The High Court has granted an application for the disclosure and inspection of communications between DLA Piper LLP (“DLA Piper”) and one of its former clients under the iniquity exception to legal professional privilege: Enigma Diagnostics Limited (in liquidation) & Ors v Boulter & Ors [2023] EWHC 1999 (Ch).
The First Claimant, Enigma Diagnostics Limited (“Enigma”), is a company in liquidation, and the Second and Third Claimants are its liquidators. The Claimants are pursuing claims against Enigma’s former director, Harvey Boulter, in respect of alleged breaches of his directors’ duties. In particular, the Claimants allege that Mr Boulter and a group of companies controlled by him (“Porton”) defrauded Enigma by misappropriating funds that Porton had raised from investors on Enigma’s behalf. The Claimants also allege that DLA Piper dishonestly assisted in the breaches of Mr Boulter’s duties by receiving funds from the investors into its client account and paying them away on Mr Boulter’s instructions to persons other than Enigma. The Defendants’ case is that Enigma and the investors understood that Porton was purchasing shares in Enigma on its own account and selling them on the secondary market, and that Porton was therefore entitled to keep the proceeds of sale for its own benefit.
Porton was a client of DLA Piper’s. A great many documents were therefore withheld from inspection on the ground that they were covered by legal advice privilege. The Claimants contended that there was no legal advice privilege in communications passing between Porton and DLA Piper because such communications were carried out in furtherance of an iniquity, namely a systematic fraud on Enigma’s investors (and investors in other companies promoted by Porton). For the purposes of the application, the court only needed to form a view on the fraud alleged against the investors; it did not need to reach a view on the fraud alleged against Enigma or on the involvement of DLA Piper.
Nicholas Thompsell sitting as a Deputy Judge of the High Court found that the Claimants’ evidence of the fraud against the investors was “impressive and compelling” and that there was a very good arguable case that Porton “was systematically telling Investors that the monies paid to DLA Piper would go to Enigma or the other Porton portfolio companies whose shares were being purchased, whilst the truth was that it was in fact trading for its own purposes and kept a substantial proportion of the money” [40]. He therefore ordered DLA Piper to give disclosure and production of documents (and for all parties to proceed for all purposes in the proceedings) on the basis that the relationship between DLA Piper and Porton was not subject to legal professional privilege.
Neil Kitchener KC and Tom Foxton acted for the Claimants, instructed by Macfarlanes LLP.
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