ASPECTS OF CONFIDENTIALITY (Lectures 5 & 6)

(A) Confidentiality - General Considerations

Professionally lawyers are required to live by a code of silence - their duty of confidentiality - which prohibits disclosure of information concerning their clients' affairs. Although this duty is subject to exceptions and qualifications, the general understanding is that lawyers simply cannot talk about their clients' affairs, no matter how beneficial disclosure might be in terms of the common good. From an utilitarian perspective there is something quite mad about thus deliberately sealing the lips of those particularly well placed to encounter fraud and corrupt practices and blow the whistle. Consider, for example, widespread loss and distress associated with massive banking, insurance and pension frauds; "corporate frauds against the public are often committed with the assistance of accountants and lawyers who close their eyes to what is happening. Some kind of magic seems to prevent the law on aiding, abetting and counselling being applied to these professionals without whose assistance the crimes could hardly be successfully carried out" [Lionel Murphy, "The Responsibility of Judges" in Law, Politics and the Labor Movement, Gareth Evans, ed. (Clayton, Victoria, 1980), p. 3 ]. If this is so, a powerful justification is surely required for trumping social welfare with the lawyer's right (and duty) of silence.



Confidentiality thus presents not only as a central feature of lawyers' ethics but also as a social problem. As David Luban puts it, modern societies are so dependent on lawyers that "their ethical problems transform themselves into public difficulties ... the ethical problems of lawyers are social and political problems for the rest of us" [David Luban, Lawyers and Justice (Princeton University Press 1988), p xviii]. Confidentiality shrouds in secrecy activities that cry out for scrutiny in the public interest and it prevents any full and fair assessment of the ethical quality of the lawyer's performance.



The duty of confidentiality is open to abuse and exploitation by unscrupulous clients and unethical lawyers alike, secure in the knowledge that they are unlikely to be called to account for activities which by their very nature must be kept secret. Strict confidentiality appears likely to thwart accountability. Furthermore, clients' interests in secrecy may erode ethical standards where, for example, lawyers assist corporate clients so to structure the minutes of their internal proceedings and other documents in order to attract protection from discovery under the doctrine of legal professional privilege. Barclays Bank v Eustice [1995 New Law Journal 1503 ] is illustrative. There a client sought legal advice on the structuring of a transaction to be entered into at an undervalue for the purpose of prejudicing the interests of a person making a claim against him within s 423 of the Insolvency Act 1986. That purpose was held to be sufficiently iniquitous for public policy to require that legal professional privilege be overridden to the effect that communications between the client and his solicitors in relation to the setting up of the transactions be discoverable , whether or nor either the client or the solicitors believed that the transactions would fall to be set aside under s 423.

If, putting the matter at its strongest, the professional duty of confidentiality applies to any and all information acquired by lawyers in the scope of their employment then some information relevant to judgments about lawyer conduct will be subject to that professional duty, hidden from view on ethical grounds, and unlikely to be readily available either to official or unofficial scrutineers. Where clients complain about the conduct of their own lawyers, confidentiality is at least impliedly waived but where clients are content with the conduct of their lawyers, even though that conduct may be professionally unethical, relevant information is protected by the ethical duty of confidentiality.



Strict confidentiality is deeply embedded in the lawyer's general role and self-image. Strict or unlimited confidentiality is, however, usually justified from the narrower perspective of the criminal lawyer, particularly in the context of a client charged with crime and conclusions drawn in that legal arena are, perhaps uncritically, generalised so as to apply to the full range of lawyer conduct. It is, however, at least questionable whether the nearly absolute prohibition on breach of confidence which characterises the role of the criminal lawyer defending a client against the state is appropriate, without modification, in other areas of lawyering [David Luban, op cit Chs 9 and 10]



The criminal arena does, however, provide the clearest illustrations of the very great weight accorded to confidentiality by the legal profession generally and academic literature features a number of standard examples such as the Lake Pleasant bodies case [J F Chamberlain, "Confidentiality and the Case of Robert Garrow's Lawyers" (1976) 25 Buff L Rev 221]: A client charged with the murder of one victim revealed to his lawyers where the bodies of other victims could be found. Despite anguished pleas for information from a parent of one of these victims, the lawyers refused to provide any, and, subsequently, their refusal was judicially approved as being required by the confidentiality of the client-lawyer relationship. The argument, in brief, is that to provide the client with the best possible defence, the lawyer requires full disclosure and such disclosure might be inhibited if not protected by the strictest confidentiality. Maintaining the integrity of the client-lawyer relationship is perceived to outweigh prevention of third party suffering. The Georgia death row case [David Kaplan, "Death Row Dilemma" January 25, 1988 National Law Journal 35] is an even stronger example. A client and another had been convicted of a murder and awaited execution. The client retained lawyers for an appeal. He revealed to these lawyers that he had framed the other out of spite. The duty of confidentiality required these lawyers to say nothing even if their silence led to the execution of the innocent victim. This provides a measure of the weight accorded to the duty of confidentiality and the integrity of the client-lawyer relationship: these are seen as more important even than the preservation of innocent life. In the event, the client died before the other was executed and, on the basis that death extinguishes the duty of confidentiality [this is at least questionable but not for exploration here], the lawyers disclosed what they had been told and the victim was set free] which illustrate that adherence to the duty of confidentiality prevails over intense human anguish and, by implication, even over the execution of an innocent wrongly convicted of murder. Of course such a court order permits a solicitor to disclose information which would otherwise have ben confidential and there are no heroic cases of lawyers refusing to comply with a ruling of a court on ethical grounds such as are encountered from time to time with journalists.



A less widely cited but no less instructive instance occurred in Scotland. A Scottish solicitor writes: "During the year of 1973, and frequently in the next two years, a murderer would appear in my office, always unannounced, never by appointment, and he would see only me. He would sit across the desk from me, tormenting me - although, in fairness, this was not his purpose - with more and more of his dark and dramatic secret. He and another man had been responsible for the murder of an elderly Jewish woman during a robbery at her bungalow home some four years earlier. Neither of them had been caught, although the man in front of me had escaped capture by the proverbial whisker. Now here he was, sitting in my office as a client, slowly dripping more and more information that an innocent man, Patrick Meehan, had been jailed for that murder. Indeed he was saying more than that ... he was virtually telling me that he was the murderer. And I was helpless ! Because of a strict rule of confidentiality between solicitor and client, I could do nothing about it - while Meehan, also a client of mine, languished in jail. Call it, if you will, a golden rule that cannot be broken, rather like that of a confessor in the Roman Catholic Church. He, too, can never divulge anything told to him within the walls of the confessional. For three years I was well and truly saddled with the crushing burden of knowing that such confidences between solicitor and client are inviolable ..." [Joe Beltrami, A Deadly Innocence (Mainstream Publishing, 1989) p 19].



And there are illustrations available from civil law as well such as Spaulding v Zimmerman [116 NW 2d 704 (1962) Supreme Court of Minesota]. Clearly the duty is regarded very seriously, perhaps even as "absolute " apparently outweighing an innocent's right to life and enduring, probably, beyond the grave. As thus understood, and generalised in its ambit to the full range of lawyering, the professional duty of confidentiality stands as a major obstacle to the disclosure of information relevant to assessing the ethical quality of the lawyer's performance.



