representation of Optima or created by the Optima Team in relation to that representation; and (iii) they are unaware of the nature of White & Case's representation of Optima or, prior to being informed that they had been added to the relevant ethical screen, that White & Case represented Optima at all.
58. Mr Diamond also states in his witness statement that at no time has he, nor, so far as he is aware, has any other members of his team, communicated any information regarding the Optima Engagement to Mr Goldberg or any other members of the Pinchuk Team.
59. White & Case adduced no evidence directly from Mr Goldberg but Mr Yardley testifies that both Mr Goldberg and Mr Diamond have informed him that Mr Goldberg was not aware of the detailed nature of the work undertaken by Mr Diamond for the Optima Engagement or of any information that was provided by Optima to White & Case in the course of that representation other than the information which was supplied by Mr Diamond to enable a conflict search to take place.
60. Mr Yardley further states that the Optima Team consisted of 89 individuals including 50 lawyers from White & Case's corporate, capital markets, tax, M&A, antitrust, employment and environment practice groups in New York (37 lawyers) and Washington DC (9 lawyers). A small amount of work was also done by two lawyers from the Brussels office (0.4 and 0.5 hours).
61. So far as concerns the Pinchuk Team, Mr Yardley deposes that 149 individuals (88 lawyers and 61 secretarial or other support staff) worked for either Mr Pinchuk or Eastone. Of the 88 lawyers, 55 work or worked in the London office and further 21 were based in the Moscow office. The remaining 12 lawyers worked in New York (4); Washington (1); Miami (1); Paris (2); Singapore (2); Hong Kong (2).
62. As to the 4 Pinchuk Team lawyers in New York (where the Optima Team was largely based) the position is as follows. One junior associate who sits on the 14^th floor had billed 216.9 hours in relation to the Pinchuk matter having started work on this engagement on 5 September 2012 when he was involved in obtaining information from dockets and other public sources. He was not aware, before the ethical screens were established, that White & Case represented Optima. Since May 2013 he has been more heavily involved in assisting in relation to various applications relating to the 1728 Application. A partner on the 22^nd floor has billed 88.2 hours in relation to overseeing the 1782 Application starting on 9 May 2013 after the implementation of the ethical screens. A junior associate on the 22^nd floor has since 1 November 2013 been researching discrete questions on New York law raised in the context of the 1782 Application as a consequence of this application for an injunction and so far has billed 37.4 hours. Lastly, a member of the Employment Group on the 24^th floor (the other 3 lawyers belong to the Commercial Litigation Group) has assisted the Pinchuk Team in relation to a minor discrete query, billing a total of 1.2 hours; he left White & Case on 4 November 2013.
63. The members of legal staff involved in the Optima Engagement sit on different floors of the New York office to those occupied by the three members of the Commercial Litigation Group involved on the Pinchuk matter. The only members of legal staff in the Optima Team in New York who have worked in the same office and department as members of the Pinchuk Team are those who formerly worked in the Commercial Litigation group (but have now left the firm).
64. All members of the Pinchuk Team (including the fee-earners in New York) have further confirmed that: (i) they were not aware, before being added to the ethical screens, that White & Case represented Optima; and (ii) they did not discuss any aspect of White & Case's representation of Optima (or any information obtained as a result of that representation) with the 3 members of the New York Commercial Litigation group who worked on the Optima representation (all of whom have since left White & Case) or any other members of the Optima Team. As to these 3 former members of the Litigation Group: (i) one who sat on a floor (26^th) not occupied by anyone on the Pinchuk Team billed 1.4 hours between 23 and 31 May 2012 in respect of advice on a discrete issue of whether privilege could be retained in certain tax advice; he left White & Case on 7 September 2012; (ii) another, who also sat on the 26^th floor, billed 16.3 hours for work between 10 and 13 June 2010 reviewing a pollution insurance contract and preparing a memorandum in relation to that contract; he left the firm on 31 October 2011 and appears not to have taken any wider role in the representation of Optima or to have had the opportunity to gain any additional information; (iii) Ms Katherine Tyurin, a Russian speaking paralegal providing general legal assistance to the Commercial Litigation group in relation to routine document management tasks, spent 20 hours between 28 June 2011 and 29 September 2011 working on the Optima matter on the 14^th and later the 22^nd floors; she left on 27 July 2012; her involvement appears to have been focused upon identifying and uploading documents onto the FTP Site for review by the Georgian lawyers.
65. One member of legal staff in the Washington office, a counsel in the Washington Antitrust Group, has billed 2.3 hours work on the Pinchuk matter providing discrete advice in relation to a limited question of public law between 15 August 2013 and 1 October 2013.
66. In the Miami office, one individual has been added to the Eastone side of the ethical screen between Eastone and Optima but he did not record any time in relation to White & Case's representation of Eastone and left White & Case on 18 November 2010, before White & Case began to represent Optima. The only individual in the Miami office on the Optima side of the ethical screens works in the Miami Corporate group; she recorded 1.6 hours of time on 12 May 2011 in relation to preparing closing binders.

