Jersey: Oligarch's Lawyer Forced To Reveal Whereabouts Of Multi-Million Pound Art Collection

In common law jurisdictions such as England and Jersey, privilege is a fundamental principle of justice which enables a client to talk openly to his lawyer, secure in the knowledge that nothing he says will later be made public.

There are two main types of privilege. Legal advice privilege protects communications between a client and his lawyer for the purpose of giving or obtaining legal advice. Litigation privilege protects a wider category of documents – those between client or lawyer and a third party – but only where they are created after proceedings have been commenced or are contemplated and for the dominant purpose of seeking or giving advice in such proceedings.

The wide ambit of the privilege and the fact it is an absolute and permanent right once established may lie behind some recent judicial attempts to limit the parameters of privilege. In SFO -v- ENRC, for example (the subject of one of our recent blogs Limits on Legal Professional Privilege),the judge did not accept that litigation privilege extended to documents created to obtain advice on how best to avoid contemplated litigation. This decision is being appealed and some doubt has been cast on it in a subsequent first instance decision (Bilta v RBS). However, another recent case demonstrates that courts will not accept claims to privilege without proper scrutiny and that privilege should not be extended beyond its existing confines.

In Kerman v Akhmedova[1], Mr Akhmedova (a wealthy Russian oligarch) had been ordered to transfer his art collection (valued at £90.5 million) to his former wife as part of a somewhat eye watering divorce settlement of £453 million. He did not do so and the wife's lawyers could not find out its whereabouts. Accordingly the wife applied for a summons against Mr Kerman, her ex-husband's solicitor, to give evidence about his role in arranging insurance for the art collection (which would assist the wife to locate it). The solicitor attended and was questioned. He objected on the grounds of privilege. The judge dismissed the objection so Mr Kerman appealed to the Court of Appeal.

There are relatively few reported cases requiring solicitors to hand over documents, perhaps because of a concern that such orders might inhibit the fundamental right of a person to obtain legal advice from his solicitor and a fear of "opening the floodgates" to such claims[2]. The Court of Appeal, however, ruled in a forthright judgment that privilege did not apply. Mr Kerman had not been asked about his dealings with his client or any advice he might have given him. The information sought related to purely factual matters and communications with third parties – Mr Kerman had been arranging insurance for the art collection (a function viewed by the court as being something a "man of business" would do as opposed to legal advice). His client could not have declined to answer such questions so Mr Kerman should not be able to rely on privilege to avoid doing so. Such communications were not privileged. The Court of Appeal further confirmed that, even if the documents had been privileged, the "fraud exception" would apply. There is no privilege if the communication or document in question came into being for the purpose of furthering a criminal or fraudulent design. This is sometimes known as "the iniquity principle". The principle applied here since the husband seemed to be deliberately transferring and concealing his assets to evade a binding court judgment.

The court accepted that requiring a solicitor to provide such information could cause embarrassment for the solicitor and difficulties for the client, especially where there was an anti-tipping off order (as here); it could destroy the client's confidence in the solicitor's independence. However, they ruled that the order was justified. It was understandable why the wife's advisers wished to obtain information from the solicitor so that they had a better idea of the assets' location. The solicitor had been an obvious source of the information. The Court further confirmed that it was right no notice had been given to the husband – there had been every reason to fear that, if alerted, the husband would have made further attempts to conceal assets.

The case is a reminder that claims for privilege will be closely examined and questionable claims will not be upheld.

Footnotes

[1] [2018] EWCA 307

[2] JSC BTA Bank v Solodchenko and others (No 3) is a rare example where the court ordered the solicitors to disclose all of the defendant's past and present contact details on the grounds they did not comprise legal advice.

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