Hotel Portfolio II UK Ltd v SMA Investment Holdings Ltd & Ors

The iniquity exception to legal professional privilege applies only where there is a clear allegation of fraud or comparable wrongdoing supported by prima facie evidence with a foundation in fact. The court must assess the alleged iniquity and its evidential basis carefully, particularly on an interlocutory application. It is also necessary to consider whether the legal advice was given outside the ordinary scope of the solicitor’s professional engagement or involved an abuse of that relationship. Legal advice about the risks of a proposed transaction does not, without more, amount to such an abuse. The solicitor need not have been complicit, but the evidence must connect the alleged wrongdoing to the privileged communications.

Hotel Portfolio II UK Ltd, in liquidation, applied for a declaration that it could disclose eight email chains and attachments despite legal professional privilege claimed by persons connected with the Orb Claimants. It relied on the iniquity, or crime-fraud, exception, alleging that Dr Smith and others had coerced Mr Cooper and Mr McNally into transferring assets through the Isle of Man Settlement and had used Stewarts Law to facilitate that conduct.

The application arose in the context of substantial proceedings concerning the ownership and transfer of assets associated with the development of hotels. The central issues were whether there was prima facie evidence of the alleged iniquity and whether the legal advice fell outside the ordinary scope of professional engagement.

1. Application dismissed. The applicant had not established a prima facie case sufficient to displace legal professional privilege.
2. The iniquity exception is narrow. A mere allegation, pleading, surmise or conjecture is insufficient. The allegation must be clear and definite, and supported by prima facie evidence giving it a foundation in fact. The court must consider the surrounding circumstances and will be very slow to deprive a party of privilege on an interlocutory application.
3. The applicant’s evidence did not establish that Mr Cooper and Mr McNally were trustees for Mr Ruhan who had acted in breach of fiduciary duty, or that there was a wider conspiracy to defraud. The change in Mr Ruhan’s pleadings was an assertion, not evidence. The judgment relied on from earlier proceedings did not amount to a finding of iniquity. Other evidence was unclear, opinion-based, hearsay or untested.
4. The court treated the exception as involving a further question: whether the advice or conduct placed the solicitor outside the normal scope of professional engagement or constituted an abuse of the solicitor-client relationship. It was unnecessary to show solicitor complicity, but mere facilitation in the sense of drafting documents was insufficient.
5. On the alternative analysis, the emails showed that Stewarts and Isle of Man counsel were advising on the risks inherent in the proposed transaction. They were performing their proper professional role and were not shown to have been deceived into acting as an instrument of fraud. The communications therefore remained within the ordinary scope of the engagement.

The court was not satisfied that the iniquity exception applied, and HPII’s application was dismissed.