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litigation privilege: how confidential are your legal papers?

20 November 2018

This article is taken from November's public matters newsletter. Click here to view more articles from this issue.


Over the past few years we have seen an increase in which assertions of privilege have been challenged in the courts. A large number of these cases have involved the major banks but the issues which have been raised are equally of importance to public bodies.

Recently the Court of Appeal handed down a very important judgment in the case of The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Limited [2018] EWCA Civ 2006 (‘SFO v ENRC’). The Law Society intervened on the part of the solicitor’s profession to ensure that the views of the profession were heard on such a profound and important issue for the profession. Guidance has now been given (which we will set out below) on the circumstances in which privilege can be claimed. The case is not being appealed to the Supreme Court so unfortunately this is not a precedent from the highest court and it remains the case that there is a degree of uncertainty in this area of law.

Background

There are two types of legal professional privilege (‘LPP’):

  • legal advice privilege (‘LAP’) – this applies to confidential communications between a client/client’s agent and lawyer where the sole or dominant purpose for obtaining or giving of legal advice. This is not restricted to advice in relation to matters where litigation is contemplated and covers communications with in-house lawyers.
  • litigation privilege – this applies to any confidential document passing between a lawyer and his/her client where the document was brought into existence for the sole or dominant purpose of litigation. This includes the situation where litigation is contemplated but it must be adversarial so for instance would exclude an inquiry or an investigation.

The current difficulty with the law in this area is that the case law which governs LPP dates back to the 16th century at a time when legal practice looked very different. We live in a world where communications take place electronically. Legal advice is expected almost instantaneously. It is all too easy to hit the send button and send out a quick email or a text. Yet there are inherent risks to the lawyer and the client in this situation. It is no wonder that in a speech 2016 Lord Neuberger said that “judges and legislators have to try harder than ever to ensure that the law is simple, clear and accessible”.

Litigation privilege

Lord Rodger in Three Rivers explained the need for litigation privilege:

litigation privilege… is based on the idea that legal proceedings take the form of a contest in which each of the opposing parties assembles his own body of evidence and uses it to try and defeat the other, with the judge or jury determining the winner. In such a system each party should be free to prepare his case as fully as possible without the risk that his opponent will be able to recover the material generated by his preparations.”

Therefore when making a decision as to whether litigation privilege is going to be claimed a three stage test needs to be applied:

  • is litigation contemplated or already in progress?
  • have the communications come into existence with the sole or dominant purpose of conducting that litigation?
  • is the litigation adversarial (rather than inquisitorial or investigative)?

SFO v ENRC

ENRC conducted an internal investigation between 2011 and 2013 with those investigations being conducted by forensic accountants and lawyers with the issues being self-reported to the SFO pursuant to 2009 guidelines. In 2013 the SFO decided to commence a criminal investigation into ENRC.

The SFO sought disclosure of documents pursuant to powers under the Criminal Justice Act 1987. They fell into four categories:

  1. Notes taken by lawyers of the evidence given to them by ENRC's employees, former employees, subsidiaries, suppliers and other third parties
  2. Materials generated by forensic accountants, as part of a ‘books and records’ review, with a focus on identifying controls and systems weaknesses and potential improvements
  3. Documents, including slides, indicating or containing factual evidence, used by lawyers to present to ENRC’s Nomination and Corporate Committee/ENRC Board
  4. Emails between a senior executive and the head of mergers and acquisitions at ENRC (a Swiss qualified lawyer).

ENRC claimed litigation privilege in respect of the anticipated criminal proceedings said to be the dominant purpose of the four categories of documents.

The claim at first instance

The issue came before Mrs Justice Andrews at first instance. She held:

  • ENRC’s assertion of litigation privilege fell at the first hurdle – ENRC could not establish that when the documents were created that litigation was a real likelihood as opposed to a mere possibility
  • anticipating a criminal prosecution was not the same as the reasonable contemplation of a prosecution
  • the documents were not created with the dominant purpose of obtaining legal advice
  • there is a difference between the creation of documents which would be used to settle or dissuade a party from bringing a claim and obtaining advice with a view to defending proceedings
  • litigation privilege could not be claimed for any of the four categories of document (although LAP could be claimed for category 3).

