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03 November 2017
The trustees in bankruptcy of Mr Lemos' estate (the "Trustees") applied for directions to determine whether information subject to LPP which had been obtained from the bankrupt's former solicitors could be used in proceedings under section 423 IA 86 (transaction defrauding creditors) which may have recovered significant value for the insolvency estate.
The bankrupt opposed the application on the basis of the Court of Appeal's judgment in Avonwick v Shlosberg which held that LPP in a document was not "property" for the purpose of the Insolvency Act 1986, therefore did not vest in the Trustees and so could not be waived by the Trustees.
The Trustees argued that Avonwick did not apply to LPP in information which related to assets of the bankrupt.
The Court held that on a proper reading of the Avonwick decision, the "Crescent Farm" principle which stated that privilege would pass to a successor in title did not apply in a bankruptcy scenario. While the Trustees were entitled to use the documents to fulfil their statutory functions, this did not include bringing a claim under section 423 of the Insolvency Act 1986.
The Avonwick judgment, as applied in this case, causes significant difficulties for trustees who are unable to rely on or deploy documents subject to LPP in order to recover assets for the bankruptcy estate.
For further information on this topic please contact Amy Patterson at Taylor Wessing by telephone (+44 20 7300 7000) or email (firstname.lastname@example.org). The Taylor Wessing website can be accessed at united-kingdom.taylorwessing.com.
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