Greenough v Gaskell [1 My & K 98] a case decided by Lord Brougham in 1833 is illustrative. In March, 1831 by Order in an action for the administration of a testator's estate a Mr Darwell was to be paid 5,000 from funds in court provided he executed a bond for 10,000. In April 1861 1600 of the 5000 was paid to Mr Darwell's solicitor, Mr Gaskell, who received the money on his client's account though allegedly he knew that his client had not given the required security. This failure was soon discovered and Mr Darwell was ordered to repay the 1600. He did not do so, attachment issued against him, and he was arrested. An application was made to the plaintiffs who joined in signing and delivering to Mr Gaskell a promissory note for 1698, being the principal plus the balance of costs. On receiving this note, Mr Gaskell advanced the money ordered to be repaid and his client was immediately at liberty. Mr Darwell became bankrupt shortly afterwards and action was brought against Mr Gaskell by those who had joined in executing the promissory note to have it cancelled. The lender plaintiffs alleged that Mr Gaskell had pressed and solicited them to execute the promissory note; had fraudulently concealed the fact that his client was then in a state of insolvency or had committed an act of bankruptcy; and had falsely represented that his client's difficulties were only temporary though he well knew the truth. The plaintiffs claimed that Mr Gaskell should be held liable when Mr Darwell failed to pay and stated many facts tending to show that the solicitor must have fully known the real situation and circumstances of his client.



The defendant solicitor emphatically denied that the note was executed at his insistence or entreaty but admitting knowledge of Mr Darwell's financial situation at the time of the transaction. Mr Gaskell also admitted possession of relevant papers, which he set out in a schedule but asserted that such papers were written or received by him in his capacity of confidential solicitor for Mr Darwell for whom he had been professionally engaged for a number of years. The argument for the plaintiff was powerfully and persuasively stated: "The privilege which entitles solicitors to withhold discovery of matters coming to their knowledge in the course of their professional business was a privilege granted solely for the benefit of the client and should never be allowed to shelter a solicitor who was sought to be personally charged with fraud" [1 My & K 98, 100]. However the court refused to order production of the documents sought by the plaintiffs, holding that a solicitor cannot be compelled at the instance of a third party to disclose matters which came to his knowledge in the conduct of professional business for a client, (even where such business had no reference to existing or contemplated litigation).. So extraordinary an outcome - that client confidentiality protects a solicitor in an action alleging fraud by the solicitor from production of documents in his possession which might well determine the matter - is difficult to justify and on the facts of this case the standard justification given simply misses the point: "... the interests of justice cannot be upholden, and the administration of justice cannot go on, without the aid of men skilled in jurisprudence, in the practice of the Courts, and in those matters affecting rights and obligations which form the subject matter of all judicial proceedings. If the privilege did not exist at all, everyone would be thrown upon his own legal resources; deprived of all professional assistance, a man would not venture to consult any skilful person, or would only dare to tell his counsellor half his case. If the privilege were confined to communications concerned with suits begun, or intended, or expected, or apprehended, no one could safely adopt such precautions as might eventually render any proceedings successful, or all proceedings superfluous [1 My & K 98, 103]. This may well provide some, perhaps persuasive, justification for the duty of confidentiality generally but it says nothing whatsoever about the limits of the duty and especially whether fraud, including solicitor fraud, unravels the obligation.



(B) Confidentiality and Fraud

R v Cox and Railton [(1884) 14 QBD 153] moves matters on but does not wholly settle the question of solicitor fraud. Here two partners, Mr Cox and Mr Railton, were tried and convicted on a charge of conspiring to defraud a judgment creditor, Mr Munster, of the fruits of his execution. At the trial a solicitor, Mr Goodman, was called by the prosecution to testify that after Mr Munster had obtained his judgment, Mr Cox and Mr Railton consulted him as to how they might defeat that judgment. The admissibility of that evidence was questioned on the grounds that the communications were between client and solicitor and privileged. The Central Criminal Court received the evidence and sought the opinion of the Court of Crown Cases Reserved as to whether it was correct to have done so.



Stephen J delivered the judgment of that court: " The case was argued first before five judges on the 5th of April, and afterwards, on account of its great importance, before ten judges on the 21st of June ... we were unanimously of the opinion that the conviction must be confirmed, but we deferred the statement of our reasons in order that they might be given with due fullness and deliberation... The question, therefore, is whether, if a client applies to a legal adviser for advice intended to facilitate or to guide the client in the commission of a crime or fraud, the legal adviser being ignorant of the purpose for which his advice is wanted, the communication between the two is privileged ? We expressed our opinion at the end of the argument that no such privilege existed. The case which has always been regarded as the great leading authority on the question of the privilege of legal advisers is Greenough v Gaskell ... in this case the rule as to professional communications was laid down [sc. that legal advisers are not only justified but bound to withhold information received in the ordinary course of professional employment] ... This rule has been accepted and acted upon ever since and we fully recognise its authority, but we think that the present case does not fall either under the reason on which it rests or within the terms in which it is expressed ... [because a] communication in furtherance of a criminal purpose does not come into "the ordinary scope of professional employment" [(1884) 14 QBD 153, 164-167, passim (1884)].



It follows that where the client is seized of a criminal or fraudulent purpose of which the solicitor is unaware, communications are not privileged and should be disclosed on a proper understanding of the rule in Greenough v Gaskell "for the protection of such communications cannot possibly be otherwise than injurious to the interest of justice, and to those of the administration of justice" [(1884) 14 QBD 153, 167 per Stephen J]. This neatly turns upholding justice into an argument for disclosure, depending upon the circumstances of the case.



In my opinion, remarkable result now follows from juxtaposing the decisions of these two landmark cases. Where it is alleged that a client was seized of a criminal or fraudulent purpose, and, possibly where both the client and the solicitor are parties to such purposes, communications are not privileged and should be disclosed in the interests of justice. Where there are allegations of fraud solely against a solicitor, so long as Greenough v Gaskell is the controlling authority, information received in the ordinary scope of professional employment remains privileged notwithstanding the allegations of fraud. Such an outcome is difficult to reconcile with logic or justice. If an innocent solicitor acting for a fraudulent client does not act within the ordinary scope of professional employment; a fortiori a fraudulent solicitor does not so act. This was the view put by counsel for the appellant in Minter v Priest [[1930] AC 558, 563] and that seems to have been accepted by Lord Buckmaster [[1930] AC 558, 569] although it was not necessary to settle the point in order to decide the case. Lord Atkin put the matter plainly enough: "If communications which otherwise would be protected pass for the purpose of enabling either party to commit a crime or a fraud the protection will be withheld" [[1930] AC 558, 581] Plainly activities criminal or fraudulent in themselves cannot possibly be otherwise than injurious to the interests of justice. One possibility is simply to regard Greenough v Gaskell as proceeding on the basis that there was no extrinsic evidence of fraud by the solicitor and that the court was therefore bound to proceed on the basis that Mr Gaskell was acting within the scope of professional employment. That suggestion raises directly the question that pressed upon Watkin Williams J in R v Cox and Railton: "what foundation was laid for admitting Mr Goodman's evidence ?" [(1884) 14 QBD 153, 161]. Lopes J took up the point, observing that "there were, so far as appears, no facts to destroy privilege given in evidence before Mr Goodman was called. It is impossible to say you are to have the secret of the client disclosed in public, so as to see if it ought to be disclosed" [(1884) 14 QBD 153, 161-162]. And this puzzle in the law of evidence relating to legal professional privilege is also a great problem for lawyer's ethics and confidentiality. There is something self-defeating about the claim that confidentiality may be breached in order to determine whether confidentiality ought to be breached.



