Legal Professional Privilege and the Modern-day Corporation: Where are Things At?
July 5, 2019
Legal professional privilege is a cornerstone principle of the English legal system. Last year, the Court of Appeal issued a landmark decision on the doctrine of legal professional privilege. The case, The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Limited  EWCA Civ 2006 (“ENRC”), partially overturned the decision of the High Court which had narrowed the scope of legal professional privilege in internal investigations. The Court’s decision had the effect of permitting documents prepared as part of an internal investigation to be protected by litigation privilege in certain circumstances. This article considers the findings of the Court in ENRC and subsequent developments.
Background to ENRC
This case arose after allegations of corruption and wrongdoing within a subsidiary of ENRC. After receiving an email from a whistle-blower in December 2010, ENRC launched an internal investigation into the allegations. In August 2011, the SFO wrote to ENRC urging it to consider the SFO’s Self-Reporting Guidelines, and in April 2013, the SFO launched a formal criminal investigation. The SFO subsequently sought declarations that ENRC could not resist disclosure of certain documents generated by ENRC’s solicitors and forensic accountants during its internal investigation. ENRC asserted that the documents, which included notes of interviews taken by ENRC’s solicitors with employees and former employees of ENRC, and materials generated as part of a books and records review conducted by forensic accountants, were the subject of legal advice privilege and/or litigation privilege. In a 2017 judgment, Andrews J of the High Court held that the documents were not protected by legal professional privilege. ENRC appealed.
Court of Appeal Judgment
In order for documents to be protected against disclosure under litigation privilege, the documents must be prepared for the dominant purpose of conducting adversarial proceedings at a time when proceedings were reasonably contemplated. The Court of Appeal held that Andrews J had erred in determining that criminal legal proceedings against ENRC or its subsidiaries or their employees were not reasonably in contemplation at the time the relevant documents were created.
The Court noted that not every expression of concern by the SFO could be regarded as adversarial litigation, thereby giving rise to litigation privilege, and emphasised that each case turns on its own facts. However, the Court held that when the SFO “specifically makes clear to the company the prospect of its criminal prosecution (over and above the general principles set out in the [Self-Reporting] Guidelines), and legal advisers are engaged to deal with that situation… there is clear ground for contending that criminal prosecution is in reasonable contemplation.” Importantly, the Court also clarified that the lack of certainty as to whether proceedings are likely does not in itself prevent proceedings being in reasonable contemplation. Thus, the Court allowed ENRC’s appeal on this point, holding that criminal legal proceedings were reasonably in contemplation by ENRC when it initiated its investigation in April 2011, and certainly by the time it received the SFO’s August 2011 letter.
The Court also allowed ENRC’s appeal against Andrew J’s finding that none of the documents were brought into existence for the dominant purpose of resisting contemplated criminal proceedings. The Court held that in both the civil and criminal context, legal advice given so as to head off, avoid or even settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purpose of resisting or defending them. Furthermore, the Court held that the need to investigate the existence of corruption was, in this case, a subset of the defence of contemplated legal proceedings and therefore fell within the scope of litigation privilege. The Court also held that ENRC had not waived privilege in relation to the documents in issue as it had never agreed to share the results of the investigation with the SFO.
Accordingly, the Court held that substantially all of the documents were subject to litigation privilege and were therefore protected against disclosure.
Legal Advice Privilege
The Court also examined the current law regarding legal advice privilege. This form of privilege protects confidential communications between a lawyer and their client for the purpose of giving or obtaining legal advice, regardless of whether litigation is in contemplation. In particular, the Court considered the meaning of Three Rivers (No 5), a leading case on who the “client” is for the purpose of legal advice privilege, finding that the case decided that communications between an employee of a corporation and the corporation’s lawyers could not attract legal advice privilege unless that employee was tasked with seeking and receiving such advice on behalf of the client. The Court opined that Three Rivers (No 5)—which is out of step with the law of other common law jurisdictions—puts the modern corporation in a less advantageous position than individuals or smaller businesses seeking legal advice. In particular, the Court opined that lawyers for these latter groups would ordinarily obtain information about the case directly from the individual or from board members, whereas in the case of large national or multinational corporations, “the information upon which legal advice is sought is unlikely to be in the hands of the main board or those it appoints to seek and receive legal advice.” Thus, it held that if it had been open to it to depart from Three Rivers (No. 5), it would have been in favour of doing so, but that this was ultimately a matter for the Supreme Court.
