Privilege - Accident Exchange V McLean

Case Alert - [2018] EWHC 23 (Comm)

Judge considers the "iniquity exception" to a claim for privilege and whether one party can waive common interest privilege

Prior caselaw has established that, where the claimant's car has been damaged by the at-fault defendant, and the claimant hires a replacement car on credit terms, even though he could have afforded to hire one without credit terms, the damages recoverable for the loss of use of the damaged car will only be the basic hire rate ("BHR") of the replacement car (ie the hire rate stripped of the cost of any "credit" elements).

The claimant in this case is a car hire company. It has established that Autofocus Limited ("AF"), which was hired by the insurers of at-fault drivers, was involved in a widespread systematic fraud whereby the company fabricated evidence to show that the BHR was lower than the hire rate charged by the claimant. AF is now in liquidation and this action is brought against AF's former directors and the solicitors of the at-fault drivers.

Following disclosure by the parties, the claimant sought inspection of documents over which the solicitor defendants asserted privilege. The claimant in turn argued that the "iniquity exception" defeated this claim for privilege. This exception provides that no legal professional privilege can be asserted "in respect of documents which are in themselves part of an iniquitous proceeding or in communications made in order to obtain advice for the purpose of carrying out iniquity".

The exception does not depend on whether or not the lawyer is party to any iniquity. In this case, it was not alleged that the solicitor defendants' clients (the drivers or their insurers) were involved in any impropriety. Smith J reviewed earlier caselaw and concluded that "in cases of third party iniquity, privilege is overridden only where the client was the wrongdoer's tool or, if it be preferred, mechanism for his wrongdoing" The judge said that the iniquity exception will apply only where there is a "particular nexus or relationship between the client and the wrongdoer" which is separate from the dealings between the client and the solicitor.

The judge went on to find that a client will be the "wrongdoer's tool" where, as a question of fact and degree, the iniquity takes the lawyer/client relationship outside the ordinary scope of professional employment. On the facts of this case, privilege was not lost because AF's wrongdoing was "parasitic" on the...

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