Every business, and every in house lawyer, will at some point be involved with an enquiry, an investigation, or potential litigation. During litigation, documents – including emails, attendance notes and reports – which are relevant to the litigation may have to be disclosed if they are not privileged.
So businesses need to know how it can assess litigation risk or conduct an enquiry without creating documents that it then has to produce and which may be detrimental to its position. The law on this issue has recently been considered by the Court of Appeal in two key cases: WH Holding Ltd v E20 Stadium LLP and SFO v Eurasian Natural Resources Corp Ltd.
In this webinar recording, our experts Mark Daniels and Helen Simm provide you with the key information you need to identify these issues when they arise and to know how you can best protect your position.
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Privileged Communications:
What you need to know
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Connect with Mark Daniels
mark.daniels@brownejacobson.com
+44 (0)121 237 3993
Privileged
Communications:
What you need to
know
Connect with Helen Simm
helen.simm@brownejacobson.com
+44 (0)330 045 2652
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We’ll cover
• The importance of privilege
• The key types of privilege
• Internal investigations
• Key case; SFO v ENRC
• In-house settlement discussions
• Key case; WH Holding v E20
• Practical take-aways
• Questions
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• an absolute right to withhold
documents that could contain your
risk analysis, acknowledged case
weaknesses and tactics from
production to a third party or the
court
• Obligation to disclose adverse
documents
• Disclosure outside litigation – eg
subject access requests
The importance of
privilege
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The key types of privilege
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Legal advice privilege (narrower)
• Only between solicitor and client
• Can apply whether or not litigation
is reasonably in prospect or in
progress
Legal advice privilege
–v-
Litigation privilege
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Litigation privilege (wider)
• Litigation must be in progress or
reasonably in contemplation
• Can apply outside of the solicitor-
client relationship provided
document produced for the
dominant purpose of litigation
Legal advice privilege
–v-
Litigation privilege
(cont’d)
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• Internal investigations – often
necessary
• Risks of disclosure – internal
investigation can provide a route
map for external regulators
• Conflicting considerations;
accountability and transparency vs
proper desire to take confidential
legal advice
• Self reporting
Internal
investigations
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• ENRC – large mining company
• Email in December 2010 from
whistle-blower containing
allegations of fraud, bribery and
corruption
• Internal investigation:
• External lawyers interviewing
employees/third parties
• Accountants “books and
records review”
• Reports presented to board
SFO v ENRC – the
background
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• SFO investigation formally opened
in April 2013 and a disclosure of a
range of documents compelled
• ENRC withheld four categories of
documents on the basis of privilege
SFO v ENRC – the
background (cont’d)
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• Lawyers notes of meetings with
employees, former employees and
third parties etc.
• Material generated by forensic
accountants during their review
• Documents prepared by lawyers to
update senior personnel within
ENRC
• Documents referred to in an
external lawyer’s letter to the SFO
The four categories
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Privilege claimed
Category
Legal advice
privilege?
Litigation
privilege?
Judgment
Lawyers’ interview notes Yes Yes Not privileged
Accountants’ material Yes Not privileged
Reports and updates to the
board etc.
Yes Yes Legal advice privilege only
Reports/emails Yes Not privileged
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• Litigation privilege did not apply
as:
• Litigation was not in
reasonable contemplation
• Dominant purpose was not
established
• Distinction: conduction
litigation and avoiding
litigation
High Court judgment –
the rationale
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• Legal advice privilege attaches to
some documents prepared by
lawyers but only between lawyers
and authorised individuals within
the client entity
High Court judgment –
the rationale (cont’d)
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• Litigation privilege
• Purpose of heading off,
avoiding or settling reasonably
contemplated proceedings is
within scope of privilege
• Uncertainty doesn’t equate to
no contemplation
• Reasonable contemplation can
occur before regulator contact
• Fact specific
Court of Appeal – a
different view
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• Legal advice privilege
• No determination
• Three Rivers approach
criticised
Court of Appeal – a
different view
(cont’d)
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• WH Holding v E20 Stadium
• Scope of litigation privilege
• Dominant purpose
• Disentangling legal advice from
pure commercial discussions
• Will the court inspect the
relevant documents?
West Ham seats and
boardroom settlement
discussions
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Practical take-aways
• Think carefully before creating
unnecessary (and potentially non-
privileged) documents
• In house lawyers – clear distinction
between legal communications and
executive/business/administrative
communications
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Practical take-aways
(cont’d)
• Clear people strategy
• Minimum circulation list –
senior personnel
• Clarity re: client and type of
privilege
• Small investigation team
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Practical take-aways
(cont’d)
• Clear document strategy
• Preservation and organisation
• Labelling and identification
• Scope
• Media and communications
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Questions?
