A narrow and controversial approach to the application of litigation privilege taken by the High Court which made documentation generated in an internal investigation susceptible to disclosure has been overturned by the Court of Appeal.
In the case of The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd, the Court of Appeal held that documents prepared by lawyers and forensic accountants during the course of an internal investigation were protected by litigation privilege.
This landmark ruling recognises the importance for businesses who find themselves having to conduct internal investigations into allegations of wrongdoing of being able to carry out their investigations with greater confidence that the documents created during these investigations will be privileged and therefore protected from disclosure.
Businesses should be aware, however, that the application of legal privilege is extremely fact-sensitive and will depend on the specific circumstances of each case.
What is legal professional privilege?
Legal professional privilege takes two forms:
1. ‘Legal advice privilege’. This applies to all communications between a client and their lawyer which have been created for the purposes of giving or receiving legal advice. There is no need for litigation to be contemplated.
2. ‘Litigation privilege’. This is wider than legal advice privilege and may apply to communications with third parties. For litigation privilege to apply: (i) litigation must be in progress, pending or reasonably in contemplation; (ii) the communications must be made for the dominant purpose of the litigation; and (iii) the litigation must be adversarial and not investigative or inquisitorial.
In this case, Eurasian Natural Resources Corporation Ltd (‘ENRC’) became aware of allegations of fraud, bribery and corruption in its group of businesses. It conducted an internal investigation, with assistance from its lawyers and forensic accountants. These allegations were subsequently brought to the attention of the Serious Fraud Office (‘SFO’), who commenced a formal criminal investigation into ENRC and its business dealings. As part of this investigation, the SFO sought disclosure of certain documents; specifically, notes of interviews between ENRC’s lawyers and current and former employees, and other documents generated by the forensic accountants during its review of internal books and records. The SFO argued that these documents were not subject to legal professional privilege and should be disclosed.
First instance decision
The High Court was tasked with considering whether ENRC was entitled to resist disclosure on the grounds of either litigation and/or legal advice privilege.
In relation to litigation privilege, the Court held that this did not apply. It held that neither allegations of criminal conduct nor even a criminal investigation by the SFO were sufficient to render litigation a real likelihood. Further, even if litigation had been reasonably contemplated, none of the documents had been created with the dominant purpose of being used in the litigation (rather, they had been produced so as to be provided to the SFO in the hope of avoiding any such litigation).
In relation to legal advice privilege, the Court held that as the notes reflected interviews that had taken place between ENRC’s lawyers and ENRC’s employees, they were not lawyer/client communications. There was also no evidence that any of the interviewed employees had been authorised by ENRC to seek legal advice from its lawyers.
This decision caused uncertainty, particularly in relation to the applicability of litigation privilege. In effect, it pushed back the threshold for litigation to be considered “reasonably in contemplation” to much later in the process (arguably to the point at which prosecution was imminent). It was also inconsistent with the approach taken in civil proceedings where litigation can be deemed to be “contemplated” at the early stages of a dispute.
Court of Appeal decision
On appeal by ENRC, the Court of Appeal held that all documents, bar two emails which were considered minor, were covered by litigation privilege, and were therefore exempt from disclosure. It held that:
(1) the High Court was wrong to find that litigation was not reasonably in contemplation once the SFO had written to ENRC;
(2) the SFO had made the prospect of a criminal prosecution clear to ENRC and lawyers had been instructed to deal with the matter. A criminal prosecution could therefore reasonably have been in ENRC’s contemplation at the time the documents were produced; and
(3) the documents were produced for the dominant purpose of defending any such litigation and should be protected by litigation privilege.
In relation to legal advice privilege, the Court of Appeal declined to make any formal ruling as to whether this applied, stating that its hands were tied by a previous judgment which provides that communications between a company’s lawyers and an employee could only attract privilege where that employee had been tasked with seeking/receiving legal advice on the company’s behalf. The Court did, however, state that this approach to legal advice privilege was outdated and inappropriate in the context of large global institutions and needed to be reconsidered by the Supreme Court in the future (either on appeal of this case or in another).