The issue of when privilege can be asserted over documents created during a company’s internal investigation has returned. Lawyers have been wrestling with the decisions late last year in Astex Therapeutics Ltd v Astrazeneca AB
and The RBS Rights Issue Litigation
where the court rejected a claim to privilege in respect of lawyers’ notes of interviews with a party’s employees. Anyone looking for comfort and a tempering of the approach taken by Hildyard J in The Rights Issue Litigation
judgment will be disappointed. Andrews J’s decision in The Director of the Serious Fraud Office v Eurasian Natural Resources Corp Ltd
takes much the same line about legal advice privilege, if anything making it harder for corporations or organisations of any kind to claim privilege over internal documents even where they have been drafted by lawyers. SFO v ENRC
raises an additional point, namely the scope of litigation privilege where the litigation in contemplation is criminal and not civil in nature. Many others have already commented on this issue and the context of a regulatory investigation. We will focus instead on the wider implications of the judgment for litigation and legal advice privilege in civil cases.
Before turning to look at the principles, the good news is that ENRC intend to appeal the decision. Once it became clear that RBS were not going to appeal The Rights Issue Litigation
decision, the prospect of the Supreme Court reviewing the troublesome Three Rivers
(No 5) and the client identity problem it created looked distant. SFO v ENRC
would appear to cover the all the points that have been causing difficulties – with luck and a fair wind we could have a decision from the Supreme Court by the end of next year that removes uncertainty and could refine or even overturn Three Rivers
The legal background to the present decision, including the principles raised in Astex
and The Rights Issue Litigation
decisions, as well as Property Alliance Group Ltd v RBS and Three Rivers
, is discussed in our briefing Three Rivers returns - privilege and the client identity question
. The analysis below continues on from that briefing.
Litigation privilege – fear is not enough
Andrews J began her analysis of litigation privilege with a reminder that the general trend has been towards strictly confining, rather than extending, its ambit. When determining whether there was a real prospect of litigation at the time the document was created and its dominant purpose, the court applies an objective test but must also consider the actual state of mind of the party claiming privilege. General fear and apprehension that proceedings may eventuate is not enough – the company must have reasonably anticipated the litigation that ensues as a real likelihood and not a mere possibility.
A contemporaneous audit trail setting out the state of mind of someone representing the mind and will of the company will be important here. If the dominant purpose of a review was to generate documents for the purpose of obtaining advice about the defence of anticipated proceedings, an absence of internal documentation supporting this assertion will be difficult to explain.
Advice given in connection with the conduct of actual or contemplated litigation may include advice relating to the settlement of that litigation once it is in train but Andrews J held that it does not extend to third party documents created in order to obtain legal advice about avoiding contemplated litigation, even if that involves seeking to settle the dispute before proceedings are issued. Evidence obtained for the purpose of persuading the potential litigant not to begin proceedings does not satisfy the test for litigation privilege.
Legal advice privilege – who is the client?
If a party fails to establish litigation privilege, it may try to fall back on legal advice privilege. Whereas litigation privilege applies to communications with third parties, only communications between a lawyer and the client are protected by legal advice privilege. The Court of Appeal in Three Rivers
(No 5) followed Wheeler v Le Marchant
, the authority that legal advice privilege does not extend to documents obtained from third parties to be shown to a solicitor to obtain legal advice. Employees are in the same position as third parties for this purpose unless they have been authorised by the company to instruct, and not merely to communicate with, the lawyer.
In general documents created by employees or notes of interviews with employees, whether the notes are taken by lawyers or not, will not be protected by legal advice privilege. The only potential way round this is the “lawyers’ working papers” rule which we discuss below. Moreover, where the lawyers have been instructed as information gatherers, as was the case in SFO v ENRC
(Dechert and subsequently DLA Piper had that role while Addleshaws and others were instructed as legal advisers), legal advice privilege will not apply to documents created by them.
All or nothing
Where lawyers are instructed to provide advice and all documents are created by them in that context as was held to be the case in PAG v RBS
, the court will not sift through evidence in order to separate fact from legal advice. Andrews J applied this approach to a slide show used by Dechert’s partner Neil Gerrard to assist him to give legal advice to ENRC’s board of directors. While any report prepared by Dechert of its investigations and the underlying materials used to produce it and the slides were not privileged, what was said at the board meeting at which Mr Gerrard gave the presentation was privileged as were the slides in their totality and any record of what he said on that occasion.