However an answer - of sorts - to this logical conundrum is provided in the judgment of the court: "We were greatly pressed with the argument that, speaking practically, the admission of any such exception to the privilege of legal advisers so that it is not to extend to communications made in furtherance of any criminal or fraudulent purpose would greatly diminish the value of the privilege. The privilege must, it was argued, be violated in order to ascertain it exists. The secret must be told to see whether it ought to be kept. We were earnestly pressed to lay down some rule as to the manner in which this consequence should be avoided. The only thing which we feel authorised to say upon this matter is, that in each particular case the Court must determine upon the facts actually given in evidence or proposed to be given in evidence, whether it seems probable that the accused person may have consulted his legal adviser not after the commission of the crime for the legitimate purpose of being defended, but before the commission of the crime for the purpose of being guided or helped in committing it... Courts must in every instance judge for themselves on the special facts of each particular case [14 QBD 153, 175-176] Thus there would have ti be some extrinsic evidence in play give colour to the suggestion of fraud and to justify the disclosure sought:""... in order to displace the prima facie right to silence by a witness who has been put in a relation of professional confidence with a client, before that confidence can be broken you must have some definite charge either by way of allegation or affidavit or what not" [Bullivant v Attorney-General for Victoria 1901 AC 201, 203 per L Halsbury]. Accordingly, the plaintiff must "go at any rate so far as to satisfy the Court that his allegations of fraud are not merely the bold assertions of a reckless pleader, but are such as to be regarded seriously as constituting prima facie a case of fraud resting on solid grounds"[ O'Rourke v Darbishire [1920] AC 581, 632 per L Wrenbury]. Once over that hurdle, however, "If communications which would otherwise be protected pass for the purpose of enabling either party to commit a crime or a fraud the protection will be withheld" [Minter v Priest [1930] AC 559, 581 per Lord Atkin]. Applying the above reasoning and dicta to the facts of Greenough v Gaskell, whilst wholly accepting the rule laid down in that case, would lead to a different and better outcome, subject to the plaintiff being able to satisfy the court that the allegations of solicitor fraud have some grounding in objective fact.



(C) Confidentiality and Privilege

One way to assess how serious any particular legal system is about upholding justice is to assess how far it is prepared to assert the right to disclosure in competition with confidentiality. The doctrine of legal professional privilege is the outcome of the conflict between the conflicting requirements of confidentiality and disclosure and the precise point at which disclosure gives way and confidentiality prevails varies as between different jurisdictions and within the same jurisdiction over time. Confidentiality does not necessarily mandate non-disclosure: it merely provides a reason for non-disclosure which may or may not be outweighed by other considerations. Privilege, however, prevents communications between a client and a solicitor from being disclosed even in a court of law. Therefore "privilege detracts from the fairness of the trial by denying a party access to relevant documents"[Grant v Downs (1976) 135 CLR 674, 686 per Stephen, Mason and Murphy JJ]. It follows from a commitment to a fair trial that privilege should be kept within very narrow limits and granted only where there are compelling reasons. The scope of privilege was addressed, as a matter of first impression, by the House of Lords in Waugh v British Railways Board [[1979] 2 All E R 1169] Their Lordships considered three possibilities: (1) the prevailing English approach that a document need not be disclosed if one of its purposes, even though subsidiary, was submission to legal advisers with a view to litigation contemplated as possible or probable; (2) the majority opinion of the Australian High Court in Grant v Downs that privilege must be confined to documents brought into being for the sole purpose of submission to legal advisers for advice or use in legal proceedings; (3) the minority opinion of Barwick CJ in Grant v Downs that in order to attract privilege from disclosure use of the document either for legal advice or in reasonably apprehended litigation had to be the dominant purpose. The House of Lords unanimously adopted the "dominant purpose" test. Although this narrowed the scope of privilege in comparison with the pre-existing law, and therefore increases the range of legitimate disclosure, in English law privilege is wider than in Australia to the possible detriment of the fairness of a greater number of trials. Whatever the extent of privilege, however, in any one legal system, where privilege runs out, confidentiality kicks in. So "moral legalism" which holds that lawyers' ethics is restricted to lawyers being required to do what the law requires - no more and no less - is unsatisfactory. And there is a real problem in so far as the reach of privilege is uncertain and problems arise for the morally conscientious lawyer in knowing whether one is constrained by the law of privilege and therefore unfree or constrained by the ethics of confidentiality and therefore that much freer to decide in accordance with one's own moral values as well as in light of the recommendations and suggestions contained in various professional codes and the like, such as the Law Society's Guide.



The complexities can be illustrated by a consideration of R v Central Criminal Court, ex p Francis &Francis [1989] 1 AC 346, a three-two decision of the House of Lords. Under the Drug Trafficking Offences Act 1986, s. 27: "(1) A constable ... may, for the purpose of an investigation into drug trafficking, apply to a circuit judge ... for an order under subsection (2) below in relation to particular material or material of a particular description. (2) If on such an application the judge ... is satisfied that the conditions in subsection (4) below are fulfilled, he may make an order that the person who appears to him to be in possession of the material to which the application relates shall - (a) produce it to a constable for him to take away, or (b) give a constable access to it ... (4) The conditions referred to in subsection (2) above are - ... (b) that

there are reasonable grounds for suspecting that the material to which the application relates - ... (ii) does not consist of or include items subject to legal privilege ..."



Police to apply to a Judge for an Order against Francis & Francis (solicitors) to produce files of G (a client) unless subject to legal professional privilege. Under s10 (2) PACE 1984 - "items held with an intention of furthering a criminal purpose" are excluded from the ambit of legal professional privilege. The question then is: Whose intention ? The police suspected that "X" an unknown drug trafficker was furnishing a female relative ("G") with funds obtained from drug trafficking and that that money was being "laundered" through G's florist business. The police further suspected that G was using such tainted money for house purchase and that G benefited either knowingly or unknowingly. Lord Bridge [at p 368] stated the question thus :Whether upon the true construction of section 10(2) of the Police and Criminal Evidence Act1984, items which would otherwise fall within the definition of 'items subject to legal privilege' are excluded from that definition if, but only if the solicitor or other person holding the item in question has the intention of furthering a criminal purpose, or whether the relevant intention may include the intention of the client or of a third party?" Lord Bridge indicates [at p 369] that "Judge Machin Q.C. ruled that [Mrs. G.'s] business was being used to launder the proceeds of drug-trafficking, and that moneys to be used for the purchase of the aforesaid particular house were the proceeds of drug-trafficking and that [Mrs. G.] had benefited therefrom either knowingly or unknowingly. He said he was satisfied that the items which were the subject of the order he made, were held with the intention of furthering a criminal purpose". Lord Bridged continued that "On the basis of this material the case has been argued both before the Divisional Court and before your Lordships on the following assumptions: (1) that the suspected drug trafficker had the intention, by acquiring property for Mrs. G., of furthering the criminal purpose of concealing the proceeds of drug trafficking; (2) that Mrs. G. was innocent of complicity in that criminal purpose; (3) that the appellants, in advising Mrs. G. in connection with the acquisition of the property in question, have acted throughout with complete propriety and with no suspicion of any illegality affecting the transaction" It is against that background that s 10(2) falls to be construed. The crucial words are: " Items held with the intention of furthering a criminal purpose are not items subject to legal privilege" So it seems that on its grammatical meaning the crucial intention is that of the holder, in this case the solicitor. But the solicitor did not have the necessary intention. Lord Bridge[at p 379] would answer the certified question as follows:

