[2021] UGCommC 198

# **THE REPUBLIC OF UGANDA IN THE HIGH COURT OF UGANDA SITTING AT KAMPALA (COMMERCIAL DIVISION) MISCELLANEOUS CIVIL APPLICATION No. 0196 OF 2020**

# 5 **(Arising from Civil Suit No. 0333 of 2018)**

**HERMON TESFALIDET GHEBRAT ………………………………………… APPLICANT**

#### **VERSUS**

## **1. MARLIN ADVOCATES } ………………… RESPONDENTS 2. MEHARI HABTEMICHAEL YEDHEGO }**

#### **Before: Hon Justice Stephen Mubiru.**

#### **RULING**

a. Background.

While practicing law with M/s Capital Law Partners, Mr. Ronald Mitegyeko Asiimwe on 15th July, 2016 prepared a loan agreement between the applicant and the 2nd 20 respondent by which the applicant borrowed a sum of US \$ 150,000 repayable within a period of two months from the date of signing that agreement. The sum of US \$ 100,000 was to be repaid on 31st August, 2016 and the balance, US \$ 50,000, on 30th September, 2016. When the applicant failed to repay the loan, the 2nd respondent on 24th April, 2018 filed a suit for its recovery. It was filed on his behalf by M/s

25 Capital Law Partners.

In her defence, the applicant claimed to have paid back the loan in full by way of instalments received by the 2nd respondent's brother and business partner, a one Mr. Samuel Tsegoi Kasete. The 1st instalment of shs.100,000,000/= was by way of transfer onto his account made on 8th

November, 2016. The second instalment of shs.360,000,000/= was paid directly to the 2nd 30 applicant on 24th January, 2017 in full and final settlement of the loan. The signed acknowledgement of receipt was unfortunately later stolen by one of the applicant's employees, prompting her to report the case of theft to the police.

### b. The application.

This application is made pursuant to section 98 of *The Civil Procedure Act*, and Order 52 rules 1, 2 and 3 of *The Civil procedure Rules*. The applicant seeks a declaration that advocate Ronald Mitegyeko Asiimwe and the 1st respondent by representing the 2nd respondent in the underlying

- 5 suit are acting in violation of their fiduciary client-advocate duties owed to the applicant and in violation of the rules regulating the conduct of advocates; and an ore of injunction restraining them from representing the 2nd respondent in the underlying suit. The application is premised on the ground that the applicant was a client of the 1st applicant and Mr. Ronald Mitegyeko Asiimwe in particular acted as her advocates in the transaction giving rise to the underlying suit as a result of - 10 which they became privy to confidential information that is prejudicial to her defence to the suit.

In his affidavit in reply, Mr. Ronald Mitegyeko Asiimwe denies having acted for the applicant in the transaction forming the subject matter of the litigation. He avers that while practicing law with M/s Capital Law Partners, he acted for the 2nd respondent in that transaction and prepared the loan

- 15 agreement for the signature of both parties. The parties negotiated the terms of the agreement by themselves, which he reduced into writing. The law firm never received any fees from the applicant. He was not involved in the performance of that contract and is not privy to any confidential information involving the applicant. The terms of the contract are not in dispute. The underlying claim is premised on breach of contract by reason of default. - 20 - c. Submissions of counsel for the applicant. Nil.

## d. Submissions of counsel for the 1st respondent.

- 25 M/s Marlin Advocates submitted that the advocate at all material time did not act for the applicant but rather for the 2nd respondent. Being a witness to the agreement did not turn the applicant into the advocate's client. The applicant has not presented any receipt as proof of payment of fees. There cannot be a conflict of interest in absence of a fiduciary relationship. The advocate is not privy to any confidential information of the applicant. The terms of the agreement witnessed by - 30 the advocate are not in dispute. The controversy between the parties relates to money due under te contract. The application ought to be dismissed.

### e. The decision.

The advocates' duty of loyalty to a current client prohibits undertaking representation directly adverse to that client without that client's informed consent. Thus, absent consent, an advocate 5 may not act in one matter against a person the advocate represents in some other matter, even when

the matters are wholly unrelated. Simultaneous representation though in unrelated matters of clients whose interests are only economically adverse, such as representation of competing economic enterprises in unrelated litigation, does not ordinarily constitute a conflict of interest.

- 10 For a conflict of interest to arise, there must be a fiduciary relationship such as one that exists between an advocate and a client. Establishment of the advocate-client relationship involves two elements: a person seeks advice or assistance from an advocate; and the advocate appears to give, agrees to give or gives the advice or assistance. Section 1 (b) of *The Advocates Act* defines "client" as including any person who has power, express or implied, to retain or employ, and retains or - 15 employs, or is about to retain or employ, an advocate and any person who is or may be liable to pay to an advocate any costs. It is thus the act of authorising or employing an advocate to act on behalf of a client which constitutes the advocate's retainer by the client (see *Halsbury's laws of England*, 4 th edition, vol. 44 (1) at p 83 and 84, paras. 99 and 101). In addition to receiving instructions, it is also good practice to receive a payment from the client prior to initiating the 20 advocate-client relationship (see D. Brian Dennison, et. al. *Legal Ethics and Professionalism. A*

*Handbook for Uganda*, Globethics.net, (2014) at p 92).

