Exception to the privilege rule

By 16 December 2018KEY ARTICLES
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Exception to the privilege rule

First published on 16 December 2018
Joseph-S-R-de-Saram

Joseph S R de Saram (JSRDS)

Information Security Architect / Intelligence Analyst / Computer Scientist / Human Rights Activist / COMSEC / SIGINT / TSCM
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The iniquity exception to privilege, also known as the ‘crime-fraud exception’, is venerable, dating at least to R v Cox and Railton (1884) 14 QBD 153. The description of this rule as the ‘crime-fraud exception’ is misleading: first, because it is not restricted to criminal or fraudulent activities, and second because it is not an exception to privilege, but rather a situation in which privilege does not arise at all.

I refer to the this article about exceptions to the iniquity rule:-

Exception to the privilege rule

Dmitry Feoktistov, deputy director of the Department of New Challenges and Threats of the Russian Ministry of Foreign Affairs and co-chair of the G20 Anti-Corruption Working Group, attends the briefing 'The Fight against Corruption on the G20 Agenda'...

Longmore LJ in Kuwait Airways Corpn v Iraqi Airways Co (No 6) [2005] 1 WLR 2734 summarised the exception, saying that where a person consults a solicitor in furtherance of a criminal purpose then, whether or not the solicitor knowingly assists in the furtherance of such purpose, the communications between the client and the solicitor do not attract legal professional privilege.

While this is a good starting point for understanding the principle, it does not reflect the principle’s breadth.

The exception has recently been applied in JSC BTA Bank v Mukhtar Ablyazov & Ors [2014] EWHC 2788 (Comm). That case is due before the Supreme Court in March. Despite its usefulness, this remains an underused principle. The principle generally – and the upcoming decision in Ablyazov in particular – merit litigators’ close attention.

Criminal conduct is not required

This principle is not confined to abuse of the client/solicitor relationship for criminal purposes, but extends to civil fraud or other equivalent underhand conduct, which is a breach of the duty of good faith, or contrary to public policy or the interests of justice.

For the purposes of its application in the civil litigation context, it is vital to remember that fraud or criminality need not necessarily be provable in order for the principle to apply. To reflect this, the term iniquity exception has been used in place of crime-fraud exception and is preferable (see Ventouris v Mountain [1991] 1 WLR 607, per Bingham LJ and Ablyazov per Popplewell J at 68).

Popplewell J in the Ablyazov case summarised the basis for the exception in the context of legal advice privilege in the following terms:

‘If the iniquity puts the advice or conduct outside the scope of such [normal] 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 purposes 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.’

Advice and litigation

The iniquity exception is most often used in the context of challenging an assertion of legal advice privilege, but it is firmly established that the principle applies also to litigation privilege (see Kuwait Airways (No 6)).

Courts guard privilege jealously and only in exceptional circumstances will it be displaced (see Derby & Co Ltd v Weldon (No.7) [1990] 1 WLR 1156 per Vinelott J at 1159). An application to the court under the iniquity exception is a step to be taken with the utmost care, and the party making the application should be in possession of, at the very least, strong prima facie evidence of iniquity if it is to have any prospect of success. The Supreme Court in Ablyazov might, of course, make fundamental changes to the exception, although in the context of such a well-established principle that seems unlikely.

In practice, the iniquity exception can prove useful in a variety of litigation contexts.

First, where there is prima facie evidence of iniquity, a pre-trial application for disclosure pursuant to this principle can give rise to material with which to defeat the claim at hand; and/or put the party making the application into a strong negotiating position.

Second, where a defendant believes itself to be the subject of repeated false claims by, for instance, members of a fraud ring, the value of material relating to one false claimant can prove relevant to identifying and defeating the claims of linked claimants.

Finally, material disclosed pursuant to the iniquity exception might be relevant to a claim against the solicitor representing a false claimant, pursuant to the principle in the Scottish case of Frank Houlgate Investment Company Limited v Biggart Baillie LLP [2014] CSIH 79.

William Irwin is a barrister at Temple Garden Chambers

Exception to the privilege rule

Dmitry Feoktistov, deputy director of the Department of New Challenges and Threats of the Russian Ministry of Foreign Affairs and co-chair of the G20 Anti-Corruption Working Group, attends the briefing 'The Fight against Corruption on the G20 Agenda'...

the complicity of any or all of the tax, security, law-enforcement and judicial authorities,

[MEANING CRIMINAL FRAUD BY OFFICIAL STATE ACTORS]

  • and the

use of charges that are either freely invented or examples of the highly selective use of accusations that could have been levelled at many other business people but were not.

[THIS IS A MIXTURE OF STREET THEATRE, MOBBING AND ‘TALKING UP A CASE WHICH HAS ZERO PROSPECTS OF SUCCESS’. IT SERVES AS A TECHNIQUE TO ISOLATE THE TARGET AND DEPRIVE THEM OF THEIR SUPPORT INFRASTRUCTURE.]

  • Reiderstvo is made possible by corruption and contributes to market-entry barriers and the insufficient restructuring of incumbent firms. 
  • The lack of protection of property rights that makes reiderstvo possible is one of the risks that make investment in Russia less attractive than it would otherwise be. This contributes to the modest level of fixed investment as a share of GDP, to the net outflow of private capital in all post-Soviet years except in 2005–07 and to the weakness of competition. The disincentives to invest apply to foreign as well as Russian firms.

[ACCORDINGLY FROM 2009 IF NOT BEFORE ASSETS STRUCTURE WERE PUT IN PLACE IN ORDER TO WITHSTAND A WORLDWIDE MAREVA INJUNCTION. CLEARLY THAT PREDATES ANYTHING RELATED TO THE PRESENT OBVIOUSLY.]

  • Since early 2012 the phenomenon of asset-grabbing has been widely publicized in the Russian media, and calls to reform law enforcement and the courts, and to protect property rights have become commonplace.
  • Reiderstvo has elicited significant civil resistance. Business associations have played a role in launching counter-measures. The state has intervened to try and guide the campaign against reiderstvo but it does not monopolise that campaign as it does the broader, official ‘anti-corruption campaign’.
  • At the same time, developments over the amnesty for economic crimes, the role of commercial courts and the management of tax charges show just how powerful the forces ranged in favour of the status quo can be.
Joseph-S-R-de-Saram

Joseph S R de Saram (JSRDS)

Information Security Architect / Intelligence Analyst / Computer Scientist / Human Rights Activist / COMSEC / SIGINT / TSCM
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