"Upon the true construction of section 10(2) of the Police and Criminal Evidence Act 1984 items which would otherwise fall within the definition of 'items subject to legal privilege' are excluded from that definition if, but only if, the solicitor or other person holding the item in question has the intention of furthering a criminal purpose".





Lord Brandon however answers the question differently: "On the true construction of section 10(2) of the Police and Criminal Evidence Act 1984 items which would otherwise come within the definition of 'items subject to legal privilege' contained in section 10(1) are excluded from that definition if they are held with the intention of either the holder or any other person of furthering a criminal purpose"



Lord Griffith summarises the matter thus [at p 381]: " The police suspect a man of being an illegal drug dealer on a very large scale; they also suspect that he is laundering the money that he makes from his drug dealing. In particular, they suspect that he has passed money through a florist's business run by a female relative which has then been used to buy a property. The police therefore wish to inspect all the documents relating to the purchase of the property which are presently in the possession of the firm of solicitors that acted on behalf of the female relative when she purchased the property. The police do not allege that the solicitors

were aware that "drug money" was being used for the purchase of the house and we are also to assume, which I confess I find somewhat unlikely, that the female relative is also unaware that "drug money" has been used to assist the purchase of the property. It is, however, notorious that vast profits are made out of illegal drug trafficking under the cover of apparently respectable businesses and it is possible that even the relatives of a drug dealer may be unaware of the true source of his wealth".



Lord Griffiths observes [1t p 385] that "In the present case, the appellants' solicitors did not seek their client's instructions before objecting to the judge's order because they were afraid that if they did so they might be in breach of section 31 of the [Drug Trafficking Offences] Act of 1986 which provides: "(1) Where, in relation to an investigation into drug trafficking, an order under section 27 of this Act has been made or has been applied for and has not been refused or a warrant under section 28 of this Act has been issued, a person who, knowing or suspecting that the investigation is taking place, makes any disclosure which is likely to prejudice the investigation is guilty of an offence. (2) In proceedings against a person for an offence under this section, it is a defence to prove - (a) that he did not know or suspect that the disclosure was likely to prejudice the investigation, or (b) that he had lawful authority or reasonable excuse for making the disclosure".



This point is developed [at p 386]: "In the course of these proceedings an application was made to Webster J. for leave to move for judicial review to quash the judge's order on the ground that it was invalid as being obtained in breach of the rules of natural justice because the client had not been told by the solicitors about the judge's order and therefore was deprived of a fair hearing when the application was made to discharge the order. Webster J. dismissed the application on paper and observed, 'A solicitor-client relationship must constitute reasonable excuse I would have thought. The application seems to me to be unarguable'. Whilst I can understand the apprehension of the solicitors on this occasion, I have no doubt that the observation of Webster J. was correct and that if an order to give access to documentation is made under section 27, the solicitor-client relationship provides a reasonable excuse within the meaning of the section for the solicitor to take his client's instructions as to whether the order should be contested". By way of answer, then Lord Griffiths agrees with Lords Brandon and Goff.



Lord Oliver confesses [at p 386] that "... the problem raised by this appeal is one which has given me very great difficulty and I have to confess to having changed my opinion more than

once both in the course of and after the conclusion of the argument. I have also to confess,

however, that in the end I have become convinced that the problems which have been canvassed arise rather from the arguments which have been addressed than from any inherent difficulty in construing the simple, straightforward and perfectly clear words of the statute which your Lordships are called upon to interpret. I take it to be a primary canon of statutory construction that words are to be read in their ordinary, natural meaning unless there is some compulsive reason for reading them in some other and secondary sense. There is here no doubt about the ordinary, natural meaning of the words of section 10(2) of the Act of 1984. They are clear; they are concise; and they are unequivocal. There is no ambiguity about them. 'Items held with the intention of furthering a criminal purpose' cannot, as a matter of plain, ordinary English, refer to items in relation to which the holder has no such intention but which figure in the intentions of some quite different person who is not the holder. Equally, there is no difficulty about giving the subsection a perfectly sensible operation. If the holder

of an item otherwise the subject matter of privilege under subsection (1) holds the item with the intention of furthering a criminal purpose, the privilege is destroyed. That much, at the least, is the clear intent of the subsection"



Lord Oliver then considers [at p 387] the counter argument: " To deny legal professional

privilege in cases where the holder of the document is innocent but the maker of the document

harbours a criminal intent which is unknown to the holder would, it is said, make much better sense and assist in furthering the general purpose for which the Act of 1984 was passed. So, the argument runs, because it would have been more sensible for Parliament to have done that, Parliament must be deemed, despite what it has said in clear language, to have intended to do it. The words must then, by interpretation, be construed as giving effect to that intention by attributing to them a meaning which they cannot possibly bear as a matter of ordinary English. It is not clear to me by what principle of statutory construction such a process is regarded as permissible unless it be by the invention of a new doctrine of judicial rectification, in exercise of which the court, by virtue of its superior perception of what public policy requires, is entitled to arrogate to itself the function of legislating where Parliament has not seen fit to do so". Thus satisfied that the language is clear and that the courts should not usurp the function of Parliament, Lord Oliver concludes [at p 388], "the intention is connected inevitably to the holding by the conjunctive "with" and one cannot sensibly as a matter of language speak of doing anything "with" someone else's intention". Accordingly Lord Oliver agree with Lord Bridge in dissent.



Lord Goff, however, adopts a purposive interpretation which allows him to join with Brandon and Griffiths in the majority. He recognises that it is a question of submission and that there are rival submissions. First, there is a literalist approach according to which intention mean intention of the holder. Here that is the solicitors but they have no such intention, nor had G because only X had a criminal intent. So the documents are privileged. The other argument is that literalism produces an absurdity. So Lord Goff can state [at p 392]: " If documents are said to have come into the possession of a solicitor with the intention of furthering a criminal purpose, that intention could just as well be the intention of some person other than the solicitor, and in particular, the intention of his client". On that basis, Lord Goff concludes: "I find myself to be in agreement with the conclusion reached by the Divisional Court that the 'intention of furthering a criminal purpose' referred to in subsection (2) cannot, by a process of literal construction, be restricted to the intention of the person having the items in his

possession at the time when delivery of them is called for." So Lord Goff perceives absurdity if literalist approach adopted - so he goes for a purposive interpretation which included client and even third party intentions. Moreover, in Lord Goff's judgment [at p 397] "...the disclosure of the third party's iniquity must, in the interests of justice, prevail over the privilege of the client, innocent though he may be". Annex 16A seeks to offer some guidance to practitioners in respect of production orders and confidentiality.



