Addlesee & Ors v Dentons Europe LLP

The iniquity exception removes legal professional privilege where a lawyer is instructed to further crime, fraud or other iniquity. It can apply even if the client is unaware of the wrongdoing and is being used as an unwitting instrument by a third party. For interim disclosure, the applicant must ordinarily show a strong prima facie case where fraud is an issue in the claim. The court must consider all the circumstances, including the exceptional nature of the exception and the importance of privilege. A final finding of fraud is unnecessary. On the evidence, the arrangements were fraudulent and the solicitors were instructed to produce comfort letters intended to promote the scheme. The exception therefore applied to documents held for the client.

About 240 investors claimed losses exceeding €6.5 million arising from an investment scheme operated by Anabus Holdings Limited. The claimants alleged that Dentons Europe LLP, formerly Salans LLP, had recklessly or negligently assisted the scheme and had induced investment by providing it with apparent legal respectability.

The application concerned whether the iniquity exception applied to documents held by the defendant for Anabus, so that otherwise privileged documents could be disclosed and inspected. The principal issues were the applicable prima facie evidential threshold, whether the alleged fraud was in issue in the claim, whether there was sufficient evidence of fraud by Anabus, and whether Anabus had instead been used as an unwitting tool by LLPP Insure Limited.

1. Applicable principles. Legal professional privilege does not attach to communications made for the purpose of furthering crime, fraud or iniquity. The exception can apply to subsequent communications intended to conceal wrongdoing or its proceeds, and it is immaterial whether the solicitor knew of the wrongful purpose. It may also apply where the client is an unwitting tool of a third party. The question is whether the relationship has been taken outside the ordinary scope of professional employment.
2. Evidential threshold. A final determination of wrongdoing is unnecessary. Where fraud is an issue in the claim, the applicant must establish a strong prima facie case. The distinction between a strong and very strong prima facie case is not readily discernible in practice. The court must assess all the circumstances, balancing the importance of privilege against the gravity of the alleged fraud. The interim nature of the application does not require proof on the balance of probabilities or satisfaction of the summary judgment test.
3. Evidence and inferences. A strong prima facie case may be established by inference. The documents showed that the investment scheme promised implausibly high returns without meaningful risk, relied on invalid or valueless financial instruments and questionable due diligence documents, lacked credible trading and funding arrangements, and used solicitors’ letters to reassure prospective investors. These features amounted to a very strong and compelling prima facie case of fraud.
4. Purpose of the retainer. The defendant was instructed to produce comfort letters concerning the medium-term notes and LLPP’s purported financial support for Anabus. The letters were intended, directly or indirectly, to encourage investment in the scheme. That purpose fell outside the ordinary lawyer-client relationship. There was also a sufficiently strong alternative case that LLPP had used Anabus as an unwitting mechanism for its own fraud.
5. Disposition. The fraud exception applied to documents held by the defendant for Anabus which would otherwise have been privileged.

First-instance decision. No earlier appellate decision is described in the judgment.