In a recent English case, JSC BTA Bank v Ablyazov and others [2014] EWHC 2788 (Comm), the High Court held that certain communications between a client and his lawyers, made during the course of legal proceedings, were not protected by privilege, on the grounds that the legal advice was being sought to assist in a strategy of concealment and deceit in relation to the client's assets. Accordingly, the court ordered that the communications should be disclosed.

It is well established at common law that legal advice privilege, or litigation privilege, may be lost if used to conceal and further crime, or fraud, or conduct injurious to the administration of justice. The exception applies regardless of whether the lawyer is aware of the criminal or fraudulent purpose of the legal advice being sought (R v Cox and Railton (1884) 14 QBD 153). It may be invoked at any stage in civil or criminal proceedings, and will require the disclosure of otherwise privileged material.

Facts

The substantive proceedings concerned an action by the claimant Bank against the Mr Ablyazov, alleging that he had misappropriated approximately US$6 billion when he was chairman of the Bank.  These proceedings concerned an application by the claimant Bank seeking disclosure from the first and second respondents (Mr Ablyazov, and his brother-in law, Mr Shalabayev), of privileged documents relating to their assets, and held by their solicitors and former solicitors (the third to fifth respondents).

The Bank submitted that:

  1. Legal professional privilege, whether legal advice privilege or litigation privilege, does not exist where the advice or litigation is in furtherance of a fraud, crime or similar iniquity (the iniquity exception). Disclosure may be ordered where there is a strong prima facie case that the iniquity exception applies.  
  2. There was a strong prima facie case that the iniquity exception applied to all the documents held by the solicitors concerning the former or current assets of the first and second respondents, who had pursued a strategy, which involved (i) lying to and/or deliberately misleading the Court and the Bank about the extent and nature of the assets of which Mr Ablyazov was the ultimate beneficial owner, and (ii) dealing with those assets in breach of court orders without informing the Court or the Bank or (after their appointment) the receivers, and (iii) lying to and/or deliberately misleading the Court and the Bank about those dealings, and (iv) otherwise seeking to prejudice the interests of the Bank by putting or seeking to put assets of which Mr Ablyazov was the ultimate beneficial owner beyond its reach.  The Bank did not allege that the solicitors knew of or were party to any iniquity.   
  3. The Court should order the disclosure of the documents sought on the grounds that they would likely cast light on the first and second respondents' beneficially owned assets which would assist the Bank in executing its judgments and enforcing the Court's orders against them.

The submissions on behalf of Mr Ablyazov included:

  1. It is not sufficient, to prevent privilege attaching, that a solicitor is used in the conduct of litigation to advance a case on behalf of his client which the client knows to be untrue and therefore involves perjury, or an attempt to deceive the other party and the court, or to disobey court orders. That is the ordinary run of case in which privilege applies. Although Mr Ablyazov's conduct in this respect may be seen as persistent and involving large sums, there is no principled distinction between his conduct and the ordinary run of case.  
  2. The Bank's case involves an impermissibly sweeping approach and fails to establish the necessary requirement that the communication in question must be "in furtherance" of the fraud.  In doing so it is inconsistent with both the common law authorities, and the European jurisprudence on Articles 6 and 8 of ECHR. What is required is that the abuse of the privileged occasion itself operates to further the iniquitous purpose. There must be a real causal connection between the particular legal advice/assistance and the wrong being committed. That was not established in this case.  
  3. Disclosure should not be granted because Mr Ablyazov invoked the privilege against self-incrimination.  
  4. Disclosure should not be granted as a matter of discretion, because it was a vast and pointless fishing expedition.  The Bank has failed to make out a case that there is any prospect of responsive material of any value in addition to that which the Bank currently holds, alternatively any prospect which justifies the expensive, time-consuming and intrusive nature of the search exercise.   
  5. The interests of others must be protected where there is joint privilege or common interest privilege.

Mr Shalabayev was not represented in these proceedings, and therefore the focus of the argument was on the position of Mr Ablyazov and his assets. The Court noted, however, that what applied to documents relating to Mr Ablyazov's assets in the hands of the solicitors' firms, would apply equally to documents relating to the assets of Mr Shalabayev.

Decision

The Court allowed the application and ordered disclosure. The evidence established a very strong prima facie case that from the moment Mr Ablyazov engaged his solicitors he was bent on a strategy of concealment and deceit in relation to his assets which would involve perjury, forgery, and contempt, as and when such was required for that purpose. This was an abuse of the normal solicitor/client relationship, and there was no confidentiality in the communications, and therefore no privilege.  

The judge held that where a solicitor is engaged to put forward a false case supported by false evidence, it will be a question of fact and degree whether it involves an abuse of the ordinary professional engagement of a solicitor, in the circumstances in question.  

Solicitor/client communications potentially engage the right to privacy in correspondence under Article 8. Where there is an abuse of the solicitor/client relationship, interference with Article 8 rights is justified where proportionate. The Court found that as the Bank had a real prospect of obtaining valuable material to assist it with the enforcement of court orders, any interference with Article 8 ECHR rights was justified and proportionate. 

The judge noted that where communications have a dual purpose, if the dominant purpose is the conduct of the litigation in accordance with the solicitor's ordinary professional retainer, then privilege will remain irrespective of the iniquitous strategy. However, if the legitimate purpose and the iniquitous purpose are of equal force, no privilege will attach.

Comment

This decision demonstrates that a strong prima facie case of fraud is required in order for privilege to be set aside on the basis of the iniquity exception. The standard of proof applied by the English Court in this case, to displace privilege based on the iniquity exception, appears to be in line with the approach of the Irish courts.  In Murphy v Kirwan [1993] 2 IR 501, [1994] 1 ILRM 293, Egan J stated: "the rule does not apply merely because fraud is alleged in the action.  There must be some prima facie evidence that the allegation has a foundation in fact." Accordingly, the casting aside of privilege on the grounds of the iniquity exception is likely to be a rare occurrence, and each case will need to be judged on its own facts.