Master Finds Privilege Does Not Apply To Documents Held In Solicitors' Client Files Due To The Fraud Exception

A High Court Master has found that documents held by a firm of solicitors on behalf of a former client were not protected by legal professional privilege, as there was a strong prima facie case that the firm had been instructed for the purpose of furthering the client's fraudulent investment scheme: Addlesee v Dentons Europe LLP [2020] EWHC 238 (Ch).

It is well established that privilege does not attach to communications between lawyer and client if the lawyer is instructed for the purpose of furthering crime, fraud or iniquity. This is referred to as the fraud exception, or sometimes the iniquity principle. It is also well established that, to apply the fraud exception, the alleged fraud need not be established on the balance of probabilities. What is required is sufficient prima facie evidence.

The present decision is of interest for the Master's discussion of the standard of evidence that applies where the existence of fraud is in issue in the underlying claim, and in particular whether the test is a “strong” or a “very strong” prima facie case. The Master's conclusion, having analysed previous authorities, is that all the circumstances of the case must be taken into account in determining the appropriate standard, bearing in mind the principle that the court will be very slow to deprive a defendant of the protection of privilege on an interim application.

So while, on the facts of this case, the Master concluded that the appropriate threshold was a “strong” (rather than “very strong”) prima facie case, the decision leaves open the possibility of the higher standard being applicable in other circumstances. The relevant factors here included that the evidence before the Master regarding fraud was likely to be substantially identical to the evidence that would be before the trial judge, that the defendant did not deny the fraud but rather did not admit it, and that the relevant fraud was that of the client company (which had been dissolved) rather than the lawyer.

Background

The claimants are about 240 investors in an investment scheme operated by Anabus Holdings Limited, a Cypriot company which has since been dissolved. The scheme involved the investors being invited to invest in gold dust.

The defendant, which previously operated as Salans LLP, acted for Anabus during the life of the scheme. The claimants say the scheme was fraudulent and that they lost (collectively) over6.5 million. They allege that the defendant recklessly and/or...