A property development company has successfully resisted an application by its former Group Finance Director to restrain use of personal documents on the grounds of legal professional privilege. The High Court held that the director was not able to assert privilege against his ex-employer over documents he created for the purpose of obtaining legal advice relating to his divorce proceedings, where they had been created or stored on his ex-employer’s IT systems.

The director argued that an email sent from his work email account to his personal email account, attaching a document recording his expectations under a bonus plan and two long-term incentive schemes, attracted legal professional privilege because it had been forwarded from his personal account to his divorce solicitors. Garnham J held that the document was not confidential as against the employer because the director could have had “no reasonable expectation of privacy”, given that the director had signed a copy of his employer’s IT policy, which provided that all emails sent and received on the company’s IT systems were the property of the company. This decision is a helpful reminder to companies of the importance of ensuring their IT and privacy policies and procedures are drafted clearly and comprehensively to facilitate, not hinder, any litigation or investigations in which the company may become involved.

Background

As senior management, the Group Finance Director (“S”) was a member of a particular bonus plan and two long-term incentive schemes, the terms of which stated that, should the director leave the company before any benefit vested, his entitlement would lapse. However, the company (“B”) had a discretion to treat former employees as “good leavers”, enabling them still to benefit. In September 2014, S was asked to resign from his position. It was agreed by the board and a remuneration committee that S should not be treated as a “good leaver” and had no entitlement to any benefits. S commenced proceedings in the High Court in connection with B’s decision to terminate his employment. At issue were two documents, which allegedly demonstrated S’s expectations under the bonus plan and two schemes.

High Court decision

The High Court heard two applications relating to S’s assertion of privilege over the documents:

  1. S’s application to restrain B from referring to the contents of the so-called “Synopsis” document in its witness statements; and
  2. B’s application for inspection of two other emails from August 2014, which it said were relevant to the claim for privilege over the Synopsis.

The Synopsis document

B had served witness evidence referencing two documents: (i) an email from S’s work email account to his personal email account, which contained nothing but B’s standard footer putting recipients on notice that the contents of the email were confidential and may be privileged; and (ii) an attachment to the email containing information for S’s solicitors in respect of his divorce proceedings (the “Synopsis”). B contended that the attachment presented a different account of S’s expectations under the bonus plan and two schemes than was set out in his witness statement. S sought an order striking out the parts of B’s witness evidence that referred to the two documents.

S argued the documents attracted privilege because he had forwarded the email to his solicitors in the course of seeking advice on assets relevant to his divorce proceedings. B countered that when a privileged document is in the hands of an opposing party in litigation, there is nothing to prevent that party adducing secondary evidence of the document and privilege cannot be relied upon as an objection to the admission of the evidence. The exception to this rule is that the court has restraining powers under its equitable jurisdiction to restrain breaches of confidence where three conditions are satisfied:

  1. the document must be confidential as against the defendant;
  2. the document must have been prepared and communicated for the purpose of seeking legal advice; and
  3. the court considers it ought to exercise its discretion to restrain the defendant from using the document.

Garnham J considered that conditions one and three were not met. The Synopsis was not confidential as against B, and S had “no reasonable expectation of privacy” in respect of the documents, as he had signed B’s IT policy, which made clear that emails sent and received on its IT systems were B’s property. S’s contract also noted that emails were subject to monitoring without consent. The judge found that the Synopsis was created in the course of S’s employment – it contained his analysis of B’s financial performance, which was created at B’s offices and on its systems. It was also saved centrally, with no protecting password or segregation from any other work related documents (e.g. it was not saved in a private folder). The judge also noted that B’s IT department and S’s personal assistant had access to his emails. The judge concluded that the Synopsis “was never confidential as against [B] or, if it was, it lost its confidentiality when it was processed on the [B’s] IT system”.

The present case was distinguished from Shepherd v Fox Williams. In that case, the employer was not entitled to use privileged documents stored on its email servers where those documents were only there because they had been forwarded by the claimant (who was not an employee) to his girlfriend (who was an employee). The girlfriend forwarded the documents from her personal email account to her work email account. The claimant was not subject to the defendant’s IT policy and there was no evidence that he had intended for his girlfriend to forward the documents to her work email address, so the confidentiality and privilege in the documents had not been lost.

Although the judge rejected S’s application, he noted that even if the documents had been confidential and privileged, he would have exercised his discretion to refuse S’s relief in light of the “stark conflict” between information set out in one of the documents and S’s witness evidence, reiterating the importance of having “clean hands” when seeking an equitable remedy such as restraining a breach of confidence.

B’s application for inspection of two emails

CPR 31.14 states that a party may inspect a document mentioned in a witness statement. However, this does not itself override a party’s right to privilege, the question being whether a party has “deployed” (e.g. relied upon) the contents of the document. The judge found that B’s application for inspection of two other emails was redundant in light of the above decision, but noted nevertheless that as S had described the contents of the first email in an attempt to demonstrate that he did not work on the Synopsis at company premises, he had deployed its content and had waived privilege as a result. The judge reached the opposite conclusion in respect of the second email, where S had simply referred to the document as part of his explanation.

Comment

This decision is significant and a useful reminder for employers conducting or contemplating internal investigations or litigation which require accessing email and other data of employees, as it suggests that employees who create or store personal documents on an employer’s IT system may not be able to assert privilege as against the employer, where the employer’s IT policy have made clear that such documents will belong to the employer.

The key point is whether the employee has a “reasonable expectation of privacy” in respect of the documents. In this case, it was relevant that the policy made clear that documents sent and received on the company’s IT systems belonged to the company, and that the relevant documents were saved centrally, accessible by others in the organisations, with no password or segregation from other work related documents.

It would be prudent for employers to ensure their IT and privacy policies and procedures are drafted so as to maximise their ability to resist claims for privilege and/or privacy over relevant documents in the context of an investigation or litigation. Clear policies on the circumstances when an employer may access employee data (including personal data) without permission or consent to enable such exercises to proceed swiftly, confidentially and without breaching data protections limitations are essential. Such policies and procedures should be communicated to employees so that they are aware of the implications for documents they create on, or send to, their employer’s systems. However, it is important to note that the High Court left open whether its decision would have been different had the director taken steps to segregate and protect the documents concerned.

The decision also provides a reminder that the court can and will refuse to exercise its discretion to grant equitable relief if a claimant lacks “clean hands” and demonstrates the dangers of referring to privileged documents in witness evidence, even for the purpose of supporting a claim to privilege.

The judgment is available here.