Has the privilege ship sailed for parties who attempt to mislead the court following Lakatamia Shipping Co authority?

The power to override privilege is an exceptional remedy, one that was used in the case of Lakatamia Shipping Co Ltd and others v Su and others [2022] EWHC 3115 (Comm), in which the court ordered the release to a claimant of correspondence between the defendant and his lawyers, applying the fraud or iniquity exception to legal professional privilege. This was a case of exceptional circumstances in which the defendant had carried out one of the most serious campaigns of contempt before the English courts.

For further context on the content of this blog you may wish to read a previous blog on privilege which is available here. You may also wish to read this blog found here, which looks at the application of the iniquity exception in a previous High Court case.

Facts

The case concerns an application by the First Claimant (“Lakatamia”) for an order that certain specific categories of document belonging to the First Respondent (“Mr Su”), be released to Lakatamia notwithstanding any legal professional privilege that might arise. Lakatamia contended that the documents in question were not subject to privilege because of Mr Su’s iniquity.

The application is part of a long running dispute between Lakatamia and Mr Su with principal judgment entered against Mr Su in November 2014, pursuant to which Mr Su owes Lakatamia more than USD 60 million. Various orders were made against, and prison sentences imposed on, Mr Su in relation to, amongst other factors, his failure to disclose information about his assets for the purposes of enforcing the original judgment.

Lakatamia’s application centred around two categories of documents, namely: (i) correspondence between Mr Su and his English lawyers between January and March 2019; and (ii) correspondence between Mr Su and his Monégasque lawyers from 15 March 2015 to date. The documents sought had been obtained from Mr Su pursuant to search orders previously made against him. Independent Reviewing Lawyers (“IRLs”) had been appointed under the search orders to review the documents before they were provided to Lakatamia in order to protect Mr Su’s legitimate legal protections, and documents were to be released to Lakatamia unless they were irrelevant or were, or could be, subject to privilege.

Lakatamia contended that certain documents withheld by the IRLs were likely to provide information as to Mr Su’s assets and that Mr Su had used his lawyers to present a false picture of his assets to the court, in breach of several orders, including a worldwide freezing order made against Mr Su back in August 2011; or that he had used his lawyers to assist in the dissipation of his assets in breach of that freezing order. It was this iniquitous conduct on which Lakatamia based its application, submitting that the exchanges between Mr Su and his lawyers, in which Mr Su sought to hide or dissipate assets, could not be privileged.

The iniquity exception

The court had to determine whether, on the facts, Lakatamia had advanced a sufficient case that the iniquity exception applied noting that the “case-law indicates that the power to override privilege is an exceptional remedy, only to be used with the greatest care”.

In making its decision, the court looked at Mr Su’s continuous attempts to avoid (i) disclosing his assets and (ii) enforcement of judgments obtained against him. Mr Su had acted dishonestly and it was clear that he had no intention of complying with the orders made against him. Lakatamia provided the court with evidence showing Mr Su’s dishonest conduct, namely that his instruction of lawyers between January and March 2019 was not for the purpose of providing a proper account of Mr Su’s assets pursuant to a court order, rather, this was Mr Su’s attempt to give the impression that he was complying, whilst at the same time concealing his assets, or dealing with them, in breach of the order.

The court found that there was no requirement for the lawyers to have been complicit in Mr Su’s concealment, with the court finding that there had been “an abuse of the ordinary professional engagement by Mr Su of his solicitor and direct access counsel” and that “it can fairly be said that they were being used as an instrument to perpetuate the deception of Lakatamia and of the court in relation to the existence and whereabouts of Mr Su’s assets.”

The order granted by the court was not in the exact terms sought by Lakatamia; the court restricted the correspondence to be released to Lakatamia finding that the iniquity exception could not apply to every item of correspondence covered in the application. The court ordered the release to Lakatamia of correspondence which concerned or contained information about the assets of Mr Su between Mr Su and (i) his English lawyers during the period 16 January to 29 March 2019, and (ii) his Monégasque lawyers during the period 16 March 2015 to 28 February 2017.

Comment

This case confirms the application of the iniquity exception in circumstances where there has been an abuse of the professional engagement between a client and lawyer in pursuit of a dishonest scheme.

In practice, the scope of the application of the iniquity exception remains narrow. It is not a blanket exception to privilege over all documents and/or correspondence. This case demonstrates that the court’s consideration of the iniquity exception will be fact specific and shows the care which the court will take when determining whether privilege will be overridden by the iniquity exception.

FURTHER INFORMATION

For further information on the issues raised in this blog, please contact Fiona Simpson, Chantelle Tang or a member of the Dispute Resolution team. 

ABOUT THE AUTHOR

Fiona Simpson specialises in civil fraud litigation, advising clients bringing or defending civil fraud proceedings, often involving injunctions and often with an international dimension.  Fiona regularly advises on freezing orders and asset tracing. She is a recommended Global Leader in Who's Who Legal: Asset Recovery Global Guide 2022 and listed as a Thought Leader in the Who's Who Legal: GIR - Asset Recovery 2022 Guide. 

Chantelle Tang is an associate in the Dispute Resolution team. Chantelle has experience working on large group action professional negligence claims. Chantelle’s practice also includes general commercial litigation and insolvency litigation. Chantelle completed her training contract in September 2022 before qualifying and joining Kingsley Napley in October 2022.