18 August 2014Print This Post

City firms face massive disclosure challenge after privilege ruling

Stack of documents

Popplewell J: “Very large quantities of often unorganised material”

Three City firms – Clyde & Co, Stephenson Harwood and Addleshaw Goddard – face a combined disclosure exercise which could last for months and cost £2.5m after a High Court ruling on legal professional privilege.

The disclosure order is part of the long-running and hugely complex Ablyazov litigation, in which the JTA BTA Bank, based in Kazakhstan, accuses Mr Ablyazov, its former chairman, and others of defrauding it of over $6bn.

Mr Ablyazov instructed Clyde & Co to defend him against the bank’s claims in 2009. The law firm was later replaced by Stephenson Harwood and then by Addleshaw Goddard.

Mr Justice Popplewell said the disclosure exercise sought by the bank would be “a search through very large quantities of often unorganised material held by three firms as the result of five years of litigation which has been conducted on all sides by means of the forensic equivalent of trench warfare”.

He said Clyde & Co held 73,337 electronic documents and 182 boxes of paper files, Stephenson Harwood potentially over one million electronic documents and 580 boxes, each containing over 1,000 pages, and Addleshaw Goddard over 500,000 emails.

Popplewell J said that “none of the solicitors’ files are organised in a way that permits easy retrieval of all documents relating to assets and asset injunctions”.

He said that all the solicitors regarded keyword searches as impractical, “both because of the complex issues of ownership and multiple privilege in the documents, and for the more essential reason that if the bank wants to find undisclosed assets then ex hypothesi it cannot know what keywords to search for.

“In this respect, the solicitors, who as the bank admits do not know of any undisclosed assets, are in no better practical position than the bank.”

Ruling in JSC BTA Bank v Ablyazov and others [2014] EWHC 2788 (Comm), Popplewell J said that although it is impossible to predict the cost with any accuracy in advance of undertaking the exercise, the combined estimates of the solicitors at this stage suggest that £2.5m “may not be unrealistic”. He observed: “On any view it will be a complex and substantial exercise lasting many months.”

The judge said the bank accepted that the cost of the disclosure exercise should not be paid by the law firms. Instead, he ruled that it should be paid by Mr Ablyazov, currently under arrest in France. Although Popplewell J acknowledged that Mr Ablyazov had “no intention of funding it”, he said the disclosure order was required by “the interests of justice”.

Popplewell J did not accept that the defendant’s attitude rendered the order futile, because in the future he might be “forced to change his mind” or the bank might decide to fund the process.

The bank argued that the documents held by the law firms were not covered by legal professional privilege, on the grounds that the privilege did not exist where the advice or litigation was “in furtherance of a fraud or crime or similar iniquity”.

Counsel for the defendants argued that not only did legal professional privilege exist, but applying what the judge termed the “iniquity exception” would breach their clients’ human rights, their privilege against self-incrimination and pave the way for a “vast and pointless fishing expedition”.

Popplewell J accepted the bank’s arguments and granted its disclosure application.

 

By Nick Hilborne

Tags: , ,


Leave a comment

We encourage you to be part of the Litigation Futures community but please note that all comments will be moderated before posting. We draw your attention to clause 5 of the Terms and Conditions of the site, which deals with user-generated content.