Litigation privilege without the fear
Serious Fraud Office v Eurasian Natural Resources Corporation (ENRC) [05.09.18]
The rule of law depends on all parties being able to seek confidential legal advice without fear of disclosure.
The Court of Appeal has overturned the High Court’s decision in the controversial case of Serious Fraud Office v Eurasian Natural Resources Corporation (ENRC) [05.09.2018], which concerned the application of litigation privilege over documents arising from a company’s internal investigation, prior to the commencement of litigation.
Whilst a landmark decision for in-house legal teams, Sir Brian Leveson, Sir Geoffrey Vos and Lord Justice McCombe did ultimately leave some questions open for the Supreme Court to consider and instigate change ‘in this or an appropriate future case’, following their own critique.
The High Court decision
The initial judgment followed a dispute between ENRC and the SFO about the protection afforded by litigation privilege and, in the alternative, legal advice privilege to documents including interview notes and forensic investigations.
In the High Court decision, Lady Justice Andrews applied a strict interpretation of the rules stating that there was ‘a recognised public interest in the SFO being able to go about its business of investigation and prosecuting crime; and the sort of evidence which one would expect to be found in the disputed documents is likely to be of considerable value to its current investigation’. She said that litigation privilege did not apply in this instance because criminal or civil proceedings were neither reasonably contemplated nor were the documents created to defend any such litigation.
She held that legal advice privilege does not cover communications forming the part of a fact-finding investigation within a corporate entity unless the communications contained legal advice and were with employees authorised to seek and receive legal advice on the corporate entity’s behalf.
There are two key forms of legal privilege under English law: legal advice privilege and litigation privilege. The former applies to communications between a lawyer and their client for the purpose of seeking or giving legal advice. The latter applies when an ‘adversarial’ factor comes into play (involving third parties) and proceedings are either contemplated or ongoing.
The High Court applied the test of “dominant purpose” stating that there was a difference between a document created for the purpose of conducting litigation in comparison to avoiding litigation before it was instigated. It was held that documents prepared for the purpose of avoiding litigation were not necessarily subject to litigation privilege.
The Court of Appeal disagreed and extended the definition of dominant purpose to include a situation where the dominant purpose of a document is to avoid legal proceedings, for example by considering settlement. In those circumstances, the Court of Appeal found that the document should be afforded the same degree of protection as if it contained legal advice for the purpose of litigation.
Whilst the initial investigation had been labelled as being for ‘corporate governance reasons’, the Court of Appeal held that at the stage at which it was carried out, the investigation was undertaken in contemplation of litigation and for the purpose of avoiding or defending it.
The case also reignites debate as to the definition of ‘client’ for the purposes of legal advice privilege, which had been previously narrowed in the Three Rivers (No 5) case in 2004.
In the Three Rivers case, it was held that the term ‘client’ solely referred to employees who were authorised to seek and receive legal advice on behalf of a corporate entity. This did not extend to those authorised to provide information, for example, during interview, so it is not the company itself who are the ‘client’ but a narrow and specifically defined group of ‘authorised’ individuals.
Whilst the court outlined, in detail, their support for change from this current position, they deferred departure from it to the Supreme Court.
This is a victory for companies and in–house counsel will be relieved by the decision and the direction of travel taken by the Court of Appeal. The implications of the High Court’s initial judgment could have been far reaching in practice, whereas the Court of Appeal’s means that legal counsel can still now undertake internal investigations into complaints and issues which may lead to litigation, or the threat of litigation, at some point in the future, without the fear of having to disclose the entirety of those investigations. As stated by the Law Society, “the rule of law depends on all parties being able to seek confidential legal advice without fear of disclosure”, including consulting a lawyer in private during the investigation process. The significance of this decision is likely to stretch far beyond the realms of the UK, applying to arbitration and additional jurisdictions.