In a significant High Court ruling, a City law firm can now fully defend against serious allegations, following a judge’s decision that legal professional privilege (LPP) doesn’t apply due to the iniquity exemption.
Deputy Master Scher determined a ‘prima facie case’ of iniquity existed concerning Vladimir Gusinski’s conduct. Gusinski, involved with the New Media Group, allegedly set up a ‘sufficiently dishonest or underhand scheme’ to avoid repaying the bank debt.
The bank in question, East-West United Bank SA, provided a $75 million credit facility to the New Media Group’s subsidiary, New Century Distribution (NCD), in 2013. By January 2018, immediate repayment of nearly $10 million was sought, which went unmet.
NCD sought a temporary insolvency moratorium from the Swiss courts, ostensibly for debt restructuring. However, claims surfaced that this was a strategic move to hinder the bank’s enforcement efforts.
Concurrently, another group company secured $5.2 million in an unrelated case, deposited into GSC Solicitors’ client account. Gusinski assured the arbitral tribunal this would repay the bank, resulting in a directive to pay $4.75 million. However, most of the funds were allegedly redirected to other New Media entities and GSC’s fees.
The bank accuses Gusinski of misleading the tribunal and claims an interest in these redirected funds, alleging GSC and consultant solicitor Barry Samuels breached trust and fiduciary duties. They also face conspiracy charges aimed at evading repayment.
Gusinski has been barred from defending the claim after failing to comply with a court order. He denies the bank’s inferences and has not admitted to the alleged facts underpinning the conspiracy claim.
Scher suggested the actions were ‘more likely than not’ misleading, as NCD misrepresented their insolvency intentions. Evidence supported claims of funds diversion from the bank, forming the basis for the iniquity exemption.
As such, no LPP could be invoked over documents related to these alleged actions, allowing GSC and Samuels to fully contest the claims without privilege barriers.
The High Court’s decision highlights the intricate balance between client privilege and the iniquity exemption, empowering GSC Solicitors to defend themselves comprehensively against claims of conspiracy and misconduct.