(D) Confidentiality and Complaints

The extraordinary outcome in Greenough v Gaskell - that client confidentiality protects a solicitor in an action alleging fraud by the solicitor from production of documents in his possession which might well determine the matter - is simply not required by the developed law. Nonetheless, cases will occur where the only evidence of lawyer fraud is to be found in confidential documents and to that extent client confidentiality screens lawyer conduct from scrutiny. One possible solution to this problem is hinted at in the [English] Law Society's Guide to the Professional Conduct of Solicitors, 1999: "A solicitor may reveal confidential information concerning his client to the extent that it is reasonably necessary to establish a defence to a criminal charge or civil claim against the solicitor or where the solicitor's conduct is under investigation by the Office for the Supervision of Solicitors, or under consideration by the Solicitors Disciplinary Tribunal" [16.02 (12)]. The status of this proposition is not clear but it appears to be a rule of practice. I think it would be monstrous if confidentiality could be breached to provide a defence to a civil claim or a charge of crime or professional misconduct against a lawyer, but not to support a claim or charge. A fair hearing of such claims or charges requires the disclosure of relevant information whether that evidence goes to prosecution or defence. Governing bodies, such as the [English] Law Society should make clear the status and scope of such limitations on confidentiality.



A better solution would be for the court or the investigative officer or committee of the governing body to see the papers in order to determine whether they should be produced and admitted in evidence, for or against the solicitor. In Australia, "the court has power to examine the documents for itself, a power which has perhaps been too sparingly exercised in the past, springing possibly from a misconceived reluctance to go behind the formal claim of privilege"[Grant v Downs 1976 135 CLR 674, 698, per Stephen, Mason and Murphy JJ]. The court itself may read documents where it is claimed that they are of a class the publication of which would be harmful to the public interest [Conway v Rimmer [1968] AC 910]; a fortiori where the claim is only one of legal professional privilege: "[W]e can see no objection to the magistrate looking at the documents, if necessary, in order to determine whether they came into existence in furtherance of a criminal purpose" [R v Governor of Pentonville Prison ex p Osman [1989] 3 All E R 701, 730 per Lloyd J].



Part of the difficulty faced by regulators and investigators lies the tendency of lawyers to present confidentiality as some kind of absolute, preferably never to be overridden and pragmatically to be overridden rarely and then only in cases where the justification is little short of overwhelming. Given self-regulation by the legal profession, the ethos of those charged with the duty of maintaining ethical standards sometimes may share and reflect the general respect for confidentiality as an absolute. On the absolutist approach, the professional duty of confidentiality necessarily restricts access to information about lawyer conduct including lawyer misconduct, if any. Socially responsible and effective regulation of lawyers' conduct requires not only balancing of confidentiality and access to information but also devising and sustaining institutional arrangements that permit critical and informed scrutiny of lawyer conduct where appropriate without damaging the legitimate interests of clients.



Although confidentiality is widely regarded by lawyers as an absolute that notion is brilliantly challenged by Lord Sumner, "The right of one party to have discovery and inspection and the right of the other, within certain areas, to be protected from inspection are parallel rights; in itself neither is paramount over the other" [O'Rourke v Darbishire [1920] AC 581, 614]. A recognition that confidentiality and disclosure are of equal status leads to serious questions about limiting confidentiality in the interests of disclosure. Both confidentiality and disclosure can reasonably lay claim to being essential to the interests and administration of justice. Hence the rather long list (15) of "Circumstances which override confidentiality" listed at para 16.02 of the Guide.



(E) Confidentiality and Investigation

One way to test just how serious any particular governing body is about maintaining high ethical standards is to look at how it deals with the conflict between client confidentiality and the disclosure of information for the purposes of assessing the ethical and/or legal quality of the lawyer's performance. In England, governing bodies have power to regulate lawyers' conduct and such regulations can override a solicitor's duty of confidentiality [Parry-Jones v The Law Society [1968] 1 All E R 179].

The Scottish and Queensland approaches offer an instructive comparison. In Scotland, Clause 4 of the first Code issued by the Law Society of Scotland in 1989 stated tersely, "The observance of client confidentiality is a fundamental duty of solicitors" which can be contrasted with the current English provision [at 16.01] which sates that a solicitor is "under a duty". A brief commentary then followed: "This duty applies not only to the solicitors but also to their partners and staff, and the obligation is not terminated by the passage of time. This principle is so important that it is recognised by the courts as being essential to the administration of justice and to the relation of trust that must exist between solicitor and client. Only in special circumstances may a court require a solicitor to break the obligation of confidentiality".

In Scotland there has been a marked reluctance to distinguish the scope of confidentiality and privilege so that "any confidential oral or written communications with your client for the purpose of obtaining or giving legal assistance are privileged (unless waived by your client whose privilege it is), though this test could alter if a recent English decision of the House of Lords was to be applied here"[R M and Janice H Webster, Professional Ethics and Practice for Scottish Solicitors (The Law Society of Scotland, 1984), p. 14 ]. The case referred to is Waugh which, as we have seen, significantly reduced the scope of legal professional privilege in England. In Scotland, however, the tendency has been to treat confidentiality and privilege as virtually synonymous. Understandably that policy led to trenchant criticisms of the Law Society of Scotland's record in respect of complaints about the conduct of solicitors [Eleventh Annual Report of the Lay Observer for Scotland, 1987; Richard H S Tur "The Law Society and Complaints", Glasgow Herald, March 8, 1988; "Profession in Crisis ?" Scots Law Times, August, 1989].



Criticism and dissatisfaction over a number of years led to the Solicitors (Scotland) Act, 1988. Section 42C (1) enacts that "[w]here the Council are satisfied that it is necessary for them to do so for the purposes of investigating a complaint made to them ... alleging - (a) professional misconduct by a solicitor ... the Council may give notice in writing in accordance with subsection (2) to the solicitor...". Subsection (2) provides that "[a] notice under subsection (1) may require - (a) the production or delivery ... of all documents which are in the possession or control of the solicitor ... and relate to matters to which the complaint relates ... (b) an explanation, within such period, not being less than 21 days, as the notice may specify , from the solicitor regarding the matter to which the complaint relates".



When this Act was at the Bill stage a concerted effort was made by a splinter organisation with a claimed membership of about one-third of Scottish solicitors which represents solicitors in professional trouble (i.e solicitors whose conduct has given rise to a complaint to the Law Society of Scotland) to amend it on the grounds that it was "potentially dangerous". Concerns of this group included that "any person with an interest" could bring complaint and that the Law Society of Scotland would be granted new powers over lawyers, including the surrender of client's papers, when complaints have been lodged ["Solicitors Seek Changes in Bill" Glasgow Herald July 5, 1988].