The applicable law: Bolkiah v KPMG

67. The principles to be applied where the court is asked to grant an injunction against solicitors or other professional agents to restrain them from acting in a matter on the ground that otherwise there would be risk of the unauthorised use of confidential information were authoritatively stated by Lord Millet in Bolkiah v KPMG^[2] in a speech with which the other members of the House agreed. I think it instructive to rehearse the facts of this case in a little detail, and in doing so I draw on Lord Millet's speech at pp. 228- 232.
68. KPMG had been the auditors of the Brunei Investment Authority ("the BIA") since 1983. Over the years, numerous large transfers of capital were made out of the BIA's core funds and KPMG were required to accept an annual representation from the Board of the BIA (of which, the appellant, Prince Jefri, was chairman) that the transfers were made on behalf of or for the benefit of the Brunei Government. During a period of 18 months between 1996 and 1998 KPMG were also retained on behalf of Prince Jefri to undertake an investigation in connection with litigation in which he was a party. The investigation ("Project Lucy") was principally conducted by KPMG's London forensic accounting department, in the course of which, inter alia, they took instructions and obtained information directly from Prince Jefri's own staff.
69.  In the course of acting for Prince Jefri, KPMG acquired extensive confidential information concerning the prince's assets and financial affairs, particularly information concerning the identity of his assets, their location, the legal structure of their ownership, the identity and structure of corporate and other vehicles used by Prince Jefri to hold assets, and the manner and financing of their purchase. Altogether 168 KPMG personnel, 12 of whom were partners and 81 of whom were assistant managers or above, worked on assignments for Prince Jefri between 1996 and 1998.
70. In January 1997, the Project Lucy team began working from a separate area within the forensic accounting department and, after July 1997, it was housed on a separate floor with restricted access. Team members were told that the work was exceptionally confidential and should not be discussed outside the team; they were also forbidden to take work home.
71. The work done by KPMG concerning Prince Jefri finished by the middle of May 1998.  In July 1998 KPMG accepted an engagement on behalf of the Government of Brunei to investigate the destination and the present location of the money which had been the subject of the special transfers out of the BIA's core funds, an engagement that was adverse to Prince Jefri's interests. At least some of the confidential information obtained by KPMG whilst acting for Prince Jefri was or might have been relevant to the engagement accepted in July 1998 ("Project Gemma"). KPMG employed 50 people on Project Gemma, 11 of whom had previously been engaged on work for Prince Jefri.
72. When KPMG accepted instructions in relation to Project Gemma, steps were taken designed to ensure that the staff assigned to this project did not possess confidential information relating to Prince Jefri. Most of the work was done in Brunei, with the work done in London being undertaken in a separate project room with restricted access in a building separate from that used by the forensic accounting department. The documents relating to the Prince Jefri assignment were in the possession of KPMG's solicitors and were thus not available to those working on Project Gemma. Also, separate computer file servers were used for Project Gemma and all electronic information relating to the Prince Jefri engagement was deleted from KPMG's servers.
73. In addition, all Project Gemma staff were interviewed by KPMG's solicitors and confirmed on affidavit that they were not in possession of confidential information acquired from Prince Jefri whether in the course of Project Lucy or otherwise. 146 individuals who had worked on Project Lucy were also contacted and confirmed that they had not discussed confidential matters outside the team. 23 could not be traced because they had left KPMG's employment.
74. Lord Millett's formulation of the applicable legal principles is well known. He said at pp. 235 -238:

[It] is incumbent on a plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish (i) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented and (ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own. Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious…

Whether founded on contract or equity, the duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so. Moreover, it is not merely a duty not to communicate the information to a third party. It is a duty not to misuse it, that is to say, without the consent of the former client to make any use of it or to cause any use to be made of it by others otherwise than for his benefit. The former client cannot be protected completely from accidental or inadvertent disclosure. But he is entitled to prevent his former solicitor from exposing him to any avoidable risk; and this includes the increased risk of the use of the information to his prejudice arising from the acceptance of instructions to act for another client with an adverse interest in a matter to which the information is or may be relevant.

Degree of risk

It is … difficult to discern any justification in principle for a rule which exposes a former client without his consent to any avoidable risk, however slight, that information which he has imparted in confidence in the course of a fiduciary relationship may come into the possession of a third party and be used to his disadvantage. Where in addition the information in question is not only confidential but also privileged, the case for a strict approach is unanswerable. Anything less fails to give effect to the policy on which legal professional privilege is based. It is of overriding importance for the proper administration of justice that a client should be able to have complete confidence that what he tells his lawyer will remain secret. This is a matter of perception as well as substance. It is of the highest importance to the administration of justice that a solicitor or other person in possession of confidential and privileged information should not act in any way that might appear to put that information at risk of coming into the hands of someone with an adverse interest. … Many different tests have been proposed in the authorities. These include the avoidance of "an appreciable risk" or "an acceptable risk." I regard such expressions as unhelpful: the former because it is ambiguous, the latter because it is uninformative. I prefer simply to say that the court should intervene unless it is satisfied that there is no risk of disclosure. It goes without saying that the risk must be a real one, and not merely fanciful or theoretical. But it need not be substantial. This is in effect the test formulated by Lightman J. in Re a Firm of Solicitors [1997] Ch. 1, at p. 9 (possibly derived from the judgment of Drummond J. in Carindale Country Club Estate Pty. Ltd. v. Astill (1993) 115 A.L.R. 112) and adopted by Pumfrey J. in the present case. I would also reject the approach taken by the New Zealand Court of Appeal in Russell McVeagh McKenzie Bartleet v. Tower Corporation and adopted by the Court of Appeal in the present case… In my view no solicitor should, without the consent of his former client, accept instructions unless, viewed objectively, his doing so will not increase the risk that information which is confidential to the former client may come into the possession of a party with an adverse interest.

Once the former client has established that the defendant firm is in possession of information which was imparted in confidence and that the firm is proposing to act for another party with an interest adverse to his in a matter to which the information is or may be relevant, the evidential burden shifts to the defendant firm to show that even so there is no risk that the information will come into the possession of those now acting for the other party. There is no rule of law that Chinese Walls or other arrangements of a similar kind are insufficient to eliminate the risk. But the starting point must be that, unless special measures are taken, information moves within a firm. In MacDonald Estates v. Martin 77 D.L.R. (4th) 249, Sopinka J. said at p. 269 that the court should restrain the firm from acting for the second client "unless satisfied on the basis of clear and convincing evidence that all reasonable measures have been taken to ensure that no disclosure will occur." With the substitution of the word "effective" for the words "all reasonable" I would respectfully adopt that formulation.

