The High Court held in Thomas & Ors v Metro Bank [2022] EWHC 2112 (Ch) that a trustee in bankruptcy had waived privilege in certain Russian law legal advice, and the underlying instructions, by summarising the advice in a witness statement written in support of a section 366 Insolvency Act inquiry.
By way of factual background, an application was made by a Respondent in an insolvency matter ("Mrs Yurova") for disclosure of privileged Russian law advice that had been obtained by the Applicants, the trustees in bankruptcy (the "Trustees") of Mrs Yurova's husband Illya Yurov (the "Privilege Application"). The Privilege Application arose as in an application under section 366 of the Insolvency Act, one of the Trustees had provided a summary of part of the Russian legal advice they received from their lawyers regarding spousal interest in assets acquired during marriage in the contents of a witness statement. Section 366 grants wide powers for trustees in bankruptcy to privately examine any person believed to be in possession of the bankrupt individual's property and includes their spouse. The witness statement set out the basis on which the Trustees sought relief from Mrs Yurova and the Russian law advice summary was used to support the argument that Mrs Yurova's personal bank accounts were in fact joint property with Illya Yurov, with the express caveat that the summary was not a waiver of privilege.
The Judge stated that in normal civil proceedings the Trustees would have been ordered to disclose the advice in full, together with the instructions giving rise to that advice, so that the advice could be seen in context. The Judge nonetheless recognised that the Section 366 context meant the Court had discretion as to whether to order disclosure of the underlying advice and/or instructions, as in insolvency proceedings disclosure only takes place if Court-ordered. On considering the facts in the case, the Judge ordered partial disclosure of:
(i) the legal advice that related specifically to the money held in bank accounts (although this had been disclosed voluntarily);
(ii) the instructions that led to the advice in question, with redactions to remove other instructions; and
(iii) any communications between the advising lawyer and those giving instructions containing substantive and disclosable instructions or advice, to the extent not captured in the advice or instructions.
In making this ruling, the Judge focussed on the overriding objecting and noted in particular that should the Trustees rely on assertions in a witness statement based on extracts of legal advice, that advice was being deployed in Court and could, for example, be misinterpreted by either Mrs Yurova or the Court if it was not disclosed in full and with its proper context. The Judge noted that the Trustees were acting as officers of the court and that this was an occasion where the Court would require them to demonstrate that they were not giving an incomplete impression of the Russian law advice by providing disclosure of the advice and its context.
This ruling is clearly consistent with the approach taken in ordinary commercial litigation towards waiver of privilege scenarios. It suggests that in insolvency scenarios where disclosure has to be applied for and ordered by the Court (which are comparatively rare), the Court will follow the same approach. Parties to a dispute should be alert to the risk of waiving privilege when summarising legal advice in evidence, and the fact that the summary could also open up the underlying instructions to disclosure. They should also be aware that merely stating that sections of evidence do not constitute a waiver of privilege will not be determinative, and will not prevent a Court from ordering disclosure of that advice, if the Court considers it appropriate to do so.
