Weighing up the law

13 May 2019

Laura White, associate in the health and safety team at Pinsent Masons, examines legal professional privilege and recent legal turbulence surrounding it.

Recently in the UK, the ability to protect confidential communications on the grounds of legal professional privilege has been in flux, as regulators challenge privilege claims in a bid to uncover those which are artificial or without foundation. The result for some has been an increasing fear of erosion of the right, and concern for the consequences. 

In the aftermath of an incident or near miss, the ability of an organisation to investigate matters thoroughly – and to seek legal advice on the consequences, without fear that the results will be fully disclosable to regulators or hostile opponents – is of considerable importance. The limits of the legal protection offered by legal professional privilege must be kept in mind however before embarking on any internal investigation. The following are the two main types of privilege:

  1. Legal advice privilege, which protects confidential communications (and evidence of those communications) between a lawyer and their client (but not communications with third parties), provided that the communications are for the dominant purpose of seeking and receiving legal advice in a relevant legal context.
  2. Litigation privilege, which protects confidential communications (and evidence of those communications) between a lawyer and their client and/or a third party, or between a client and a third party, created for the sole or dominant purpose of obtaining information or advice in connection with the conduct of existing or reasonably contemplated litigation (including avoiding or settling, as well as defending or resisting, that litigation).

The 2017 decision of the High Court in SFO vs ENRC marked what is generally seen as the high (or perhaps low) watermark in the erosion of privilege in internal investigations, with the court endorsing what was seen by many lawyers as an overly narrow and restrictive approach, particularly as to the requirements for anticipated litigation to trigger litigation privilege. The court decided that an SFO (Serious Fraud Office) investigation was not ‘adversarial’, and that at the time of the documents’ creation an SFO prosecution, which was adversarial, was only a possibility, and not in ‘reasonable contemplation’.

It also held that litigation was not the investigation’s dominant purpose. Instead, other purposes were also identified. Moreover, it held that ENRC’s attempts to persuade the SFO not to commence proceedings were not (unlike defending litigation) a litigation purpose, and as ENRC had intended to share the products of its investigation with the SFO, privilege could not apply.

Following the decision of the High Court there was dismay. Businesses felt at risk over their ability to conduct internal investigations without having to hand over documentation to regulators. Perhaps unsurprisingly, the matter was appealed to the Court of Appeal, whose decision went some way to restoring order and addressing many of the more controversial features of the High Court’s decision.

Adopting a much more commercial approach, the decision of the Court of Appeal is generally seen to return to the approach as was generally understood before the High Court’s judgment. In finding that litigation was reasonably contemplated by ENRC, the Court of Appeal looked at the evidence holistically, observing that the ‘whole sub-text’ of the relationship between ENRC and the SFO was that if the matter could not be resolved, prosecution may follow. It did not necessarily matter if the investigation was only at an early stage.

Similarly, in finding that litigation was the dominant purpose of the investigation, the Court of Appeal took a pragmatic view, appreciating that an investigation may have multiple purposes, but that this does not necessarily preclude litigation being the dominant one. Consistently with practical reality, the Court of Appeal also jettisoned the controversial distinction between avoiding and defending litigation, recognising that both are litigation purposes.

Also positive is the Court of Appeal’s approach to the relevance of regulator dialogue and self reporting; the fact that a document is prepared with the ultimate intention of providing it to an opponent does not automatically deprive the preparatory work of litigation privilege. The Court of Appeal recognised the public interest in enabling businesses to investigate effectively before making decisions about self reporting.

However, a source of concern remains the definition of ‘client’. With the Court of Appeal constrained by legal precedent from doing anything to relieve the harsher consequences of previous narrow definitions, the position remains that its application to more complex corporate structures creates confusion, and can result in a loss of privilege.

Yet, the matter does not end there. Privilege challenges continue, with a series of further cases coming before the courts as parties seek to force their opponents to reveal more than they would like. The result is that nothing can be guaranteed, with everything turning on the particular facts at issue. Purely commercial discussions are unlikely to attract either legal advice or litigation privilege, and the dominant purpose test is crucial for both litigation privilege and – it appears from very recent case law – legal advice privilege.

Parties must be alive to the strict requirements for privilege to attach and remain, if they are to maximise the possibility of resisting disclosure of confidential communications to hostile opponents in proceedings before the UK courts. The waters remain muddied – the hope is that the Supreme Court will be asked to clarify the UK rules around privilege sooner rather than later. In the meantime, the best course is to seek expert advice at the outset.