The appeal

The first instance decision raised concerns about the extent to which litigation privilege can be claimed, not just where there was a possible criminal investigation but that by virtue of the first instance decision that there was a real danger that litigation privilege generally was being eroded. The Law Society intervened in the appeal on behalf of the solicitor’s profession and in its written submissions gave several examples of the impact of the first instance decision:

"1. A doctor is accused by a complainant of negligence after one of his patients, a relative of the complainant, dies. He has not been formally charged; neither the GMC, nor the police, are investigating at this stage. But he wishes to consult a solicitor with a view to obtaining evidence from a relevant expert who may assist his defence. Whether he can invoke litigation privilege should not depend on whether he is willing to assert that there was good evidence supporting the allegation that he had been negligent. The judge’s approach would force him, in effect, to choose between exercising his right to privilege and his right against self-incrimination.

2. A person is arrested on suspicion of assault. His defence is mistaken identity. He has not been charged. He wishes to consult a solicitor with a view to interviewing third parties about his whereabouts on the day in question. There can be no question of him being able to describe evidence which implicates him: he is innocent and considers there to be no evidence against him at all. It would be wrong to deny him the ability to invoke litigation privilege.

3. A teacher is dismissed from her employment, after an allegation is made that she was seen taking class A drugs. The teacher tells her solicitor that the allegation was false. She is terrified about being arrested by the police for drug offences, or there being any kind of criminal proceedings, which she believes will seriously prejudice her attempts to find alternative employment as a teacher. The teacher believes that the pupil had a grudge against her and tells her solicitor that the pupil had demonstrably lied about various other more minor matters, which the school did not take into account. She should be able to instruct a lawyer to interview third parties who may be able to provide evidence supporting her case.

4. A man with learning difficulties and a psychological condition is arrested, after an accusation of rape. He tells his solicitor that the complainant consented. A key issue may be his personal capacity to evaluate consent, and the reasonableness of his belief. The solicitor wishes to commission an expert report in order to advise on how the client should defend himself. To do so without prejudicing his client’s position she needs to be confident that (a) the factual account of what happened, provided to the expert, (b) the client’s description of his mental condition, and (c) the opinion of the expert, will remain confidential. Under the High Court ruling she would not have that confidence.

5. Finally, a large organisation such as a company, a university, or a public authority, is accused of wrongdoing carried out by its employees. A regulator may take preparatory steps indicating that it has concerns about the alleged conduct. Or the organisation itself, bearing in mind that it needs to take allegations of serious wrongdoing seriously, and in order to decide whether to self-report, may instruct lawyers to investigate and ascertain how strong or weak its position is. Litigation may well, in these scenarios, be in reasonable contemplation.”

Whilst these cases are not necessarily cases that a public authority would be involved in there are clearly scenarios where there would be a real danger on the basis of the first instance decision that internal investigations and reports would not necessarily attract litigation privilege.

The Court of Appeal upheld ENRC’s appeal. In relation to categories 1, 2 and 4 the Court of Appeal held that the documents were protected by litigation privilege (with two exceptions falling within category 4). It held that they were created with the intention of resisting or avoiding the SFO proceedings and therefore the ‘dominant purpose’ test was satisfied. It was felt that seeing off, avoiding or settling off litigation was something that ought to be protected by litigation privilege.

Whilst the case primarily dealt with litigation privilege there was an issue regarding LAP and a challenge to Three Rivers (No 5). The main thrust of Three Rivers (No 5) was that communications between an employee of a company and that company’s lawyers would not attract legal advice privilege unless the employee had been told to specifically seek that advice on behalf of the client. Carrying that through to the appeal the court felt that on the basis of Three Rivers (No 5) the interview notes could not attract LAP. The court did go on to say that it would have been in favour of departing from Three Rivers (No. 5) but it would require the Supreme Court to consider the matter.

It was thought that there may be an appeal to the Supreme Court by the SFO but that is not being pursued.

Conclusions

It is important to bear in mind that whether or not litigation privilege can be claimed will be determined on a case by case basis. There are certain practical considerations and we would suggest that these should be at the forefront of your mind:

  • consider the question of privilege at an early stage. If claiming litigation privilege is in contemplation then set out why litigation is being contemplated before any documents are created.
  • do not circulate documents too widely and think about who needs to see the documents. Make a list of those people so that the group is clearly defined.
  • make sure at the outset of an evidence gathering exercise or a report that your staff commissioned to carry out that task are adequately trained in privilege matters.
  • have a policy as to the circumstances in which documentation can be destroyed.
  • consider whether external advice is required.

The full judgment in the case can be read here.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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