R (on the application of AL) v Serious Fraud Office  EWHC 856 (Admin)
Let there be no confusion: first interview notes in internal investigations are rarely privileged. This is the message of the High Court in a judgment which is heavily critical of the Serious Fraud Office (SFO) for failing to take steps to force the disclosure of detailed employee interview notes taken during a company’s internal investigation into corruption. The SFO had relied instead on ‘oral summaries’ after the company concerned had asserted privilege over the notes themselves. The claimant in this case is an ex-employee of the company and is the first individual to be charged with criminal conduct where the SFO has entered into a deferred prosecution arrangement (DPA) with a company for related offences. The ruling raises novel issues concerning the extent to which the SFO, in fulfilling its disclosure obligations towards individuals in the claimant’s position, is under a duty to obtain documents from a company with which the SFO has concluded a DPA in order to review documents and disclose them.
Company enters into DPA regarding bribery offences
XYZ’s bribery offences came to light in 2012 during an internal investigation. XYZ self-reported to the SFO, and, in 2013, the SFO began an investigation. The SFO entered into a DPA regarding the offences with XYZ in 2016.
Employee interview notes taken during internal investigation
During the internal investigation in 2012, several senior employees were interviewed by lawyers from an external law firm. These interviews were not recorded but the lawyers took copious notes. During the SFO investigation, the SFO asked to see the employee interview notes, but the company asserted privilege over the notes and declined to provide them. It offered instead to provide the SFO with ‘oral proffers’, whereby a partner from the law firm would read aloud a short summary of the interview notes. The SFO agreed to this approach. The oral proffers were relativity short. The transcript of the longest was the claimant’s in this case, at just three pages. To give some context, the claimant’s original interviews (which the oral proffer summarised) lasted around fifteen hours.
A term of XYZ’s DPA was that XYZ must disclose to the SFO all information and documents ‘not protected by a valid claim of legal professional privilege or any other applicable legal protection’.
Ex-employees also charged
In February 2016, the claimant was charged with two counts of conspiracy to corrupt, and one of conspiracy to bribe. Three other employees of XYZ were also charged with similar offences. In order to formulate his defence, the claimant wanted to see the full employee interview notes. The claimant has been charged with conspiracy offences, which require agreement between two or more people to commit an offence: it could therefore be highly important for his defence to have access to the full interview notes of the other employees.
SFO fails to obtain employee interview notes under the DPA
Despite repeated requests from the claimant’s representatives, the SFO failed to obtain the full interview notes from XYZ, whose lawyers continued to insist that they were privileged. The SFO instead served the claimant with the written transcripts of the oral proffers. The claimant accordingly began judicial review proceedings to challenge the SFO’s decision not to compel XYZ to provide the full interview notes.
The SFO argued that, while it disagreed with the law firm’s reasoning regarding privilege, the claims were ‘not obviously invalid’. The SFO contended that its decision not to trigger the breach clause of the DPA required weighing-up multiple competing concerns. Judicial review of the SFO’s decision not to trigger a breach of the DPA was, the SFO submitted, a challenge to the exercise of legitimate prosecutorial discretion. Moreover, in the SFO’s judgment, there was no need for the claimant to receive the full interview notes because the oral proffers of the interview notes would suffice.
Court expresses concern regarding the SFO’s approach
Although the judicial review application was dismissed because the Crown Court, not the High Court, was found to be the appropriate forum to address disagreements regarding disclosure, Holroyde LJ and Green J made clear they had “real reservations as to the position adopted by the SFO in this case.”
SFO should have pursued law firm for interview notes
The court criticised the SFO’s claim that its decision not to pursue its request for disclosure of the interview notes from XYZ was an exercise of legitimate prosecutorial discretion. The court found that the SFO did not enjoy a broad discretion to decide whether or not to compel XYZ to produce the interview notes – the SFO’s discretion was ‘circumscribed’ by the Attorney General’s Guidelines on Disclosure and the claimant’s rights, under both Article 6 of the European Convention on Human Rights and common law, to a fair trial. The SFO ought to have been guided by the need to protect the claimant’s right to a fair trial, and should therefore have pursued XYZ for the interview notes; the SFO was not free to decide to do otherwise.
Oral proffer process ‘highly artificial’
The court was similarly critical of the SFO’s approach to privilege. They found the oral proffer process to be ‘highly artificial’. The SFO had alluded to ‘testing’ of the oral proffers which, it claimed, had confirmed that they were an accurate reflection of the interview notes. However, the SFO had no access to the interview notes, so the court had “real difficulties in understanding what sort of testing could have been undertaken which would have come up with a reliable answer”.
