Solicitor loses appeal against order to give evidence on Russian client’s assets and not tip him off about it

Munby: Appeal dismissed

A solicitor compelled to give evidence about a billionaire Russian client’s assets, and forbidden from revealing his court appearance to the client, has lost his appeal against those orders.

He complained about being given just three days’ notice to attend court, which he described as an “ambush”, and that the issues he was questioned about were covered by legal advice privilege.

Anthony David Kerman of London firm Kerman & Co is a long-time adviser to Russian businessman Farkhad Akhmedov, who in 2016 was ordered to pay his wife £453m in what is believed to be the largest ever divorce settlement in the UK.

At the time of the hearing in December 2016 before Mr Justice Haddon-Cave, Mr Kerman said he was retained “on general terms” by Mr Akhmedov and his companies, but not specifically on the divorce.

He was asked about his role in arranging insurance for a £90m modern art collection that Mr Akhmedov had been ordered to transfer to his wife, and also about the assets in a Panamanian company that held around $890m of the money paid to Mr Akhmedov for his shares in a Russian energy company – representing the majority of his fortune.

Haddon-Cave J rejected Mr Kerman’s claim of privilege and made the solicitor subject to an order requiring him to produce relevant documents and also not to disclose anything about the events to anyone but his own lawyer.

His evidence revealed that both the art collection and the company’s assets had been transferred shortly before the start of the ancillary relief trial.

Combined with investigations carried out by the wife’s legal team, Haddon-Cave J inferred that Mr Akhmedov was trying to hide his assets and so he set aside all the recent dispositions. He also made a without-notice worldwide freezing order.

On privilege, Sir James Munby, giving the ruling of the Court of Appeal, said the questioning of Mr Kerman was confined to two factual topics: insurance for the art collection and the company’s banking arrangements and the transfer of funds. He was not asked about his dealings with or advice to his clients.

Had the same questions been put to Mr Akhmedov, he would not have been able to rely on privilege to refuse to answer, and Sir James, president of the Family Division, said there was no reason why Mr Kerman should be able to rely on it – not least because privilege belongs to the client, not the lawyer.

Further, the information sought from Mr Kerman related to communications with third parties.

“To this point, [Mr Kerman’s counsel] had, at the end of the day, no effective answer. Indeed, he had to concede, rightly in my judgment, that communications between a solicitor and a third party are not privileged,” said Sir James.

The court also dismissed Mr Kerman’s complaints about the timing of the summons – which he argued should not have been made before the wife applied for a preservation order – and the ‘anti-tipping-off’ order.

Sir James acknowledged that “the calling of a solicitor to give evidence in circumstances such as this, especially if coupled with the making of an ‘anti-tipping-off’ order, is pregnant with potential embarrassment for the solicitor and difficulties for the client…

“Such orders may have the effect of inhibiting frank discussion between solicitor and client and, even worse, of destroying the confidence the client has in the solicitor’s independence.”

However, he said Haddon-Cave J was justified in proceeding as he did.

“I can well understand why the wife’s advisers wanted to obtain the information in the event supplied by Mr Kerman before they embarked upon attempts to obtain freezing orders, so that they had a better understanding of where – indeed, in which jurisdiction – the relevant assets were located, and so that the relief sought, whether in this or in foreign jurisdictions, could be more specifically focused and targeted.”

Sir James added that Mr Kerman was an obvious potential source of the needed information and was no longer on record in the financial remedy proceedings.

Indeed, the shortness of the notice given to Mr Kerman “had the proper effect of reducing the period of embarrassment to which he would be exposed were he to be contacted by his former clients”.

There was nothing wrong with the witness summons, Sir James said, and Mr Kerman could have made an immediate application to the Court of Appeal for more time, but did not.

As for the anti-tipping-off order, Sir James said the case “plainly” called for it, although he said such an order “is, of its nature, short-lived and temporary. It should be granted for a specified period and not expressed, as Haddon-Cave J had done, as being “until further order”.

This meant the order the judge had made was defective, “though in my judgment this does not entitle Mr Kerman to any relief”.

Although the parties reached agreement on 5 January 2017 that the orders should be discharged, it was not until 21 February 2017 that Mr Kerman was told that the relevant order had been sealed on 7 February 2017.

Sir James said this was “most unfortunate, but there is no warrant, in my judgment, for any criticism of the wife’s solicitors”.

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