Barrowfen Properties v Patel & Ors

The court granted Barrowfen's application under Practice Direction 51U to compel disclosure of documents withheld on grounds of legal professional privilege where the iniquity exception applied or where documents had been created in the course of a joint retainer. The judge held that where a solicitor accepts a joint retainer the default position is that neither client may assert privilege against the other in respect of documents created in the course of that retainer.

The court found that, on the particular facts, there was (i) a very strong prima facie case of iniquity in relation to the Bedford rectification and the Suresh resignation allegations and (ii) a strong prima facie case in relation to the Trustee resignation, trusts-registration and administration allegations. Those findings engaged the iniquity exception to legal professional privilege and justified disclosure of S&B's matter files and advice to Girish and Barrowfen II in relation to the five defined claims.

This is a first instance application under Practice Direction 51U made by Barrowfen Properties Ltd to challenge the defendants' withholding of documents on grounds of legal professional privilege. Barrowfen sought disclosure on two bases: (a) that the documents were created in the course of a joint retainer between Stevens & Bolton LLP and both Barrowfen and Mr Girish Patel (so neither client could assert privilege against the other) and (b) that the so-called iniquity exception (fraud/iniquity) disapplied privilege for documents created to further wrongful conduct.

Background and parties: Barrowfen (the company) alleged that Girish (a former director) unlawfully sought and obtained control of the company by a package of steps including removing Bedford from the register of members, forging resignation letters and trustees' documents, amending the register so he could vote trust shares, and orchestrating an administration to enable acquisition of the principal asset via Barrowfen II. Barrowfen also pleaded claims against Stevens & Bolton, but the judge decided the iniquity application without regard to the allegations against the firm (S&B) and recorded that S&B adopted a neutral position in respect of asserting privilege pending the court's determination.

Nature of the application: Barrowfen applied for an order requiring the defendants to produce documents and matter files containing legal advice given by S&B to Girish and to Barrowfen II in relation to five defined claims (Bedford rectification, the Suresh resignation, trustee resignations, trusts-registration and administration). Barrowfen also pursued ancillary relief to regularise disclosure certificates and searches; S&B had separately sought Part 18 information which was largely resolved at the hearing.

Issues framed by the court: (i) the scope of the iniquity exception and whether it extends to breaches of statutory directors' duties (Companies Act 2006 ss 171–175 and 177); (ii) the standard of proof required to displace privilege (the judge applied the test of a very strong prima facie case for matters attracting litigation privilege in some instances and adopted Master Clark's strong prima facie formulation generally); and (iii) whether documents were created in the course of a joint retainer so as to prevent one client asserting privilege against the other.

Reasoning and findings: The judge reviewed authorities on the iniquity exception and joint retainer principles and applied them to the pleaded facts and affidavit material. On the Bedford rectification claim and the Suresh resignation claim the court was satisfied there was a very strong prima facie case of iniquity, dishonesty and breaches of duties under the Companies Act 2006. On the Trustee resignation, Trusts-registration and Administration claims the court was satisfied there was a strong prima facie case of wrongdoing and breaches of duty. On that basis the iniquity exception applied to documents created by S&B in relation to those claims. The court therefore ordered that the defendants disclose matter files and documents containing legal advice given by S&B to Girish or Barrowfen II in relation to the five claims. The judge noted Girish's absence from the hearing and proceeded under CPR Part 23.11; he declined to make certain coercive orders against Girish in his absence (such as an unless order or a compulsory witness statement) but set extended deadlines for revised disclosure certificates and lists.

Contextual points: the judgment explains the court's approach to privilege where allegations of fraud or dishonesty arise; it confirms that the iniquity exception can extend to breaches of statutory directors' duties and explains the differing thresholds applicable to litigation and legal advice privilege.

The court allowed the iniquity application and ordered disclosure. The judge concluded that Barrowfen had established a very strong prima facie case of iniquity in relation to the Bedford rectification and Suresh resignation claims and a strong prima facie case in relation to the Trustee resignation, Trusts-registration and Administration claims; those findings engaged the iniquity exception and, together with the joint-retainer principle, justified an order that Stevens & Bolton disclose matter files and advice to Girish and Barrowfen II relating to the five defined claims.