Willmont & Anor v Shlosberg

Compulsorily obtained documents and information may be used only for the statutory purposes for which the compulsory power was conferred. Sharing such material between office-holders of connected insolvency estates may be permissible where it assists the beneficial administration of the relevant estates, including where there is a real, rather than fanciful, prospect of benefit.

Material raising suspected dishonesty or malpractice may be used by office-holders for proceedings benefiting their own estate. Sharing it with another office-holder requires the court’s permission. Disclosure documents may be reviewed for the proceedings in which they were disclosed, but collateral use requires an exception under CPR 31.22(1). Adequate segregation procedures can protect retained legal professional privilege.

The joint liquidators of Webinvest Ltd and the joint trustees in bankruptcy of Mikhail Shlosberg sought directions concerning three categories of material: documents obtained under compulsory insolvency powers, documents disclosed in related litigation, and documents subject to Mr Shlosberg’s individual legal professional privilege.

The liquidators and trustees had common personnel and solicitors. They wished to share and use material in the Conspiracy Claim, the Edelweiss Claim and possession proceedings. Mr Shlosberg contended that the proposed uses exceeded the statutory purposes of the compulsory powers, breached the collateral-use rule for disclosure documents, and endangered his privilege.

1. Compulsion Material. Documents or information obtained compulsorily under the Insolvency Act 1986 could be used only for the purposes for which the relevant power was conferred. The person obtaining the material owed a corresponding duty of confidence. The principal purpose of sections 235, 236 and 366 was to assist the beneficial winding up of a company or bankruptcy of an individual.
2. Sharing material obtained by the trustees under section 366 with the liquidators could fall within those purposes where it assisted the beneficial pursuit of the connected insolvency proceedings. It was sufficient that there was a real prospect, rather than a fanciful prospect, of a surplus or other benefit to the estate from which the material had been obtained. On the evidence, the prospect of recoveries in the possession proceedings meant that threshold was met, although a surplus in Webinvest’s liquidation presently appeared unlikely.
3. The powers also served the public interest in uncovering and remedying dishonesty or malpractice. However, the trustees could not share material with third parties for that purpose without the court’s permission. Permission was granted because the Conspiracy Claim and Edelweiss Claim involved substantial allegations of dishonest schemes and improper diversion of assets.
4. The permission extended only to material whose disclosure served one of the identified purposes. The trustees had to assess each category of documents separately. The common office-holder’s dual role did not itself create an additional legal impediment.
5. Disclosure Material. “Use” under CPR 31.22(1) included reviewing disclosed documents. Review for a collateral purpose was prohibited unless an applicable exception arose. Where documents were initially reviewed to advise on the disclosure proceedings, using them to seek permission or agreement for a further use was impliedly permitted. The liquidators could review the material in the Conspiracy Claim, but further deployment required permission, agreement or another applicable exception. There was no real risk of unconscious misuse by the experienced insolvency practitioner or solicitors.
6. Privileged Material. The proposed segregation protocol, under which potentially privileged material was reviewed by independent solicitors and withheld from the common office-holder and his solicitors where necessary, adequately protected Mr Shlosberg’s retained privilege.

First instance decision. The judgment records related decisions in the same litigation, including [2015] EWHC 3832 (Ch), [2016] EWCA Civ 819, [2016] EWHC 1001 (Ch) and [2016] EWCA Civ 1138, but those decisions are not appellate stages of this judgment.