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INIQUITY AND LEGAL PROFESSIONAL PRIVILEGE

INIQUITY AND LEGAL PROFESSIONAL PRIVILEGEJonathan Fisher QC discusses how the recent decision in JSC BTA Bank v Mukhtar Ablyazov affirms the application of the iniquity principle in both civil and criminal cases.

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In JSC BTA Bank v Mukhtar Ablyazov, Mr Justice Popplewell granted an application made by JSC BTA Bank (the Bank) for disclosure from Mr Mukhtar Ablyazov of documents held on behalf of Mr Ablyazov by three solicitors’ firms. In granting the application, Mr Justice Popplewell affirmed the so-called “iniquity principle”, the development of which is slowly narrowing the application of legal professional privilege in borderline cases.

COMMENTARY

In the recent case of JSC BTA Bank v Mukhtar Ablyazov and Ors [2014] EWHC 2788 (Comm), Mr Justice Popplewell granted an application for the disclosure of documents, dismissing an argument that those documents were privileged. The decision formed part of a series of proceedings that have been running in the English Courts for the past five years.

The story began in Kazakhstan in May 2005, when Mr Ablyazov was appointed as chairman of JSC BTA bank. He occupied this position until February 2009 when the Kazakhstan State took control of the bank. Mr Ablyazov fled Kazakhstan, and travelled to London. In August 2009 the bank began proceedings against Mr Ablyazov. It was claimed that he had fraudulently misappropriated US$295 million. Other proceedings followed, bringing the total value of the claims to US$6 billion. Subsequently, the bank obtained judgment for a total of US$4.6 billion (JSC BTA Bank v Mukhtar Ablyazov [2014] EWHC 2788 (Comm) (see paragraphs 4-7). In giving judgment, Mr Justice Popplewell gave a damning assessment of Mr Ablyazov’s conduct, stating that “…the scale and complexity of this web of offshore companies is a hallmark of MrAblyazov’s modus operandi and a testament to his determination to put and keephis assets beyond the reach of the Bank.” (JSC BTA Bank v Mukhtar Ablyazov [2014] EWHC 2788 (Comm) (see paragraphs 37 and 38).

The central issue in the application for disclosurewas whether documentation held by Mr Ablyazov’s solicitors could be disclosed on the basis that it was subject to the “iniquity” exception to the rule on legal professional privilege. Mr Justice Popplewell held, affirming the principle first articulated by Lord Justice Bingham in Ventouris v Mountain [1991] 1 WLR 607 (at page 611), that the iniquity principle was engaged and that the information should be disclosed. He reasoned that the “touchstone” of legal professional privilege was an assessment of whether, in relation to legal advice privilege or litigation privilege, the solicitor was acting in the “...ordinary course of the professional engagementof a solicitor…” A solicitor would not be acting in the ordinary course of his professional engagement where “...iniquity puts the advice or conduct outside the normal scope of such professional engagement, or renders it an abuse of the relationship...” (JSC BTA Bank v Mukhtar Ablyazov [2014] EWHC 2788 (Comm) (see paragraph 93).

In defining iniquity, Mr Justice Popplewell distinguished between criminal cases and civil cases. In criminal cases the scope of iniquity was narrower. The reason for this was that in the “...‘ordinary run’...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.” By contrast, in civil proceedings, where there was “…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.” (JSC BTA Bank v Mukhtar Ablyazov [2014] EWHC 2788 (Comm) (see paragraph 93).

Mr Justice Popplewell concluded that 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.” In this case solicitors were not being employed in the ordinary course of engagement, “...they were being unwittingly used as an instrument to pursue a strategy which, had they known of it, they would have been unable to pursue on their client’s behalf.” (JSC BTA Bank v Mukhtar Ablyazov [2014] EWHC 2788 (Comm) (at paragraph 99).

The concept of iniquity, which lies at the heart of the decision in JSC BTA Bank v Mukhtar Ablyazov, was first articulated by Lord Justice Bingham, in Ventouris v Mountain [1991] 1 WLR 607 (at page 611). He noted that a request for disclosure of instructions given by a client to his solicitor could not be made “…without the consent of the client, and in the absence of iniquity or dispute between the client and solicitor.” A number of years later, Lord Justice Bingham’s observation was adopted by Lord Justice Schiemann, in Barclay’s Bank v Eustice [1995] 1 WLR 1238, who elaborated on the principle, citing a series of cases which “…established that advice sought or given for the purposes of iniquity is not privileged.” The cases relied upon by Lord Justice Schiemann concerned the traditional crime / fraud exception to legal professional privilege, demonstrated most pertinently in the case of R v Cox & Railton (1884) 14 QBD 153, where it was held that privilege does not attach to communications criminal in themselves, or intended to further any criminal purpose. The decision in Barclay’s Bank v Eustice effectively extended this principle to cover conduct that is fraudulent – and even conduct that is morally ambiguous – often described as “sharp practice” (1249C at F). The principle has had some support in recent years. It was applied in BBGP Managing General Partner Limited v Babcock & Brown Global Partners [2011] Ch. 296 and Williams v Mohammed [2011] EWHC 3293, affirmed on an application for permission to appeal by Lord Justice Arden [2011] EWCA Civ 670.

The significance of JSC BTA Bank v Mukhtar Ablyazov is that the decision further affirms the existence of an iniquity exception to legal professional privilege. Disappointingly, however, the boundaries of this principle remain unclear. On a strict reading of the case, it could be argued that iniquity is only engaged where there is a deception of solicitors of the magnitude conducted by Mr Ablyazov, affecting both the other party and the court. However, this interpretation is at odds with the principle articulated in Barclay’s Bank v Eustice, where even “sharp practice” could fall under the scope of the exception. The existence of the iniquity principle, and if it does exist, it’s scope, need to be considered by the Supreme Court at an early opportunity. The appellate courts should not be allowed to slowly erode the application of legal professional privilege in borderline cases without consideration of the matter at the highest level.

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The views expressed in this article represent those of the author and not Bright Line Law.

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