Discussions between an attorney and client are privileged – they’re private. They can’t be disclosed in court or anywhere else without the client’s consent. But, as we explain below there are exceptions to the rule, including the ‘iniquity’ or fraud exception. When an exception kicks in, the privacy of the lawyer/client relationship is stripped back so that discussions and previously privileged documents can be revealed – with knock-on consequences in particular for any litigation involving the client. At ParrisWhittaker we specialise in advising clients involved in commercial disputes in the Bahamas and elsewhere. The concept of privilege plays a large part in all of our dealings with clients, opponents and the courts.
What Is Legal Professional Privilege?
Legal professional privilege (‘LPP’) underpins the attorney/client relationship. It enables a client to speak openly and honestly with his or her advisors, uninhibited by the fear that what is discussed might later be open to the scrutiny of the courts or a legal opponent. Importantly, when privilege is claimed the courts are unable to draw any negative conclusions from the fact that something has not been disclosed. But clients should bear in mind that LPP has limits. Not everything that passes between a lawyer and a client is protected. LPP will be lost if:
The relevant communication ceases to be confidential (for example it is disclosed to a third party)
The client voluntarily waives the right to privilege
In certain circumstances where the privileged communication is disclosed inadvertently
The rules around privilege are strict, and different tests apply when communications relate to pending or ongoing litigation (so-called ‘litigation privilege’).
Loss Of Privilege: The Fraud or ‘Iniquity’ Exception
So we’ve seen that privilege can be waived or lost due to inadvertent disclosure or loss of confidentiality. But it can be lost for other reasons too. For example, the courts won’t cloak communication in privilege if the basis of the communication is to further some kind of fraud or criminality – the ‘iniquity exception’. The exception is based squarely on public policy. The reasoning is as follows:
If a client is using interactions with a lawyer to pursue fraud it couldn’t reasonably be said that he or she is doing so in theordinary course of professional communications
It would be “monstrous” (to use the description of one English Court of Appeal judge) for a court to protect the communications of someone whose purpose in making the communication was to commit fraud or a crime
A long line of cases decided in the UK courts, all of which courts in the Bahamas will take into account when reaching decisions about LPP, establish firmly how the iniquity exception is applied in practice. Below we examine one case from 2020.
The Iniquity Exception In Practice: Barrowfen Properties
In Barrowfen Properties (2020) the High Court in London – applying the iniquity exception to LPP – ordered that documents containing legal advice should be disclosed to the claimants. As a result the claimants would be able to avail of the information disclosed as they pursued their wider claims against the defendants. These claims centered on a family-run property business with a range of assets including a substantial commercial property in South London.
The allegations in the triggering of the iniquity exception involved director duties. Specifically that Mr. Patel as a director of a company had deliberately attempted to exploit a corporate opportunity by implementing a secret plan to put the company into administration and acquire its principal asset. This was in breach of his duties as a director under The Companies Act, 2006. (For example, the duty to promote the success of a company and the duty to avoid conflicts of interest.)
For our purposes it’s sufficient to note that the claimants, Barrowfen Properties, successfully established that there was a ‘strong prima facie’ case of fraud against the first defendant Girish Patel. This enabled the court to order disclosure of what the defendant considered legally privileged information. (Note it’s easer to reach the benchmark for activating the iniquity exception to get privileged communications disclosed than actually proving fraud at trial)
In reaching its decision to remove the protection of LPP, the court appeared to extend the circumstances where the iniquity exception can be engaged. It’s clearly not limited to instances of serious crime but can apply to fraud in a wider sense.
Comment
In practical terms the decision in Barrowfen couldn’t have been clearer. The judge’s order required the defendant to disclose ‘all matter files or documents created for the purposes of giving or receiving legal advice or containing legal advice..’ It shows how dramatically the cloak of LPP can be lifted when it’s established that a client is intent on some kind of fraudulent or criminal enterprise. Even when there’s no suggestion of fraud, clients should be aware of the limitations of LPP and the circumstances in which it may be waived. In particular care should be taken when distributing sensitive information by email where inadvertent disclosure to third parties is possible.
It’s no exaggeration to say that an order to disclose what might have been assumed to be privileged information can prove fatal to even the strongest case.
Contact ParrisWhittaker
If you would like more information about these issues or commercial disputes in general call us on 1-242-352-6110 or contact us online or live chat.
