There are two types of legal professional privilege (LPP):
i. Legal advice privilege – which arises in relation to the giving or receiving of legal advice that is confidential; and
ii. Litigation privilege – which arises when confidential communications between legal advisers, clients and their third parties arise, provided that they are made for the sole or dominant purpose of conducting existing or contemplated litigation, which is adversarial in nature rather than investigatory or inquisitorial.
The potentially grey area of litigation privilege and/or legal advice privilege in relation to confidential legal communications generated during an internal investigation, triggered by the possibility of a company being charged with criminal offences, was dealt with by the High Court in the case of SFO v Eurasian Natural Resources Corporation Ltd.
Summary of the facts
The case involved a claim by the SFO for a declaration that certain documents generated during investigations undertaken between 2011 and 2013 by solicitors and forensic accountants into the activities of Eurasian Natural Resources Corporation Limited (ENRC) are not subject to LPP.
ENRC had begun an internal investigation in 2011, which included a lengthy period of dialogue with the Serious Fraud Office (SFO), which the SFO characterised as a self-reporting process; this classification was disputed by ENRC. In 2013, ENRC sacked its then solicitors, whereupon the SFO commenced its own criminal investigations into alleged fraud, bribery and corruption. As part of that investigation, the SFO issued notices against various entities and individuals, including ENRC, seeking to compel the production of documents. ENRC refused to produce documents on the grounds that they were subject to LPP – legal advice and/or litigation privilege. The SFO’s powers of compulsion do not extend to documents covered by LLP.
The SFO accepted that, if the documents they sought contained legal advice, such advice could be redacted. However, the SFO disputed ENRC’s generic claim that the documents sought were all protected by LPP.
The disputed documents included four classes:
i. solicitors’ notes of evidence given to them by individuals, including employees and former employees of ENRC;
ii. materials generated by the forensic accountants, in respect of which ENRC claimed litigation privilege only;
iii. documents indicating or containing factual evidence presented by a partner in the form of solicitors advising ENRC, to its nomination and corporate governance committee and/or board; and
iv. 17 documents referred to in a letter sent to the SFO by legal advisors that succeeded those sacked in 2013.
LPP
The Court made the point that a claim for privilege is unusual because the party and its lawyers claiming privilege are judges in their own cause. Accordingly, merely asserting privilege, even when done on affidavit by a solicitor, is not conclusive; the Court must consider the claim carefully.
Litigation privilege
When analysing the legal principles, the Court draw a distinction between various sorts of documents as follows:
A. those brought into existence for the purpose of conducting litigation on the basis that such documents are not intended to be shown to the other party, even if the document relates to settlement – e.g.: an actuarial report to assist a party’s solicitors to advise the client on whether or not to accept an offer of settlement (litigation privilege attaches to such a document);
B. documents created in order to obtain legal advice on how best to avoid contemplated litigation i.e.: documents created to equip the client with evidence to assist the client to persuade its opponent not to commence proceedings against the client in the first place (such documents are not privileged);
C. communications that are created for the purpose of the client obtaining legal advice, even if the advice relates to anticipated litigation, are covered by legal advice privilege, not litigation privilege; and
D. communications between the client’s lawyer and third parties, not the client, will only be protected by LPP if they satisfy the test for litigation privilege.
The Court went on to hold that:
i. it is not right, as a matter of policy, for legal advice privilege to attach to factual information that a lawyer may obtain, or direct others to obtain, as part of a fact finding or evidence gathering exercise in circumstances in which litigation is not in contemplation; and
ii. the fact that a solicitor is retained by a company to carry out certain investigation in order to provide the company with legal advice and that requires the solicitor to speak to persons who are not responsible for instructing the solicitor, the substance of his communications with those persons is not coveredby legal advice privilege.
The Court expressly upheld the words of Hildyard J in the case of The RBS Rights Issue litigation [2016] EWHC 3161 (CH) at paragraph 64:
“…the fact that an employee may be authorised to communicate with the corporation’s lawyer does not constitute that employee as the client or a recognised emanation of the client”.
