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“Once privileged, always privileged”

24 October 2019

The Court of Appeal has held that legal advice privilege attaching to communications between a company client and its lawyers survived the dissolution of the company client, even where the Crown had disclaimed its interest in the documents concerned.

Background

A number of investors had invested in a scheme marketed by a Cypriot company named Anabus (the “Company”). The scheme failed, and the Company was dissolved. The investors subsequently claimed the scheme had been fraudulent and started proceedings against the Company’s former lawyers. The investors wished to see communications between the Company and its lawyers, where the lawyers had advised about the scheme. As such, they applied to court for an order requiring the Company’s former lawyers to disclose the documents in question.

It was common ground between the parties that despite the fact that the Company was incorporated overseas, any personal property and tangible goods situated in England and Wales which belonged to the Company (which included the property in the relevant communications) passed to the Crown as bona vacantia on the dissolution of the Company. The Crown had disclaimed all interest in the documents concerned, without either asserting or waiving any legal professional privilege attaching to the documents.

At first instance, the Company’s lawyers successfully resisted the investors’ application on the grounds that the documents were protected by legal advice privilege. The investors appealed. The question for the Court of Appeal to consider was whether the legal advice privilege attaching to the communications survived the dissolution of the Company and the Crown’s subsequent disclaimer.

Decision

The Court of Appeal held that the communications concerned were still protected by legal advice privilege, and that they should not be disclosed.

Lewison J delivered the main judgment on behalf of the Court of Appeal, and he put the public policy rationale underpinning legal advice privilege at the centre of the decision. He stressed that legal advice privilege exists because a client must be able to tell things to their lawyer in confidence, knowing with certainty that that confidence will never be broken without the client’s consent.

Once established, the relevant communication will remain privileged unless and until that privilege is waived or it is overridden by statute. Here it was common ground between the parties that no statutory provision overrode the privilege.

Privilege does not cease to exist simply because there is no legal person to assert it

The crux of the investors’ argument was that if there is no legal person capable of asserting legal advice privilege, then that privilege ceases to exist.

This position was roundly rejected by the Court of Appeal, which was at pains to stress the absolute nature of legal advice privilege. Legal advice privilege is created at the time each relevant communication is made. Once created, the privilege attaches to the communication and belongs to the client who was necessarily involved in the relevant communication at the time it was made. If the client ceases to exist, the Court said that the “only remaining question” and the “right question” was whether there is anyone who has the right to waive the privilege (and whether they have done so).

The Court held that just as privilege survives the death of a living person, so it does with a corporation. Whilst a person’s personal representative could potentially waive privilege on behalf of the deceased in certain circumstances, there was no equivalent representative for a dissolved company.

The Court expressly did not determine whether the right to waive privilege passed to the Crown, but decided that the Crown’s disclaiming ownership of the documents in question did not amount to waiver of privilege. The fact that there was no-one left to potentially waive the privilege, meaning that it would exist indefinitely, did not trouble the Court. The Court was far more concerned that introducing an exception to privilege in the case of a dissolved corporation might encourage other exceptions to be made and this would “undermine the policy of certainty that underpins legal advice privilege”.

“It is the lawyer’s duty to assert privilege”

The investors argued that they should not have to pay the Company’s lawyers’ costs for successfully resisting the application, on the basis that the firm did not need to actively contest the application, or to appear before the Court. The Court rejected this argument, holding that as the Company’s lawyers were the only party named in the application and the investors were seeking mandatory orders against the firm to produce the documents concerned, it would be “extraordinary” if the firm was not entitled to appear to contest the application.

Drawing on previous authorities, the Court of Appeal was clear that it is a lawyer’s duty to assert privilege on behalf of their clients (or former clients) where such privilege exists and that if they incur costs in doing so, they are doing no more than fulfilling that duty. Although the Court did not say that solicitors must always participate in contested proceedings for disclosure, they may do so without overstepping the limits of their duty. Ultimately, the Court of Appeal upheld the first instance decision to award the Company’s lawyers 80% of their costs of contesting the application.

Conclusion

The decision robustly upholds the ambit of legal advice privilege against an attempt to argue that it should fall away when a company has been dissolved. It also provides welcome clarification for lawyers regarding their role in asserting and upholding privilege on behalf of former clients.

The judgment is available here.

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