Fraud - June 2010
Privilege: The Fraudster’s Friend?
Claimants and their solicitors frequently rely upon legal
professional privilege as their reason for refusing to provide
information or to allow inspection of documents in their
control. Often, their reliance upon privilege is perfectly
valid. However, occasionally, the reliance on privilege
is tenuous and cited in an attempt to shield all manner of
documents and communication – from fabricated invoices, even to the
identity of an accident management company behind the dubious
claim.
What, therefore, is to be done when it is
suspected that the right of privilege is being abused to protect a
fraudster and to prevent the investigation of a dodgy
claim?
Legal professional privilege has long been
considered as a fundamental human right, which underpins our common
law. It protects communications between lawyers and their
clients from the prying eyes of opponents and the Court. Lord
Taylor in R v Derby Magistrates (1996)
said:-
"The principle that runs through all [the
authorities] is that a man must be able to consult his lawyer in
confidence, since otherwise he might hold back half the truth. The
client must be sure that what he tells his lawyer in confidence
will never be revealed without his consent. Legal professional
privilege is thus much more than an ordinary rule of evidence,
limited in its application to the facts of a particular case. It is
a fundamental condition on which the administration of justice as a
whole rests."
There are broadly two types of privilege;
legal advice and litigation. The former relates generally to
communications between lawyers and their clients, provided they are
confidential and for the purposes of seeking or giving legal
advice. The latter relates to documents created by
communications between lawyers and third parties, the dominant
purpose of which is to assist in anticipated litigation. The
right, therefore, is far reaching and this compounds the issues
facing fraud lawyers in cases where foul play is suspected.
Weightmans fraud team has recently been
instructed on such a case, which involved a suspected induced
collision and various associated alleged losses. The key
concerns were that the vehicle the claimant was alleged to have
been driving was owned by an accident management company and a
number of his alleged losses were suddenly and inexplicably
abandoned by the claimant, who issued proceedings in connection
with his claim for personal injury only.
The claimant’s subsequent witness statement
intimated that the only loss he had ever sustained was personal
injury, contrary to the various losses for which, according to
earlier correspondence from his solicitors, he had previously
contended.
The claimant’s solicitors were invited to
explain how precisely they came to be instructed to pursue those
abandoned claims, why they were abandoned and to identify the
source of the apparent misinformation which, the facts suggested,
was the accident management company.
The solicitors’ responses were vague,
ambiguous and whilst they implied the claims came from the accident
management company, they refused to identify the precise source of
the misinformation.
Accordingly, an application was made for
specific disclosure of various documents and the application relied
upon two closely related legal principles.
The first was the fraud exception to
litigation privilege (Kuwait Airways v Corporation v Iraqi Airways
Co (2005), which stated that in instances where there was, on the
face of it, a case of fraud against the party or his lawyer, the
documents prepared in relation to that suspected fraud do not
attract privilege.
The second was the public policy exception to
litigation privilege (Istil Group v Zahoor (2003) which stated
that, in cases where the suspected fraud is not against a party or
his lawyer, but a third party (such as a suspect accident
management company), the public interest in the proper
administration of justice requires that the related documents ought
to be disclosed.
The court heard the application, was convinced
that the authorities applied to the case and ordered the claimant
to disclose and provide inspection of every document passing
between his solicitors and the accident management company,
including initial referral documentation, payments and telephone
communications. The Claimant was also ordered to pay the
costs.
Accordingly, whilst legal professional
privilege is a fundamental human right, which requires protection,
it does not represent a shield for fraudsters and in cases where
there is evidence of fraud, the court is able to look behind the
claim for privilege and make a order for disclosure and inspection
of the documents that have been prepared to further that fraud. In
turn, this enables Defendants to compile the evidence required to
defeat this type of fraudulent claim.
Jeff Turton is a fraud specialist in
Weightmans’ Liverpool Motor Investigation Unit.