But what happens if the relevant documents result from purported legal advice provided to the Defendant? The general position is that this evidentiary paper trail would be beyond a claimant’s reach on the grounds of the defendant’s right to assert “legal professional privilege” over those documents.
English law has developed a carve out to legal professional privilege to address this potential injustice: the “fraud” or “iniquity” exception, which allows a claimant to access what would otherwise be privileged material. The legal rationale behind this exception being (i) communications to further a dishonest purpose cannot be said to be given in the course of a legal adviser’s usual role and (ii) it would be monstrous for the court to apply protection (in the form of privilege) in those circumstances.
The exact scope of when and how the exception applies is, however, not always clear.
“Fraud Exception” in practice
The exception most frequently comes into play when there has been a criminal fraud committed with the involvement (innocent or otherwise) of legal advisers, for example in the context of advising/supporting a fraudulent investment scheme or misrepresenting the dissipation of assets in subsequent litigation.
Attempts to use the doctrine beyond the archetypal fraud scenario have included an alleged transaction at an undervalue for the purpose of receiving housing benefits and an application to use legal advice received by an employer regarding options to make an employee redundant in a subsequent employment claim.
One key preliminary question is what kind of wrongdoing must the Defendant have committed for the Claimant to invoke the exception? As dealt with in the section below, there is a lack of clarity on whether an applicant must show a degree of dishonesty or whether the exception comes into play with more general allegations of misfeasance. Other subtleties in the exception’s application include:
- Has the claimant been able to make out a “strong” or alternatively “very strong” prima facie case of wrongdoing? The applicable test differs on the facts of the claim and the type of privilege (i.e. legal advice or litigation) asserted.
- What client-legal adviser material could be provided to a claimant? The claimant will not be allowed to review all correspondence between a solicitor and their client – there will (as with any test of privilege) need to be an analysis of whether the “dominant purpose” was to provide bone fide legal advice.
- The defendants may seek to raise human rights arguments regarding any such application, arguing that an enquiry into their legal correspondence may create a risk to a fair trial. To date, arguments have been largely unsuccessful, but the position is likely to be fact specific.
A balancing act
The exception applies to a range of dishonesty beyond solely criminal acts or fraudulent misrepresentations, but the extent to which it so extends is less clear. The decision in BBGP Managing General Partner Ltd and others v Babcock & Brown Global Partners  EWHC 2176 (Ch) expressed the test to be applied in broad terms including when:
"…the wrongdoer has gone beyond conduct which merely amounts to a civil wrong; he has indulged in sharp practice, something of an underhand nature where the circumstances required good faith, something which commercial men would say was a fraud or which the law treats as entirely contrary to public policy [emphasis added]."
The underlined wording, potentially expanding the test to take into account a range of public policy considerations beyond dishonesty, was subject to subsequent obiter judicial discussion in the Curless v Shell International Ltd. The Court of Appeal in those proceedings concluded this was incorrect and there remained a need for a degree of dishonesty.
The current scope of the exception was considered in the recent case of Barrowfen Properties Ltd v Patel. The Court held that the exception could apply to allegations of breaches of the Companies Act 2006 relating to obligations owed by company directors if those “…allegations involve fraud, dishonesty, bad faith or sharp practice or where the director consciously or deliberately prefers his or her own interests over the interests of the company and does so "under a cloak of secrecy". The case is of interest as the breaches complained of would not necessarily lead to a conclusion of dishonest conduct, but the Court confirmed there must also be an additional element of the Defendant’s actions of the type described in BBGP.
The appropriate test to consider before disapplying the fundamental principle that individuals or businesses should be free to take legal advice without fear of it becoming public is undoubtedly a difficult one. Clearly, it must be for the party seeking to apply the exception to show there is some form of prima facie case to be answered. In addition, given the breadth of potential wrongdoing that would otherwise be concealed behind the cloak of legal privilege, English law must be sufficiently flexible to allow a claimant to access the documents it needs to prove its case in circumstances other than a clear case of criminal fraud.
Conversely, judges need to be careful when applying the doctrine that they do not expand the criteria to such an extent that every decision taken by a business or individual can subsequently be scrutinized by a third party. As the Court of Appeal found in Shell, it would be inappropriate to allow inspection of documents where the nature of the advice is that given by lawyers “day in, day out”.
In conclusion, borrowing a passage from the leading judgment in Shell, the scope of the exception and whether “public policy” criteria should apply will continue to be debated and “…is an important argument, which will no doubt have to be decided one day…” in the future!
 Following the judgment in Barclays Bank Plc v Eustice  EWCA Civ 29,
  EWCA Civ 1710,