AAZ v BBZ & Ors

Legal professional privilege does not protect communications made for the purpose of fraud or serious iniquity. The exception is not confined to criminal fraud or fraud in the narrow civil sense. It may apply where legal advice facilitates transactions intended to defeat or prejudice a financial claim, including transactions within section 37 of the Matrimonial Causes Act 1973 or section 423 of the Insolvency Act 1986.

The court must be satisfied that the conduct is genuinely dishonest, rather than merely disreputable. The assessment is fact-sensitive. Where the evidence establishes a wider pattern of deliberate asset concealment and prejudice, the exception may extend beyond the particular transaction already impugned.

The applicant wife sought ancillary financial relief against the respondent husband. During the proceedings, the husband’s solicitor was summoned to give evidence about the insurance and location of a valuable art collection and about assets held through a respondent company.

The solicitor objected to questioning and document production on legal professional privilege grounds. The court had previously found that the husband had withdrawn from the proceedings, breached disclosure and other orders, and used corporate structures and transactions to put assets beyond the wife’s reach. The central issues were whether the communications arose in a relevant legal context and whether the fraud or iniquity exception justified lifting privilege.

1. Privilege and legal advice. Communications made confidentially for the purpose of legal advice may include a continuum of communication, but the advice must arise in a relevant legal context. Arranging insurance and managing investment or bank assets were, on the facts, activities more characteristic of a solicitor acting as a client’s man of business than giving legal advice. The possibility that legal consequences might exist did not, without more, bring those activities within the privilege.
2. Fraud or iniquity exception. The exception applies where legal advice is sought or given to effect fraud or iniquity. It extends beyond criminal fraud and narrow civil fraud. The court must nevertheless be satisfied that the conduct is dishonest, not merely disreputable or ethically deficient, and must balance the public importance of privilege against the seriousness of the alleged fraud.
3. Application to the facts. The husband’s non-participation, repeated breaches of orders, use of respondent companies as vehicles for his benefit, and transactions designed to defeat or impede the wife’s claim established serious iniquity. The subsequent movement of the art collection and portfolio assets reinforced that conclusion. The reasoning in Barclays Bank Plc v Eustice [1995] 1 WLR 1238 was directly applicable. Its rationale was not confined to the precise transaction challenged under section 423 of the Insolvency Act 1986.
4. Section 37 and other authorities. The same reasoning applied to transactions within section 37 of the Matrimonial Causes Act 1973. C v C (Privilege) [2006] EWHC 336 (Fam) did not assist the respondent because privilege had been preserved there only for want of sufficiently compelling evidence. The decision in JSC BTA Bank v Solodchenko (No.3) [2011] EWHC 21763 (Ch) was fact-specific, interlocutory, and had not considered the fraud exception.
5. Orders. The objections to questioning and document production were rejected. Permission to appeal and a stay were refused. The solicitor was required to produce documents concerning the art collection and portfolio assets. The court held that the husband’s iniquity made a stay inequitable and that time was of the essence.