Billionaire Baron Hans Heinrich Thyssen-Bornemisza has lost a preliminary round in his fight to regain control of a $2.7 billion family fortune held in a Bermuda trust.

The Bermuda Court of Appeal on Monday dismissed the Swiss Baron's appeal against a prior ruling allowing papers dealing with legal communications between him, his fifth wife Carmen (Tita), a Spanish beauty queen, and their lawyer to be used as evidence in the upcoming civil trial.

The Baron's lawyers had unsuccessfully argued the couple's papers were "jointly privileged communications''. Mr. Robert Ham QC contended that the Baroness only had a hope of some financial benefit, not a direct benefit, and that was not enough to make her a part of the suit.

But Alan Boyle, lawyer for the Baron's eldest son Georg, argued any claim to privilege was misconceived.

In dismissing the appeal, the three Appeals Court judges ordered the Baron to pay the legal costs of the respondents -- George, along with Favorita Holding Ltd. (the company that owns the Baron's industrial empire), Thybo Trustees Ltd. (which owns Favorita) and another company Tornabuoni Ltd.

However, the case could now go before the Privy Council as the Baron has 21 days in which to lodge an appeal against the Appeals Court decision.

The 15-page judgment made by Sir James Astwood (President) and Appeals Court Judges Edward Zacca and Sir Alan Huggins contains further detail about what promises to be a lengthy high profile battle in the Bermuda Supreme Court, which will put the Island's trust laws under the microscope.

The Baron, aged 78 and a renowned art collector, is ultimately attempting to dissolve a Bermuda trust, claiming that since 1995 his son has not paid him the full 40 million Dutch guilders a year that was agreed upon. He claims the arrears now amount to about $70 million. Reportedly also at stake is the Baron's art collection. In 1993 it was sold to the Spanish government for $350 million and is now housed in Madrid in the Thyssen-Bornemisza Museum and could become part of the dispute if the Bermuda trust is dissolved.

A dozen top British lawyers will fill the courtroom in the civil trial, which is scheduled to start in September and expected to last at least one year. Sir Alan stated in his judgment that the Baron "is a man of immense wealth and interests in numerous countries''.

He continued, "Wishing to minimise his liability to pay taxes and intending to provide for the distribution of his property after his death and to avoid family disputes whilst at the same time providing himself with an income during his life, the Baron entered into a complicated series of transactions which centred around what has been termed `the Continuity Trust'.'' Baron suffers setback Mr. Justice Huggins stated the Baron asked his son Georg to have the Continuity Trust drawn up in accordance with his wishes and it was executed in 1983. However, in 1997, according to the Appeals judgment, the Baron came to the conclusion that the Continuity Trust had not been drawn up in accordance with his wishes and that his son was to blame. "Accordingly he instituted the present action to have that trust set aside on the grounds (inter-alia) of presumed undue influence from 1983 to 1995.'' Mr. Justice Huggins pointed out that on the day before the writ was issued the Baron declared a third trust called The Vlaminck Trust whereby the interest in the intended proceedings was to go to himself and a trust company. The beneficiaries would be the Baron, and thereafter, in the event of his death, the Baroness, "so that the Baroness had a defeasible contingent interest''.

The Bermuda trust's beneficiaries are Georg, CEO of the Thyssen-Bornemisza Group, and the Baron's four other children, and the adopted son of Carmen (but not Carmen). Ironically, the trust was set up to keep the industrial conglomerate together and avoid inheritance rows.

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