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When can a legal representative be summoned as a witness to give evidence against their client in a financial remedies case?

Byron James, barrister, Expatriate Law (based in the United Arab Emirates) considers the circumstances in which legal professional privilege may not apply in financial remedies cases.

 

 

Byron James, Expatriate Law (based in the United Arab Emirates)


Undoubtedly one of the great elements of trust placed upon the legal profession is that they will not collude in a fraud against proceedings. However, there needs to be a sufficiently wide and protected environment for litigants to be able to seek legal advice from their legal representatives without fear of that advice being made known outside the room in which it was given. It is for these reasons that legal professional privilege exists and exists in the form that it does: that it is not absolute and is subject to with specific exceptions. How many legal representatives are aware of the parameters of legal professional privilege and the circumstances in which they could be called to give evidence? If so, would they be fully aware of what they could be compelled to reveal, that which falls outside the legal professional privilege protection? To what extent do legal representatives fully inform their clients of the same before embarking on specific tasks for their client?

In AAZ v BBZ (& Ors) [2016] EWHC 3349 a solicitor was summonsed as a witness to give evidence regarding the enforcement of a previous order awarding the Wife £453,576,152, of which £350,000,000 was to be in lump sum and £90,581,865 was to be reflected in the award of a 41.5% share of a modern art collection.

Issues concerning enforcement of the final order were likely not least because the Husband did not attend and was not represented at the final hearing, in breach of various orders made by the High Court. At the final hearing the Court was asked to determine the Wife's contention that the Husband was worth £1,000,000,000 (i.e. a billion pounds), that the assets were both matrimonial in character and should be subject to the sharing principle. It was for these reasons that the Wife's legal team took the step of seeking a specific determination within the judgment of what aspect of the award was 'only concerned with maintenance' and not 'property consequences' so that this specific amount would be capable of enforcement under the Lugano Convention in Switzerland against one of the Husband's companies.  As an aside, this exercise was particularly important in the European context where a different distinction is made between 'maintenance' and 'property.' "Maintenance" is based on a needs calculation whilst "property" is more vested in sharing. The needs calculation, as one can see from paragraph 131 (of the final hearing judgment), extends into purchase of property, professional costs and a capitalised lump sum, with perhaps the latter only falling within what UK lawyers would normally consider 'maintenance'.

Having obtained the final hearing awards, the Wife's legal team then sought to establish the location of  the modern art collection and to investigate the asset portfolio of one of the companies considered to be worth $890,065,115. To progress enforcement, the Husband's long standing solicitor (correctly anonymised within the judgment) was witness summonsed to give evidence before Mr Justice Haddon-Cave.  As a point of practice, this order included a 'non-tipping off' provision which 'prohibit[ed] [the Solicitor] from notifying the Respondents that he had been summonsed' (para 2).

The solicitor was then cross examined on two issues: the first being the location of the modern art collection and the second being the asset portfolio of the Husband's company. At the final hearing the Wife had given evidence that she was aware that the Solicitor had been involved in arranging insurance for the modern art collection and played 'a role in other aspects of [the Husband's] financial affairs' (para 2). The solicitor was represented at this hearing, and both lines of the proposed questioning were objected to.


The modern art collection

The first line, regarding the modern art collection, was objected to because it was submitted that the solicitor's actions regarding arranging insurance for this modern art collection had fallen within a 'continuum of communication' between the Husband and the Solicitor 'involving legal questions concerning, e.g., the fiscal and other consequences of storage of the Modern Art Collection in a particular EU or non-EU country.' (para 15). The Wife contended that arranging insurance did not fall within the context of providing 'legal advice' and that it did not fall within 'a relevant legal context' so that  consequently it did not attract legal professional privilege.

Legal professional privilege will 'attach to 'legal advice' given by a lawyer to their client' (para 13). Mr Justice Haddon-Cave cited Balabel v. Air India [1988] Ch. 317 (CA) and Three Rivers District Council v. Governor of the Bank of England (No.6) [2004] UKHL 48 in support of his analysis of the law in relation to the meaning of 'relevant legal context'. In Balabel, Taylor CJ [at para 330] stated "legal advice" may involve a "continuum of communication"; it is not confined to telling the client the law, but includes "advice as to what should prudently and sensibly done in a relevant legal context" (para 13(1)). In Three Rivers, Lord Rodger (at para 60) stated that a "relevant legal context" exists to ask whether the client has, expressly or impliedly, asked his lawyer "to put on legal spectacles" when giving the advice sought (para 13(2)). Lord Scott in Three Rivers (at para 38) stated that where a solicitor becomes a client's "man of business" advising the client on investment maters, finance policy and other business matters, the advice may lack a "relevant legal context" (para 13(3). Lord Scott (at para 38, in Three Rivers), also stated that in cases of doubt the judge should ask whether the advice relates to the "rights, liabilities, obligations or remedies of the client either under private law or under public law" and whether the "occasion" on which and "purpose" for which the advice takes place makes it (objectively) reasonable to expect the privilege to apply (para 13(4)). 

