Accident Exchange Ltd & Anor v McLean & Ors

The third-party iniquity exception to legal professional privilege applies only where the wrongdoer has used an innocent client as a tool or mechanism for the wrongdoing. It is a question of fact and degree whether the relevant nexus takes the solicitor-client relationship outside the ordinary scope of professional employment. A third party’s parasitic exploitation of an existing, legitimate solicitor-client relationship is insufficient.

A contractual right to obtain information and documents may place them within a party’s control for disclosure purposes. It does not, without clear wording, amount to a wider waiver of another privilege-holder’s rights or authorise inspection by third parties. Common interest privilege is not ordinarily waivable by one holder alone.

Accident Exchange Limited and Automotive and Insurance Solutions Group PLC brought claims alleging conspiracy and deceit arising from the fabrication and deployment of credit-hire-rate evidence by Autofocus Limited and associated solicitors.

The claimants sought inspection of documents over which solicitor defendants asserted privilege, relying on the alleged iniquity of Autofocus. Other solicitor defendants sought disclosure and inspection of files held by solicitors acting for the claimants’ customers in underlying credit-hire claims. The issues were whether the iniquity exception applied, whether the documents were within the claimants’ control under rule 31.8 of the Civil Procedure Rules, and whether privilege had been waived.

1. AE’s application refused. The court accepted that there was a strong prima facie case of systemic dishonesty by Autofocus. That did not establish that the solicitor defendants’ clients had lost privilege.
2. The court reviewed R v Cox and Railton (1884) 14 QBD 153, R v Central Criminal Court ex p. Francis & Francis [1989] 1 AC 346 and The Owners and/or Demise Charterers of the Dredger “Kamal XXVI” and the Barge “Kamal XXIV” v The Owners of the Ship “Ariela” [2010] EWHC 2531 (Comm). In third-party iniquity cases, the innocent client must have been used by the wrongdoer as a tool or mechanism. Whether that nexus exists is a question of fact and degree.
3. The relevant relationship is whether the communication or conduct falls within the ordinary scope of professional employment. The existence of a separate relationship between wrongdoer and client, used to advance the wrongdoing, is a hallmark of cases where privilege is lost. Autofocus had exploited an existing legitimate lawyer-client relationship; it had not used the defendant drivers or insurers as its tools. The exception would therefore be a major and unjustified extension if applied.
4. The applicant solicitors’ applications also refused. Under the rental agreements, particularly clause 4.21, the claimants were entitled to require information and copies of documents. Those documents were therefore within their control for rule 31.8 purposes. But the clause did not expressly or impliedly waive the clients’ privilege generally or authorise disclosure to third parties.
5. The court accepted that the claimants and their customers had common interest privilege. Following Winterthur Swiss Insurance Co v AG (Manchester) Ltd (in liquidation) [2006] EWHC 839 (Comm), the ordinary position was that one holder could not waive common interest privilege alone, subject to any contrary arrangement. The contractual arrangements made the customers, rather than the claimants, the primary privilege holders.

All applications for inspection were refused.

First instance decision. No prior appellate decision is stated in the judgment.