Accident Exchange v McLean

The recent decision of Sir Andrew Smith in Accident Exchange Ltd v McLean (“Accident Exchange”)1 has clarified the law relating to the iniquity exception to privilege2 in two significant ways. First, by establishing that the “innocent tool” test propounded by Lord Goff of Chieveley in R v Central Criminal Court, ex p Francis & Francis (“Francis & Francis”)3 is to be applied when determining whether an innocent client should lose privilege as a result of iniquity perpetrated by a third party. Second, by providing guidance as to how the “innocent tool” test is to be interpreted in practice.

The claimants (referred to as “AE” in the judgment) were companies providing “replacement motor vehicles on credit terms to clients whose vehicles have been damaged in road accidents”.4 AE’s business involved recovering hire charges from drivers who had caused the accidents (“Defendant Drivers”) or their insurers, by means of credit hire claims. Autofocus Ltd (“AF”) were the perpetrators of “perjury on an industrial scale”5 in certain credit hire claims involving AE. As a provider of forensic services, AF fabricated and manipulated evidence about the rates of hire of replacement vehicles. AF’s perjured evidence was then used by some Defendant Drivers to “strip out” allegedly irrecoverable credit elements from vehicle hire charges levied by AE, to AE’s substantial detriment.6 AE accordingly brought a claim seeking damages for conspiracy and deceit against certain directors of AF as well as various solicitors who acted for the Defendant Drivers (the “Solicitor Defendants”). Following the exchange of disclosure lists, AE brought an application against the Solicitor Defendants seeking inspection of documents, over which the Solicitor Defendants asserted privilege on behalf of the Defendant Drivers. AE sought to rely on the iniquity exception to defeat this claim for privilege.