In the wider sense, retainer entails the instructions by a client or a client's authorisation for an advocate to act in a case or a fee paid to an advocate to act in a matter during a specified period or 25 a specified matter, or a fee paid in advance for work to be performed by the advocate in the future (see *Omulele and Tollo Advocates v. Magnum Properties Limited, Kenya C. A. Civil Appeal No. 75 of 2015; [2016] eKLR*). When a client hires an advocate to represent him or her, the client is said to have retained the advocate. This act of employment is called the retainer. The advocate must tell the client whether he or she will represent the client, preferably in writing, the scope of 30 the representation, and clearly set forth the essential terms applicable to the engagement including the fee arrangement. The best practice is to discuss the scope of the representation with the

potential client in the initial consultation and then to confirm that in writing in the engagement letter. If the client reasonably believes that there is an advocate-client relationship, then the advocate has professional obligations to that client.

5 A conflict of interest is a situation where one owes separate duties to act in the best interest of two or more parties in the same or related matters. Regulation 4 of *The Advocates (Professional Conduct) Regulations* provides as follows;

An advocate shall not accept instructions from any person in respect of a contentious or no contentious matter if the matter involves a former client and the advocate as a 10 result of acting for the former client is aware of any facts which may be prejudicial to the client in that matter.

The implications of this rule are that; (i) an advocate who has formerly represented a client in a matter cannot thereafter represent another person in the same or a substantially related matter in 15 which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing; (ii) an advocate cannot knowingly represent a person in the same or a substantially related matter in which a firm with which the advocate formerly was associated had previously represented a client; (a) whose interests are materially adverse to that person; and (b) about whom the advocate had acquired information 20 protected by Regulation 4 that is material to the matter; unless the former client gives informed consent, confirmed in writing; (iii) an advocate who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter cannot thereafter: (a) use information relating to the representation to the disadvantage of the former client except as these Regulations would permit or require with respect to a client, or when the information 25 has become generally known; or (b) reveal information relating to the representation except as the Regulations would permit or require with respect to a client.

An advocate asked to represent several individuals seeking execute a transactional agreement is likely to be materially limited in the advocate's ability to recommend or advise on all possible 30 positions that each might take because of the advocate's duty of loyalty to the others. The critical question is the likelihood that a difference in interests will eventuate and, if it does, whether it will materially interfere with the advocate's independent professional judgment in considering

alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client. Relevant factors in determining whether there is significant potential for material limitation include the duration and intimacy of the advocate's relationship with the client or clients involved, the functions being performed by the advocate, the likelihood that disagreements will arise and the

5 likely prejudice to the client from the conflict. The question is often one of proximity and degree.

An advocate may not represent multiple parties to a negotiation whose interests are fundamentally antagonistic to each other. This is so because the advocate has an equal duty of loyalty to each client, and each client has the right to be informed of anything bearing on the representation that 10 might affect that client's interests and the right to expect that the advocate will use that information to that client's benefit. For example, an advocate cannot undertake common representation of clients where contentious litigation or negotiations between them are imminent or contemplated. Other relevant factors are whether the advocate subsequently will represent both parties on a continuing basis.

On the other hand, common representation is permissible where the clients are generally aligned in interest even though there is some difference in interest among them. Parties are aligned in interest in such arrangements or relationships in which all parties stand to benefit from one particular outcome. In some transactions, given the possibility of incurring additional cost, 20 complication or even and other relevant factors, the clients may prefer that the advocate acts for all of them. In such cases the advocate seeks to resolve potentially adverse interests by developing the parties' mutual interests. There is a clear alignment of interests between lender and borrower: both sides want to maximize the financial return on investments.

25 A person who consults with an advocate about the possibility of forming a client-advocate relationship with respect to a matter is a prospective client. Even when no client-advocate relationship ensues, an advocate who has learned information from a prospective client cannot use or reveal that information except as the Regulations would permit with respect to information of a former client. An advocate in that situation cannot represent a client with interests materially 30 adverse to those of a prospective client in the same or a substantially related matter if the advocate

received information from the prospective client that could be significantly harmful to that person in the matter.

When advocates have been associated within a firm but then end their association, the question of 5 whether an advocate should undertake representation is more complicated. There are several competing considerations. First, the client previously represented by the former firm must be reasonably assured that the principle of loyalty to the client is not compromised. An advocate changing professional association has a continuing duty to preserve confidentiality of information about a client formerly represented. Second, the rule should not be so broadly cast as to preclude 10 other persons from having reasonable choice of legal counsel. Third, the rule should not unreasonably hamper advocates from forming new associations and taking on new clients after having left a previous association. Thus, if an advocate while with one firm acquired no knowledge or information relating to a particular client of the firm, and that advocate later joined another firm, neither the advocate individually nor the second firm is disqualified from representing another

15 client in the same or a related matter even though the interests of the two clients conflict.

