Aug 1
The claimant solicitors acted for the first defendant in a fraud action, central to which was an allegation that the first defendant was being used as a front by the second defendant. The action was settled on terms which did not entitle the claimant to receive payment under a conditional fee arrangement it had with the first defendant. The claimant brought an action against the first defendant, alleging that (1) he had falsely represented that he would act in his best interests alone, and the fraud claim would not succeed; (2) the retainer was subject to an implied term that the first defendant would act in his best interests and in good faith towards the claimant, and (3) by his misrepresentations and settling the fraud action on the basis that he did, the first defendant had acted in bad faith and deprived the claimant of payment under the retainer. The second defendant was a party to the claim on the basis that he had wrongfully conspired with the first defendant and induced the breach of the retainer. The defendants contended that key elements of the claim related to the content of privileged communications between the claimant and the first defendant. The claimant maintained that it was entitled to rely on the material either because the iniquity exception to privilege applied or because privilege did not apply in relation to a solicitor who was suing a former client, whom the solicitor had represented on a contingency fee basis. The judge granted the defendant’s application for an order restraining the claimant from using privileged material. The claimant appealed, contending, inter alia, that privilege did not apply because there was never any confidentiality between the parties in relation to the documents in question.
On the appeal—
Held, (1) (Per Arnold and Phillips LJJ) Confidentiality was a necessary, but not a sufficient, condition for legal professional privilege to apply. While the nature of legal professional privilege was that it was “a right to resist compulsory disclosure of information”, that was not a complete statement of the nature of the right. The effect of privilege was to confer an enhanced degree of protection for a particular genus of confidential information. Thus privilege enabled the party (or one of the parties) entitled to the privilege to obtain an injunction to restrain use of the information, including use of the information by a person who had knowledge of it (in particular, where that person either already had copies of privileged documents or had come into possession of them) in legal proceedings (at least provided that the injunction was obtained before the information had been adduced in evidence at trial). By contrast, information which was confidential but not privileged might still be admitted in evidence even if it was unlawfully obtained by the person seeking to rely upon it. The argument that documents recording communications between solicitor and client which were in the possession of the solicitor were not privileged in subsequent proceedings between solicitor and client, that the solicitor did not need to obtain disclosure of such documents from the client, and that the information contained in the documents was not confidential as between the solicitor and the client, was thus contrary to both principle and authority. The fact that the information was known to the solicitor did not mean that it did not have the necessary quality of confidence if it was not in the public domain. If the information was not in the public domain, then the solicitor owed the client a duty to keep the information confidential. The fact that the solicitor did not need to obtain disclosure of the documents did not mean that privilege had no role to play. On the contrary, the client could rely upon privilege to prevent the solicitor using the information in the documents without the client's consent (paras 115–118, 129).
(2) Appeal dismissed. The judge was right to find that even taking the claimant’s case at its highest, the alleged false statements related back to the original alleged fraud and was not a new or different fraud relating to the proceedings which took the case out of the ordinary run, and therefore the iniquity exception to privilege did not apply. A court would usually look very carefully to see whether the necessary threshold for the iniquity exception had been met at all, particularly in circumstances where the allegations of fraud were mere allegations and, as in the present case, were no more than repetitions of the allegations of past fraud which gave rise to the original proceedings. Moreover, if the claimant in the present case was permitted to rely on privileged material in pursuit of its claim, in any case where the underlying allegations involved fraud, a solicitor in the position of the claimant would be able to bring a subsequent claim against its client (whether for costs or damages) relying on the privileged material in which the client had explained why those underlying allegations were unfounded (paras 83, 86, 90, 93, 111, 112, 129).
Quaere. Whether, for the iniquity exception to privilege to be considered by the court, substantial fraud has to be established or a lower threshold to establish fraud is sufficient (paras 85–86).
George Bompas QC and Matthew Rogers (respectively instructed by and of Candey Ltd) for the claimant.
Hannah Ilett (instructed by B A International Solicitors Ltd) for the defendants.