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Panama papers: advice privilege and Sharland set aside
Sep 29, 2018, 21:35 PM
Panama papers, fraud, family law, legal profession privilege, legal advice privilege, Sharland,  UKSC 60, legal advice, David Burrows, divorce, disclosure
The subject of legal profession privilege (LPP) is in the news at present: there is talk of its definition being reviewed in legislation going through Parliament, and its application to the Panama papers has raised question as to how it applies to the leaked documents.
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Advice privilege and the Panama papers
The subject of legal profession privilege (LPP) is in the news at present: there is talk of its definition being reviewed in legislation going through Parliament, and its application to the Panama papers has raised question as to how it applies to the leaked documents. And yesterday (7 April 2016), the Law Society Gazette quoted two solicitor doyens of family law - Nigel Shepherd and Tony Roe - as saying that information from the Panama leaks could be used to open up and set aside court orders on the basis of fraud (per Sharland v Sharland  UKSC 60,  2 FLR 1367). In all of this, perhaps all lawyers need carefully to reflect on the extent to which legal professional privilege (in this case, mostly legal advice privilege (LAP)) applies, and to what extent that overrides the leaking of otherwise confidential information - which appears to be what has happened with the Panama papers.
There is a public interest in confidential information remaining private (Attorney-General v Guardian Newspapers Ltd (No 2)  1 AC 109 [Spycatcher case]), and this applies even more so in the case of confidential information also covered by LAP. If documents have been leaked, is anyone who comes by them entitled to rely on them in separate court proceedings? A reply to this point involves: (1) consideration of LLP generally; (2) a look at exceptions to the rules on LLP; and (3) what happens if documents are illegally disclosed (ie leaked).
The general common law rule which applies to all court proceedings is that, subject to defined exceptions, the court must see or hear all evidence relevant to issues to decide the result. 'Privilege' is one of those exceptions. It is derived from privilegium, the Latin for a law applied to a private individual. It is a term which is mainly applied in three totally distinct and dissimilar aspects to confidential information passed to a lawyer by a client or a potential court witness to enable the lawyer to advise and to act for the client, and it applies to the advice of the lawyer. Secondly, it applies to the right (self-incrimination privilege) which a person has in court proceedings not to give evidence which may make them liable to criminal proceedings (a right of silence). Finally, it applies jointly to parties to litigation who are willing to negotiate on terms that their admissions in negotiations remain private (without prejudice rule privilege).
LLP, or 'legal privilege' as Parliament tends to call it, is composed of two limbs: advice privilege (LAP), and litigation privilege. It is the first which is the concern here. The second applies to documents and information accumulated by lawyers, where their dominant purpose is intended litigation. Advice privilege depends on there being a confidential relationship between a client and their lawyer. The right to the privacy which results is the right of the client, not the lawyer. It is this form of privilege which is the issue in the Panama papers case: has the leaker of the information in any way permissibly breached the individual client's confidentiality, whatever one may think of that individual's tax affairs or other dealings?
The subject of advice privilege was fully considered by the Supreme Court most recently in R (Prudential plc and Anor) v Special Commissioner of Income Tax  UKSC 1 (over the past 20 years it has been the subject of at least five more major House of Lords/Privy Council/Supreme Court judgments). Accountants who advised on tax law sought privilege for their advice. By a majority of 5:2 the Supreme Court rejected their arguments. They held that advice privilege, though defined by the common law, applied only to legal advice (in a 'relevant legal context' (Balabel v Air India  Ch 317, Taylor J in the Court of Appeal) from lawyers, as well as patent attorneys, trade mark agents and licensed conveyancers. Any extension to this, eg to accountants' advice on tax law, surveyors on land law etc, was a matter for Parliament.
The justification for LLP is based on its importance to administration of justice: that an individual should have the right (not a 'privilege' in that sense) to 'make a clean breast' of a matter to a legal adviser (Anderson v Bank of British Columbia (1876) 2 ChD 644 at 649, per Sir George Jessel MR). A history of the subject and a classic definition can be found in Lord Taylor CJ's speech in R v Derby Magistrates' Court, exp B  UKHL 18. This case stressed the extents of the right and the public interest in administration of justice: that a lawyer must be able to give his client an unqualified assurance that whatever the client tells him in confidence will never be disclosed without his consent, and that this assurance is absolute subject only to the qualifications referred to below.
The Derby Magistrates case was a remarkable case and shows the breadth of advice privilege - that it must be available to 'good guys' as well as 'bad'). The case was described by Lord Millet in B and Others v Auckland DIstrict Law Society (New Zealand)  UKPC 38 as follows:
' The public interest in overriding the privilege could scarcely have been higher than it was in R v Derby Magistrates' Court, exp B. B (the applicant) was charged with the murder of a young girl. He made a confession to the police, but afterwards he changed his story and said that his stepfather had killed the girl. B was tried and acquitted. The stepfather was then charged with the murder. At his committal for trial, B was called as a prosecution witness. In cross-examination he was asked by the defence about the instructions he had given his solicitors in relation to his original account of what had taken place. He declined to waive privilege. The stepfather then obtained from the stipendiary magistrate the issue of a witness summons requiring B's solicitor to produce all attendance notes and proofs of evidence disclosing B's factual instructions in defence to the charge of murder but not the advice given to him by solicitors and counsel. B applied for judicial review.'
