People who are targets of liquidators' and other claimants' investigations often attempt to hide behind the veil of legal professional privilege to avoid producing documents.
However, the veil of legal professional privilege can be lifted if it can be shown that there are reasonable grounds to believe that the documents were created for the purpose of defeating creditors and frustrating their claims. This is commonly known as the fraud exception to legal professional privilege. The concept of fraud used in this context is broad: it is not limited to nefarious conduct and extends to attempts to defeat creditors.
This is a useful (and arguably underutilised) tool in the arsenal of liquidators, bankruptcy trustees, and other potential claimants.
- Legal professional privilege is not a bar to accessing communications brought into existence in furtherance of a fraud or to defeat claims of creditors
- The 'fraud exception' extends to anything that might be described as a fraud on justice, including communications brought into existence in furtherance of the commission of a crime or offence, fraud, sham, or for the purpose of frustrating claims of creditors
- Legal advice relating to restructuring of assets may therefore be potentially accessible if it can be established that there are reasonable grounds to believe that the privileged documents were brought into existence in furtherance of a fraud in that broader sense
Subscribers to the Insolvency Law Journal can access a more detailed article authored by Noel McCoy and Sophie Waples here.
Alternatively, you can read our Insight by clicking the link below..