After a period in which there was relatively little case law or developments in respect of the law of legal professional privilege (‘LPP’), there have been several cases in recent years dealing with the extent and limitations of LPP, both legal advice privilege (“LAP”) and litigation privilege.

Introduction

In respect of LAP, the judgment of Hildyard J in the RBS Rights Issue litigation considered the question of who constitutes the “client” for the purpose of LAP. That question had not been properly addressed in the leading case of Three Rivers District Council v The Governor and Company of the Bank of England (No 5) [2003] EWCA Civ 474. The RBS Rights Issue case was considered in Enyo’s blog of 14 December 2016 , but in summary, the court took a narrow and restrictive approach to the question of “who is the client”, which generated concern amongst lawyers and their corporate clients and has caused them carefully to consider what additional steps and precautions need to be put in place to ensure, so far as possible, LAP can be asserted in respect of legal advice sought from, or provided by, legal advisers.

There have been fewer major developments regarding litigation privilege until the recent case of SFO v Eurasian Natural Resources Corporation [2017] EWHC 1017 (QB) (the “SFO case”). In a similar vein to the developments in respect of LAP, the effect of the court’s decision in this case has been to narrow and restrict the scope of litigation privilege in certain circumstances.

Background to litigation privilege

In summary, litigation privilege may be asserted by a party (a client) where:

1. there is a confidential communication between a lawyer and his/her client or between either of them and a third party;
2. which communication is made for the dominant purpose of litigation; and
3. litigation is reasonably in prospect or contemplation.

Since litigation privilege may be asserted in respect of communications with third parties, difficulties in identifying the “client” (as noted above) are not relevant. There are, however, other difficulties with litigation privilege, including the question of precisely what is meant by “litigation” (which, in order to satisfy the test, must be in reasonable contemplation).

That question in respect of civil claims is relatively easy to answer.  Proceedings in any of the High Court, County Court, Employment Tribunal or (where subject to English law) arbitral proceedings constitute “litigation.”

In respect of other tribunals, public inquiries and statutory investigations, the position has historically been less clear. In Three Rivers District Council v The Governor and Company of the Bank of England [2004] UKHL 48, it was stated that one of the criteria for establishing litigation privilege was said to be that litigation was “adversarial” not investigative or inquisitorial. Unfortunately, the House of Lords gave no further guidance on what was meant by “adversarial.” 

Recent developments

The question was not considered by the courts for many years until the SFO case.  An opportunity arose to consider to deal with the ambiguity in the 2015 case of Property Alliance Group v Royal Bank of Scotland [2015] EWHC 1557 (Ch) (the “PAG case”) (which was mainly concerned with without prejudice privilege), but was missed.

Incidentally, the implication of the PAG case on without prejudice privilege was that an FCA investigation may be considered “adversarial” from the start and so litigation privilege could be asserted as soon as the FCA’s fact-finding begins. (This was based on the fact that such an investigation could lead to civil claims in the Upper Tribunal, there was a public benefit to settling investigations and on that basis, there was a public policy rationale for the without prejudice rule which also extended to settlement discussions with regulators (in that case the FCA).) However, the court did not directly address the question of when an investigation is “adversarial” for the purpose of litigation privilege and therefore it was necessary for lawyers and their clients to exercise caution in their communications in such circumstances.

In civil cases, the test for litigation privilege is whether the party claiming privilege is aware of circumstances which rendered litigation “a real likelihood rather than a mere possibility.” In the recent SFO case, the court has however now confirmed that a strict approach to litigation privilege in the context of criminal proceedings (as opposed to civil proceedings) is preferred. In that case, the court found that:

1. only a prosecution (not an investigation) amounted to “litigation”;
2. a prosecution only becomes a real prospect once it is discovered that there is some truth in the accusations;
3. the contemplation of a criminal investigation did not necessarily equate to contemplation of a prosecution; and
4. accordingly, litigation was not in reasonable contemplation even though a criminal investigation was contemplated by the SFO.

The conclusion is, therefore, that it is now easier to establish that litigation is reasonably in contemplation in the civil rather than criminal context.

Additional observations

There are a number of additional points to note from the judgment:

1. the court also took a strict approach to whether documents had been prepared for the dominant purpose of litigation. The creation of documents with a “dual-purpose” has long been a complicated and difficult area when considering whether litigation privilege can be asserted. The court’s observations would appear to apply equally to both criminal and civil contexts and, given the court’s adoption of a strict approach to the question of dominant purpose, it remains important for lawyers and clients to make it clear whether any particular document is created for the dominant purpose of litigation (as opposed to a secondary or ancillary purpose).
2. even if the purpose of the document was to obtain advice in relation to a criminal investigation and minimise the risk of that investigation (and subsequent prosecution) occurring, that would be insufficient to engage litigation privilege (although LAP may be relied upon).
3. in respect of LAP, the court’s approach supported and corresponded with the narrow interpretation set out in the RBS Rights Issue litigation (see the Enyo blog from 14/12/2016). Of particular note, the court:
   • emphasised that where the client is a corporation, LAP will attach to communications with a lawyer only if they are to/from a person authorized to seek and receive legal advice on behalf of the corporation and the communication must be for the purpose of giving or receiving legal advice. These communications must be distinguished from the preparatory work of compiling information (or fact-finding) or evidence gathering which, whether undertaken by the client or the lawyer, will not of themselves attract LAP (although they may attract litigation privilege if the other elements of the test are met). 
   • rejected an alternative claim for LAP which contained lawyers’ notes of interviews with the client’s employees on the basis that there was no evidence to support the suggestion that those employees were authorized to seek or receive legal advice from the lawyers on behalf of their employer (the client company).
   • endorsed Hildyard J’s decision in the RBS Rights Issue Litigation that the lawyers’ working papers were not privileged due to their existence solely as the lawyers’ papers.  Instead, the court held that it was necessary to look at whether they contained legal advice and/or would betray the trend of legal advice from the lawyers.

The judge further suggested that LAP is unlikely to attach to communications with individuals who are qualified lawyers but who are not employed in a legal role even if they are giving legal advice.  This appears to be an arbitrary and formulaic position to adopt and may result in significant unfairness in practice.

Conclusion

Legal developments in recent years in respect to the law of privilege have brought some much needed clarification in certain areas.  However, those same cases have also introduced unfortunate and unwelcome uncertainty in others, and the general trend has been to confine rather than to extend the scope of LPP. Generally, practitioners and clients should welcome the clarity and guidance from the courts in what is a complicated area of law. 

However, although the court’s decision in the SFO case was clearly driven by a desire to encourage openness between litigating parties and support for the established proposition that “justice is better served by candour rather than suppression”, some may feel genuine concern at the restrictions and narrow limits which have been imposed in the context of advising clients subject to criminal investigations (and to LPP generally) in recent years. The public policy rationale behind the right to assert privilege in communications with legal advisers remains as important as ever; the potential erosion of that right by the courts as they refine and develop the common law must be avoided.