Developing the Doctrine of Legal Professional Privilege:
- Bilta (UK) ltd & Ors and (1) Royal Bank of Scotland plc (2) Mercuria Energy Europe Trading Limited  EWHC 3535;
- R v Jukes  EWCA Crim 176;
- Comments made by the SFO regarding ENRC appeal
Bilta & RBS
In May 2017, the High Court released its judgment in SFO v ENRC, which was examined in detail in our June 2017 Newsletter. The judgment has been widely received as a significant narrowing of litigation privilege in the context of internal investigations. The appeal of ENRC is scheduled to be heard in the Court of Appeal in July this year. However, two subsequent cases have illustrated the issues that are developing around litigation privilege. In Bilta v Royal Bank of Scotland, the High Court considered the scope of litigation privilege over documents created in the course of an internal investigation following allegations by Her Majesty's Revenue and Customs (HMRC). In order to claim litigation privilege three criteria must be satisfied: (1) litigation must be in reasonable contemplation; (2) the documents must be created for the sole or dominant purpose of litigation; (3) the litigation must be adversarial (i.e. not investigative or inquisitorial). In Bilta the court considered the second limb of this test. In 2010, HMRC wrote to the Royal Bank of Scotland (RBS) stating that it was investigating carousel intra-community fraud, and that its investigation might affect input-tax that had been claimed from HMRC by RBS. RBS launched an internal investigation and cooperated fully with HMRC throughout. In 2012, HMRC wrote to RBS and said that it was minded to deny RBS £86 million in input VAT, but that its decision had not yet been made. RBS took legal advice, met with HMRC and agreed to provide a full written report. With the limitation period approaching expiry, HMRC protectively issued an adverse finding against RBS, but reassured RBS that this did not constitute its final decision and that it would take account of RBS' written report.
Bilta was threatened with an adverse assessment by HMRC and made allegations of dishonest assistance against RBS. Bilta wrote to RBS and requested documents that had been created during its internal investigation, such as interview transcripts with ex-employees. Bilta argued that when the documents were created litigation with HMRC was in contemplation, but that the documents had not been created for the sole or dominant purpose of litigation, so did not attract litigation privilege.
The Court held that RBS's notes and transcripts of interviews with employees were covered by litigation privilege. It said that, when assessing litigation privilege, courts should look at the specific facts of the organisation's interactions with the investigating body and see where those facts fall on the continuum forming the road to litigation. It also highlighted the Court of Appeal's judgment in Re HighgradeTraders, which, it said, was not considered by the Court in ENRC and which states that the subsidiary purpose of preparing documents for investigation may be subsumed by a primary purpose of preparing for anticipated litigation.
On the facts, the Court held that the letter from HMRC stating that it was minded to make an assessment against RBS constituted a "watershed moment", and was akin to a letter before action. Although the letter did not formally issue proceedings, from that point onwards RBS were gearing up for litigation and any documents created were created predominantly for that purpose.
R v Jukes
In January 2018 the Court of Appeal heard another key privilege case, R v Jukes.
Paul Jukes was a transport and operations manager at a waste and recycling company. In 2010, an employee at his workplace was fatally injured when he attempted to clear a blockage in a baler machine. The firm launched an investigation, and in his interview, Jukes stated that he was responsible for health and safety. Sixteen months later, Jukes was interviewed by the Health and Safety Executive (HSE) and police as part of their investigation into the death. This time, Jukes denied that he had been responsible for health and safety. At trial, the prosecution relied on his first statement, and he was sentenced to nine months imprisonment.
The Court of Appeal held that litigation privilege did not apply to his first statement and that it could be used in court. It said that, at the time of the interview, no decision to prosecute had been taken by the HSE and that "an investigation is not adversarial litigation".
The Court also had regard to the fact that at the time of the HSE interview, neither Jukes nor his employer knew whether the HSE had sufficient knowledge to have a realistic prospect of securing a conviction.
Whereas Bilta was taken as a signal that courts may be willing to take a more nuanced view of litigation privilege, Jukes has tacked very closely to the High Court's decision in ENRC. As the judgment was given by the Court of Appeal, it may indicate the line that the Court is likely to take when it hears the ENRC appeal later this year.
It is possible to draw two important conclusions from Jukes and Bilta. Firstly, it may be easier to assert litigation privilege in civil litigation, although the court's decisions will very much depend on the facts of each case. Certainly, as stated in ENRC, criminal investigation does not equate to adversarial litigation. Secondly, timing is crucial. In Jukes, the relevant evidence dated from an early point in the investigation, when no prosecution decisions had been taken and the evidence was fairly opaque, so the Defendant could not have known whether litigation was reasonably in contemplation. In Bilta, the relevant evidence had come into existence at a late stage, when the HMRC investigation had been ongoing for several years and there had been a preliminary indication of their findings that led RBS to understand that litigation was likely.
SFO comments on ENRC appeal
Speaking at a Q&A session in Washington DC on 2 March 2018, John Gibson, SFO case controller for the ENRC investigation, described some reporting of that case as "melodramatic".
He reiterated the court's judgment, that privilege would apply if a company knows there is serious wrongdoing and anticipates there will be adversarial proceedings, but rejected the view that the judgment has eroded litigation privilege. When challenged that requiring a company under investigation to demonstrate some knowledge of wrongdoing undermined the concept of litigation privilege, he responded that "this is the tightrope that lawyers and companies will have to walk".
It is likely that, however the Court of Appeal rule in the ENRC appeal to be heard this summer, the case would be appealed to the Supreme Court, so the question of the proper application of litigation privilege is unlikely to be resolved in 2018.