Is Your Legal Advice Capable Of Being Disclosed?

When you roll into your solicitors’ offices and discuss your affairs, you might assume that your conversations and correspondence are protected. Nobody’s beady little eyes can have a nosey and peer over this material, can they?

Well, think again. 

Join us please in considering what Deputy Master Scher broadcast in the case of East-West United Bank SA v Gusinski & Ors [2024] EWHC 2223 (Ch) (“the East-West Case”) on the iniquity exception from legal privilege.

A Quick Time Out From Iniquity!

As appears normal the law is dripping deliriously with exceptions. 

One perhaps might wonder if they should be referred to as exceptions at all. For a legal principle, one might be forgiven for thinking there is always an exception. 

To digress with a couple of wholly unrelated examples of exceptions in law:

• Strict liability for unlawful dividends when there are insufficient distributable reserves is potentially not so strict if limited by some Re Marini Section 1157 relief.
• Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 about requirements for a written document to transfer an interest in law is caveated by the section saying “…nothing in this section affects the creation or operation of resulting, implied or constructive trusts”.

Back to iniquity!

Legal Advice Privilege A Cardinal Principle

On the one hand legal advice privilege is considered a cardinal principle or a fundamental human right. On the other hand, it is not unsnappable. 

In comes the iniquity exception which can outflank the normal presumption that documents providing legal advice or which a client provides to extract legal advice from their solicitor are firmly protected from disclosure absent the client’s waiver of privilege.

What Is The Iniquity Exception For Legal Advice Privilege?

Deputy Master Scher suggested the leading case Al Sadeq v Dechert LLP & Ors [2024] EWCA Civ 28 on the iniquity exception for legal privilege has cleared the clouds. 

However, iniquity is not simply confined to criminal or fraudulent purposes but can extend to the seemingly nebulous concept of:

“… underhand conduct which is in breach of a duty of good faith, on contrary to public policy or the interest of justice.”

This perhaps could enable iniquity to be stretched to cover quite a range of conduct that might be difficult to define. Yet the following does add some flesh to these rather bare bones:

The iniquity exception does not apply merely because a solicitor is engaged to conduct litigation by putting forward an account of events which the client knows to be untrue, even when this involves a deliberate strategy to mislead the other party and the court, and to commit perjury. Rather, the touchstone is whether the iniquity puts the conduct outside the normal scope of such professional engagement, or is an abuse of the relationship which falls within the ordinary course of such engagement.

This position was further elucidated that iniquity can entail the deployment of a client’s deception of a lawyer to enable a client to put forward a false case for example supported by false evidence:

… my summary of the principles above is derived from Popplewell LJ’s summary in Al Sadeq v Dechert LLP of his own analysis in the case of JSC BTA Bank v Ablyazov [2014] EWHC 2788 (Comm). In Ablyazov, Popplewell J (as he then was) considered the authorities in detail, from [68] to [93]. He concluded at [93]:

I would conclude, therefore, that the touchstone is whether the communication is made for the purposes of giving or receiving legal advice, or for the purposes of the conduct of actual or contemplated litigation, which is advice or conduct in which the solicitor is acting in the ordinary course of the professional engagement of a solicitor. If the iniquity puts the advice or conduct outside the normal scope of such professional engagement, or renders it an abuse of the relationship which properly falls within the ordinary course of such an engagement, a communication for such purpose cannot attract legal professional privilege. In cases where a lawyer 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. In the “ordinary run” of criminal cases the solicitor will be acting in the ordinary course of professional engagement, and the client doing no more than using him to provide the services inherent in the proper fulfilment of such engagement, even where in denying the crime the defendant puts forward what the jury finds to be a bogus defence. But where in civil proceedings there is deception of the solicitors in order to use them as an instrument to perpetrate a substantial fraud on the other party and the court, that may well be indicative of a lack of confidentiality which is the essential prerequisite for the attachment of legal professional privilege. The deception of the solicitors, and therefore the abuse of the normal solicitor/client relationship, will often be the hallmark of iniquity which negates the privilege. (emphasis added)

The East-West Case About Iniquity

In the East-West Case the iniquity was put forward as follows:

The alleged wrongdoing is sufficiently iniquitous. It is alleged that Mr Gusinski and his companies avoided repaying an undefended debt by misleading the Swiss courts and the Arbitral Tribunal, and by transferring funds within the group of companies…in my judgment the allegations in this case fall squarely within the more broadly worded category of “underhand conduct [equivalent to fraud] which is in breach of a duty of good faith, or contrary to public policy or the interest of justice.”

…

On a careful assessment of the material before me, it appears more likely than not on the balance of probabilities that the Borrower, controlled by Mr Gusinski, misled the Swiss court about its intentions when applying for the moratorium; that the Respondent Companies, controlled by Mr Gusinski, misled the Arbitral Tribunal; and that the Borrower, controlled by Mr Gusinski, diverted funds which could have been seized by the Bank to other companies within the New Media Group.

There is, therefore, a prima facie case of the iniquity relied on by the Claimant as giving rise to the iniquity exception, namely a decision by Mr Gusinski to avoid the New Media Group repaying the sums owed to the Claimant, and a sufficiently dishonest or underhand scheme which allowed him to achieve that. In my judgment, there is sufficient evidence here to satisfy the merits threshold for that iniquity.

Conclusion

In conclusion, no legal professional privilege applies to documents and communications brought into existence as part of or in furtherance of the alleged decision by Mr Gusinski to avoid the New Media Group repaying the sums owed to the Claimant, and the alleged scheme which has so far allowed him to achieve that. This includes, for the avoidance of doubt, the matters raised in the present claim.