75. On the subject of "Chinese Walls", Lord Millet said:

Even in the financial services industry, good practice requires there to be established institutional arrangements designed to prevent the flow of information between separate departments. Where effective arrangements are in place, they produce a modern equivalent of the circumstances which prevailed in Rakusen's case [1912] 1 Ch 831^[3]. The Chinese Walls which feature in the present case, however, were established ad hoc and were erected within a single department. When the number of personnel involved is taken into account, together with the fact that the teams engaged on Project Lucy and Project Gemma each had a rotating membership, involving far more personnel than were working on the project at any one time, so that individuals may have joined from and returned to other projects, the difficulty of enforcing confidentiality or preventing the unwitting disclosure of information is very great. It is one thing, for example, to separate the insolvency, audit, taxation and forensic departments from one another and erect Chinese Walls between them. Such departments often work from different offices and there may be relatively little movement of personnel between them. But it is quite another to attempt to place an information barrier between members all of whom are drawn from the same department and have been accustomed to work with each other. I would expect this to be particularly difficult where the department concerned is engaged in the provision of litigation support services, and there is evidence to confirm this. Forensic accountancy is said to be an area in which new and unusual problems frequently arise and partners and managers are accustomed to share information and expertise. Furthermore, there is evidence that physical segregation is not necessarily adequate, especially where it is erected within a single department.

    In my opinion an effective Chinese Wall needs to be an established part of the organisational structure of the firm, not created ad hoc and dependent on the acceptance of evidence sworn for the purpose by members of staff engaged on the relevant work.

76. The House of Lords concluded that KPMG had not discharged the heavy burden of showing that there was no risk that information confidential to Prince Jefri may unwittingly or inadvertently come to the notice of those working on Project Gemma.
77. On Mr Pinchuk's behalf, Ms Rose QC submitted that the grant of an injunction was a discretionary remedy and that it behoved the court to take account of the impact on Mr Pinchuk if an injunction were granted disqualifying White & Case from acting for Mr Pinchuk in the Commercial Court action. Ms Rose relied on the evidence of Mr Pinchuk that he would be gravely prejudiced if an injunction restraining White & Case from acting for him in both the Commercial Court action and the LCIA arbitration were granted, particularly in the former. White & Case were the solicitors of Mr Pinchuk's choice and he had developed a very close relationship with them, especially Mr Goldberg, who was a Russian speaker. White & Case also had numerous Russian speakers to assist on a case where the language of the documents and the individuals involved was Russian. If White & Case were disqualified from acting for him, Mr Pinchuk would have great difficulty in finding another firm with a London office with the necessary expertise and Russian speakers; and, in addition to incurring very substantial additional costs, the determination of his claims would be seriously delayed. A search conducted by Mr Pinchuk's solicitors for possible unconflicted London firms to replace White & Case revealed that in London there was one firm with a similar ranking to White & Case which had one Russian speaker in the relevant department and 4 other firms with commercial practices who had one Russian speaker (a partner) in the disputes resolution department. The injunction sought does not extend to counsel retained in the Commercial Court action and Ms Rose accepted that alternative representation was available in London for Mr Pinchuk and that it was not essential for her client to have the benefit of the full range of skills offered by White & Case. Nonetheless, the prejudice to Mr Pinchuk was such that the court ought to consider very carefully whether it would be proportionate to disqualify White & Case from acting in the Commercial Court proceedings when at the same time the firm was to cease to act for him in the LCIA arbitration.
78. It is trite law that a final injunction is a discretionary remedy, but it does not follow that the court must weigh the interests of the other client against the interests of the client who has otherwise satisfied the requirements for the grant of an injunction against his former solicitors to protect his confidential information. Instead, the discretion must be exercised in accordance with established principles and it is clear from Lord Millet's disapproval of the balancing exercise undertaken by the New Zealand Court of Appeal in Russell McVeagh McKenzie Bartleet & Co v Tower Corporation [1998] 3 NZLR 641 that the impact of the claimed injunction on Mr Pinchuk is not a relevant consideration when deciding whether to grant the Claimants' application.