Mr Justice Haddon-Cave found that 'the arranging of insurance is something that a "man of business" would do for a client rather than qua solicitor' (para 16) and that such arranging was 'a fairly routine matter' (Ibid). As the advice was given outside a 'relevant legal context' professional privilege did not apply and the questions were allowed. It was revealed by the solicitor "that H had moved the Modern Art Collection from a repository in central Europe to a new repository in another European country in November, i.e. shortly before the trial" (para 6).


The company asset portfolio

The second line of questioning related to the asset portfolio of a limited company. Mr Justice Haddon-Cave found that communications between the Husband and the solicitor regarding this company as a 'monetary asset' was within a 'relevant legal context' (para 17) although it was noted that wider considerations of the company's bank accounts with the Husband and company shareholders might be considered closer to 'a man of business' than acting as solicitor. This distinction was not considered for long however as Mr Justice Haddon-Cave went on to consider the matter in the context of fraud.

Mr Justice Haddon-Cave considered Barclays Bank Plc v. Eustice [1995] 1238 (CA), C v. C (Privilege) [2006] EWHC 336 (Fam) and Ventouris v. Mountain [1991] 1 WLR 607 when determining whether the fraud exception had been met. The essential bottom line is that as per Schiemann LJ in Barclays Bank (at para 1249) Where legal advice is sought or given for the purpose of effecting fraud or "iniquity", it is not privileged (para 14(1)). The fraud itself does not need to pertain to a specific criminal or civil fraud but rather sits in the wider context of fraud as set out by Munby J in C v C (para 35) and Schiemann LJ in Barclays (para 1249) rather than any narrow construction of the same (para 14(2).  Following Goff LJ in Gamlem Chemicals Co (UK) Ltd v. Rochem Ltd (unreported 7 December 1979) (as cited by Schiemann LJ in Barclays Bank at p. 1249) the court must be satisfied in every case that what is prima facie proved really is dishonest, and not merely disreputable or a failure to maintain good ethical standards.  Each case depends on its own facts (para 14(3)).

Reference was made to a number of key findings made at the final hearing (para 19), where effectively Mr Justice Haddon-Cave found that the Husband's engagement with the proceedings had been deliberately obstructive, that one of the companies was a bare trust and nominee for the Husband, the other company was a 'Dear me' trust designed to pay money to the Husband, that a disposition was made by the Husband to the 'Dear me' trust which satisfied the criteria of a reviewable disposition in accordance with section 37, MCA 1973. These findings were considered to build a picture of 'a naked determination to hinder or prevent the enforcement of W's claim' (para 20) and this was only exacerbated by the revelation by the solicitor of the steps taken to hide the modern art collection.

The main argument by the solicitor for the assertion that legal professional privilege applied in relation to the company's portfolio was that the lifting of privilege is 'transaction specific' and therefore should pertain only to the reviewable disposition. This was rejected because the Husband's conduct "as a whole has been "sufficiently iniquitous" for public policy to require the communications between him and his solicitor in relation to Modern Art Collection and P Ltd's monetary assets to be discoverable" (para 23).

The questions were then allowed and it was revealed by the solicitor that some $600,000,000 of one of the company's assets had been transferred to a different country and a different trust vehicle before the final hearing had taken place. These steps seemed to be 'deliberate steps shortly before the trial to make enforcement of any monetary award by the court in favour of W even more difficult' (para 8).


In summary

This was a case in which the judge found that there had been fraud and it was fortunate for the Wife that she was aware of the solicitor's involvement in the dealings with the modern art collection which provided a prima facie case. There will of course be other cases in which the margins are finer and the prima facie case less clear that there has either been fraud or the involvement of a solicitor outside of a legal context and more 'of a man of business'.

The difficulty with these cases being that one can only argue about the specifics once one is fully aware of the details but all too often the details are only ascertainable with a prima facie case, with those details often only available once the investigation into them is properly made, a circular process which keeps going in on itself.

However, this case is a cautionary note to legal representatives who provide services to their clients outside a legal context and more 'as a man of business'. Their clients should be informed that such actions are not going to be protected by legal professional privilege in the same way that legal actions will be. Further, wherever legal advice is given in the context of a fraud, and in the modern financial remedies context this may well involve (usually international) dispositions designed to defeat proceedings, then legal professional privilege will not apply.

Where one finds oneself as the legal representative in such a case, the client should be made aware that you too can become a source of information if a fraud is found to prima facie exist. Where one is bringing a section 37 reviewable disposition application or dealing with other such fraud on the other side of a case, strong consideration should be given to the evidential value which could be achieved by summonsing the other party's solicitor to give evidence.