Practical Implications of the Case
The Court of Appeal’s holding on the wide scope of litigation privilege will have been welcomed by companies wishing to proactively address allegations of criminal wrongdoing. While it will depend on the facts of each case whether or not documents fall within the scope of litigation privilege, the Court’s judgment made it clear that it can apply even prior to an investigation by the SFO. This is sensible: as the Court emphasised, it is “obviously in the public interest that companies should be prepared to investigate allegations from whistle blowers or investigative journalists, prior to going to a prosecutor such as the SFO, without losing the benefit of legal professional privilege for the work product and consequences of their investigation.” Furthermore, the Court’s express invitation for the Supreme Court to overturn Three Rivers (No 5) is significant in giving new force to arguments for a wider construction of legal advice privilege—one that is more fitting to modern commercial realities. However, as the SFO has announced that it will not be appealing the case, we will need to wait until another case comes along for this issue to be reconsidered.
The Court of Appeal’s decision in ENRC has been considered in recent cases, including WH Holding Ltd v E20 Stadium LLP  EWCA Civ 2652 and Glaxo Wellcome UK Ltd v Sandoz Ltd  EWHC 2747 (Ch).
WH Holding Ltd v E20 Stadium LLP
In WH Holding Ltd v E20 Stadium LLP, the parties were involved in litigation arising pursuant to a contract between them. The appellants, West Ham, appealed against the dismissal of their application under CPR r.31.19(6)(a) for the Court to inspect six emails in respect of which privilege had been asserted by the respondent, E20. The emails had been sent between E20’s board members, and between the board members and stakeholders. E20 claimed litigation privilege on the basis that the emails had been composed with the dominant purpose of discussing a commercial proposal for settling the litigation. Relying on the Court of Appeal’s decision in ENRC, Norris J had held that the emails were protected by litigation privilege on the basis that a document did not have to be concerned with obtaining advice or information for use in litigation in order to be protected by litigation privilege. Rather, he held that the privilege would protect documents prepared for the dominant purpose of formulating and proposing the settlement of litigation that was either in existence or in reasonable contemplation.
The Court of Appeal upheld West Ham’s appeal and ordered disclosure of the disputed documents. The Court held that litigation privilege was engaged when adversarial litigation was in reasonable contemplation. Further, once engaged, it covered communications between the parties or their solicitors and third parties seeking advice or information for the sole or dominant purpose of conducting the litigation. However, the Court held that they had not been shown any authority which would extend the scope of litigation privilege to purely commercial discussions. Nor, according to the Court, was there any justification for doing so as “it has always been recognised that privilege is an inroad into the principle that a Court should be able to decide disputes with the aid of all relevant material.” The Court went on to clarify that it did not consider that ENRC extended the scope of documents covered by litigation privilege, holding that the disputed documents in that case all fell within the recognised categories of advice or information going to the merits of contemplated litigation. The Court held that ENRC merely clarified that the conduct of litigation includes its avoidance or compromise, and that Norris J was incorrect in thinking that the case had gone any further.
Accordingly, the Court held that litigation privilege would protect documents in which advice or information obtained for the sole or dominant purpose of deciding whether to litigate or to settle could not be disentangled, and those which would otherwise reveal the nature of the advice or information. However, documents created with the dominant purpose of discussing a commercial settlement did not fall within the scope of the privilege. Moreover, there was no separate head of privilege covering internal communications within a corporate body.
Glaxo Wellcome UK Ltd v Sandoz Ltd
The recent case of Glaxo Wellcome UK Ltd v Sandoz Ltd also interpreted and applied ENRC – this time in relation to the question of legal advice privilege. In this case, the claimants sued the defendants for passing off their generic inhaler product as the claimants’ inhaler. The claimants applied under CPR r.31.19(5) to challenge the defendants’ claim to legal advice privilege in respect of two documents withheld from inspection. The defendants asserted that two internal emails from an employee seeking information to provide to the defendants’ external legal advisers for the purpose of giving them legal advice, and an internal email providing the requested information, were subject to legal advice privilege. Relying on ENRC, Chief Master Marsh held that communications between an employee of a company and the company’s lawyers could not attract legal advice privilege unless that employee had been tasked with seeking and receiving such advice on behalf of the client, and that the employee had to be authorised to seek and/or obtain the legal advice that was the reason for the communication. The Court held that preparatory work of compiling information by persons with no authority to seek or receive legal advice will never be subject to legal advice privilege. On the evidence, the Court held that the defendants had failed to discharge the burden on them to demonstrate an entitlement to legal advice privilege, and accordingly allowed the claimants to inspect the two emails.
It will be important to watch this space as the courts continue to interpret ENRC, and thus to clarify the scope of litigation privilege and legal advice privilege as it relates to the modern-day corporation.