The application of the Bolkiah principles to the instant case

79. In my judgement, the information imparted to White & Case relating to: (i) Mr Bogolyubov's and Mr Kolomoisky's assets -- where and how they are held, including the identity and structure of the corporate vehicles used to hold such assets; (ii) Mr Bogolyubov's and Mr Kolomoisky's interests in the Optima entities to be re-structured and other entities in the mining sector; (iii) Mr Bogolyubov's and Mr Kolomoisky's interests in entities, including Nikopol, that were related parties quoad the Optima corporate group; and (iv) the terms of related party transactions, including those involving Nikopol, is all confidential information which White & Case was under a duty not to disclose.
80. It was not seriously contended at the hearing that the information identified in paragraph 79 above is not confidential information; nor could it have been. Nor is it in dispute that the Claimants have not consented to the disclosure of the information. However, Mr Thanki QC for White & Case submitted that the Claimants' application must fail because Lord Millet's statement of principle was concerned with confidential information of a client which might be relevant to a matter in which the interests of another client are adverse to his own and here it cannot be said that the Claimants (who were White & Case's clients on the Optima Engagement)^[4] have an interest in the Commercial Court action since they are not parties thereto. Instead, the parties sued in that action by Mr Pinchuk are Mr Bogolyubov and Mr Kolomoisky and these are legally separate from the Claimants and have their own distinct interests.
81. I do not accept this submission. The Bolkiah test is satisfied if, inter alia, the interest of the other client in the new matter is, or may be, adverse to the client seeking the injunction, and the burden of proof on the claimant is not a heavy one. Thus, bearing in mind that the duty on White & Case was an unqualified one to keep the information confidential and not, without the consent of the Claimants, to make any use of it or to cause any use to be made of it by others otherwise than for the Claimants' benefit, I conclude that the Claimants' interests are adversely affected for the purposes of the Bolkiah test by reason of their joint majority shareholders being adversely affected by the action. If this approach be wrong, I would hold that White & Case owed to Mr Bogolyubov and Mr Kolomoisky the same duty to keep the information identified in paragraph 79 confidential as they owed to the Claimants and that, for the purposes of the Bolkiah principles, Mr Bogolyubov and Mr Kolomoisky are to be treated as White & Case's clients on the Optima Engagement together with the Claimants.
82. Mr Thanki also submitted that the confidential information in issue was not sufficiently relevant to the Commercial Court action to satisfy the Bolkiah test. He argued that since the Commercial Court proceedings were almost wholly concerned with Mr Pinchuk's trust claims in respect of the stake in KZhRK acquired by Mr Bogolyubov and Mr Kolomoisky, such relevance that the confidential information might have to the action was too nebulous or peripheral to satisfy the Bolkiah test. I disagree. In my judgement, the information in issue satisfies the relevancy element of the test in regard to the Commercial Court action for the following reasons: (a) knowledge of Mr Bogolyubov's and Mr Kolomoisky's assets could be of significant use for enforcement purposes and may assist on issues of credibility; (b) the information is relevant to the allegation in paragraph 50 (f) (viii) of Mr Kolomoisky's Defence that Mr Pinchuk diverted profits from Nikopol to companies under his control and to the declaration sought by Mr Pinchuk as to sums due upon the reckoning of mutual debts, including Nikopol dividends; and (c) I think there is a real possibility, as suggested by Mr Jowell QC for the Claimants, that Mr Pinchuk will or may allege that Mr Bogolyubov and Mr Kolomoisky have diluted Nikopol's profits through related party transactions since gaining control of the company.
83. Have White & Case shown that there is no real (i.e. non-fanciful, non-theoretical) risk that the information has already or will come into the possession of any member of the Pinchuk Team?
