The handling of material which is potentially subject to legal professional privilege is an important and often contentious matter in the investigations context.  In a recent decision which addresses the practical aspects of evidence handling, the  Divisional Court dismissed a claim that the SFO was under a duty to use independent third party IT staff to apply search terms to material in its possession in order to identify which material may be subject to legal professional privilege ("LPP").   The Court ruled that the SFO’s policy (as set out in its Operational Handbook), whereby search terms are applied by the SFO before any responsive material is then reviewed by independent counsel, was lawful. 

The case (R (McKenzie) v Director of the Serious Fraud Office [2016] EWHC 102 (Admin)) also has some read-across value for the approach adopted by other investigation agencies to potentially privileged material.  In this e-bulletin we summarise the court's ruling and its implications.

Background

The claimant had been arrested at Heathrow last year on suspicion of having committed offences contrary to section 1 of the Bribery Act 2010.  (Interestingly, this appears to relate to a case which is not one of the SFO's well-publicised investigations, supporting the agency's frequent public comment that they have a number of active bribery investigations ongoing "behind the scenes" at present).   On arrest, a USB stick, an iPhone 6, a Samsung mobile telephone and a Dell laptop computer were seized from him pursuant to section 54 of the Police and Criminal Evidence Act 1984 (a power which permits the seizure of evidence from a detained person at the police station).  Shortly thereafter the SFO served a notice under section 2(3) of the Criminal Justice Act 1987 which required the claimant to produce further items. In response he produced his gold iPhone and various pieces of computer equipment belonging to his company. 

Some weeks later the SFO notified the claimant's solicitors that it believed that the gold iPhone might contain some LPP material and that its content was being quarantined within the SFO's computer systems. The solicitors were asked to provide a list of search terms to enable potential LPP material to be identified so that it could be isolated for review by independent counsel.  This prompted the claimant's solicitors to respond by saying that there was LPP material stored on all of the devices. They had not previously raised the question of LPP material in connection with any of the material seized or produced. The claimant's solicitors refused to provide search terms on the basis that the SFO procedure was unlawful, arguing that the use of in-house IT staff to isolate material potentially subject to LPP was inconsistent with the terms of the Attorney General's Supplementary Guidelines on Digitally Stored Material 2011 (which appear as an Annex to the 2013 Guidelines on Disclosure). Further, the claimant submitted that the approach of the SFO gave rise to a risk that their investigative team would gain access to LPP material.

The claimant therefore sought judicial review of whether the SFO's procedure (as set out in its Operational Handbook) for dealing with material potentially subject to LPP which is embedded in electronic devices that have been seized using statutory powers, or produced in response to a notice, was lawful.

Comment

The court (Burnett LJ and Irwin J) was unequivocal in its ruling that the SFO's procedure was lawful.  A seizing authority was held to have a duty to devise and operate a system to isolate potentially privileged material which could reasonably be expected to ensure that such material would not be read by members of the investigative team before being reviewed by an independent lawyer.   The procedures should make it "very unlikely" that the investigative team could access the LPP material.  However, the SFO's procedures did just that, and the SFO was not required to meet the higher standard (described in the civil case of Bolkiah v KPMG [1999] 2 AC 222) that there must be no "real risk" that LPP could be read by anyone involved in the investigation.

This decision will have come as a relief to the SFO, as the process being challenged is a routine one that is followed in almost all of its investigations.  An adverse ruling would have undermined most of the SFO's current investigations and caused a significant operational headache going forward, as it would have forced the SFO to engage external  IT staff to receive investigative material and run search terms before such material could be released into the SFO's possession.

This decision will also be of practical interest to any party dealing with an SFO investigation where material potentially subject to LPP is involved.  A Mr Munson, who is a senior investigator within the SFO, gave evidence during the proceedings on the process and safeguards in place:

  • The DFU (the SFO's digital forensic unit to which seized or produced devices are first provided) downloads content onto the digital review system named Autonomy. If that content is thought to contain LPP material it is immediately quarantined with the result that the investigation team is denied access to it.
  • A different team known as the DRS team applies the search terms which result in material responsive to those terms being confined to a separate folder.
  • No material located on the Autonomy system can be viewed by members of an investigative team until it has been "released" by the DRS.
  • Access by investigators is thereby controlled. They have access only to areas which relate to their own cases. They have no access to any material quarantined for LPP purposes until it has been reviewed and released by the independent lawyer, and no access is ever granted to material which has been found to be subject to LPP.
  • The staff of the DFU and DRS teams are not part of the investigation team and are two independent technology specific departments with specialist skills. 

In addition to this practical insight:

  • The Court found that the procedures set out in the SFO's own Operational Handbook are not inconsistent with the Annex to the 2013 Guidelines on Disclosure.  In particular, where the Guidelines stipulate that "someone independent and not connected with the investigation" should apply the LPP search terms to material, this does not mean someone "institutionally independent" of the SFO.
  • The Court found that the Criminal Justice and Police Act 2001, which empowers investigators to "seize and sift" material, provides no support for the proposition that the preliminary sifting (whether electronic or manual - in the case of hard copy seizures) should be outsourced.
  • As noted above, the Court rejected the application of the test laid down by the House of Lords in Bolkiah v KPMG [1999] 2 AC 222.  This case concerned when a professional advisor holding client material or information could be injuncted by that client from acting for another client with an interest adverse to his, in a matter to which the material or information in the possession of the professional advisor may be relevant.  The Court found that this was inapplicable as it was “…inappropriate to equate a public body exercising statutory powers in connection with suspected crime with a solicitor who proposes to act against his former client".
  • The Court also rejected an analogy with R (Rawlinson and Hunter Trustees) v Central Criminal Court [2012] EWHC 2254 (Admin), which concerned the independence of counsel carrying out the determination of LPP, stating.. "There is a world of difference between determining whether something is protected by LPP, which involves close consideration of the content and context of a document or communication, and identifying a document, file or communication as potentially attracting LPP, which does not".

Conclusion

The conclusion that the SFO's approach is lawful is unsurprising, both from a legal perspective and given the practical implications that a ruling to the contrary would have had.  One point of interest is the judge's comments about the scope of the SFO's duty to safeguard LLP material.  Whilst the SFO's procedures satisfied its obligations in this regard, the case may provide some fertile scope for discussion with any other regulatory agencies who suggest a review mechanism which does not afford such clear safeguards to the fundamental right to LPP.