In March, 1991 a section 42C notice was issued against a recalcitrant solicitor who had not responded to letters from the Law Society of Scotland for several months [LSC/91/31/PJY]. This was met some 21 days later by a letter from a second solicitor, acting for the first, who challenged the validity of the notice on the grounds that since the complaint was brought by one not the solicitor's client it was not brought by a person "having an interest" and in any event the common law duty of confidentiality had not been ousted by section 42C. Therefore no document would be produced. Remarkably the Law Society of Scotland meekly accepted this argument and did not attempt to enforce its notice. Eventually, in March 1992, the complainer was advised that the complaints had been dismissed. It may be said that years later papers have now come to light raising serious issues of conduct but whether the Law Society of Scotland will re-open the case remains to be discovered.



One might readily question the correctness of the second lawyer's arguments and their acceptance without challenge by the Law Society of Scotland simply because it is such an extreme view that confidentiality prevails over even statutory provision to the contrary. In the particular case one might go further. There were third party allegations of fraud against a solicitor and client. Since Scots law accepts the notion that fraud negatives confidentiality [Micosta S A v Shetlands Island Council 1983 SLT 483] even if the defence lawyer's heroic argument was cogent on the facts there was no confidentiality to prevail over the statute. Confidentiality is very widely drawn in Scotland and that is accepted by the Law Society of Scotland. Accordingly, it is particularly difficult to subject the conduct of Scottish solicitors to scrutiny with a view to assessing the ethical quality of their performance.



The Solicitors' Handbook issued in 1988 by the Queensland Law Society Incorporated deals with confidentiality thus: "Without the client's knowledge and voluntary consent, a practitioner should not directly or indirectly reveal any matter which has been communicated to him (whether in writing or otherwise) in his capacity as a practitioner, or use it in any way thereafter detrimental to his client's interests or lend or reveal the contents of the papers in any brief or instructions to any person except to the extent:

(i) required by law, rule of Court, or Court order, provided that where there are reasonable grounds for questioning the validity of the authority presented to him he may first take all reasonable steps to test the lawfulness of that authority; or

(ii) necessary for replying to or defending any charge or complaint or criminal or unprofessional conduct or professional misconduct brought against him or his partners, associates or employees".



It is apparent that a solicitor in Queensland in sharp contrast to one in Scotland cannot hide behind client confidentiality when faced with charges of unprofessional conduct or professional misconduct. Indeed, under Rule 82(2) of the Rules of the Queensland Law Society Incorporated, "A practitioner shall after being called upon by the Council so to do provide to the Council a sufficient and satisfactory explanation of any matter relating to his conduct or to his practice as a practitioner ... and shall if necessary or required [produce] books, papers, files, securities, other documents or any other record of information of any type whatsoever ... in the custody, possession or control of the practitioner and which he is entitled at law so to produce". Beyond that, Rule 83 deems it to be professional misconduct for a practitioner to fail to furnish a sufficient and satisfactory reply and/or to produce material as required by Council.



The relevance of legal professional privilege in the context of a governing body's investigation of a solicitor for alleged misconduct has recently exercised the Supreme Court of the Northern Territory of Australia [Rogerson v Law Society of the Northern Territory, Supreme Court of the Northern Territory of Australia (1993) 88 NTR 1] After a full examination of the authorities, including Brayley v Wilton [[1976] 2 NSWLR 495] and A Solicitor v The Law Society of New South Wales [Supreme Court of New South Wales, No 18475 of 1987, November 26, 1987; see Frank Riley, New South Wales Solicitors Manual, para. 4391], Kearney J concluded that "... it would be contrary to the public interest which legal professional privilege is designed to serve - the better to administer justice - that it be used to protect champertous costs agreements framed by solicitors. Such agreements are directed against the public interest"[p. 37 of the transcript]. Accordingly, despite the position adopted by the Law Society of Scotland on this matter, in no jurisdiction in which the question has been considered judicially (including England, New South Wales, and the Northern Territory) has legal professional privilege, far less confidentiality, been effective to thwart investigation by a duly appointed officer of the governing body. Indeed, a further passage from the judgment suggest an appropriate reading of legislation such as the Solicitors Scotland Act1988: "Section 82A reveals a legislative scheme whereby the Council of the Law Society, for strictly limited purposes, may appoint an investigator, from a limited class of people, with wide powers to investigate including requiring the production of documents and the giving of information but with stringent requirements to preserve confidentiality. There is no sufficient reason to read down the wide words of s 82A(1) and (5). In at least some cases an investigator would have to see privileged material to reach a conclusion. Some of this material may be highly confidential. It may record the facts as told to the solicitor in the seeking of advice, it may deal with very private personal matters or business matters of great sensitivity. The revelation of this material to an investigator may distress a client who may positively forbid its disclosure. Although as a matter of practice an investigator may not persist in such circumstances he probably has the power to do so. Questions of lawful justification or excuse under s 82A(6) may then arise for decision. The powers which the Council exercises are not punitive powers, although they may have a punitive effect. The Council is acting to protect the public interest by ensuring due investigation. Its role is not limited to a particular matter or client, although in a given case it may concentrate on one matter or the affairs of one client. Ultimately, it is concerned with the broad issues of fitness to practice and protection of the community. A number of cases were cited to us to establish the historical foundations of the privilege and the importance of it. I am sure no-one on this court challenges the importance of and necessity for the rule as a general principle. But the point is that there are certain fundamental rules of public policy embodied in the Legal Practitioners Act which make it plain that this very important, indeed vital, privilege cannot be used to prevent those charged with ensuring that practitioners behave properly from carrying out investigations to that end for the protection both of the profession and the public. Otherwise the exercise of the privilege itself may bring into disrepute the very ends for which it was designed."

In any event different jurisdictions draw the line between confidentiality and privilege at different points and this gives rise to the piquant possibility of the "confidentiality shopper". One might reasonably expect sophisticated and informed rogues to prefer to employ solicitors to do their dirty work under cover of the greatest secrecy available. On that basis, the Australian legal systems and professions appear relatively unattractive, given their openness and the narrow limits in which privilege is confined, together with the facility with which courts will read allegedly privileged documents to ascertain whether privilege should apply. England, on the present analysis, is more attractive to those seeking a high degree of confidentiality but recent developments would appear to be reducing its appeal. Scotland appears to offer client and solicitor the greatest degree of secrecy by a considerable margin. This is no matter for pride, however, because the most secret system is the system most likely to benefit racketeers, drug-traffickers, money-launderers, fraudsters, and terrorists and to harbour rogue solicitors.



(F) Confidentiality and Statute

One way to test how serious a government is about law enforcement is to assess its legislative provisions seeking disclosure of what would otherwise be privileged information. In this context, Scotland is an anomaly because until recently it has no government of its own and that, too, is likely to leave its lawyers much more to their own devices than elsewhere. In Britain, however, three statutory provisions bear directly upon the scope of confidentiality. Under section 24 of the Drug Trafficking Offences Act, 1986 "a person" (which would ordinarily include a lawyer) concerned in the retention or control of the proceeds of drug trafficking is required to report the matter and is expressly immunised from any contractual liability for breach of any restriction upon the disclosure of information. Secondly, under section 12 of the Prevention of Terrorism (Temporary Provisions) Act, 1989, "A person may notwithstanding any restriction on the disclosure of information imposed by contract disclose to a constable a suspicion or belief that any money or property is or is derived from terrorist funds". Thirdly, section 18 of the Prevention of Terrorism (Temporary Provisions) Act, 1989 requires a person to disclose information about acts of terrorism. This requirement is subject to a defence of reasonable excuse which, in the opinion of the [English] Law Society might be satisfied by a claim that the information was received by a lawyer within the scope of professional employment and is therefore confidential, although that interpretation does not appear consistent with the other sections or with the general purpose of the legislation. Such provisions are likely to be interpreted by the Courts as overriding even legal professional privilege. The new Guide has a section on "Momey-Laundering" [16.07] and that is augmented by Annex 16B. It is rather too early fully to assess the impact of a tougher legislative regime on lawyers' ethics but there are new considerations not only about what one must or may disclose but also on what one may no longer disclose to a client.



