Summary

The UK Court of Appeal recently confirmed that lawyers (Decherts) could no longer act for a company (Avonwick). Our views on the first instance decision can be found here.

Background

The high court had decided that a bankrupt’s right to privilege does not automatically vest in the trustee in bankruptcy under the Insolvency Act 1986 (IA). The court granted an injunction in order to protect Mr Shlosberg (a bankrupt)’s right to privilege in circumstances where Dechert, solicitors for both Avonwick and Mr Shlosberg’s trustee in bankruptcy, had reviewed privileged documents as part of ongoing proceedings involving Avonwick (as claimant) and Mr Shlosberg (as defendant).

Appeal

Avonwick appealed, on the basis that a bankrupt’s right to privilege falls within the definition of ‘property’ which automatically vests in a trustee on bankruptcy under the IA; or, that by necessary implication of those provisions, a trustee is nevertheless entitled to use a bankrupt’s privileged documents in exercising his statutory functions.

Decision

  • The Court of Appeal dismissed the appeal
  • It was held that the statutory function of a trustee under the IA to ‘get in, realise and distribute the bankrupt’s estate’ does not extend to deploying a bankrupt’s privileged documents in order to assist a third party with prosecuting its claim
  • That is the case even though using the privileged material would reduce the value of a creditor’s claim on the bankrupt’s estate.