Work product of the solicitor
The Court held that a work product, being confidential material created by a lawyer for the purposes of giving legal advice, is capable of being protected by legal advice privilege if, and only if, it would betray the tenor of the legal advice.
By way of example, a verbatim note of what a solicitor was told by a prospective witness is not, without more, a privileged document, just because the solicitor has interviewed the witness with a view to using the information that the witness provides as a basis for advising his client.
Legal advice privilege
The Court made it clear that, as stated by Lord Scott in Three Rivers (No. 6), at paragraph 38, legal advice privilegeprotects communications passing between the client and its lawyers which “relates to the rights, liabilities, obligations or remedies of the client either under private law or public law”; there is no need for litigation to be contemplated. If the communication is between the client (or the client’s agent) and the lawyer for the purpose of obtaining legal advice in the reasonable anticipation of litigation, it is covered by legal advice privilegerather than litigation privilege. The rationale for legal advice privilege is to promote full and frank communication between lawyers and their clients, which is good for the rule of law and the administration of justice. It is an essential pre-requisite for legal advice privilege protection that the communications are and remain confidential.
Accordingly, in relation to the disputed documents set out above; the Court held as follows:
- No legal advice privilege as those interviewed were not “the client” and no litigation privilege as no litigation was reasonably likely, so the dominant purpose test was not made out.
- No litigation privilege for the same reasons as at (i) above.
- Legal advice privilege upheld as the documents formed part of a continuum of communications between the client (ENRC staff authorised to instruct and receive advice from lawyers) and its lawyers, but no litigation privilege for the same reasons as at (i) above.
- No legal advice privilege because at the time that the letter was sent to a senior manager of ENRC, who was himself a lawyer, he was not employed by ENRC as a lawyer, rather to lead on and execute M&A transactions and be involved in strategic planning (this being a quote from ENRC’s annual report and accounts), so he was a man of business not a lawyer, so no legal advice privilege could arise.
Lessons learned from ENRC case
- Once a company becomes aware of a potential problem, it should consider very carefully how to proceed.
- If the problem is drawn to the company’s attention by a whistle-blower, using the company’s internal policy and referring the matter to the company’s whistleblowing officer, the company should think very carefully how to instruct outside Counsel so as to try and ensure that legal advice privilege can be maintained – in the absence of a reasonable expectation of either a criminal prosecution or civil litigation, a company can only rely on legal advice privilege.
- Couch instructions to outside Counsel in terms of seeking legal advice in relation to the issues disclosed by the whistle-blower; do not just ask outside Counsel to carry out an investigation/evidence gathering exercise. Outside Counsel should consider intermingling legal advice with factual evidence that they have gained by way of any investigation so that any work product has a chance of being protected from disclosure because legal advice privilege attaches to it.
- When considering issues of either potential criminal prosecution or civil litigation, do not mix up what is merely possible with what is sufficiently likely. The Court in ENRC made it clear that a criminal investigation is not grounds for believing that a criminal prosecution is a reasonable expectation.
- A company should consider very carefully the issues before going down the self-reportingpath, because once on the path of cooperation, this will affect the Court’s view on any subsequent claim for LLP – with the benefit of hindsight, a Court will conclude that cooperation means that the work done by the company’s outside Counsel is no longer confidential; rather that the company’s intention is to share the company’s lawyers’ work product with the SFO (or other regulatory or prosecuting body).
- Counterintuitively, the Court made it clear that in a case involving a possible criminal prosecution, a claim in respect of litigation privilege is arguably harder to maintain than in a case involving civil litigation. This is because, in a criminal case, the Court pointed out that there is an investigation stage which is usually completed before any decision to prosecute is taken. Accordingly, ENRC’s leading counsel was “misconceived” when he tried to characterise the criminal investigation by the SFO as adversarial litigation. The Court held in terms that it was not, so no litigation privilege could arise: “The policy that justifies litigation privilege does not extend to enabling a party to protect itself from having to disclose documents to an investigator” – even when the investigator, as is the case with the SFO, is also the prosecuting authority.
Unsurprisingly, ENRC have sought to appeal the decision, so watch this space.
For further information, please contact Richard Isham at risham@wedlakebell.com.