Interlocutory Iniquity

This is a guest post by Graeme Johnston.

The English courts decided long ago that there is an iniquity exception from legal professional privilege. ‘Iniquity’ includes, but is wider than, fraud or crime. It is the client’s iniquity that generates the exception: the lawyer’s guilt or innocence is irrelevant. 

Despite the longevity of the concept, applying it to disclosure of documents in civil litigation has not always been straightforward. 

This note discusses two troublesome aspects which have now been significantly clarified by the Court of Appeal in its 24 January 2024 judgment in Al Sadeq v Dechert LLP [2024] EWCA Civ 28.

The challenges of interlocutory assessments

In civil litigation, it’s sometimes necessary to reach some sort of conclusion on substantive factual and legal issues long before trial. But interpreting and applying the relevant principles can be quite difficult.

Some examples from the English litigation context may help to clarify this.

• To dismiss an opponent’s case summarily, a party must show that it has no real prospect of success or is an abuse of process. There have been many cases exploring the nuances and applications of these notions. 

• To obtain an interlocutory injunction, a party need only show that there is a serious issue to be tried. If so, the focus then switches to considering whether damages would be an adequate remedy and – if not- the “balance of convenience” – the harm each party will suffer if an injunction is or is not granted.

• To obtain an order to serve proceedings abroad, a party must show a good arguable case that the court has jurisdiction under one of the relevant “gateways.” 

In discussing the last of these three examples, the Court of Appeal observed in 2019 that what was originally intended to be a straightforward test had become befuddled by glosses, glosses upon glosses, explications and reformulations.

As we shall see, a similar situation has arisen in the iniquity context. It is this which the Court of Appeal has now sought to cut through in the Al Sadeq case. It remains to be seen whether theirs will be the last word on it for the time being, or whether the issues will also be taken up to the Supreme Court.

Assessing iniquity at the interlocutory stage

Al Sadeq addresses the issue of how to apply the iniquity exception to the disclosure of documents held by a law firm whose client refuses to waive privilege.

The context of the case is that the claimant complains of being seized in one jurisdiction (Dubai) within the UAE and rendered to another (Ras Al Khaimah) then treated in seriously unlawful ways as part of an investigation into alleged corruption by the claimant and others. He contends that the law firm and three of its partners were unlawfully complicit in aspects of this. It’s important to note that nothing has been resolved on that topic- it will be something for trial. For the purpose of the disclosure application, the focus was instead on alleged iniquity on the part of the law firm’s client – in effect, the Ras Al Khaimah government

The two main disputed issues of law were:

1. The degree to which an alleged iniquity must be apparent in order for the exception to apply in this procedural context. The case law has used the phase “prima facie” for a long time, but what does that actually mean in this context?

2. The connection between the iniquity and the document. Does the iniquity exception only apply to documents created “in furtherance of” the iniquity (language found in some of the cases) or is it wider than that? If so, how much wider?

The court’s answers to these questions are, in outline that:

1. The test is the balance of probabilities – “more likely than not” – taking into account the information available to the person reviewing the document at the interlocutory (pre-trial) stage. This may be, for example, a solicitor doing so for the purpose of disclosure, or a judge doing so for the purpose of resolving a disclosure dispute.

2. The exception applies not only to documents created “in furtherance” of an iniquity but also to those which came into existence “as part of” the iniquity. The court gives examples of what that means, and its limits.

Answer 1 is in the middle of the range of possibilities argued for by the parties.

Answer 2 makes the exception broader than the alternative argued for on behalf of the law firm.

Presumably a similar approach will be taken to oral evidence in civil litigation, though the topic will under English civil procedure tend to arise only at trial (in the absence of US-style depositions) unless a party is specifically ordered to address a particular issue in a statement before trial.

Some notes on points 1 and 2 may assist in understanding what they will mean in practice.

Point 1 – is there sufficient indication of iniquity?

The parties contended for a wide range of interpretations:

“There appeared to be common ground [that the relevant standard] was ‘a strong prima facie case’… However it was apparent from the course of the argument that the parties had very different ideas of what that means in practice. 

• [Counsel for the party challenging the privilege claim] said at one point that it required a real prospect of success. This is the test for strike out or summary judgment, and requires only a degree of probability or conviction which makes it more than fanciful. 

• [Counsel for the party asserting privilege], on the other hand, suggested that prima facie case means that the iniquity has to be established as more likely than not. At one stage he suggested that strong prima facie case means it must be much more likely than not, and very strong prima facie case means it must be very much more likely than not; but his ultimate submission, as I understood it, was that the difference between prima facie and strong or very strong prima facie was a matter of emphasis of the clarity of the evidence needed, so that strong and very strong here meant clearly and very clearly established on the balance of probabilities.”

(Note: Sub-paragraphs added for ease of reading)

As noted above, the court decided that prima facie in this procedural context means balance of probabilities. 

The court also deprecated the practice of glossing the phrase prima facie with “the epithets strong or very strong.”

Clearly it’s good to have some clarity on this at least, though “balance of probabilities” may often be quite debatable. It is likely to be quite a different beast from the balance of probabilities test as applied at trial in that

1. It will for the most part be applied by solicitors to their own clients’ documents. English courts are reluctant to order independent re-reviews but presumably parties faced with such a claim in litigation will consider the importance of having legal representatives who were in no way mixed up in the alleged iniquity, even innocently. The risk of conflict of interest, or at least cognitive bias, in reviewing your own firm’s advice in such a context must be high.

2. It will be based on incomplete, untested material rather than on the totality of what has been presented, tested and argued about at trial.

