Barrowfen Properties v Patel & Ors

The iniquity exception to legal professional privilege extends beyond crime and fraudulent misrepresentation to dishonest or bad-faith conduct, sharp practice, and deliberate conduct by a director which secretly prefers personal interests over those of the company. It may apply to alleged breaches of sections 172 to 175 and 177 of the Companies Act 2006. Disclosure of privileged material requires a strong prima facie case; where litigation privilege is claimed and fraud is an issue in the action, a very strong prima facie case is required. In a joint retainer, one client cannot assert privilege against the other concerning communications made during the retainer.

Barrowfen applied under Practice Direction 51U to compel disclosure of documents over which Stevens & Bolton LLP asserted legal professional privilege on behalf of Girish Patel and Barrowfen Properties II Ltd. It relied on the iniquity exception, contending that Mr Patel had used the company and its solicitors in connection with dishonest conduct, and also argued that documents generated during a joint retainer could not be withheld from the company.

The application concerned five alleged schemes: removal of a shareholder from the register, forgery of a director’s resignation letter, forgery of trustee resignation documents, manipulation of the register to control trust votes, and placing the company into administration to acquire its principal property. The central questions were whether the evidential threshold for the iniquity exception was met and whether the company was entitled to disclosure.

1. Application granted. The court ordered disclosure of matter files and documents created for, or containing, legal advice provided by Stevens & Bolton LLP to Mr Patel or Barrowfen Properties II Ltd concerning the five claims.
2. In a joint retainer, neither client may assert legal professional privilege against the other in respect of communications passing between the clients and the solicitor during the retainer. That was the default position under The Sagheera [1997] 1 Lloyd’s Rep 160 and BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2011] Ch 296.
3. The iniquity exception is not confined to crime or fraudulent misrepresentation. It extends to fraud in the wider sense, including dishonest or bad-faith conduct, sharp practice, and underhand conduct where good faith is required. By analogy with BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2011] Ch 296, the exception may apply where breaches of sections 172 to 175 and 177 of the Companies Act 2006 involve fraud, dishonesty, bad faith or deliberate secret preference of personal interests.
4. For documents protected by legal advice privilege, the applicable threshold was a strong prima facie case. For documents protected by litigation privilege, where fraud was an issue in the action, the court required a very strong prima facie case. The court adopted the guidance in Addlesee v Dentons Europe LLP [2020] Ch 243 and applied the approach in Kuwait Airways Corpn v Iraqi Airways Co (No 6) [2005] 1 WLR 2734 and Derby & Co Ltd v Weldon (No 7) [1990] 1 WLR 1156.
5. The court found the relevant thresholds met. There was a very strong prima facie case concerning the removal of Bedford from the register and the forged resignation letter, and a strong prima facie case concerning the trustee documents, manipulation of the register and administration plan. The alleged conduct involved breaches of statutory directors’ duties and secret preference of Mr Patel’s interests over those of the company.
6. The court could determine the application by considering the allegations against Mr Patel alone and without forming a view on the claims against Stevens & Bolton LLP. Mr Patel’s failure to advance a positive defence did not prevent adverse comment or inference in the civil proceedings, notwithstanding the private prosecution.