‘Settled law’ that first interview notes are not privileged
The judges were emphatic in their agreement that “the law as it stands today is settled. Privilege does not apply to first interview notes.” The SFO’s claim that the law firm’s argument regarding privilege was ‘not obviously invalid’ was therefore incorrect as a matter of law, and the SFO should have challenged the assertion of privilege over the notes. Moreover, by using the ‘not obviously invalid’ test, the SFO failed to assess privilege claims adequately because it had not evaluated the law firm’s assertion of privilege on its merits. Even if the ‘not obviously invalid’ test was appropriate, the SFO had offered no evidence whatsoever to suggest it made any reasoned examination of the law firm’s claim of privilege.
XYZ’s law firm’s suggestion that the interview notes contained ‘lawyers’ musings’ and therefore were privileged was also rejected. Any genuinely privileged material in the interview notes, the court said, could be redacted prior to disclosure.
Waiver of privilege had also not been properly considered
XYZ’s lawyers insisted that the provision of the oral proffers did not mean that privilege over the interview notes had been waived. The court reasoned that, if the interview notes were truly privileged (as the lawyers claimed they were), and the proffers summarised the contents of those interview notes, then it followed that privilege over the contents of the interview notes had been waived. The pertinent question was whether this waiver was on a limited basis (i.e. for the exclusive use by the SFO).
The court found that there was no evidence that the SFO had considered questions of waiver nor (it followed) whether such waiver was limited. Even if it had, the court would have had ‘difficulties’ accepting any argument that the waiver was limited. At the time the oral proffers were provided, XYZ knew or should have known that they would be used in the furtherance of the SFO’s investigation into the employees and that in due course if the employees were charged the SFO would need to disclose the contents of the oral proffers to the employees. Thus even if XYZ’s waiver of privilege by providing the oral proffers to the SFO was for a limited purpose, that purpose must have included the subsequent transmission of the underlying employee interview notes to the charged employees, including the claimant.
‘Without prejudice to privilege’ wording not effective
It was irrelevant that when the proffers were made by XYZ to the SFO they were said to be without prejudice to privilege. The test for waiver is not subjective; it is objective. If objectively a client waives privilege it cannot then claim that the waiver did not exist simply because it (subjectively) asserts that there has been no waiver.
SFO should have considered duty to cooperation contained in DPA
The judges were also critical of the SFO’s failure to consider whether XYZ was obliged to waive privilege over the employee interview notes under its duty to cooperate contained in the DPA.
Given the court’s conclusion regarding the matter of the appropriate forum, much of significance in this judgment is strictly obiter. However, the judgment is a good indicator of judicial opinion on privilege, in particular in relation to materials created during internal investigations.
A company will often want (and in some cases will be obliged due to regulatory obligations) to investigate internally suspicions or allegations of bribery and corruption. Such an investigation must take into account the possibility that materials produced, including employee interview notes, may need to be disclosed in any subsequent external investigation by investigators such as the SFO.
The issue of whether such materials have to be disclosed to an investigating authority (or indeed to parties to subsequent civil litigation) is both topical and controversial. Recent case law has tended to favour disclosure of employee interview notes where no claim to litigation privilege can be made out. In the RBS Rights Issue Litigation, the High Court held that employee interview notes produced during a bank’s internal investigation (where litigation was not in contemplation) did not attract privilege because the notes were not lawyers’ working papers and the employees were not the lawyers’ client. This ruling on interview notes was followed by Andrews J in the SFO v ENRC decision last year, the appeal of which is due to be heard in July. The judges’ remarks in the XYZ judicial review application do not bode well for those still hoping that interview notes may be found to attract legal advice privilege – the law firm’s claim that the law remained unclear as to whether interview notes were per se privileged was resoundingly rejected by the court.
The SFO has appeared willing to accept oral summaries of witness interviews in the past, both in this case and others (eg Standard Bank). The judges’ criticism of the SFO’s acceptance of oral proffers in this case may affect the SFO’s willingness to do so in the future.
XYZ’s DPA was approved by Lord Justice Leveson, as was the DPA with Standard Bank. So while oral proffers have been viewed as acceptable in the context of previous DPA negotiations, the judges’ comments in this case make it very unlikely that oral proffers could be considered suitable to be disclosed in future cases instead of the underlying interview notes or transcripts in the context of criminal proceedings involving third parties (e.g., as in this case, an ex-employee).
Finally, the claimant is the first individual to be prosecuted for a crime where a corporate entity has concluded a DPA for the same offence. The case therefore establishes an important precedent regarding the scope of the SFO’s duties of disclosure towards third parties who are being prosecuted regarding the misconduct of a company which has entered into a DPA.