In Australia, there were wide ranging statutory duties under the Financial Transactions Reports Acts 1988-1991 to report certain cash and financial transactions but lawyers were not included. Accordingly a suspicion or belief that certain moneys are derived from or used in connection with drug trafficking or other serious crime imposes no legal duty on Australian lawyers to report and confidentiality would appear to impose an ethical duty of silence unless the lawyer concluded that these activities are likely to result in serious bodily harm. On this basis, Australian lawyers would appear to be more attractive to money launderers than are their British counterparts. And it is no surprise that the National Crimes Authority reported that money from crime has been laundered through the Queensland real estate industry. It was alleged that lawyers faked documents, including mortgage loans and tenancy agreements, to facilitate the investment of the proceeds of crime in real estate and passed money through their trust accounts to avoid detection. The NCA therefore recommends that the Federal Government should change the law so that lawyers would be required to report certain transactions through their accounts [The Courier-Mail, Brisbane, May 15, 1992]. I have yet to follow up the recent legislative history of this matter in Australia. In America, the Inland Revenue Code 6050I compels those engaged in trade or business who receive more that $10,000 in cash in one transaction to report that fact. American lawyers fiercely resisted this legislation as damaging to the lawyer-client relationship but it passed into law and has been upheld as constitutional [United States of America v Goldberger & Dubin PC 935 F 2d 501 (2nd Cir 1991)] Like arguments will be canvassed in Australia if the Federal Government accepts the NCA recommendation. At times, government policy will be inconsistent with the lawyer's tradition role as partisan advocate, zealously pursuing the client's interests independently of the ethics of the matter. Implementation of government policy may be prejudiced by the lawyer's traditional commitment to secrecy and client service and lawyers necessarily encounter pressures to reconsider their role and in particular their social responsibilities. This is well illustrated by Corporate Affairs Commission of New South Wales v Yuill [(1991) 172 CLR 319] which holds, albeit narrowly and as a matter of particular statutory interpretation, that the power of an inspector under s.295(1) of the Companies (New South Wales) Code to require production of books of a corporation is not subject to legal professional privilege.



(G) Confidentiality and Self-Interest

Behind the rhetoric of liberalism and the lawyer's traditional role lurks self-interest. As the poet put it;



I'll no say men are villains a':

The real, harden'd wicked,

Who hae nae check but human law,

Are to a few restricked:

But, och, mankind are unco weak,

And little to be trusted:

If self the wavering balance shake,

It's rarely right adjusted

[Robert Burns, "Epistle to a Young Friend", May 1796}

Lawyers face greater temptation than others with better prospects of escaping detection. It beggars the imagination to suppose that self-interest might not influence some lawyers and lead to unethical or illegal conduct. For example, in Minter v Priest [[1930] AC 558] one encounters a solicitor none too choosy about the means he uses to benefit himself, namely fraud and defamation. There is no way of knowing the incidence of such disreputable conduct among lawyers because those who know about it usually have very good reason to keep it secret. Occasionally such matters come to light as recently in Doran v The Council of the Law Society of Scotland [1992 SLT 456; see, too, Re Sydney Gordon Maidment, Supreme Court of South Australia, August 26, 1992] where a solicitor had been censured and fined and named publicity had been ordered because he had allowed his own interests to come into potential conflict with those of his clients.

In some instances, however, there will be no conflict as between lawyer and client. Indeed their joint adventure may be beneficial to both but contrary to ethics, law, third party rights, or public policy. Consider Finers (a firm) and Others v Miro [1991] 1 All E R 182: Mr Miro (a businessman with homes in Texas, Spain and elsewhere, specialising in insurance) and Mr Stein (a partner in Finers, a firm of solicitors in London) met in 1982 or1983. Mr Miro was a wealthy man with assets worth between $3M and $5M. Mr Stein, acting as Mr Miro's solicitor, set up an elaborate and sophisticated corporate trust structure for holding his client's assets, the effect of which is that all the assets were held to the order of Mr Stein on behalf of Mr Miro. The object of the exercise was secrecy. Mr Miro did not want it known that he owned these assets because, apparently, he feared political expropriation and he therefore relied on Mr Stein's duty of confidentiality to keep the facts hidden from view.



In February 1990 a sub-committee of the United States House of Representatives issued a report on the insurance business with a substantial part dealing with alleged fraud and containing many serious charges against Mr Miro. In 1986 an insurance company had been incorporated in Louisiana as part of a group controlled by Mr Miro. The group included a reinsurance company in Ireland and a trust company in England. It is alleged that on October 1, 1987, sums of US$3,897.181.93 and US$1,250,000 were paid by the insurance company to the reinsurance company and the trust company respectively. These payments became the subject of civil actions in Louisiana at the instance of the liquidator of the insurance company against various parties, including the reinsurance company, the trust company, and Mr Miro. Many of these matters were known to Mr Stein but he says that it was not until May 1990 that he fully appreciated the seriousness of the allegations against his client and the possibility that the assets which he held on behalf of Mr Miro might be in whole or part assets misappropriated from the insurance company.



In these circumstances, Mr Stein froze Mr Miro's client account and other assets on May 15, 1990 and applied to the court under RSC Ord 85 r 2 for directions as to how he should deal with the assets and, in particular, whether he should notify the liquidator in Louisiana of the situation. The judge directed that the liquidator should be notified of the existence of the proceedings and in due course the Court of Appeal held that where a solicitor had strong evidence of suspected fraud on the part of a client he was entitled, under the rule that fraud unravels all obligations of confidence, to apply to the court either under its inherent jurisdiction or under RSC 85 for directions as to how to deal with the client's assets under his control notwithstanding the inevitable breach of the solicitor's duty of confidence to his client and, because the solicitor was potentially liable as a constructive trustee at the suit of those entitled to assets misappropriated by the fraud, the court could direct the solicitor to notify interested persons of the existence of the proceedings.

The case raises a number of interesting and novel points and it suggests that English Courts are increasingly alert to the potential mischief that the professional duty of confidentiality may work. Sophisticated fraudsters, international racketeers, drug traffickers, and terrorists have a clear need for strictly confidential asset-holding and money-laundering services and the legal profession is uniquely placed to provide confidential services: "The duty of confidentiality ... makes lawyers special; it is a code of silence that seals their lips in a way that other ... lips are not sealed" [Luban, op cit p 180]. How far does an ethical lawyer's professional obligations of loyalty and secrecy extend in the teeth of increasing suspicions that the client is a fraudster, racketeer, trafficker, or terrorist and at what point does the honest lawyer's professional obligations to society supersede those to the client and permit or require disclosure ? Is it legitimate for the lawyer to ask or to receive an inflated fee for such services ?



