Preserving a bankrupt’s rights of privilege (Avonwick Holdings Ltd v Shlosberg)

Preserving a bankrupt’s rights of privilege (Avonwick Holdings Ltd v Shlosberg)

Does legal professional privilege attaching to information and documents of a bankrupt devolve to his trustee in bankruptcy? James Mather, barrister at Serle Court, examines the Court of Appeal’s answer to this question in Avonwick Holdings v Shlosberg.

Original news

Avonwick Holdings Ltd and others v Shlosberg [2016] EWCA Civ 1138

The Court of Appeal dismissed an appeal by the bankrupt respondent’s principal creditor and trustees in bankruptcy against an order that the trustees’ solicitors stop acting also for the creditor in respect of any matter relating to the respondent or his affairs. The trustees had passed documents to their solicitors which belonged to the respondent and were subject to legal professional privilege. The trustees argued that they had acquired the benefit of the privilege and could waive it to allow the creditor to deploy the information in proceedings against the respondent. However, the Court of Appeal held that the privilege attaching to information and documents of a bankrupt was not property which vested in the trustees in bankruptcy under the Insolvency Act 1986 (IA 1986).

What was the background to the case?

The respondent, Mr Shlosberg, is a Russian businessman domiciled in England against whom his principal creditor Avonwick Holdings (Avonwick), after a substantial trial, obtained a judgment in November 2014 in the sum of $195m plus interest. Mr Shlosberg failed to pay the debt and was bankrupted on Avonwick’s petition in January 2015.

Avonwick was represented in the proceedings against Mr Shlosberg by solicitors who were also appointed to act as legal advisers by Mr Shlosberg’s trustees in bankruptcy (trustees).

The trustees exercised their powers under IA 1986, s 311(1) to obtain privileged and confidential documents in the hands of Mr Shlosberg’s former solicitors. The trustees passed those documents on to their solicitors, who read them in detail. The solicitors imposed no information barriers between those acting for Avonwick and those acting

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