84. As to past disclosure, it was argued on behalf of White & Case that the court could safely conclude, on the basis of: (i) the investigatory steps taken by the Neutral Team and the confirmations it obtained from the Pinchuk Team; (ii) the geographical separation of the Pinchuk and Optima Teams; and (iii) the establishment of ethical screens, that there was no real risk that the confidential information had passed to the Pinchuk Team. And as to the future, it was submitted that there was no real risk of disclosure of the confidential information to the Pinchuk Team given: (i) the establishment of the ethical screens; (ii) the geographical and departmental separation of the Pinchuk and Optima Teams; and (iii) a proffered undertaking by White & Case that all lawyers in any of the firm's US offices who are currently members of the Pinchuk Team will be removed from that team and will not work on the Commercial Court action.
85. It was in September 2010 that the Eastone/Pinchuk Team began work on the dispute between Mr Pinchuk and Messrs Bogolyubov and Kolomoisky over the Ferroalloy Holding dividend dispute and it was in May 2012 that the team began evaluating claims against Messrs Bogolyubov and Kolomoisky. On the other hand, the confidential information in issue was vouchsafed to the Optima Team in the period May to September 2011^[5] and no measures of any sort to avoid the passing of this information to other White & Case employees or partners were in place until March 2013, when ethical screens were first established. As Lord Millet observed in Bolkiah^[6], the starting point is that, unless special measures are taken, information moves within a firm and in my judgement the enquiries made by the Neutral Team including the answers they obtained when interviewing members of the Pinchuk Team and the physical separation of most but not all of the members of the two teams do not discharge the evidential burden on White & Case as to the risk of past disclosure in the period down to the introduction of ethical screens. As to the enquiries concerning electronic and hard copy documents, these do not preclude the possibility of oral disclosures. And as to the confirmations obtained in interview, the possibility remains that there has been inadvertent disclosure, or that disclosure may have escaped the memory; also, 19 members of the Pinchuk team who had left White & Case before the Neutral Team was set up in November 2013 were not interviewed, and nor were similar confirmations sought in interviews of all the members of Optima Team, a step that could have provided a cross-check and could have been undertaken if White & Case had engaged an external firm of lawyers to carry out the task. I also observe that the precise questions asked and the answers received in the interviews have not been disclosed; nor have there been produced any documents evidencing the interviews.
86. As to physical separation of the teams, as detailed in paragraphs 60 – 66 above, members of the Pinchuk and Optima Teams overlapped in the New York office during which time there might have been direct communication of the information to members of the Pinchuk Team by someone on the Optima Team. In addition, members of the Pinchuk Team worked in the Washington and Miami offices where, at different times, members of the Optima Team were working, giving rise to the risk of information passing second-hand. There were also a number of Russian speakers on the Optima Team in New York, some of whom one would expect to have had contact with the Moscow office and might have inadvertently disclosed some or all of the confidential information to members of the Pinchuk Team in that office. In addition, it must be remembered that members of large firms working in different departments in different locations can communicate by telephone and often meet for events organised by the firm.
87. Accordingly, I conclude that White & Case have failed to discharge the evidential burden on them as to risk and in consequence I find that there is a real risk that: (i) the confidential information in issue came into the possession of some of the Pinchuk Team in the period April 2011 to 13 March 2013; and (ii) accordingly, use of that information (at least inadvertently) has been or will be made in the Commercial Court action.
88. Subject to the question of delay, the conclusion expressed in paragraph 87 above entitles the Claimants to the relief they seek and it is unnecessary to consider whether there is a future risk of the leakage of the information notwithstanding the establishment of ethical screens, the geographical separation of the teams and the proposed undertaking by White & Case. Nonetheless, I would observe that: (i) the ethical screens do not satisfy Lord Millett's view that an effective Chinese wall needs to be an established part of the organisational structure of the firm; and (ii) the members of each team are drawn not just from one group within the firm but from several groups and the screens do not physically hinder contact between the members of the teams and other non-team individuals working for White & Case.

