Foundation Stimm v King & Spalding International LLP & Anor

The iniquity principle removes legal professional privilege from documents brought into existence as part of or in furtherance of fraud, crime or equivalent underhand conduct. The exception is confined to conduct outside the ordinary scope of a lawyer’s professional engagement or amounting to an abuse of the lawyer-client relationship. It is assessed provisionally, ordinarily on the balance of probabilities, without conducting a mini-trial. The exception applies to documents directly iniquitous in themselves and to documents revealing, preparing or furthering the iniquity, but not merely to documents which would not exist but for it. Where only some strands of iniquity are established, privilege is removed only from documents sufficiently connected with those strands.

Foundation Stimm applied for production of documents withheld by King & Spalding International LLP and Nigel Heilpern on grounds of legal professional privilege. It alleged that Nikolaos Trimmatis had used the solicitors in a series of fraudulent or otherwise iniquitous transactions concerning the sale and refinancing of the Parkes Hotel.

The applications concerned the iniquity exception, disclosure against Mr Trimmatis as a non-party, and alternatively a preliminary issue as to whether Stimm had been a client of the defendants. The court also considered whether the hearing should be held in private because documents already in Stimm’s possession might retain privilege against the world.

1. Iniquity application allowed in part. The court applied the principles stated in Al Sadeq v Dechert LLP and assessed the alleged iniquities against Mr Trimmatis alone. It was inappropriate to make provisional findings about the defendants’ dishonesty or complicity where such findings were unnecessary to determine disclosure and would risk unfairness before trial.
2. Three strands were established on the balance of probabilities. Mr Trimmatis dishonestly concealed connections between Vannes and Harbinger from IBRC/NAMA. He dishonestly provided Beaufort/Aerium with documents concerning title to Harbinger’s shares and the alleged deposit loan, including forged or fictitious documents. He dishonestly misappropriated the £1.9 million transferred by Stimm and Opim, including money which should have been repaid to Stimm and money used to obtain shares for his own company.
3. Those matters were likely outside the ordinary run of legal work and involved an abuse of the lawyer-client relationship. The relevant documents were never privileged if they were created as part of or in furtherance of those iniquities. The court cautioned, however, that the issue might require document-by-document review, particularly where communications could reveal what Mr Trimmatis told the defendants or sought advice about.
4. The alleged fraud on Mr Arippol/Vennbridge, the alleged fraud concerning HMRC’s VAT and SDLT positions, and the alleged fraud concerning AWI were not established. In particular, contradictory tax positions did not establish iniquity where the court could not determine which factual account was false.
5. The defendants were directed to review documents falling within the identified categories. The court rejected a transaction-wide approach: privilege could not be removed from unrelated advice merely because other aspects of the transaction were iniquitous.
6. The non-party disclosure application under CPR 31.17 was granted. Mr Trimmatis was a necessary and proper party because the privilege was his or that of companies associated with him, and the order ensured that he could not obstruct disclosure by asserting privilege.
7. The preliminary issue application was refused. Whether Stimm was a client was not dispositive of the claim, and using the existing trial window for that issue would cause delay and disproportionate cost.
8. The hearing properly remained in public. The requirements for derogation from open justice under CPR 39.2 were not met, although the court directed that potentially privileged documents should, so far as possible, be read silently rather than aloud.