Lawyers Beware!

Communications between a solicitor and their client for the purpose of seeking or giving legal advice or for the purposes of litigation are usually privileged.  Legal advice privilege or litigation privilege may be lost in a number of circumstances, for example, if it used to conceal and further crime or fraud.  It is important to note that this exception applies whether or not the lawyer was aware of the criminal or fraudulent purpose of the legal advice being sought.  This has been long established since the case of R v Cox and Railton (1884) 14 QBD 153.

The recent judgment of the English High Court in JSC BTA Bank v Ablyazov and others [2014] EQHC 2788 considered this iniquity exception. This judgment forms part of a lengthy legal battle between JSC BTA Bank (“the Bank”) and Mukhtar Ablysazon, its former chairman, who allegedly defrauded the Bank for more that US$6 billion. The Bank sought disclosure of documents which were created between the respondents and their solicitors relating to the respondent’s assets which would usually attract legal professional privilege.

The decision

The Court had to establish

1. Whether there were categories of documents to which privilege did not attach; and
2. Whether the Court should exercise its discretion in favour of ordering disclosure.

In considering whether to exercise its discretion the court had to take into account the sheer volume of documents.  It was estimated that a review of the solicitors file would have come to a cost of £2.5 million. The Court looked at the value of the unenforced judgments, in the sum of $4 billion, and stated “If, as the Respondents contend, the exercise involves looking for a needle in a haystack, it is nevertheless a potentially very valuable needle”. The Bank did acknowledge that the cost of this exercise should not be borne by the solicitors.

The court also noted the “vast web of companies” used by the respondent and said “it is not fanciful to suppose that despite the strategy being to use the solicitors to conceal assets, there will be references in communications with them to assets which were not disclosed.”

The Court ordered disclosure of the documents. The court found that there was an abuse of the normal solicitor/client relationship and there was no confidentiality in place in their communication. Therefore the Court found that privilege did not attach to these documents. Where there is an abuse of the solicitor/client relationship interference with Article 8 of the European Convention on Human Rights can be justified. There were a number of documents which could assist the Bank with enforcing their court orders.

The Court invoked a dominant purpose test. The question to be raised is whether the dominant purpose in creating the document was the conduct of litigation in the normal way.

Conclusion

A strong case of fraud must be established for privilege to be set aside on the iniquity exception.  The standard of proof is in line with the Irish courts in Murphy v Kirwan [1993] 2 IR 501 “…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”.

Nonetheless a lawyer must be cautious when taking client instructions and must always bear in mind that anything which is put in writing may be discoverable by the courts.

For further information, please contact Paul Keane on pkeane@reddycharlton.ie.