The Court of Appeal today overturned the High Court’s decision in the landmark case of the Serious Fraud Office v Eurasian Natural Resources Corporation (ENRC), holding that documents produced by ENRC during an internal investigation were protected by litigation privilege.
The trigger for when an investigation may be protected by litigation privilege can be quite early – depending on the facts
The Court of Appeal found that an ‘adversarial process’ sufficient for litigation privilege purposes was reasonably contemplated at the point at which ENRC commenced an internal investigation following a whistle-blower report alleging corruption in parts of its business, and it was certainly contemplated when the SFO subsequently contacted ENRC about the same matter (even though the SFO stated it was not at that time carrying out a criminal investigation into ENRC).
It is a question of fact as to whether the relevant individuals in the company believe there is a real likelihood of a prosecution. The fact there may be some uncertainty on the likely outcome because the company is at an early stage in its investigation or because the criminal authorities have not commenced a formal investigation is not determinative. Litigation privilege may still arise in these circumstances.
The ‘dominant purpose’ question also turns on the facts
Similarly, where documents are prepared for more than one purpose, it will also be a question of fact as to whether or not ‘litigation’ is the dominant purpose (the second limb of the test for litigation privilege).
In this instance, the investigation of the allegations was initially framed in contemporaneous documents as a being for ‘corporate governance reasons’ – but the Court of Appeal, nonetheless, found the dominant purpose was to investigate the facts so the company could defend the proceedings that were reasonably contemplated at the time.
Documents prepared to avoid litigation are protected by litigation privilege
The Court of Appeal also confirmed that documents prepared for the purpose of avoiding litigation (in both civil and criminal litigation) are protected by litigation privilege (thereby overturning the High Court’s rather counter-intuitive decision on the status of such documents).
Future change to legal advice privilege?
This case also raised various questions regarding legal advice privilege—with ENRC arguing that one of the key cases on legal advice privilege (Three Rivers (No.5)) has been incorrectly interpreted.
ENRC argued the effect of Three Rivers (No.5) was not to restrict protection only to communications between lawyers and those within a company who are authorised to seek and receive legal advice, but that a more expansive view should be taken to encompass communications between lawyers and those employees/agents who are authorised to provide lawyers with information to help them advise. In relation to this, the Court of Appeal noted that large corporations should not be in a less advantageous position than a smaller entity when gathering information upon which legal advice will be sought.
The Court of Appeal expressed a strong degree of sympathy for these arguments, indeed it said that if it had been open to it to depart from Three Rivers (No. 5), it would have been in favour of doing so. Ultimately, it held that it is for Supreme Court to make the change.
For its part, the SFO argued that even if ENRC were correct in its interpretation of Three Rivers (No.5), the test for legal advice privilege should also include a dominant purpose element (ie was the dominant purpose of the communication to give or obtain legal advice?). The practical effect of this would be to further limit legal advice privilege. Again, the Court of Appeal did not make any decision on this point, but it did, helpfully, express strong scepticism of this approach.
Given legal advice privilege remains, for now, restricted to communications between lawyers and those individuals within a company charged with seeking/receiving legal advice, where a company is unable, on the facts, to satisfy the thresholds for litigation privilege, there remains a risk that records of interviews between lawyers and other individuals may not be protected by legal advice privilege. One exception to this may be if the notes may be properly classified as lawyers working papers. The test for such protection was one of the issues before the Court of Appeal, but, again, it ultimately decided this should be another question for the Supreme Court.
A further post on the implications of this case, including its implications for companies engaged in investigations involving or considering reporting to the Serious Fraud Office will follow.