On September 5 2018 the Court of Appeal of England and Wales handed down its highly awaited judgment in Serious Fraud Office v Eurasian Natural Resources Corporation  EWCA Civ 2006. The Court of Appeal was asked to consider whether the High Court had erred in finding that certain documents were not protected by litigation privilege because they had been created too early during an internal investigation for litigation to reasonably be in contemplation. The court below found that documents, including lawyers’ notes of witness interviews, had been created for the purpose of avoiding, rather than defending, criminal prosecution. This distinction and the decision as a whole were controversial, as their effect was to significantly narrow the circumstances in which litigation privilege could apply to records prepared as part of an internal investigation.
In a critically important reversal, the Court of Appeal found that, although the Serious Fraud Office had not commenced a formal investigation against Eurasian Natural Resources Corporation Limited (“ENRC”), criminal proceedings were possible and, therefore, documents brought into existence for the dominant purpose of resisting or avoiding criminal proceedings against ENRC were covered by litigation privilege.
Lawyers and companies in England and Wales are breathing a sigh of relief that the wider scope of litigation privilege has been restored. However, the Court of Appeal’s judgment makes clear that the factual matrix surrounding the creation of documents by ENRC and its counsel was key in determining the extent of litigation privilege.
Canadian courts have taken a similarly contextual approach in making determinations as to whether or not documents associated with an internal investigation are protected from disclosure as a result of litigation privilege. There is no formula to guarantee that broad litigation privilege claims will prevail.
For example, in Alberta v Suncor Energy Inc, 2017 ABCA 221, the Alberta Court of Appeal found that a chambers judge was incorrect in finding that because the dominant purpose of an internal investigation was in contemplation of litigation, every document created or collected during that investigation was protected by legal privilege. The Alberta Court of Appeal rejected a “blanket” approach to privilege determinations and required an analysis of specific categories of documents, having regard to the precise circumstances of their creation. The fact that an investigation had been commenced was found insufficient to claim that all materials produced as part of that investigation were protected by solicitor-client privilege or litigation privilege. The Alberta Court of Appeal remitted the privilege claims back to be assessed with greater particularity, through a “referee”, appointed under Alberta’s rules, to review the privilege claims made for specific documents or categories of documents, and make a recommendation on the specific privilege claims to the judge.
While Canadian courts have not established rigid criteria for the application of litigation privilege in the context of internal investigations, there are several factors that weigh heavily in the adjudication of such privilege claims. It pays to consider these factors carefully at the outset of, and throughout, an internal investigation. Usually, maximizing privilege protection around an internal investigation is a high priority because it provides greater control over the nature, scope and timing of disclosure choices, which is desirable even if the likely eventual strategy will be cooperation with authorities.
Among the privilege factors that should be considered at the front end of an internal investigation, and revisited throughout, are:
- Greater counsel involvement lends support to privilege claims. Albeit principally relating to claims of solicitor-client privilege, rather than litigation privilege, Canadian Imperial Bank of Commerce v. Her Majesty the Queen 2015 TCC 280 presents an example of how lack of counsel involvement at key stages can undermine privilege claims in connection with internal investigations.
- Clearly define the purpose and scope of the investigation: Creating a “counsel instruction memo” or “investigation charter” is an effective way to lay the foundation for privilege claims. A “counsel instruction memo” or “investigation charter” should set out the purpose, scope, objectives, methods and strategies of the investigation as well as the individuals and other stakeholders involved. Such documentation can be pivotal when privilege claims are contested, as R v. Husky Energy, 2007 SKQB 383 illustrates. In that case, the Court relied on an “investigation charter” as evidence that the investigation was for the dominant purpose of addressing potential litigation, notwithstanding that the company’s obligation to report an incident to regulators would have inevitably required some investigation and evidence gathering.
- Consider carefully the manner of recording interviews: The manner of the recording in question - who created the record and how – often carries significant weight in the determination of privilege claims. In R v Assessment Direct Inc, 2017 ONSC 5686, the court held that audio recordings of telephone conversations of an employee of the accused company speaking with potential witnesses (which were seized by police pursuant to a search warrant) were not protected by litigation privilege because they simply recorded facts. Justice Nordheimer held “…it is the revelation of the party’s litigation strategy that is protected, not base information itself” and as the recordings would not reveal counsel’s observations, thoughts or opinions, they were not privileged. By contrast, in R v. Dunn, 2012 ONSC 2748, notes taken by a lawyer of an interview of his client during an internal investigation were considered protected by litigation privilege. This reflects the courts’ willingness to protect records that would reveal impressions or views of counsel.
- Guard legal advice diligently: Communications between counsel and the client in support of legal advice enjoy the greatest protection under the law. Nevertheless, the quasi-constitutional status of solicitor-client privilege can be lost through lack of confidentiality or waiver, including implied waiver. Work product of counsel that summarizes the result of an investigation, legal risks and strategies should only be accessible by the appropriate instructing agents of the organization (non-conflicted senior officers, the Board, the Audit Committee, the Special Committee, etc., as the case may be, depending on circumstances). In addition, it is important to be alert to the challenge that not all communications between counsel and client are necessarily protected by solicitor-client privilege. Communications which are factual in nature and not in support of legal advice will be more difficult to protect. This can be particularly difficult for in-house lawyers who often take on multiple roles within their organizations, not all of which involve the provision of legal advice.
- Manage communications with law enforcement: In ENRC, there were extensive communications between the company’s external counsel and law enforcement, resulting in confusion and unmet expectations on the part of law enforcement. This aggravated the danger of loss of privilege (which materialized at first instance but was reversed on appeal). Cooperation is usually an ‘all in decision’: if a commitment to cooperate is made, law enforcement will expect to receive all of the fruits of the investigation, and will be obliged to disclose all such material to any other accused who face the same allegations, as R v. Nestle, 2015 ONSC 810, illustrates. If it becomes necessary to share with law enforcement only a narrow set of information that is arguably privileged, try to negotiate a non-waiver agreement, which aims to protect against broader subject matter waiver.