Enigma Diagnostics Limited (in liquidation) & Ors v Harvey Boulter & Ors

The iniquity exception removes legal professional privilege from communications or documents used in furtherance of fraud or equivalent underhand conduct. The exception is exceptional, particularly on an interlocutory application, and usually requires a strong or very strong prima facie case. The court may apply a lower threshold where the alleged fraud is collateral to the issue to be tried. The assessment is fact-sensitive and has no single formula. Where the evidence collectively establishes a very good arguable case that legal services were used to assist fraud, privilege may be displaced and disclosure ordered.

The claimants, a company in liquidation and its liquidators, alleged that the first defendant used a company controlled by him to sell beneficial interests in shares at a substantial profit while investors were led to believe that their payments would fund the issuing companies. They applied for disclosure of communications held by the defendant law firm and its former solicitor.

The application concerned legal advice privilege and whether the alleged deception constituted iniquity sufficient to remove it. The first defendant did not attend the hearing. The central issue was whether the evidence established the required prima facie case of fraud.

1. Nature of the privilege. Legal professional privilege includes advice privilege and litigation privilege. Only advice privilege was in issue. Privilege remains protected even after a company has been dissolved, but it does not extend to documents or communications forming part of a fraud.
2. Iniquity exception. The exception is not confined to criminal conduct. It extends to fraud and equivalent underhand conduct involving breach of a duty of good faith, conduct contrary to public policy, or conduct contrary to the interests of justice. Its application does not depend on wrongdoing by the solicitor or on the solicitor’s knowledge of the wrongdoing.
3. Required evidential standard. Because privilege is fundamental, the exception is applied only exceptionally and the court is slow to remove privilege interlocutorily. There is no universal formula for the required strength of evidence. Ordinarily, a strong or very strong prima facie case is required. A prima facie case may suffice where the alleged fraud is unrelated to the issue to be tried.
4. Application. The evidence, viewed cumulatively, was compelling. It supported a very good arguable case that investors were systematically told that payments would be transferred to the relevant portfolio companies, whereas a substantial proportion was retained by the defendant’s company. The application therefore met the threshold for iniquity.
5. Order. The court held that the defendant company had no right to legal professional privilege in material held by the law firm concerning share sales conducted using its services. The draft disclosure order was approved in principle, with the final form and costs to be addressed subsequently.

First-instance decision. No appellate history was stated in the judgment.