Finers v Miro is not a whistle-blowing case. Whatever may have been Mr Stein's purpose in making application to the court in May, 1990 for legal directions and, perhaps, ethical guidance it was not to give warning that his client might be a fraudster. That possibility was already up and running many months earlier. The explanation for the action may be found in another remarkable case, Agip (Africa) Ltd v Jackson [[1990] Ch 265; resoundingly upheld by the Court of Appeal [1991] 3 W L R 116. On "Tracing the Proceeds of Fraud" see P J Millett (1991) 107 LQR 71]. The defendants, a firm of accountants, acting on the instructions of a french lawyer, M. Coulon, assisted in the disposal of funds obtained through fraud by the plaintiff's chief accountant: "Mr Jackson and Mr Griffin knew that the money was coming from the plaintiffs, an oil company with a branch in Tunisia; that most of it was being paid to Kinz, which ran a jewellery business in France; that more than $10m. had been deal with in this way in less than two years; and that their instructions came from the recipients and not from the plaintiffs. They knew of no connection or dealing between the plaintiffs and Kinz or of any commercial reason for the plaintiffs to make substantial payments to Kinz. They must have realised that the only function which the payee companies or Euro-Arabian performed was to act as "cut-outs" in order to conceal the true destination of the money from the plaintiffs. They must have realised that the only purpose in having two "cut-outs" instead of one was to make it impossible for investigators to make any connection between the plaintiffs and Kinz without having recourse to Lloyds Bank's records; and their object in frequently replacing the payee company by another must have been to reduce the risk of discovery by the plaintiffs".



"This is damming evidence; but it does not stop there. The letter dated 14 August 1984 from Knapp-Fishers shows that Mr Jackson was concerned - whether for himself or his clients is immaterial - at the possibility that the plaintiffs might obtain disclosure of Lloyds Bank's records, discover what had happened to the money, and try to recover it. Mr Jackson and Mr Griffin are professional men. They obviously knew that they were laundering money. They were consciously helping their clients to make arrangements designed for the purpose of concealment from inter alios, the plaintiffs. It must have been obvious to them that their clients could not afford their activities to see the light of day. Secrecy is the badge of fraud. They must have realised at least that their clients might be involved in a fraud on the plaintiffs. Can Mr Jackson and Mr Griffin possibly have believed that their arrangements had an honest purpose ? They pleaded no such belief. They have given no evidence ..."



"What did Mr Jackson and Mr Griffin think was going on ? ... some evidence ... suggests that they thought that their clients were engaged in evading Tunisian exchange control ... In my judgment, however, it is no answer for a man having knowingly assisted in a fraudulent and dishonest scheme to say that it was "only" a breach of exchange control or "only" a case of tax evasion. It is not necessary that he should have been aware of the precise nature of the fraud or even of the identity of its victim. A man who consciously assists others by making arrangements which he knows are calculated to conceal what is happening from a third party, takes the risk that they are part of a fraud practised on that party. But it is not necessary to rest my decision on this ground. After Mr Smyth's letter of 14 August 1984, the defendants cannot claim that the possibility of a fraud on the plaintiffs never crossed their minds; it was specifically drawn to their attention. Yet they never made any inquiries of the plaintiffs or took any steps to satisfy themselves that the arrangements had the plaintiff's knowledge and approval. They comforted themselves with the fact that there was "no clear case of fraud under English law".



"I am led to the conclusion that Mr Jackson and Mr Griffin were at best indifferent to the possibility of fraud. They made no inquiries of the plaintiffs because they thought that it was none of their business. That is not honest behaviour. The sooner those who provide the services of nominee companies for the purpose of enabling their clients to keep their activities secret realise it the better. In my judgment, it is quite enough to make them liable to account as constructive trustees [[1990] Ch 265, 294-295].



And so it was judgment for the plaintiffs with costs. This remarkable case raises several highly interesting implications. But first a digression; in July, 1984 Mr Jackson and M Coulon met with Mr Smyth, a partner in the firm of Knapp-Fishers, solicitors. Mr Smyth's attendance note would make interesting reading but since there was no admissible evidence of the truth of its contents, Millett J disregarded it and what it says is not reported. However, Mr Smyth followed up the meeting with a letter of considered advice in which, so far as it is reported, he stated: "Turning now to Agip, Agip may be able to establish a cause of action by claiming that the payments were obtained by fraud. Agip could also rely on English law as the fraud would presumably have taken place within England, at the time when the moneys were transferred out of Agip's account into the account of the UK company. However, although Agip may be able to establish a cause of action, it would still be necessary for Agip to establish fraud (as defined under English law) for any action for the recovery of the moneys to be successful..."



"Because of the general principle of banking confidentiality, it would be extremely difficult for the Tunisian Government or Agip to obtain an order requiring Lloyds Ban to disclose banking transactions unless disclosure is ordered by the English courts ... However, if Agip could establish a cause of action by reason of possible frauds, it might obtain an order for the disclosure of banking transactions ... As in our case, there would appear to be no clear case of fraud under English law, this could frustrate early disclosure by Lloyds Bank, although Agip could seek an injunction whereby the moneys in Lloyds Bank account would be "frozen" until the matter came to full trial. If Agip can establish fraud, recovery of the moneys after the recipient companies have been liquidated will depend, to some extent upon whether or not Lloyds Bank held the money on trust for Agip [[1990] Ch 265, 277-278].

Now suppose that Mr Smyth, himself a professional man, realised that Mr Jackson and M Coulon had "consulted him to learn how to plan, execute or stifle an actual fraud" [O'Rourke v Darbishire [1920] AC 581, 613 per L Sumner]. In such circumstances no duty of confidence attaches to the communications and the question arises whether Mr Smyth had any ethical or legal duty to advise Agip or Lloyds Bank of the possible existence of a fraudulent scheme. Certainly Agip might have discovered what Mr Zdiri was up to much earlier had Mr Smyth thought it proper to express some degree of concern. On the traditional view of the lawyer's role, however, Mr Smyth's lips are sealed, whatever the consequences short of serious bodily harm.

Are professional advisers, including lawyers, now at risk personally as constructive trustees for moneys which they have assisted clients retain ? The decision in Agip should exercise lawyers greatly given its implications:- "It is not honest ... [to] provide the services of nominee companies for the purposes of enabling ... clients to keep their activities secret" [[1990] Ch 265, 295 per Millett J]. Any person, including a lawyer, providing such services in circumstances of dishonesty will be liable as a constructive trustee and perhaps also criminally liable if there was knowing participation in a scheme permanently to deprive others of their property. Beyond that, there is the question of professional ethics. Ordinarily dishonesty is treated very seriously by governing bodies and frequently it leads to the dishonest solicitor being struck off. Paragraph 17.01 of the [English] Law Society's Guide to the Professional Conduct of Solicitors states the principle that "Solicitors must not act, whether in his professional capacity or otherwise, towards anyone in a way which is fraudulent [or] deceitful ..."



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