Owen Williams and Fraser McKeating on how the law of privilege works in the context of investigations
Practical tips
How can a firm carrying out its own internal investigation increase the likelihood that legal professional privilege will apply?
- Before starting any investigation, it is best to discuss the matter with a lawyer to receive advice on the preservation of privilege.
- If the business considers that the issues at hand may give rise to litigation (be it civil or criminal), and it is therefore considered that litigation privilege is likely to apply, this conclusion should be recorded early on, with reasons and in writing, so there is an audit trail.
- The business should, in any event, set up a dedicated team which is authorised to request and receive advice on the investigation from lawyers, recording which individuals are in that team. Communications requesting or containing legal advice should be marked “privileged and confidential” and circulation restricted to maintain confidentiality.
- Be careful not to create communications relating to settlement of actual or potential litigation that are
not also seeking advice or information.
Entities operating in the property sector are coming across investigations on a regular basis. While tackling potentially damaging issues head-on can be a daunting prospect for any business, addressing them promptly and effectively when they arise can save time and resources in the long run. A properly conducted internal investigation will diminish potential disruption to the business and prevent the risk of a one-off issue becoming a protracted problem.
At the outset of an internal investigation, a crucial question is whether sensitive documents produced during that process are at risk of later having to be disclosed externally to interested third parties. It is therefore important to have an understanding of the law of privilege, which protects the confidentiality of legal communications, and to know how it operates in the context of investigations.
Legal professional privilege entitles a party to withhold certain documents from being disclosed to third parties. It has two parts: legal advice privilege and litigation privilege. The word “document” in this context means any form of recorded information, including electronic data such as e-mails and text or instant messages.
Legal advice privilege
Legal advice privilege applies to confidential communications between lawyers and their clients for the purpose of giving or receiving legal advice.
Legal advice privilege does not extend beyond lawyers to other professionals advising on legal matters. For example, documents generated by or sent to accountants or claims consultants giving legal advice are not covered (R (on the application of Prudential Plc) v Special Commissioner of Income Tax [2013] UKSC 1; Walter Lilly & Company Ltd v Mackay [2012] EWHC 649).
When it comes to legal advice privilege, the definition of “client” in a corporate context is limited to those within the client entity who are specifically authorised to seek and receive the legal advice on that entity’s behalf (Three Rivers District Council v The Governor & Company of the Bank of England (Three Rivers No 5) [2003] EWCA Civ 474). So, for example, notes of investigatory interviews between lawyers and non-client employees/partners will not generally attract privilege, unless otherwise covered by litigation privilege.
Litigation privilege
Litigation privilege allows parties involved in live or potential adversarial litigation to prepare their case without the risk of their opponent being able to view material generated.
It applies to confidential communications between a client and their lawyer, or between either of them and a third party, for the dominant purpose of obtaining advice or information in connection with the litigation or to conduct or assist in the litigation. The litigation must be in progress or reasonably in contemplation at the time of the communication.
The need for the communication to be for the purpose of obtaining advice or information was discussed recently in WH Holding v E20 Stadium LLP [2018] EWCA Civ 2652. The Court of Appeal decided that e-mails discussing a commercial settlement were not privileged as they were not for the purpose of obtaining advice or information in connection with the litigation.
Encountering an investigation
In an age of increasing regulation, those operating in the property sector could find themselves the subject of or involved in an external investigation by regulators or other enforcement authorities. RICS, ARB and other professional bodies can investigate complaints and sanction their members, which can include expelling them.
Regulatory concerns can lead to, or overlap with, internal investigations. An internal investigation may be necessary in the context of potential criminal conduct or regulatory concerns, or prospective civil claims. Alternatively, a firm may instigate its own investigation on discovery of alleged employee or partner misconduct, or in light of grievances or whistle-blowing allegations.
The question of whether privilege applies is of particular importance where the same or similar issues are being investigated both internally and externally. Enforcement authorities and regulators carrying out an external investigation or commencing proceedings may suspect that documents generated in an internal investigation may be of benefit to them. Recent high-profile cases have seen regulators such as the Serious Fraud Office going as far as the Court of Appeal to seek orders for the disclosure of documents generated during internal corporate investigations.
Internal investigations and criminal proceedings
It seems logical that a firm should not be deterred from prudently investigating an allegation of criminal wrongdoing for fear of being punished by having to reveal what they have uncovered. But the High Court decision in SFO v Eurasian Natural Resources Corporation Ltd (ENRC) ([2017] EWHC 1017) gave rise to precisely those concerns, after it was found that documents arising from an internal investigation into allegations of criminal corruption had to be divulged to the SFO.
To sighs of relief, the Court of Appeal recently overturned the High Court decision SFO v ENRC [2018] EWCA Civ 2006. It rejected the first-instance conclusion that litigation privilege could not apply until a prospective defendant is aware that prosecution – as opposed to merely investigation – is reasonably in prospect. The court held that, while an organisation may need to investigate allegations further before it could say whether criminal proceedings are likely, that uncertainty will not in itself prevent the existence of litigation privilege.
The judgment brings the law on what litigation being “reasonably in contemplation” means in a criminal context back into line with the position for civil claims. The decision should give greater confidence to businesses conducting internal investigations in the context of potential criminal wrongdoing that associated documents will be protected from disclosure.
Owen Williams is a managing associate and Fraser McKeating is a senior associate in the dispute resolution and professional services team at Lewis Silkin
