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CA upholds role of privilege in company investigations

Leveson: Contributed to join ruling

The Court of Appeal has overturned a High Court ruling that was seen as driving a coach and horses through the protection provided to corporate clients by legal professional privilege (LPP).

Appeal judges said it was “obviously in the public interest” that “companies should be prepared to investigate allegations from whistleblowers or investigative journalists” before reporting them to a prosecutor such as the Serious Fraud Office (SFO), without losing the benefit of LPP.

“Were they to do so, the temptation might well be not to investigate at all, for fear of being forced to reveal what had been uncovered whatever might be agreed (or not agreed) with a prosecuting authority.

“The remedy for the SFO is not to allow prevarication and delay (which might be said to have occurred in this case) to prevent a timeous investigation, when it becomes clear that the company is not wholeheartedly reporting its own conduct and making appropriate waivers of privilege.”

The court heard in SFO v ENRC [2018] EWCA Civ 2006 [1] that the Eurasian Natural Resources Corporation (ENRC) had asserted that documents produced during an investigation by its solicitors, DLA Piper, and forensic accountants were protected by litigation privilege and/or legal advice privilege.

The documents “related to fraudulent practices allegedly committed in Kazakhstan and Africa, which had been notified to ENRC by a whistleblower” and included notes made by DLA Piper of 184 interviews.

The SFO claimed the documents were not the subject of LPP. Granting declarations sought by the SFO in a ruling last spring, Mrs Justice Andrews said an investigation by the SFO was not “adversarial litigation” and it could not be argued that “just because there is a real risk of an investigation, there is also a real risk of prosecution”.

Sir Brian Leveson, president of the Queen’s Bench Division, Sir Geoffrey Vos, chancellor of the High Court, and Lord Justice McCombe said in a joint judgment that it seemed to them that “the whole subtext of the relationship between ENRC and the SFO was the possibility, if not the likelihood, of prosecution if the self-reporting process did not result in a civil settlement”.

They concluded that Andrews J “ought to have concluded that the documents were brought into existence for the dominant purpose of resisting or avoiding contemplated criminal proceedings against ENRC or its subsidiaries or their employees”.

As a result, the Court of Appeal found that three categories of documents generated during investigations into the activities of ENRC, with the exception of two emails, were subject to litigation privilege.

The judges said the issue of legal advice privilege was “far less important”, and it was unable to depart from an earlier Court of Appeal decision in Three Rivers (No5), which could only be overturned by the Supreme Court.

However, they said that large companies, as much as small businesses and individuals, needed to “seek and obtain legal advice without fear of intrusion”.

They went on: “If legal advice privilege is confined to communications passing between the lawyer and the ‘client’ (in the sense of the instructing individual or those employees of a company authorised to seek and receive legal advice on its behalf), this presents no problem for individuals and many small businesses, since the information about the case will normally be obtained by the lawyer from the individual or board members of the small corporation.

“That was the position in most of the 19th century cases. In the modern world, however, we have to cater for legal advice sought by large national corporations and indeed multinational ones.”

In this case, the judges said that whatever the rule on the extent of LPP, it should “be equally applicable to all clients, whatever their size or reach”.

Julian Acratopulo, president of the London Solicitors Litigation Association and partner at Clifford Chance, commented: “Lawyers and clients investigating the most serious criminal issues will sleep a little easier in their beds, following ENRC’s win in the Court of Appeal today.

“However, they may well still have nightmares about what constitutes a client for the purposes of legal advice privilege. The Court of Appeal made clear that, although in principle large corporations should be treated no differently, clarification of this issue was a matter for the Supreme Court.”

Christina Blacklaws, president of the Law Society, which intervened in the case, said: “As a result of this ruling, an individual or organisation facing criminal prosecution can be far more confident that discussions with their solicitors will remain confidential.

“If the High Court ruling had been upheld, any organisation facing a prosecution – not just multinationals, but charities, newspapers, small businesses or local authorities – could have to turn over private communications with their lawyers.”

Paul Bennett, professional practice partner at Aaron & Partners, said: “The judgment is useful clarification that LPP includes covering advice when the dominant purpose of seeking advice is avoiding legal proceedings or is given with a view to settlement after an investigation.”

He added: “Clients, including solicitors and law firms under investigation by regulators such as a Solicitors Regulation Authority or the Information Commissioners Office, can have confidence at investigation stage that advice is covered by LPP following this decision.”