Litigation Privilege & Investigations – English Court of Appeal Guides the Way
In a recent decision, the English Court of Appeal upheld an appeal over a High Court ruling that a business under criminal investigation by the Serious Fraud Office should turn over materials prepared for an earlier internal investigation.
 

Litigation privilege – the general rule

The general rule is that litigation privilege exists over confidential communications between a lawyer and a client, or between either of them and a third party, where the communication was for the dominant purpose of the litigation, and at the time the communication was made, the litigation was in being or was reasonably contemplated. 
Following the emergence of adversarial style statutory and regulatory investigations, the Irish courts have been more willing to allow parties assert litigation privilege over communications exchanged for the purposes of the investigation (in being or reasonably contemplated).1       

Serious Fraud Office investigation not adversarial?

The position in the UK regarding litigation privilege is broadly similar to Ireland, however, confusion arose following the judgment in Director of Serious Fraud Office (SFO) v Eurasian Natural Resources Corporation Limited (ENRC)2  in 2017. A whistleblower had alerted ENRC to allegations of corruption, fraud and bribery within its group and the company had undertaken its own investigations. The SFO then proceeded to investigate ENRC, with a view to pursuing a possible prosecution. It issued notices compelling the production of documents, including statements and evidence provided by the company's employees and officers; reviews of books and records by forensic accountants; factual evidence; and documents containing legal advice.  ENRC asserted that all documents were subject to litigation privilege. The SFO maintained that there was no generic entitlement to litigation privilege. The English High Court held that documents created by ENRC and its legal advisors as part of an internal investigation and then later in contemplation of a criminal investigation by the SFO were not protected by privilege as: 
  • the SFO investigation could not be regarded as adversarial litigation. [Litigation privilege could have been asserted had the documents been prepared in contemplation of a criminal prosecution, not merely a criminal investigation];
  • the litigation must be reasonably anticipated – criminal proceedings arising from the investigation were one of a range of hypothetical outcomes and a fear of prosecution on a "worst case scenario" was not good enough to satisfy the test for litigation privilege; and
  • the initial internal investigation conducted by ENRC's legal advisors was a 'fact-finding' one (with a view to ENRC then obtaining legal advice).
Another judgment of the English High Court in the same year Bilta (UK) Ltd (In Liquidation) v Royal Bank of Scotland3  threw the position into further confusion as here a claim of litigation privilege was successful in relation to an investigation by the Revenue authorities and the ENRC judgment was distinguished on the basis of the dominant purpose of the documents – the other element of the test. 

Court of Appeal decision - claim to litigation privilege allowed

The Court of Appeal did not believe that the High Court judge incorrectly interpreted the law on litigation privilege or the correct test to be applied but rather the Court believed that she did not give enough regard to certain facts and evidence which discussed the possibility of litigation following the investigation. In upholding the appeal on 'litigation privilege' issues the Court of Appeal held that:
  • The judge had been wrong to conclude that a criminal prosecution had not reasonably been in prospect. On the evidence, the SFO had made clear at the outset to ENRC the prospect of its criminal prosecution following the investigation.
  • In both civil and the criminal context, legal advice given so as to head off, avoid or even settle reasonably contemplated proceedings was as much protected by litigation privilege as advice given for the purposes of resisting or defending such contemplated proceedings.
  • It was in the public interest that companies should be prepared to investigate allegations, prior to going to a prosecutor such as the SFO, without losing the benefit of legal profession privilege for the work product and consequences of their investigation.

Clarity for clients?

The Court of Appeal judgment provides clarity for both Irish and English law jurisdictions on the issue of litigation privilege and its application in investigations.  Some key takeaway points are:  
  • Best practice is never to presume that communications created for an investigation will always be protected by privilege.  Parties involved in an investigation should always consider at the outset (a) the likelihood of litigation and (b) how best to deal with privilege in a given context.
  • A claim to litigation privilege in the context of an investigation will only succeed where both elements of the test are met:
    • the dominant purpose of the communication/document is to avoid legal proceedings or with a view to settlement;

    and

    • litigation is in contemplation or in being whether that litigation be a regulatory investigation or a "traditional" courtroom battle.
It is understood that the SFO is considering an appeal to the Supreme Court.
 
See some of our previous articles on privilege and internal investigations here and here.
 
1 Quinn & Ors v IBRC & Ors [2015] IEHC 315; The Director of Corporate Enforcement v Leslie Buckley [2018] IEHC 51.
2 [2017] 1 WLR
3 Bilta (UK) Ltd (In Liquidation) v Royal Bank of Scotland [2017] EWHC 3535 (Ch) 
 
Contributed by:  Rebecca MacCann

 

Twitter

 

Follow us @WilliamFryLaw

Key Contacts

Lisa Carty Partner

Paul Convery Partner

Derek Hegarty Partner

Related Practice Areas