The perils of privilege (Re Yurov)

25/08/2022

This analysis was first published on Lexis®PSL on 18 August 2022 and can be found here (subscription required).

Re Yurov; Thomas and others v Metro Bank plc and others [2022] EWHC 2112 (Ch), [2022] All ER (D) 33 (Aug)

What are the practical implications of this case?

Parties and practitioners should be alive to the risk of waiving privilege if they refer to and/or summarise legal advice which they have received in their evidence. It may result in a party being required to disclose that advice or parts thereof. A party cannot avoid waiving privilege purely by making a statement that ‘I do not waive privilege’.

One factor which the court considered in deciding whether to order disclosure was the risk that the advice might alert individuals about the trustees’ lines of investigation. An interesting question arises as to whether in future cases this factor tips the balance in favour of refusing to order disclosure.

The court re-affirmed that if further disclosure is required, it is constrained to the point which is in issue. If minded to refer to and summarise legal advice in a witness statement, then practitioners might decide to keep those references as narrow and as focused as possible to limit the extent of any waiver of privilege.

This was an unusual case. As the court acknowledged, an application under IA 1986, s 366 would typically not require disclosure from either party during the application.

What was the background?

Mr Yurov’s bankruptcy arose out of a judgment handed down by Mr Justice Bryan on 23 January 2020.

Mr Yurov’s trustees in bankruptcy sought relief under IA 1986, s 366 against four UK banks. Mr Yurov’s wife, Mrs Yurov, became a respondent to that application and holds accounts with those banks in her sole name. The trustees wanted access to the bank statements for those accounts.

The supporting witness statement by one of the trustees referred to Russian legal advice which they had received, which, in brief, was that under Russian law, 50% of the balances in Mrs Yurov’s bank accounts belonged to Mr Yurov. The witness statement expressly stated, ‘I do not waive privilege’.

Mrs Yurov asserted that the trustees had thereby waived privilege in that advice and asked for a copy of it. The trustees denied any such waiver but provided an extract from the advice in relation to spousal interests in bank accounts.

Mrs Yurov applied for disclosure of the whole Russian law advice.
The court, in summary had to decide:

•  (1) Whether it was appropriate to order disclosure? This involved consideration of point
   (2) below
•  (2) Whether the trustees had waived privilege in the Russian law advice?
•  (3) If so, whether the entire advice should be disclosed?

What did the court decide?

Disclosure/waiver of privilege?

Whether disclosure should be ordered within insolvency applications depends on all the circumstances and the overriding objective. The issue concerning waiver of privilege was a relevant factor.

A statement such as ‘I do not waive privilege’ is not sufficient to avoid waiving privilege. Had privileged material had been deployed in court? Nea Karteria Maritime Co Ltd v Atlantic & Great Lakes Steamship Corp (No 2) [1981] Com LR 138.

The trustees had deployed the Russian law advice in court. The moment when a party is taken to have done so is earlier than the substantive hearing itself. At least if it is clear that the party will be relying upon the material.

Whole advice?

What is the extent of the ‘whole of the material relevant to the issue in question’?

A party is required to disclose further material to prevent unfairness, but disclosure is constrained by the need to go no further than necessary to prevent injustice. The court therefore refused to order disclosure of the whole advice.

Instead, following the approach in Fulham Leisure Holdings Ltd v Nicholson Graham & Jones [2006] EWHC 158 (Ch), [2006] All ER (D) 175 (Feb), disclosure was ordered of: (i) advice on Russian law on monies held in bank accounts in the name of one spouse (which was the point in issue); and (ii)
instructions and communications between the advising lawyer and those instructing insofar as it related to the underlined issue.

Case details:

•  Court: Business and Property Courts of England and Wales, Insolvency and Companies List (ChD)
•  Judges: Deputy Insolvency and Companies Court Judge Parfitt
•  Date of judgment: 9 August 2022