Helpful clarification of dissolved companies’ entitlement to legal advice privilege
Lee Victor Addlesee & Ors v Dentons Europe LLP [13.11.18]
On its dissolution, a company legally ceases to exist and any assets revert to the Crown. Where this includes privileged documentation, does privilege survive and why? This was the issue before the court recently in Lee Victor Addlesee & Ors v Dentons Europe LLP.
Dentons acted for a company who sold a scheme of investment in gold dust. 240 investors have brought claims alleging that Dentons recklessly or negligently enabled the scheme and induced their investments by affording the scheme respectability.
The facts are very similar to a host of fraudulent investment schemes we are seeing in all sorts of areas of the economy, including holiday resorts, hotels, student accommodation and self-storage units.
On 13 November, judgment was handed down in an interim application for disclosure made by the claimants.
The claimants were seeking disclosure of files they would not ordinarily be entitled to. Dentons had acted for the company and it was agreed in the application that legal advice privilege applied to the company’s files, unless any exceptions to privilege applied.
In essence, the claimants argued that legal advice privilege was not owed to the company as it had been dissolved. The company had ceased to exist and could not benefit from privilege, and the Crown, into whose hands the company’s rights and property vested on dissolution, disclaimed its interest.
The court found that privilege was effective for the period in which the company could be restored to the register. That period ended in June 2036. The key consideration for the court was that if privilege was not upheld and disclosure ordered, this might result in a situation where “having been restored to the register and otherwise placed in the position it was before dissolution, the privilege to which the Company should then be entitled would be irretrievably lost”.
The involvement of dissolved companies is a common feature of litigation. There are often difficult issues arising, such as who ultimately bears the costs if a claimant seeks to apply to restore a company in order to sue it. Claims involving allegedly fraudulent investment schemes are also very common at the moment and it is likely that the fraudulent company will have been dissolved.
This judgment provides some helpful clarification of dissolved companies’ entitlement to privilege and should ensure that insurers are not faced with responding to expensive interim applications of the sort made in this case.
However, it is worth sounding a note of caution: this was only the first part of the claimants’ application for disclosure, as they were also seeking disclosure on the grounds that the iniquity exception applied. In this the parties have been assisted by Sir Andrew Smith’s helpful judgment in the recent case of Accident Exchange Ltd v McLean and others  which stated that “It is clear law that there is no legal professional privilege in respect of documents which are in themselves part of an iniquitous proceeding or in communications made in order to obtain advice for the purpose of carrying out iniquity”.
Related item: Litigation privilege without the fear