Trustees in bankruptcy and privilege—a spanner in the works? (Shlosberg v Avonwick Holdings)

Trustees in bankruptcy and privilege—a spanner in the works? (Shlosberg v Avonwick Holdings)

Does a trustee in bankruptcy (TIB) acquire the benefit of the bankrupt’s legal professional privilege? Marcia Shekerdemian QC of Wilberforce Chambers considers the decision in Shlosberg v Avonwick Holidings Ltd.

Original news

Shlosberg v Avonwick Holdings Ltd and others [2016] EWHC 1001 (Ch), [2016] All ER (D) 76 (May)

The Chancery Division ruled that the claimant’s TIB had acquired the benefit of his legal professional privilege with respect to one of three categories of documents held by the second defendant solicitors, who were also acting for the claimant’s creditor (Avonwick). Both Avonwick and the claimant had been engaged in hostile litigation. In all the circumstances, no order wasgranted requiring the solicitors to cease acting for the trustees. However, an injunction wasgranted requiring the solicitors to cease acting for Avonwick.

Why does this case matter?

This case involved consideration of an important point of principle, namely whether and to what extent a TIB is entitled to obtain documents which were subject to legal professional privilege in favour of the bankrupt, prior to his bankruptcy.

Arnold J had to consider whether the TIBs of a bankrupt, Mr Shlosberg (S), could claim the benefit of the privilege attaching to three categories of document. It wascommon ground that prior to his bankruptcy, S would have been entitled to the benefit of any privilege attaching to those documents.

The issue arose within the framework of an application by S for an injunction restraining the solicitors from acting for his TIBs and for his major creditor (who had live proceedings pending against him).

Arnold J decided that in two out of the three categories, privilege remained with S.

Until Shlosberg, it had always been assumed that a TIB simply stepped into the shoes of the bankrupt and that accordingly, the TIB simply acquired the benefit of any privilege formerly exercisable by the bankrupt

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About the author:
Eleanor qualified in 1998 into the insolvency team at ASB law. She became a partner in 2005, and went on to head up the Recovery & Insolvency team. Whilst traditionally specialising mainly in contentious corporate insolvency matters, in recent years she has moved into the non contentious arena, in particular specialising in company administrations.