Disclosure and Iniquitous Behaviour

The High Court has provided helpful clarification on the circumstances in which parties might seek disclosure of documents, in the context of a fraud, which might otherwise be privileged.

In a recent decision of the High Court, international law firm Dentons has been ordered to disclose documents that would otherwise be privileged belonging to a client accused of running a fraudulent investment scheme.

The case of Addlesee v Dentons Europe LLP [2020] EWHC 238 (Ch) concerns an investment scheme operated during 2010 by a Cypriot company (now dissolved) under which investors, via a network of agents and introducers, were encouraged to invest in gold dust.  The scheme subsequently collapsed with the majority of investors left unpaid and suffering financial losses.    The claimants allege that the scheme was fraudulent and that they collectively lost millions.

The defendant to the proceedings is Dentons, the successor firm to Salans LLP which acted for the Cypriot company in respect of the investment scheme.  The claimants applied for disclosure of client files held by Dentons in respect of the investment scheme, but Dentons maintained that those files were privileged.

However, the High Court applied the fraud exception to legal professional privilege on the basis that the claimants had established that scheme itself was prima facie fraudulent.  In fact, the court held that the claimants had shown such a strong prima facie case of fraud that it also considered that Salans LLP had been instructed for the purposes of furthering the fraudulent scheme.

Salans LLP had produced letters of comfort for the Cypriot Company to encourage investors to participate in the scheme.  This was considered to fall outside the normal lawyer/client relationship, and in the circumstances Dentons could not maintain that the client files of the Cypriot company remained privileged, and they must therefore be disclosed.

The decision in this case followed an earlier decision of the Court of Appeal (on appeal by the claimants) that once legal advice privilege had attached to a communication by reason of the circumstances in which the communication was made, the communication remained privileged unless and until the privilege was waived or overridden by statute.  The fact of the company whose privilege it was have been dissolved was of no consequence.

While it is useful to have further clarification of circumstances in which privileged documents might fall to be disclosable by law firms, it is likely that there will be further decisions on this subject matter in due course.  Law firms must exercise the utmost caution when disclosing any documents, especially when there is a chance that such documents might fall to be privileged; it is not their privilege to waive.  We anticipate that this will not be that last of applications of this nature.

If you would like to discuss anything relating to this article, please contact Sara Roden at [email protected]