The House of Lords, said Lord Millet, upheld B's claim to privilege. The House 'expressly rejected the argument that legal profession privilege is an interest which falls to be balanced against competing public interests'. Once the privilege is said to exist it is absolute:
' ... Lord Taylor CJ said  1 AC 487, 508:
"the drawback to that approach is that once any exception to the general rule is allowed, the client's confidence is necessarily lost. The solicitor, instead of being able to tell his client that anything which the client might say would never in any circumstances be revealed without his consent, would have to qualify his assurance. He would have to tell the client that his confidence might be broken if in some future case the court were to hold that he no longer had 'any recognisable interest' in asserting his privilege. One can see at once that the purpose of the privilege would thereby be undermined."'
Exceptions prove the reason for a rule
The privilege applies to enable the adviser to provide legal advice in the course of a professional relationship which involves the provision of skilled legal advice (taken from Lord Sumption's definition inPrudential (above) at para ). But what are the exceptions to this? This may be a challenge for Parliament if any legislation is passed, for it may be that legal professional privilege will prove to be as easily defined according to its exceptions than to its main elements. The exceptions to LLP were reviewed by Fulford LJ inR v Brown  EWCA Crim 1328, but a simplified version of the position is set out inPrudential by Lord Neuberger:
' Where LLP attaches to a communication between a legal adviser and a client, the client is entitled to object to any third party seeing the communication for any purposes, unless (i) the client has agreed or waived its right, (ii) a statute provides that the privilege can be overriden, (iii) the document concerned was prepared for, or in connection with, a nefarious purpose, or (iv) one of a few miscellaneous exceptions applies (eg in a probate case where the validity of a will is contested.'
To this list can be added: (1) the very narrow band of exception identified byR v Brown (impropriety witnessed by a nurse in a prison interview room overrode LAP); and (2) where a lawyer learns of illegality such that s/he should report to appropriate authorities (W v Egdell  EWCA Civ 13,  Ch 359, eg proposed commission, or possible commission, of a criminal offence).
The main exception to LAP here is that the fraud or 'iniquity exception' was explained by Stephen J inR v Cox and Railton (1884) 14 QBD 153: that the confidentiality of advice privilege cannot be used to enable a client to obtain a lawyer's advice to further a dishonest intent. If documents show that a dishonest intent - eg tax evasion, or, say, plans to abduct a child - then privilege cannot apply. AsCox asserts, it did not apply in the first place, and the documents lose any confidential status they may have had.
But what is the position if confidentiality documents covered by LLP come to the attention of a third party, as might be the case if family lawyers handle Panama papers? The cat is out of the bag, but can it be put back? That was the question - whether or not privilege is lost - pondered by the Privy Council inB and Others v Auckland District Law Society (New Zealand)  UKPC 38. But inB v Aucklandprivilege had been conditionally waived in respect of particular documents and for limited purposes. To that extent, the documents were out of the bag. Once the condition no longer applied LLP revived, as Lord Millet in the Privy Council explained:
' ... The documents are privileged because they were created for the purpose of giving or receiving legal advice. If they are not produced voluntarily, production cannot be compelled. If they are produced voluntarily, the right to withhold production no longer attaches to them. In that sense the privilege may be said to be lost. but they are the same documents, and it is not appropriate to describe them as privileged. Their inherent characteristics are the same. The policy which protected them from unauthorised disclosure is the same. The cat is still a cat. It can be put back in the bag.'
Fraud and legal professional privilege
English courts are protective of LLP, as theDerby Magistratescase and more recent cases such asBerezovsky v Hine  EWCA CIv 1089 show. I do not know what the rules are about professional confidentiality in Panama, but if stolen or leaked documents which in England would be confidential and covered by LLP were to come before an English court, the justification for reference to them must be fraud. Fraud must be clear from the face of the papers and must be specifically pleaded (Medcalf v Weatherill  UKHL 27,  1 AC 120; Bar Standards Board,Guidance on pleading fraud). If the fraud allegation is based upon another fraud - the leaking or removal of what would be privileged documents at common law - the sand underlying the foundations of a spouse's set aside application becomes close to quick-sand, and not a sure foundation for aSharland set-aside application.
The Court of Appeal looked askance at what they regarded as a breach of confidence inImerman v Tchenguiz and Others  EWCA Civ 908,  2 FLR 814. How much more disapproving may they be if a case is based upon confidential - perhaps privileged - documents which have been leaked to the applicant, who has adopted any illegality in their removal save where the applicant has a cast-iron case that stolen or leaked documents prove fraud? You can follow David Burrows on Twitter: @dbfamilylaw The views expressed by contributing authors are not necessarily those of Family Law or Jordan Publishing.