On a separate point, the court also clarified that, in an interlocutory context there is no relevant distinction to be drawn between cases in which the iniquity is one of the substantive issues in the proceedings and those where it is not. The context there was that the underlying claim in this case alleges unlawful conduct by the defendant law firm and partners, but for the purpose of the disclosure application the parties agreed to proceed on the assumption that the relevant iniquity was that of the law firm’s client. As the court observed, this “was obviously a tactical decision for the purposes of the application, so as to seek to limit the need for the court to inquire into, or form a view on, [the law firm’s] knowledge and the propriety of its conduct, for the purpose of establishing iniquity exceptions to the relevant merits threshold.”

Point 2 – part of or in furtherance of

This is the main paragraph defining out the necessary link between the iniquity and the document:

“[W]here there is a prima facie case of iniquity which engages the exception, there is no privilege in documents and communications brought into existence as part of or in furtherance of the iniquity. These are two categories, either of which is sufficient. 

Part of will include documents which report on or reveal the iniquitous conduct in question. I do not thereby intend to exclude documents brought into existence in preparation for the iniquity, which Cox and Railton [1884] indicates are covered by it, and which Goff J expressed in Butler [1971] as an additional category; they would also be part of the iniquity. This is based on the formulation in the course of or in furtherance of, expressed by Lord Sumner in O’Rourke v Darbishire [1920]… and echoed by Templeman LJ in Gamlen [1977]; but I prefer the rubric part of to in the course of, for two reasons. 

• First, in the course of might suggest some temporal limit, whereas documents revealing the iniquity may come into existence after it is complete and if so should be within the exception. 

• Secondly, it might be interpreted to mean that any documents which would not exist but for the iniquity are caught, which was [the submission of the party seeking disclosure]…. This is in my view too remote a connection to justify application of the exception.

This seems to me a principled solution because the rationale for the exception is that, where it applies, the iniquity should be revealed.”

(Note: To help with readability, I have separated the original text into shorter paragraphs and added sub-paragraphs)

The court emphasised that the iniquity exception can apply even if the lawyer is an entirely innocent “tool” of those guilty of iniquity, emphasising that

“the abuse of the lawyer/client relationship is a prerequisite to the exception applying at all, and it may be important to distinguish on a document by document basis whether the exception applies in the first place.”

To clarify this point, the court gave a hypothetical example:

“[S]uppose that [the law firm] held a document which recorded information about unlawful conditions in which [the claimant] was being or had been held. If that information came to be obtained simply as an incidental consequence of [the firm’s] general retainer in the investigation, it would be part of [the firm] being an innocent tool in the course of their clients perpetrating an iniquity and the exception would apply. The document would be disclosable as being one created as part of, and revealing, the iniquity.”

On the other hand:

“If… the information were provided for the specific purpose of seeking [the firm’s] legal advice on whether the detention was or had been lawful, it would not be disclosable.”

Balance of harm?

I mentioned at the start of this article that, in deciding whether to grant an injunction before trial, the English courts apply a balance of convenience test which in practice tends to be about relative harm.

In Al Sadeq, the court intriguingly suggests “that there might exist exceptional circumstances which could justify a court taking the view that a balance of harm analysis has a part to play.”

This suggestion is based on prior authorities. However, the court clearly does not expect such considerations to play a major part: 

“I cannot envisage any circumstances in which that exception will be applicable to a decision taken by a party or its lawyer when conducting disclosure, but it may possibly arise when a court is adjudicating on disclosure. I do not attempt to identify what those circumstances might be, and there are none in the current case.”

Conclusion

The result of the appeal on this point was that the defendants’ solicitors had conducted their disclosure review applying the wrong legal test – one that leaned too far in favour of privilege and against disclosure. 

The disclosure exercise was therefore ordered to be re-done.

It would be unfair to blame the defendants’ solicitors for this, given 

1. the uncertainty about the precise legal test, and
2. the fact that unhappy legal and professional consequences are much more likely to flow from over- rather than under-disclosure in this context (the latter being remediable by the court upon the application of the other party, as was done here).

On that second point, Richard Moorhead, Jenifer Swallow and I wrote a note in November 2022 (reported in the Law Society Gazette) suggesting that the SRA’s June 2022 guidance over-stated the extent of confidentiality.

I’ve just re-read these documents in light of this new judgment. While aspects of our November 2022 note will need an update in light of this new judgment, I think that our fundamental points stand.  

And on this particular point, even though the standard (the meaning of ‘prima facie’) is now decided to be somewhat higher than I, and evidently some others, had understood it to be, it is significantly less than others argued for. Moreover, the judgment’s interpretation of the connecting factor (‘part of’) is at the broad end of plausible interpretations and this is significant as it brings into scope all sorts of incidentally-mentioned information which does not meet the rather stringent ‘in furtherance of’ test.

Postscript

Early on in the judgment, a judicial eyebrow appears to be raised at this point:

‘The 2013 Engagement letter… [provided that] ‘{W]e will be providing strategic input and guidance in relation to the investigation, and providing legal professional privilege’

… The curious reference to legal professional privilege as something that [the law firm] would be “providing” is explained by [the solicitor representing them in this case] as infelicitous drafting, seeking to convey that the work [the law firm] would carry out would engage legal professional privilege.’

The implicit concern seems to be that the language of the engagement letter can be read as suggesting that privilege is part of what is being sold, rather than just being incidental. That is not novel or unexpected but is perhaps something to reflect upon in the context of a case such as this.

Graeme Johnston, the founder and CEO of Juralio. Before that he was a solicitor and partner at Herbert Smith Freehills.