The Walkers building in George Town. - Photo: Stephen Clarke

In a years-long case, described by Chief Justice Anthony Smellie as “hostile” and “marred by allegations … of abuse”, Walkers law firm was found liable by the Grand Court of the Cayman Islands for breaches of attorney-client confidentiality.

Brazilian bankers Katia Rabello and Fernando Toledo brought proceedings against Walkers in 2014, claiming the firm acted against their interests as long-time clients by working for a hostile third party, Dr. Afonso Braga, a Brazilian court-appointed trustee in bankruptcy.

Additional plaintiffs on the case are Cayman-registered firms Arnage Holdings Ltd., Brooklands Holdings Ltd., and East Farthing Holdings Ltd.

“Dr. Braga is regarded by the Plaintiffs as their arch nemesis, he having pursued and rendered the Rabello family interests, including Katia Rabello herself and her interests, bankrupt in Brazil,” the chief justice wrote in his judgment, released 24 July and published by OffshoreAlert.

“It is uncontroverted that in aid of Dr. Braga’s campaign against the Plaintiffs, the Defendant obtained the disclosure of the Plaintiffs’ confidential information in this jurisdiction by way of ex parte [without notice] applications to this Court and provided that information to be deployed by Dr. Braga against them in Brazil.”

Walkers represented Braga in 2010 and 2011 in a disclosure application that was part of a major multi-jurisdictional fraud investigation, extending across the United States, British Virgin Islands, Belize and Brazil. In doing so, the plaintiffs argued that Walkers violated its ongoing duties to them as multi-generational clients of the firm.

When litigation against Walkers was filed in 2014, Katia Rabello was serving a 16‑year prison sentence in Brazil for conspiracy to commit crime, money laundering, tax evasion and mismanagement. She has since been released.

Rabello was convicted in 2012 and jailed for her role in the ‘mensalão’ or ‘big monthly payment’ case, a vote-buying scheme considered one of Brazil’s largest political corruption scandals.

The Grand Court rejected Walkers’ argument that the plaintiffs’ case should be dropped on grounds of illegality, in other words, that a ruling in the plaintiffs’ favour would allow Rabello to profit from her own wrongdoing.

The plaintiffs are seeking up to US$400 million in damages against Walkers.

“The Defendant has not even attempted to say why the defence of illegality should apply to bar each and every one of the Plaintiffs’ claims,” the judgment states.

The court also rejected the argument by Walkers that the plaintiffs were not clients of the firm.

“It is also clear that the Defendant remained throughout under a continuing duty of trust and confidence (in respect of all retainers) not to disclose – nor take steps contrary to its client’s interests to disclose their confidential information,” the ruling states.

“It follows that the Defendant should not have accepted the Braga Retainer, as the Defendant has itself come belatedly to acknowledge. In acting for Dr. Braga against the Plaintiffs and their interests, the Defendant breached its duties and obligations of trust, confidence and loyalty which it owed to the Plaintiffs.”

Smellie added that no explanation has been offered by Walkers for the breaches committed.

The court also denied an application by Walkers to embargo publication of the judgment, stating that it “would be contrary to settled case law and without principle or precedent”.

A press statement by the plaintiffs’ lead counsel Anthony Akiwumi called the decision “an important professional liability judgment which arises in the context of the consideration of the nature, scope and duration of attorney-client relationships and the breach by attorneys of their enduring fiduciary duties of loyalty and confidentiality owed by them to their clients”.

Akiwumi continued, “The Judgment is notable in that all of the Defendant’s defences on liability were rejected. In particular, the Honourable Chief Justice dismissed the Defendant’s proposition that despite a twenty-five year multi-generational legal services/private client relationship, the Plaintiffs were not clients of the firm.”

Asked for comment, Walkers issued the following statement to the Compass: “Walkers is disappointed by the recent interim decision of the Grand Court, but on the strength of our external legal advice we will be appealing the decision. As this is an ongoing matter, we have no further comment.”

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