Getting Bank Statements Can Be Difficult For A Trustee In Bankruptcy Overview
This post Getting Bank Statements Can Difficult For The Trustee In Bankruptcy (Privilege Case) sprouts from the case of Thomas & Ors v Metro Bank Plc & Ors (Re Ilya Yurov) [2022] EWHC 2112 (Ch).
This is a great case to look at to dispel any myth that might exist that a Trustee in Bankruptcy should be able to get bank statements with relative ease. This is the sort of matter that highlights perhaps why creditors ought not to be able to control an Insolvency Practitioner, particularly when expecting court applications to be brought.
Advice received by the Trustee in Bankruptcy was sought about how Russian Law treats bank accounts acquired during marriage. The advice received appears to have been that 50% of the balances in the non-bankrupt spouse’s bank accounts belonged to the bankruptcy estate.
The Trustees wanted disclosure of the bank accounts of the non-bankrupt spouse (Mrs Yurova) and issued an application under Section 366 of the Insolvency Act 1986 against various banks.
Section 366 Application To Get Bank Statements
The Section 366 application to get bank statements of Mrs Yurova deployed privileged advice obtained about Russian Law. The Trustees said they had not waived privilege through their use of the caveat in their introduction to the relevant Russian legal position, that they were not waiving privilege:
I do not waive privilege in that advice but in summary, the Trustees have been advised that the starting point under Russian law is that as a general rule, and in the absence of agreement between the parties to the contrary, the property of spouses is subject to the regime of joint property, pursuant to clause 1 of Article 33 of the Family Code of the Russian Federation No. 223-FZ of 29.12.1995 (the “Family Code”).
The Court did not consider the Trustee’s caveat effective or the suggestion that privileged material might have not yet been deployed before the Court:
… the Trustees sought to argue that although Mr Thomas’s witness statement referred to privileged material, this material was not being deployed in court – or at least not yet. It was argued that it will only be deployed at the hearing of the s. 366 Application itself. I disagree. It would be manifestly unjust and risk undermining the proper management of litigation if the party on the receiving end of an application supported by privileged material had to wait until the substantive hearing before being able to obtain sight of the remainder of the privileged material concerning the issue in question. To have to wait until that point would invite an application for an adjournment at the last minute, wasting court time and costs for both sides. It seems to me that the moment at which a party is taken to have deployed material in court must be earlier than that, at least if it is clear that the party will ultimately be relying on the material. As Mr McCombe said, why put off dealing with the issue. I agree. This was the view taken by Auld LJ in the Divisional Court in R v Secretary of State for Transport, Ex p. Factortame [1997] EWHC Admin 445, in which he stated as follows:
“Much will depend, of course, on the indication given by the party waiving privilege before trial whether he intends to rely upon the privileged material at trial and, if so, for what purpose. If he does intend to put it in evidence, there is an obvious advantage in both parties knowing where they stand before trial. It enables each of them to determine whether and how to proceed with the litigation and to avoid costly adjournments for further discovery and consequential work which otherwise would occur if the point had to be determined at trial.”
Applying the Factortame principle, I am satisfied that the Trustees have deployed the Russian law advice in court. The whole basis of the s. 366 Application is that Mrs Yurova’s bank statements relate to Mr Yurov’s money. As the Trustees describe it, this depends on the Russian law of matrimonial property. This is not a case where a party has accidentally waived privilege and would like to turn the clock back.
In this case, the Court noted that it was unusual for disclosure applications to arise in applications under Section 366 of the Insolvency Act 1986 but it nevertheless ordered the Trustees to make disclosure of the relevant privileged material:
I consider that if the Trustees are going to be making submissions about the application of Russian law, there is a risk of injustice to Mrs Yurova if the Trustees do so relying on assertions in a witness statement based on extracts from legal advice they have received. Those extracts could well be misleading, or could be misinterpreted whether by Mrs Yurova or the court. I do not consider that the Trustees would set out deliberately to create such an impression, but it seems to me to be important that the Trustees can demonstrate that they have made everything relevant available. Had the Trustees sought an order for expert evidence on Russian law, the material instructions and the report of the expert would have been provided to Mrs Yurova pursuant to CPR Part 35. Without those protections, it seems to me that the only fair way to proceed is for the Trustees to disclose the remainder of the legal advice they have received which falls within the paragraph above.
Oliver Elliot Observation On Trustees Getting Bank Statements
If the basis of an application relies upon the deployment of privileged material that is entered into evidence then it appears potentially challenging to argue privilege has not been waived. Deployment of the expression “I have been advised that…” would seem potentially risky.
In this case, it may be the Trustees in Bankruptcy could ultimately be successful. Nevertheless, the use of summary procedures such as those under Section 366 or 236 of the Insolvency Act 1986, whilst they might be considered relatively straightforward, that position is far from certain. There is a risk with any litigation. This case and Green v Chubb [2015] EWHC 221 (Ch) can be useful reminders as to how that might be so.
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