East-West United Bank S.A. v Vladimir Gusinski & Ors

Legal professional privilege is inviolate where it exists, and does not involve balancing privilege against competing interests. The iniquity exception applies where communications are made in relation to fraud, crime or equivalent underhand conduct contrary to good faith, public policy or the interests of justice.

The exception is not confined to wrongdoing known to or participated in by the solicitor. A solicitor’s involvement in advancing a client’s false case does not automatically engage it. The question is whether the conduct falls outside the ordinary scope of the professional engagement or abuses the solicitor-client relationship.

The threshold is a prima facie case, meaning that the available evidence makes the iniquity more likely than not. Where that threshold is met, privilege does not attach to documents or communications brought into existence as part of, or in furtherance of, the iniquity.

The claimant sought a declaration that the iniquity exception to legal professional privilege applied to communications involving Vladimir Gusinski, companies in the New Media Group, their solicitors GSC Solicitors LLP and Mr Barry Samuels, and counsel.

The underlying claim concerned alleged efforts to avoid repayment of substantial sums owed under a credit facility. The claimant alleged that the group misled the Swiss courts and an arbitral tribunal, diverted funds which could have been used to repay the debt, and frustrated enforcement. GSC and Mr Samuels took a neutral position. None of the companies or other privilege holders opposed the application.

The central issues were whether the alleged conduct was sufficiently iniquitous to engage the exception and whether the evidence satisfied the applicable merits threshold.

1. Application granted. The court held that no legal professional privilege applied to documents and communications brought into existence as part of or in furtherance of the alleged decision to avoid repayment and the alleged scheme implementing it.
2. The court adopted the principles derived from Al Sadeq v Dechert LLP and others [2024] EWCA Civ 28. Privilege is inviolate where it exists. It does not arise in relation to communications connected with fraud, crime or equivalent underhand conduct. The juridical basis is that the iniquity deprives the communication of the necessary quality of confidence.
3. The exception may apply even where the solicitor is not involved in, or aware of, the client’s iniquity. However, merely advancing a client’s account of events which the client knows to be untrue does not necessarily suffice. The touchstone is whether the conduct falls outside the normal scope of professional engagement or amounts to an abuse of the solicitor-client relationship.
4. The applicable merits threshold was a prima facie case. On the material available, the court had to ask whether it appeared more likely than not, on the balance of probabilities, that the iniquity existed. If the threshold was met, privilege was excluded from documents and communications brought into existence either as part of or in furtherance of the iniquity.
5. The alleged conduct was sufficiently iniquitous. It included misleading the Swiss court about the purpose of a moratorium, diverting payments away from the claimant, and misleading the arbitral tribunal about the availability of funds earmarked for repayment. The evidence, which was uncontradicted, made it more likely than not that the alleged scheme existed. The court therefore found a prima facie case engaging the exception, while making no final findings on the underlying claim.