The High Court has held that the iniquity exception to privilege applied in respect of certain aspects of a transaction, so that no privilege attached to various categories of documents over which the defendants had asserted privilege. It did not, however, follow that none of the defendants' documents relating to the transaction were privileged: Foundation Stimm v King & Spalding International LLP and Anor [2025] EWHC 1067 (Ch).
The iniquity exception provides that legal professional privilege will not apply to documents or communications that are made as part of, or in furtherance of, a fraud, crime or other iniquity. Successful applications for disclosure of documents over which privilege has been asserted on the basis of the iniquity exception are relatively rare. However, the exception will apply if there is sufficient evidence that there has been an iniquity, and that it involves an abuse of the lawyer/client relationship – such as where lawyers are used to provide authenticity and regularity to the iniquitous behaviour.
However, even where multiple iniquities have been established in relation to a transaction, it does not follow that none of the documents connected with the transaction are privileged. This decision higlights that documents must still be reviewed to determine whether they involved an abuse of the lawyer/client relationship. That may not be the case, for example, if the client was seeking advice in relation to the lawfulness or otherwise of the proposed iniquitous conduct (as opposed to seeking advice that would assist the client in committing the iniquity). Similarly, privilege would apply to any communications about matters which were not tainted by the iniquity.
Background
The case arose from the sale of a property in Kensington for £33.5 million. The sale involved a number of parties and a complex transactional framework. Mr Trimmatis, a non-party to the proceedings, was interested on both sides of the transaction. King & Spalding and one of its partners, Mr Heilpern, acted for the purchaser.
Following the sale, Mr Trimmatis was declared bankrupt and a bench warrant was issued for his arrest. The purchaser company and most of the other entities involved in the transaction were dissolved. The Stimm Foundation ("Stimm"), a foundation beneficially owned by Mr Trimmatis's former co-owner in the property, claimed that the transaction was based in fraud. It sought to recover from King & Spalding and Mr Heilpern certain sums which Stimm had paid over to King & Spalding during the course of the transaction at Mr Trimmatis's request and which, it claimed, had been misappropriated.
The issues for decision turned on the extent to which Mr Trimmatis was involved in iniquity and, if so, the extent to which King & Spalding and Mr Heilpern colluded with him or were aware of his wrongdoing.
In the course of the bankruptcy proceedings against Mr Trimmatis, Stimm became aware that a file had been opened by King & Spalding in Stimm's name. Stimm subsequently requested a copy of the file from the bankruptcy trustee, which was released to it with King & Spalding's consent. King & Spalding said that this was an error (indeed Stimm had never been a client) but accepted that privilege in relation to the documents in the file had been lost against Stimm.
The file contained hard copy documents only. Stimm therefore sought disclosure of other relevant documents. King & Spalding claimed that some of the documents were privileged. Stimm claimed that the iniquity exception applied.
Decision
The High Court (Andrew Twigger KC sitting as a Deputy Judge) found that three of the six "strands" of iniquity alleged by the claimant were adequately demonstrated, but that the documents relating to the transaction would need to be reviewed individually to determine whether they involved an abuse of the lawyer/client relationship such that privilege did not apply.
Relevant legal principles
The Court of Appeal decision in Al Sadeq v Dechert [2024] EWCA Civ 28 (considered in this blog post) definitively set out the law concerning the iniquity principle. For the purposes of the application before it, the court summarised the key propositions from that case, including:
- The iniquity principle is not confined to cases where the legal adviser is party to, or aware of, the iniquity. The relevant iniquitous purpose is that of the client or a third party who is using the client as a tool for the iniquity.
- The iniquity exception does not apply to the "ordinary run of cases". The key issue is whether the iniquity puts the conduct outside the scope of a lawyer's professional engagement, or is an abuse of the relationship which falls within the ordinary course of that engagement.
- One distinction between the "ordinary run of cases" and an abuse of the lawyer/client relationship may be whether the accused has consulted their adviser (i) after the commission of the iniquity for the legitimate purpose of being defended; or (ii) before the commission of the iniquity for the purpose of being guided or helped in committing it.
- The abuse of the lawyer/client relationship is a prerequisite to the exception applying. It may, therefore, be important to distinguish on a document-by-document basis whether the exception applies.
- Save in exceptional cases, the standard of proof for the iniquity exception is the balance of probabilities. In other words, the existence of the iniquity must be more likely than not on the material available.
- Where 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. The latter means documents that are iniquitous themselves, including communications for the purposes of carrying out a fraud. The former includes documents that report on or reveal the iniquitous conduct.
Decision on the facts
The court then considered each alleged "strand" of iniquity and the evidence provided in support of them, finding that three had been sufficiently made out:
- Mortgage Fraud. It was alleged that Mr Trimmatis dishonestly concealed that he had an interest in both sides of the transaction. The mortgagees had repeatedly sought, and received, assurances that this was not the case. On the basis of the evidence before it, the court found that it was more likely than not that it was Mr Trimmatis's intention from the outset of instructing King & Spalding that the mortgagees be induced to redeem their charge for less than they were owed. Further, the iniquity amounted to an abuse of the lawyer/client relationship because Mr Trimmatis could not have put the transaction into effect without a solicitor and he needed the defendants to "give the appearance of regularity and authenticity" to what he was doing.
- Fraud on a third party funder. It was alleged that forged, backdated and fictious documents were provided to a third party for the purposes of inducing it to acquire shares in the buyer and fund the acquisition. While the judge noted that ultimate determination of whether the documents were forged, backdated, or fictitious would be a matter for trial, based on the evidence before it, it was more likely than not that certain documents had been forged and the third party had been misled about the chain of title to shares in the buyer. The iniquity amounted to an abuse of the lawyer/client relationship because Mr Trimmatis had consulted King & Spalding before commission of the iniquity for the purpose of being helped to commit it, even if Mr Heilpern was unaware of what was happening. The defendants were needed to pass on the forged documents so as to give them the appearance of "regularity and authenticity".
- Fraud on Stimm. While it was alleged that certain forged, fictitious and backdated documents were provided to Stimm so that it would provide the transaction deposit, the core allegation was that the deposit provided by Stimm was then dishonestly misappropriated. The court found that the circumstances of the case were such that a commercial person would say that the misappropriation was a fraud. This iniquity was compounded by the iniquities surrounding the forged and fictitious documents. Once again, the court held that the iniquities amounted to an abuse of the lawyer/client relationship. The defendants were needed to give the appearance of "regularity and authenticity" to what Mr Trimmatis was doing. Mr Heilpern was involved in the production of some of the forged, fictitious and backdated documents and, whether or not he realised what was going on, "he was being used as a tool to further an iniquity and was instrumental in it".
The other alleged "strands" of iniquity were dismissed on the basis that the claimant had not provided sufficient factual basis to evidence that it was more likely than not that the iniquity occurred.
Implications for disclosure
Despite the provisional findings that there was an abuse of the lawyer/client relationship, the judge said it was not possible to be certain that any documents involved an abuse of that relationship without reviewing them. He noted: "In so far as Mr Trimmatis told the defendants what he was doing, or what he intended to do, and sought advice about whether it was lawful, those communications might be privileged."
Further, the judge noted that there were likely to be privileged documents containing communications about matters which were unrelated to the strands of iniquity that had been established.
Consequently, the judge held that the documents would have to be reviewed to determine which documents had to be produced pursuant to the court's findings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