Delay

89. It was submitted by Mr Thanki that the Claimants had unduly delayed in issuing the instant application with the result that, an injunction being a discretionary remedy, the court ought to exercise its discretion against granting the relief sought. Ms Rose also complained of the apparent delay in seeking relief from the court.
90. In advancing his submissions, Mr Thanki relied on the knowledge of Mr Bogolyubov and Mr Kolomoisky, Mr Mordechai Korf and Mr Timur Novikov and contended that as a result of such knowledge the Claimants were aware that White & Case were acting for Mr Pinchuk in proceedings adverse to their interests well before the 1782 Application was served in September 2013 and should not have waited until October 2013 to raise the issue of their confidential information.
91. The evidence as to the knowledge of the above individuals is hearsay only.

Mr Bogolyubov and Kolomoisky

92. Mr Bogolyubov and Mr Kolomoisky accept that they knew of the Commercial Court action in March 2013. They also knew of the Optima Engagement. Neither holds a management position with any of the Claimants but they own directly or indirectly the joint majority of the share capital of the Claimants.

Mr Korf

93. Mr Korf is the President and CEO of GAA, was on the boards of Optima Group LLC, Optima Industrial Management and Optima Acquisitions, and had a close involvement in the Optima Engagement. The evidence is that he only became aware that White & Case was acting for Mr Pinchuk in the Commercial Court action from around June 2013 and was not aware of the substantive details thereof until September 2013. In particular, he was not aware that any of the confidential information of the Claimants might have any relevance to the action. He first became aware that Mr Pinchuk had instructed White & Case to bring proceedings adverse to the Claimants when he was served with the 1782 Application in September 2013, at which time he learned of the detailed nature of the claims brought in the Commercial Court and in the LCIA arbitration.

Mr Novikov

94. Mr Novikov was in contact to a degree with White & Case in the course of the Optima Engagement and accordingly knew of the engagement. He works for Mr Kolomoisky and Mr Bogolyubov primarily assisting them with corporate restructuring matters. He is not and never has been an employee or agent of the Claimants. Mr Korf does not recall Mr Novikov making him aware of White & Case's representation of Mr Pinchuk against Mr Bogolyubov and Mr Kolomoisky in the Commercial Court action and LCIA proceedings prior to the service of the 1782 Application. However, it seems fairly likely that he was told of the Commercial Court action by Mr Bogolyubov and/or Kolomoisky, notwithstanding that there is no direct evidence to this effect.
95. Even if the knowledge of Mr Bogolyubov, Mr Kolomoisky and Mr Novikov were to be attributed to the Claimants, and even given the knowledge of Mr Korf which is plainly attributable to the Claimants, I do not think that the failure to protest about a threat to the Claimants' confidential information until after notice of the 1782 Application is a ground for debarring the Claimants from being awarded the relief they seek. I say this because it would not in my judgement have been at all clear to laymen, unfamiliar with all the details of the information supplied to White & Case on the Optima Engagement and confronted by the lengthy and densely pleaded Particulars of Claim, that there was a risk that confidential information imparted during the Optima Engagement might be used against Mr Bogolyubov and Mr Kolomoisky in the Commercial Court action. In short, I accept Mr Jowell's submission that it is only when one views the Commercial Court action in light of the allegations made in the LCIA proceedings that Mr Bogolyubov and Mr Kolomoisky breached the Beneficiaries Agreement by siphoning off profits that it becomes clear that there is a link to the confidential information provided in the Optima Engagement.
96. If, in accordance with its own Policy document, White & Case had informed the Claimants in March 2013 that ethical screens had been established, the position might well have been different. However, as we have seen, this step was not taken, a point that considerably undermines the force of the firm's contention that the Claimants have sat on their rights and are seeking an injunction for tactical reasons.

Conclusion

97. For the reasons given above, the Claimants are entitled to the injunction they seek and White & Case will be enjoined from acting for Mr Pinchuk in the Commercial Court action. I will hear Counsel on the precise wording of the order the court should make.

Note 1   See paragraph 11 above    [Back]

Note 2   [1999] 2 AC 222    [Back]

Note 3   Here the solicitors were a two partner firm with the partners doing business separately from each other without any knowledge of each other’s clients and each partner had the exclusive use of some of the firm’s clerks.    [Back]

Note 4   Mr Yardley contends in paragraph 45 of his first witness statement that White & Case’s only clients on the Optima Engagement were Optima Acquisitions LLC and Optima Industrial Management LLC. GAA was incorporated on 14 February 2012 and the 2nd -7th Claimants became part of GAA on various subsequent dates from February 2012 to April 2013 after the inception of the Optima Engagement and the provision of the confidential information in issue. However, in my judgement, GAA and all of the other Claimants became White & Case’s clients for the purposes of the engagement, notwithstanding their dates of incorporation and the dates they became part of GAA; and GAA succeeded to Optima’s rights to keep confidential information provided by its subsidiaries in the course of the engagement.     [Back]

Note 5   The IPO was abandoned in October 2011    [Back]

Note 6   At p.237 H    [Back]