Chain of communication
Andrews J addressed one aspect of the client identity question which many may not have thought was a potential problem but does follow logically from Three Rivers
(No 5). Where in-house counsel has authority to instruct external lawyers to advise the company, the advice will not lose its privileged status because it is sent to the board of directors directly instead of via in-house counsel since the board is the manifestation of the client for these purposes. Both the board and in-house counsel will be authorised to instruct the external lawyers for the purpose of obtaining legal advice and both the instructions and the advice will be privileged.
General counsel and in-house lawyers
The application of Three Rivers
(No 5) to in-house lawyers was considered in Menon v Herefordshire Council
. Lewis J held that where employees are authorised to obtain legal advice from their employer’s in-house lawyers, they will constitute the client (they are often called authorised employees or client employees). Confidential communications between the employees and the lawyers for the purposes of obtaining and giving legal advice in connection with the discharge of their functions will be protected by legal advice privilege.
Questions may arise concerning the role of an in-house lawyer when legal advice privilege is in issue - were they communicating as a professional adviser or as an executive? ENRC claimed privilege over internal communications with Mr Ehrensberger, a qualified lawyer, who was said to have spent virtually all of his time as its Head of Mergers and Acquisitions acting as a lawyer. The judge concluded that the objective evidence available established that Mr Ehrensberger was acting not as a lawyer but as a “man of business”, even though legal advice was being sought and given. She said that if the person sending the information to Mr Ehrensberger had wanted privileged legal advice he should have sent it to General Counsel.
Lawyers’ working papers
The lawyers’ working papers rule (similar to the US work product concept) is not well-developed or understood in English law and was not discussed in Three Rivers
(No 5) or PAG v RBS
. It was relied on unsuccessfully by RBS in The Rights Issue Litigation
where some of the interview notes in question were made by US lawyers.
Andrews J followed the approach taken by Hildyard J in the earlier case: a lawyer’s notes will only be privileged if they betray the tenor of their legal advice. The client cannot obtain the protection of legal advice privilege over interview notes simply by procuring a lawyer to interview the witness rather than doing so himself.
The judgment in SFO v ENRC looks at all the problems created by Three Rivers (No 5) straight in the eye. It does not attempt to get round them, rightly accepting that there is little scope for a first instance judge to flex the rules, particularly where another first instance judge, Hildyard J, has just determined many of the same points. One also gets the impression that the judge was not particularly keen to find a way round the constraints on legal advice privilege imposed by Three Rivers (No 5) and those imposed on litigation privilege by Waugh v British Railways Board – she readily accepted the policy considerations that make claims to privilege hard to establish.
One argument used to get round Three Rivers (No 5) in the context of interviews with employees supported by Thanki’s The Law of Privilege was rejected by Hildyard J and even more roundly dispatched by Andrews J. This argument states that the concept of “instructions” to the lawyer is broad enough to include the communication of the relevant facts by any employee authorised by the company to do so. Andrews J held that this analysis is contrary to authority and wrong in principle.
This leaves lawyers and their corporate clients, or any clients who are not individuals, with some insoluble problems when it comes to ensuring that documents arising from internal investigations are privileged, for the time being at least. With meticulous care, it may be possible to create notes that satisfy the lawyers’ working papers test – that remains to be seen – but the only communications that will definitely be protected are those in which the lawyer gives legal advice to the client, whether that be the board of directors or others authorised to instruct lawyers on the organisation’s behalf.
If the client is aware of these issues and records their intentions carefully at the time, they may be able to claim litigation privilege. Identifying who is authorised to give instructions to internal or external lawyers, keeping internal communications to a minimum and being conscious that their content may become public, and controlling the circumstances in which evidence is gathered may help establish a claim to legal advice privilege.
We will have to wait to see whether the Court of Appeal gives ENRC permission to appeal and, assuming it does, to see whether it expresses any interest in departing from Three Rivers (No 5) and adopting the more generous approach taken to the client identity issue by the appellate courts in Hong Kong and Singapore and that taken in the United States. For the time being, corporations and other organisations need to be aware that their internal communications and reports following an event, accident, potential contractual breach or suspected regulatory infringement, even where lawyers are involved, may well have to be disclosed in subsequent proceedings.