Court of Appeal: legal advice privilege survives collapse of client

The High Court ruled previously that the documents remained privileged for as long as the company could potentially be restored to the register, in this case until 2036. The Court of Appeal has gone further, overturning a previous case on the point to find that documents, once privileged, remain privileged unless that privilege is waived by the person entitled to waive it.  Here, that was the company and the company had not waived privilege.

Litigation expert Emilie Jones of Pinsent Masons, the law firm behind Out-Law, said that the decision "emphasises the absolute nature of legal professional privilege".

"If a document meets the criteria for privilege, and retains the necessary characteristics including confidentiality, the basic rule is that it is privileged forever," she said. "There are very limited exceptions to this, the main one being where privilege is waived, which can only be done by the person to whom the privilege belongs."

"This case is a reminder of how careful law firms and other professionals who find themselves facing claims or investigation by third parties have to be with their clients' privileged information. The court emphasised that it is a lawyer's duty to assert their client's privilege. That is the case even where the client is a company which no longer exists because it has been dissolved, as is frequently the case with fraudulent investment schemes," she said.

Civil fraud and asset recovery expert Alan Sheeley said that parties wishing to access privileged information held by professional advisers "need to think creatively about their litigation strategy".

"A number of regulators, including the Solicitors Regulation Authority, have powers to demand that privileged client documents be handed over in the course of a regulatory investigation," he said.

"Once privileged documents are in the hands of a regulator, it may be possible for third parties to glean information about their contents. For example, relevant information may be discussed at a public disciplinary hearing, and safeguards applied to such hearings like anonymisation might not fully prevent third parties from picking up relevant information," he said.

Legal advice privilege is a type of legal professional privilege (LPP), which generally attaches to confidential communications between lawyers and their clients for the dominant purpose of the provision of legal advice. A document which is privileged need not generally be shared with counterparties to litigation or others, including regulators and enforcement agencies.

The claims here were brought by a group of investors in a collapsed gold dust investment scheme marketed by the Cypriot firm, Anabus Holdings Ltd. The scheme closed in 2010 and Anabus was dissolved in 2016. The investors claim that the scheme was fraudulent and are seeking damages from Dentons Europe LLP, the English law firm, for deceit or negligence. The law firm acting for Anabus, Salans LLPs, has since become part of Dentons.

The investors, as part of their claim against Dentons, sought disclosure of various documents passing between Anabus and Salans which they agreed, for the purposes of this appeal, would have attracted legal advice privilege unless an exception to privilege applied. Master Clark, in the High Court, refused disclosure, on the grounds that it was still possible as a matter of law that Anabus could be restored to the register at which point it would once again be able to re-assert privilege.

In her judgment, Master Clark referred to the leading case on this topic, Garvin Trustees Ltd v The Pensions Regulator, in which the Upper Tribunal held that the right to asset legal professional privilege ceased on dissolution of the company. She said that the circumstances here differed, as in the Garvin case the time for restoring the company to the register had passed.

The Court of Appeal, while dismissing the investors' appeal, overturned the Garvin case. It found that the law had taken a "firm position" that once a communication had become privileged, it would only cease "if waived by the client (or someone otherwise entitled to waive it) or is overridden by statute".

"If an exception were to be made in the case of a dissolved corporation, one would have to consider what other exceptions might have to be made," said Lord Justice Lewison, giving the judgment of the court. "For example, a members' club that ceases to exist for lack of membership; a society registered under the Friendly Societies Act 1974 or non-charitable donations to a fund held by trustees might all be said to fall within the same principle."

"The recognition of exceptions would, in my judgment, undermine the policy of certainty that underpins legal advice privilege," he said.

The court briefly considered the 'iniquity' exception, under which no privilege attaches to documents or communications between client and lawyer where the purpose of the client was the furtherance of crime, fraud "or other iniquity". The court found that, whether or not this exception applied, it did not conflict with the underlying principle that documents, once privileged, remain so.

"These are complex and fluid areas of law on which specialist advice is needed," said Alan Sheeley. "Just this week, the Court of Appeal heard an appeal on the boundaries of the iniquity exception, in particular whether it applies to advice on how to 'cloak' discriminatory dismissal of an employee as redundancy. Next year, the Court of Appeal will hear an appeal on the Financial Reporting Council's regulatory powers to access audit clients' privileged documents."