Iniquity Exception To Privilege JSC BTA Bank v Ablyazov

This judgment considers the iniquity exception to legal professional privilege and the point at which a client conducts himself so dishonestly that the very advice given or litigation pursued by the solicitor is in furtherance of a fraud or crime, and no longer has the benefit of absolute protection from disclosure. The case is JSC BTA Bank v. Mukhtar Ablyazov and others [2014] EWHC 2788 (Comm).

Communications between a solicitor and his client for the purposes of seeking or giving legal advice, or for the purposes of litigation, are normally privileged. The principle is that clients should be able to speak freely to their lawyers without fear of their communications being made known to others. Sometimes in the course of those communications, a client will instruct a solicitor to pursue a case which the client knows to be false. The question considered by this judgment is the point at which the client conducts himself so dishonestly that the very advice given or litigation pursued by the solicitor is in furtherance of a fraud, crime or similar iniquity by the client. In those circumstances, the communications between a solicitor and his client which would normally be subject to legal professional privilege can be held not to have the benefit of that absolute protection from disclosure (the iniquity exception).

The litigation between JSC BTA Bank (the Bank) and Mukhtar Ablyazov, its former chairman, who allegedly defrauded it of more than US$6 billion, has kept the courts and a number of lawyers busy for more than five years now. The latest judgment to emerge from this ongoing battle relates to whether the iniquity exception applies to communications between Mr Ablyazov and the three firms of solicitors he instructed during that period: Clyde & Co, Stephenson Harwood and Addleshaw Goddard (which still acts for him).

Background

The Bank has been pursuing Mr Ablyazov since 2009 and currently has unsatisfied judgments against him for amounts in excess of US$4 billion. The proceedings started with a worldwide freezing order being made against Mr Ablyazov which also required him, in the usual way, to provide disclosure of his assets. Mr Ablyazov was plainly somewhat reluctant to do that, and the judgment (together with the Bank's appended statement of case) recites in some detail the findings of successive judges that Mr Ablyazov had concealed assets, dealt with them in breach of the freezing order, lied to the court and (where necessary) forged documents to support his false evidence.

Mr Ablyazov fled the jurisdiction before he could be sentenced for his contempt, and was debarred from defending the claims against him. He is currently in prison in France, from where his extradition is sought. The Bank, meanwhile, is attempting to piece together such information as it can about his assets (held through numerous intermediaries and special purpose vehicles) in order to enforce its judgments. In this application it sought disclosure from Mr Ablyazov's current and former solicitors in order to assist its enforcement efforts.

The iniquity exception to legal professional privilege

Principles of the exception

The question of whether privilege does or does not exist is vital: as Mr Justice Popplewell (the Judge) made clear, if privilege attaches to a document, it is inviolate and the document cannot be disclosed without the client's consent, whatever the competing reasons for which it should be.

As set out above, the general principle is that legal professional...