When will fraud trigger the iniquity exception to privilege?

A recent Court of Appeal decision adds to the case law on an issue that is often raised in fraud actions: whether the fraud element prevents the defendant from relying on legal privilege because of the "iniquity exception" - that privilege does not apply to protect communications made in furtherance of a crime, fraud or equivalent conduct.  It illustrates that parties will not necessarily be prevented from maintaining privilege in all cases where it is found that they have made false statements to their solicitors and the court: Candey Ltd v Bosheh [2022] EWCA Civ 1103.

In considering whether the inequity exception applies, the court will apply the test set out in JSC BTA Bank v Ablyazov [2014] EWHC 2788 (Comm) (considered here): were the disputed communications part of the ordinary course of the professional engagement of the solicitor, or had there been an abuse of the solicitor/client relationship, such that privilege over those communications was negated.

In this case, the issue arose in the context of a claim by a firm of solicitors against their former client in respect of their fees for acting in proceedings against the client alleging fraud. The Court of Appeal agreed with the High Court's analysis that the solicitors were seeking to rely on alleged fraudulent statements made in the underlying action where they acted for the client. There was no new or different fraud which took the case out of the ordinary run and the iniquity exception was therefore not applicable.

The court also went on to say, obiter, that a court will look very carefully to see whether the necessary threshold for the iniquity exception has been met, particularly where mere allegations of fraud are made and are, as in this case, just repetitions of past fraud which gave rise to the original proceedings. It is not enough to allege fraud – there must be some evidence that it has some foundation in fact.

For more details of the decision, including as to related issues regarding confidentiality between solicitors and clients in this context and improperly obtained evidence, see this post on our Litigation Notes blog.