A judge has ruled that a law firm can defend itself against serious allegations by lifting the client’s claim of legal privilege.
- Deputy Master Scher found a prima facie case of iniquity, involving a scheme by Vladimir Gusinski to avoid repaying a bank loan.
- The iniquity exemption was applied, allowing the law firm GSC Solicitors and Barry Samuels to present a full defence.
- East-West United Bank claims funds were misdirected by Mr Gusinski and sought to apply the iniquity exemption in court.
- The ruling indicates no client privilege for documents related to the alleged fraudulent scheme.
Deputy Master Scher’s decision allows a City law firm to fully defend itself in the High Court against serious allegations. The firm was initially restricted by a claim of legal professional privilege (LPP) from its former clients. However, the judge’s decision, influenced by the iniquity exemption, permits the firm to counter the allegations effectively.
The iniquity exemption was triggered as Deputy Master Scher noted a ‘prima facie case’ of misconduct involving Vladimir Gusinski. This case stemmed from his decision to avoid the New Media Group’s repayment obligations to East-West United Bank SA, through what was perceived as a dishonest scheme. The bank facilitated this exemption to enable the law firm GSC Solicitors and their consultant solicitor, Barry Samuels, to adequately defend themselves in the mainstream proceedings.
The court heard that East-West United Bank had provided a $75 million credit facility to New Century Distribution, an arm of the New Media Group, back in 2013. After issuing an acceleration notice in 2018 for immediate repayment of nearly $10 million, the payment was not fulfilled, nor did any group companies respond. Consequently, New Century Distribution secured a temporary insolvency moratorium from the Swiss courts, allegedly to restructure its debts.
However, Deputy Master Scher reported that the claimant bank felt this moratorium was strategically used to prevent enforcement of debt collection, thus, approaching the London Court of International Arbitration for resolution. At this juncture, another group company affiliated with Mr Gusinski was awarded $5.2 million from an unrelated High Court case.
Funds from that award were directed into GSC’s client account, and subsequently $4.75 million was earmarked for the bank, as indicated by Mr Gusinski to the arbitral tribunal. Yet, the bank alleged deceit, claiming most of the award money was transferred to and distributed within New Media Group’s entities, with portions allocated to GSC as fees.
Consequently, the High Court ruling granted the bank’s claim on establishing interest in the disputed funds, alleging GSC and Mr Samuels breached fiduciary duties by disbursing the monies. The bank extends an assertion of conspiracy against the firm, involving strategic delay tactics to evade repayment responsibility, implicating GSC and Mr Samuels as co-conspirators.
In conclusion, Deputy Master Scher recognised a ‘prevalent likelihood’ of misleading actions by New Century Distribution when obtaining a temporary Swiss insolvency. Additionally, he pointed out that the arbitral tribunal was deceived about fund allocation, as orchestrated by Mr Gusinski. These facts satisfied the court’s threshold for determining an iniquity exception, thereby negating any LPP on relevant communications and documents.
The ruling highlights the court’s commitment to ensuring fair legal proceedings by lifting privilege under valid iniquity claims.
