ADVICE PRIVILEGE: JOINT OR SOLE CONFIDENTIALITY

Instructions from successive clients

Kousouros v O’Halloran and Aresti [2014] EWHC 2294 (Ch), Simon J concerns the extent to which rules of confidentiality and advice privilege apply where a solicitor has received instructions from more than one client in relation to the same matter. It raises questions as to the extent of a solicitor’s duty of confidentiality to one or more clients. In such circumstances does a joint legal professional privilege operate? If so, how can such privilege be terminated? If it is terminated, can one of the parties to the privilege apply to the court to restrain any breach of confidence?

Kousouros is an appeal from a circuit, to a High Court, judge and is against a preliminary issue order for restraint of production of confidential documents said to be covered by advice privilege. In Kousouros the term ‘disclosure’ is used interchangeably by the judge to mean both ‘disclosure’ (ie a party ‘discloses’ document by saying it exists (CPR 1998 r 31.; FPR 2010 r 21.1(1)); and production of a document for reading (see eg CPR 1998 r 31.22(1)(a)) by the court. These terms will be kept distinct in what follows: the distinction is explained further in the note at the end of this article.

The case is of importance in any circumstances where instructions may have been taken (as here) from one party, and then from others in the same case; or where instructions have been taken jointly from two parties who then become involved in litigation. An easy example of this is where a couple jointly acquire property and, for example, they jointly receive advice on equitable interests. This latter circumstance – where instructions are joint from the outset, which was not the case in Kousouris – presents a different question. It is governed by rules that prevent waiver or other release of confidential documents, save by agreement of both parties to the privilege (eg trustees who jointly instruct, parties to a joint purchase, married couples who seek advice jointly etc).

Kousouros: the case

The claimant (‘HK’) claimed that his father, who died in Cyprus in March 2007, had orally agreed to transfer to him property in Islington, North London (‘the property’). The second defendant his sister (‘AA’) did not agree. The first defendant a solicitor (‘RO’) was instructed by the sister, following her father’s death, as follows:

[7] …. to recover her share of the English estate. The firm accepted instructions in the terms of a letter of 17 January 2008. The contents of an attendance note of 16 January 2008 and, in particular, what the [AA] may or may not have told [RO] about the oral agreement is at the centre of the disclosure issue.

The 2008 documents and others arising up to and including a letter of 28 January 2011 were all said by AA to be covered by legal advice privilege; and therefore either not to be eligible for production in court or (if already handed over to other parties) to be prevented by injunction from further use by them as confidential documents.

RO arranged with a local Cypriot lawyer to obtain probate of the father’s will in Cyprus, and RO then paid inheritance tax on the English estate on the basis that the property was part of it. (This tax was later repaid.) RO obtained an English grant for AA ‘for [her] use and benefit’ (June 2010) and arranged to transfer the property into his name as administrator. In September 2010 RO was asked by HK to register the property in HK’s sole name. He ceased acting for AA a month later. The claim was issued in June 2010 to test the oral agreement: was HK entitled to a transfer of the entirety of his father’s interest in the property? That claim remains to be tried.

The position of the solicitor

By September 2010 at least the position of RO as recorded by Simon J was that:

[15] ….. it must have been clear to [him], that there was a potential conflict of interest between his duty to act on behalf of the 2nd Defendant as a beneficiary claiming a half interest in an estate that included the Property and his duty to act on behalf of the estate in circumstances where there was an issue as to whether the Property formed part of the estate.

In outline the circuit judge found (see para [31]) that

(1) Where a solicitor acts for a beneficiary claiming under a will, legal advice privilege constitutes a bar to disclosure; but
(2) If the solicitor acts as a personal representative of the estate, the beneficiaries under the will have a joint interest in the administration of the estate, advice privilege is joint and cannot be asserted by one against the other.

The question of the solicitor’s duty of confidence was not directly in issue at this point, though it was relevant to the question of from whom RO had initially taken instructions. That said it may be worth recording that conflicts in relation to client confidentiality are an essential component of the solicitor-client relationship. It is defined now by the Solicitors Regulation Authority Code of Conduct at Chapter 3 which records that a conflict may arise where a solicitor acts for two or more current clients. A solicitor should therefore ‘never act where there is a conflict, or a significant risk of conflict, between [the solicitor] and [his/her] client’. On this point the Code concludes by reminding solicitors that ‘conflicts of interest may [their] duties of confidentiality and disclosure’.

Legal advice privilege

Simon J started by analysing how legal advice privilege arises, mostly by reference to ISTIL Group Inc & Anor v Zahoor & Ors [2003] EWHC 165 (Ch) (‘ISTIL friends’) paras [35] to [37]) where Collins J explained by extensive reference to earlier authority the meaning of legal professional privilege (normally regarded as having two components: legal advice privilege (in paly here) and litigation privilege). He concluded that he must analyse privilege in this case (para [38]):

(1) In what circumstances is the advice privilege of one party treated as ‘joint or shared’?
(2) If it is so treated, ‘how may it be lost’?

The judge below took the view that because HK had a joint interest in the estate he had a joint privilege with AA so long as RO’s firm was acting for the estate. Simon J disagreed with this view:

[52] Whilst I agree that [HK] and [AA] had a joint interest as beneficiaries under the will in ensuring that it was properly administered,… I do not accept that the consequence was that [AA] was unable to maintain the legal advice privilege in relation to her original instructions to [RO] and in relation to the advice she received.

A joint interest (if any) can only arise at the time a document comes into existence (Goddard v Nationwide Building Society [1987] QB 670, CA). AA first sought advice from RO at a time when he had no involvement in the estate; and she was entitled to seek advice in her own right on that basis (para [58]: see eg Ventouris v Mountain (The Italia Express (No 1)) [1991] 1 WLR 607, CA per Bingham LJ). It was not open later for RO to decide ‘he was no longer bound by [his] duty of confidence to his client’: he should have withdrawn from acting (para [59]).

On the issue of whether privilege could be lost Simon J held that once a document covered by privilege come into another party’s hands then (by reference in particular to ISTIL Friends (above, at [74])):

[65]… the law in relation to breach of confidence comes into play and the Court may intervene under its equitable jurisdiction to prevent an actual or threatened breach of confidence.

Indeed there is a substantial jurisprudence (eg Derby & Co Ltd v Weldon (No 8) [1991] 1 WLR 73, CA; ISTIL friends (above)) to which Simon J did not find it necessary to refer, relating to whether the handing over of a privileged document causes it to cease to be privileged. Thus in Derby (No 8) (above) the Court of Appeal considered how to deal with the position which occurs where a party or their solicitors ‘knowingly take advantage of an obvious mistake’ by another party where that other party mistakenly provides inspection of privileged documents. The short point is that by release of a document – by mistake or not – a party does not lose the confidentiality in that document.

So here, said Simon J, normally the court would intervene to prevent the use of confidential information; but a party who seeks to assert privilege must act promptly. In the particular circumstances of this case, Simon J held that AA had so acted. He concluded that the documents in AA’s application were covered by advice privilege and that, ‘to the extent that the material has come into the hands of [HK] an order should be made maintaining its confidentiality and precluding its use’.

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