An advocate moving from a firm acting on one side of a dispute to the firm on the other side must be able to show that no conflict of interest would arise. 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,

20 and not merely fanciful or theoretical. But it need not be substantial. As Lightman J, stated in *Re a Firm of Solicitors, [1997] Ch 1, [1995] 3 All ER 482*;

The law regulating the freedom of a solicitor who, or whose firm, has at one time acted for a client subsequently to act against that client reflects the need to balance two public interests. First there is the interest in the entitlement of that client to the fullest 25 confidence in the solicitor whom he instructs and for this purpose that there shall be no risk or perception of a risk that confidential information relating to the client or his affairs acquired by the solicitor will be disclosed to anyone else…Second there is the interest in the freedom of the solicitor to obtain instructions from any member of the public, and of all members of the public to instruct such solicitor, in all cases where 30 there is no real need for constraint; there must be good and sufficient reason to deprive the client of the solicitor or the solicitor of the client of his choice

Regulation 4 operates to disqualify the advocate only when the advocate involved has actual knowledge of protected information. If an advocate is disqualified from representation on account of conflict of interest, no advocate in a firm with which that advocate is associated may knowingly undertake or continue representation in such a matter, except where;- both the affected client and

- 5 the prospective client have given informed consent, confirmed in writing; or the advocate who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; and (a) the disqualified advocate is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and (b) written notice is promptly given to the - 10 prospective client.

Although adverse conflicts can also arise in transactional matters, for a conflict of interest to arise, the aggrieved party must be a former client of the advocate purporting to act on behalf of the opposing party, and there must be a nexus between the two transactions or disputes, which 15 prejudices the position of the former client (see *Nyeenya Mayambala and two others v. Bisaso Nathan H. C. Civil suit no.263 of 2005*). What is proscribed is prejudicial information which the advocate may have obtained by virtue of having acted for the former client (see *Ayebazibwe Raymond v. Barclays Bank Uganda Ltd and three others H. C. Civil Suit No. 165 of 2012*). Prejudice from such information need not be proved; all the court needs to establish is that 20 prejudice is likely to be occasioned by the advocate acting (see *V. G. Keshwala v. Shonubi Musoke and Co. Advocates, H. C. Misc. Application No. 501 of 2013*). Where the information is not prejudicial, the duty ought not to be imposed (see *Rakusen v. Ellis, Munday and Clarke [1912] 1 Ch 831; Re a Firm of Solicitors [1992] 2 WLR 809* and *Re a Firm of Solicitors [1995] 3 All ER 482*). Therefore, an advocate at one time retained by a client but not in possession of relevant

25 confidential information, is not by reason of the fact of such past retainer precluded from

subsequently acting against him.

The scope of a "matter" for purposes of this Regulation 4 depends on the facts of a particular situation or transaction. The advocate's involvement in a matter can also be a question of degree.

30 When an advocate has been directly involved in a specific transaction, subsequent representation of other clients with materially adverse interests in that transaction clearly is prohibited. The underlying question is whether the advocate was so involved in the matter that the subsequent representation can be justly regarded as a changing of sides in the matter in question, or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent

- 5 matter. The fact that an advocate has once served a client does not preclude the advocate from using generally known information about that client when later representing another client. A conflict of interest exists if there is a significant risk that an advocate's ability to consider, recommend or carry out an appropriate course of action for the client will be materially limited as a result of the advocate's other responsibilities or interests. - 10

The issue whether the advocate is possessed of relevant confidential information cannot be decided on the basis of a general allegation. It has to be stated with sufficient particularity as to the nature of the confidential information. Information acquired in a prior representation may have been rendered obsolete by the passage of time, a circumstance that may be relevant in determining 15 whether two representations are substantially related. Information that has been disclosed to the public or to other parties adverse to the former client ordinarily will not be disqualifying. A former client is not required to reveal the confidential information learned by the advocate in order to establish a substantial risk that the advocate has confidential information to use in the subsequent matter. A conclusion about the possession of such information may be based on the nature of the 20 services the advocate provided the former client and information that would in ordinary practice be learned by an advocate providing such services.

In the instant case, there is no proof that either the 1 st respondent or Mr. Ronald Mitegyeko Asiimwe is privy to any confidential information of the applicant that is prejudicial to her defence

25 in the underlying suit. For all the foregoing reasons, the application is accordingly dismissed. The costs of this application are in the cause.

Dated at Kampala this 25th day of March, 2021 …………………………..

Stephen Mubiru 30 Judge, 25th March, 2021.