In an important decision on the scope of legal professional privilege, the Court of Appeal has determined that where a law firm is instructed to conduct an internal investigation into potential wrongdoing, the documents it produces during that process will be protected from disclosure.
Although it has been subject to much debate and litigation over the years, the rules regarding legal privilege are relatively straightforward.
There are two main categories:
- Legal advice privilege: This covers communications between a lawyer and a client for the purposes of giving or receiving legal advice; and
- Litigation privilege: This covers communications between a lawyer, client and third parties where the dominant purpose relates to actual or contemplated legal proceedings.
In Director of the Serious Fraud Office v. Eurasian National Resource Corporation Limited, the question was whether the “client” in question (“ENRC”) could rely on legal professional privilege to prevent disclosure to the Serious Fraud Office (“SFO”) of documents prepared by its external legal counsel for the purposes of an internal investigation.
ENRC operated in the mining sector. In 2010, it received an email from an apparent whistleblower alleging corruption and financial wrongdoing within one of its subsidiaries. ENRC instructed external lawyers to investigate these allegations. Whilst that investigation as ongoing, on 10 August 2011, the SFO wrote to ENRC regarding “recent media and intelligence reports” regarding the allegations and urged ENRC to consider instigating the SFO’s self-reporting procedure. At that stage, the SFO made it clear that it was not carrying out a criminal investigation.
Several meetings then took place between the SFO, ENRC and its lawyers over a lengthy period of time, culminating in a request from the SFO, in March 2013, for disclosure of certain documents. These included, amongst other things, notes taken by ENRC’s lawyers of the evidence provided by certain individuals and materials generated by ENRC’s forensic accountants, both for the purposes of the internal investigation.
The High Court determined that neither legal advice privilege nor litigation privilege applied and ordered the documents to be disclosed to the SFO. ENRC appealed to the Court of Appeal.
Court of Appeal decision
The Court of Appeal allowed the appeal.
Specifically, it determined that the relevant documents were protected by litigation privilege, on the basis that:
- The High Court was wrong to conclude that a criminal prosecution was not reasonably contemplated, once the SFO had written its initial letter to ENRC on 10 August 2011. In particular, “the whole subtext of the relationship between ENRC and the SFO was the possibility, if not the likelihood, of prosecution if the self-reporting process did not result in a civil settlement”;
- It was reasonable to regard the dominant purpose of the documents as being to defend those contemplated criminal proceedings, if they arose; and
- It was in the public interest that companies should be prepared to investigate allegations without losing the benefit of legal professional privilege for the work product or consequences of that investigation. Otherwise, they might be tempted not to investigate at all.
This is a welcome decision for organisations instructing law firms to carry out internal investigations.
Although this case related to a potential criminal prosecution by a government department, there seems no reason in principle why it should not also apply to disciplinary or grievance investigations concerning employees, or investigations into allegations raised by potential whistleblowers. The key issue in such cases is whether: (a) legal proceedings (such as an employment tribunal claim) are reasonably contemplated; and (b) the dominant purpose of the documents relates to those potential proceedings.
This is necessarily a fact-specific issue but, the Court of Appeal has taken a sensible and pragmatic view to encourage (rather than dissuade) companies to seek professional legal assistance to get their own houses in order. It is, of course, always open to an employer to waive legal privilege, where it is prudent to do so.
In light of the Court of Appeal’s decision in relation to litigation privilege, the issue of legal advice privilege in this particular case was considered less important. However, the court did suggest that it may be time to re-evaluate the law in this area. In particular, the definition of “client” for legal advice privilege is restrictive and only covers individuals who are actually responsible for instructing the “lawyer”.
One question we are often asked is when communications and documents sent to and from in-house lawyers are covered by legal privilege. As a general rule, the same principles apply as they would do to an external lawyer. Where in-house counsel are acting as the “lawyers” advising the business, care should be taken to identify the appropriate internal “client” who is charged with seeking legal advice. It is also important to note that privilege only applies where in-house counsel is acting in his or her professional capacity as a lawyer (rather than carrying out other tasks, such as management or business administration).
Where in-house counsel is the “client” when dealing with an external “lawyer”, again it should be clear from the engagement with the law firm that he or she is authorised to seek and receive external legal advice.