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privilege prevails

18 December 2018

[2018] EWCA Civ 2006, Serious Fraud Office (SFO) v Eurasian Natural Resources Corp. Ltd

Court of Appeal (Civil Division) (Sir Brian Leveson, Sir Geoffrey Vos and Lord Justice McCombe), 5 September 2018

Key points:

  • The Court held that documents produced during an internal investigation prior to the commencement of proceedings can be protected by litigation privilege
  • The Court clarified the law in Three Rivers (No. 5) that communications between legal advisers and employees of a corporate client will not be protected by legal advice privilege unless such employees were tasked with seeking and receiving legal advice.
  • Despite the Court’s clarification of the law in Three Rivers (No. 5), it was critical of the decision which narrowly defined the client when dealing with corporate entities and the Court opened the door to an eventual appeal to the Supreme Court on this point.

Case summary

The Court of Appeal recently allowed an important appeal relating to the disclosure of documents created in the build up to the eventual proceedings brought by the Serious Fraud Office (SFO). Eurasian Natural Resources Corp. Ltd (ENRC), the appellant, had claimed that the documents were protected by legal professional privilege (comprising litigation privilege or legal advice privilege), and the Court agreed that most of the documents were protected by litigation privilege.

Litigation privilege

Generally, litigation privilege can cover communications between a client and their legal adviser, and communications between the legal adviser and third parties, while legal advice privilege only applies to confidential communications between a client and their legal adviser. Legal advice privilege covers both patent attorneys (under the Copyright, Designs and Patents Act 1988) and trade mark attorneys (under the Trade Marks Act 1994), though it is worth noting that the legislation only provides protection in relation to specific areas of law. When one wants patent or trade mark attorney advice to attract legal advice privilege, care should be taken to ensure that it falls within one of these categories; for example, copyright and database right is not expressly included within the relevant legislation, though it may relate to matters which are expressly covered. Advice given by attorneys may also be covered by litigation privilege under the Legal Services Act 2007, but there are more hurdles to pass before litigation privilege can apply, as this case illustrates.

The High Court judgment in this case had alarmed legal advisers and clients alike as they could have been required to disclose all documents produced during internal investigations. The Court of Appeal’s judgment has now restored some degree of balance; there are still hurdles that must be passed before communication can be protected by litigation privilege however.

The High Court’s decision was largely on the basis that the eventual prosecution by the SFO was not in the reasonable contemplation of ENRC at the time it began its internal investigation and even if it had been, the documents were not created for the dominant purpose of being used for such litigation, but rather as part of a fact-finding mission.

The Court of Appeal disagreed with the findings on both points. The Court recognised that although a large corporation might not aware of what an internal investigation would unearth, adversarial litigation could still be found on the facts to be in its reasonable contemplation when beginning such an investigation. If the results of an internal investigation undertaken to discover whether any wrongdoing had taken place could not be protected by litigation privilege, corporations might be tempted to not investigate at all.

The Court also made it clear that even though ENRC had hoped to avoid or settle proceedings with the SFO through the results of its internal investigation, the documents produced could still be covered by litigation privilege as avoiding or settling litigation was as good a purpose as resisting or defending proceedings.

Legal advice privilege

Because the Court found that most of the documents in question were covered by litigation privilege, it did not consider it necessary to resolve whether they would also have been covered by legal advice privilege. The Court of Appeal did however express some opinions on the law of legal advice privilege, in particular in relation to the Court of Appeal’s decision in Three Rivers District Council and Others v Governor and Company of the Bank of England (No. 5) [2003] EWCA Civ 474 (Three Rivers (No. 5)).

The Three Rivers (No. 5) case had found that legal advice privilege would only attach to communication between a corporate client’s employees and its legal advisers, where such employees had been tasked with seeking and receiving legal advice. As this narrow approach has been the subject of criticism and other common law jurisdictions have allowed a much broader and more modern approach, the Court felt that although was not required to, it would discuss how it would have determined the matter.

Initially, the Court confirmed that Three Rivers (No. 5) was the law and it would have been bound to follow this decision. The Court did however consider that the approach adopted in the Three Rivers (No. 5) was an outdated approach, which is inconsistent with the requirement for large national or multinational corporations to rely on their employees’ knowledge of their business. It is unlikely that such a corporation would task its employees to seek or receive legal advice, but for internal investigations it would have to rely on its employees’ knowledge and it would be in the interest of the corporation that any documents produced containing this knowledge can be protected by legal advice privilege.

Despite the Court being bound by its decision in Three Rivers (No. 5), it considered that if it had been open to it to depart from this decision, it would have considered doing so. A departure would however have to come from Parliament or the Supreme Court.

Conclusion

Therefore corporations are currently left in a position whereby they cannot easily rely on legal advice privilege where documents are produced with the assistance of their employees, such as notes from interviews taken by legal advisers as part of their overall advice, as was the case here. This is critical to keep in mind in relation to any communication between patent or trade mark attorneys and a corporate client’s employees, especially where the corporation will have to involve a wider pool of its employees to input into those communications, on, for example, non-legal technical or confidential matters.

As litigation privilege can protect communication between a legal adviser and third parties, it may be more relevant where information needs to be gathered from a corporate client’s employees. So although the Court could not overrule Three Rivers (No. 5), its judgment has restored some balance in allowing clients to undertake a potentially essential fact-finding investigations before any proceedings are brought or even threatened without necessarily losing legal privilege over the results of such investigation.

This article was first published in the December 2018 issue of the CITMA Review, the journal of the Chartered Institute of Trade Mark Attorneys (CITMA). For more information on CITMA, please visit citma.org.uk

Authors

Cerryg Jones, who is one of the UK’s best-known IP litigators with 25 years litigation experience, is a partner at Browne Jacobson and has been involved in many of the UK’s most high profile trade mark infringement cases including acting for the owner of the Glee Club comedy and music group owner Comic Enterprises in its dispute with Twentieth Century Fox over the TV programme ‘Glee. cerryg.jones@brownejacobson.com

Christian Burchardt, a trainee solicitor in the firm’s Nottingham Commercial team, assisted.

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