Kerman v Akhmedova

The Court of Appeal dismissed the solicitor Mr Kerman’s appeal against orders made by Haddon-Cave J requiring him to attend to give evidence and to produce documents. The court applied established principles of legal professional privilege and the recognised "fraud" or "iniquity" exception, holding that privilege does not extend to communications with third parties and that the exception applied to the transactions and transfers found by the trial judge. The court also held that the use of a witness summons and short-notice, without-notice procedure (including an anti-tipping-off order) was justifiable in the circumstances to prevent the dissipation or concealment of assets, though it emphasised that anti-tipping-off orders should be time-limited and discharged once they have served their purpose.

Key legal points: legal professional privilege is confined to communications between client and lawyer for the purpose of legal advice; communications with third parties are not covered; where the court finds iniquitous or fraudulent conduct aimed at defeating claims, the fraud exception may displace privilege; witness summonses in the prescribed form do not require specification of issues; anti-tipping-off orders are permissible but should normally be for a specified and limited period.

Background and parties: The appeal arose out of high-value matrimonial financial remedy proceedings in which the wife (the petitioner) obtained a substantial award against the husband and related orders concerning assets held by a Panamanian company. The appellant, Mr Anthony D. Kerman, a solicitor formerly acting in the proceedings, was ordered to attend to give evidence and to produce documents. Haddon-Cave J made rulings on legal professional privilege and granted an order duces tecum and an anti-tipping-off order; those rulings were the subject of this appeal.

Nature of the application: The wife sought to summon Mr Kerman to give evidence and to produce documents relevant to the location and disposition of assets (notably a modern art collection and a portfolio of funds), and to prevent tipping off the respondents to ongoing investigatory and preservation steps. The relief sought was a witness summons, production of documents and confidentiality / anti-tipping-off orders.

Issues before the court:

• whether Mr Kerman’s communications and documents were protected by legal professional privilege or instead were excluded because he acted as a "man of business" in respect of the matters in question;
• whether the fraud or iniquity exception to privilege applied so as to allow questioning and production; and
• whether the process by which Mr Kerman was summoned and the anti-tipping-off ("gagging") orders were made was procedurally proper, including compliance with the Family Procedure Rules and with statutory requirements (notably s.31G of the Matrimonial and Family Proceedings Act 1984), adequacy of notice, the absence of an undertaking as to damages and the indefinite duration of the anti-tipping-off orders.

Court reasoning (concise): The Court of Appeal upheld Haddon-Cave J. It accepted that the witness summons in statutory form and short notice were justified because there was a real risk that notice would enable the respondents to move or conceal assets; the applicant’s advisers legitimately wished to discover where assets were located before obtaining freezing or preservation orders. The court emphasised that legal professional privilege is confined to confidential communications between solicitor and client for the purpose of legal advice and does not extend to communications with third parties. The evidence elicited from Mr Kerman related to dealings with third parties and factual matters (insurance arrangements and transfers of assets), not to privileged communications with the client, so privilege did not prevent disclosure. The court also held that the fraud/iniquity exception applied on the factual findings made by the trial judge, but declined to decide in this appeal the finer question whether the appropriate test is "iniquity" or "dishonesty". The anti-tipping-off order was appropriate in principle but should have been expressed for a specified period; that defect did not, however, justify overturning the order. The absence of an undertaking in damages was not a ground for relief because a witness summons is not an equitable freezing remedy and an undertaking in damages is not routinely required for an anti-tipping-off order.

Procedural posture: This was an appeal to the Court of Appeal from Haddon-Cave J’s judgments and ancillary orders, including Z v Z and others (Legal Professional Privilege: Fraud Exemption) [2016] EWHC 3349 (Fam). The Court of Appeal dismissed the appeal.

Appeal dismissed. The Court of Appeal held that Haddon-Cave J was entitled to summon Mr Kerman and to order production of documents. Legal professional privilege did not protect the factual communications and third-party dealings the judge put to Mr Kerman, and the fraud (or iniquity) exception applied on the judge’s findings. The use of short-notice procedure and an anti-tipping-off order was justified on the evidence though anti-tipping-off orders should be time-limited; the procedural defects identified did not merit quashing the orders.

Appeal from Haddon-Cave J: Z v Z and others (Legal Professional Privilege: Fraud Exemption) [2016] EWHC 3349 (Fam). The financial remedy proceedings before Haddon-Cave J were reported at AAZ v BBZ and Others [2016] EWHC 3234 (Fam) and AAZ v BBZ and Ors [2016] EWHC 3361 (Fam). Permission to appeal to this court was granted by King LJ on 16 March 2017. The Court of Appeal delivered judgment on 27 February 2018 ([2018] EWCA Civ 307).