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Connect with Mark Daniels
mark.daniels@brownejacobson.com
+44 (0) 0121 237 3993
Privileged
Communications:
What you need to
know
Connect with Helen Simm
helen.simm@brownejacobson.com
+44 (0)330 045 2652
Hinweis der Redaktion
Internal investigations may need to be undertaken for a variety of reasons:
Whistle-blower allegations of fraud/bribery/misconduct
Suspicious transactions or communications within the business
Accident or environmental incident – to identify reasons and make improvements
Sometimes – may be mandatory requirement to investigate – either under regulations or under corporate governance rules
Obvious problem – documents created in the course of the investigation may later provide a route map for external regulators if investigation is carried out
Conflicting considerations: want to investigate fully and take legal advice before taking the next step; but real and proper concern that this may create difficulties at a later stage
ENRC large mining co operating in high risk bribery areas such as Kazakhstan and Africa. 2009/2010, making acquisitions of a number of organisations, one of which (Camrose) was alleged to have unlawfully acquired a mine. ENRC aware of these allegations but could not completely discount them.
Whistleblower email sent to ENRC – brought to the attention of the board, audit committee engaged lawyers (DLA, then Dechert) to investigate. Investigation also involved ENRC’s General Counsel.
Accountants instructed in April 2011 to undertake books and records review.
SFO became directly involved in August 2011, contacting the GC about an article in the Sunday Times that referenced allegations in whistleblower email. Reminded ENRC about the need to self report. A number of meetings held with ENRC during which the progress of the criminal investigation was discussed. SFO were aware of the scope of the investigation and ongoing interviews etc.
Criminal investigation formally opened by SFO in April 2013
SFO compelled production of a range of documents relevant to the investigation – s2(3) CJA 1987 - The Director may by notice in writing require the person under investigation or any other person to produce …any specified documents which appear to the Director to relate to any matter relevant to the investigation or any documents of a specified description which appear to him so to relate; and
ENRC refused to disclose four categories of documents on the basis that they were protected by privilege – s2(9) CJA 1987
SFO sought declaration from the High Court that disclosure of the documents could be compelled
Category 1 – third parties inc subsidiaries, suppliers
Category 4 included reports generated by the forensic accountants and emails/letters enclosing copies of those reports (including emails from a lawyer within ENRC)
Category 4 - 9 were the FRA reports (or appendices thereto) and and a further 6 of these documents are said to be e-mails or letters “enclosing copies of the FRA books and records reports – Lit P claimed as per category 2
Other 2 docs in cat 4 were emails between former GC of ENRC, then head of M and A, and a senior ENRC exec – as per cat 2
Prior to this case – would have been anticipated by most lawyers that privilege would apply to all the above documents, particularly in cats 1-3
Litigation privilege
Lawyers meeting notes
Accountants’ material
Accountants’ reports/emails enclosing those reports
Communication sole or dominant purpose is conducting that anticipated litigation
Litigation is adversarial
Legal advice privilege
Documents prepared by lawyers
Confidential communication
Lawyer and client
Purpose giving or seeking legal advice
Litigation was not in reasonable contemplation
ENRC did not establish that litigation was “a real likelihood rather than a mere possibility”
prosecution only a real prospect “once it is discovered that there is some truth in the accusations, or at the very least that there is some material to support the allegations of corrupt practices”
SFO investigation only the first stage of assessing whether further steps would be taken and therefore not “adversarial litigation” at that stage
“Criminal proceedings cannot be reasonably contemplated unless the prospective defendant knows enough about what the investigation is likely to unearth, or has unearthed, to appreciate that it is realistic to expect a prosecutor to be satisfied that it has enough material to stand a good chance of securing a conviction.”
Dominant purpose not met
no evidence to show that the purpose of the internal investigation had anything to do with the conduct of future criminal proceedings
Distinction: conducting litigation and avoiding litigation
Avoiding litigation not sufficient Litigation privilege does not extend to third party documents created in order to obtain legal advice as to how best to avoid contemplated litigation or a future regulatory or criminal investigation
Legal advice privilege:
J quoted Three Rivers 5 – “the judgment of the Court of Appeal supports the proposition that where the party asserting privilege is a corporate entity, legal advice privilege attaches only to communications between the lawyer and those individuals who are authorised to obtain legal advice on that entity’s behalf”
Court unanimously disagreed with the conclusions of Mrs Justice Andrews. More pragmatic approach
9 issues for consideration - Re LP
1: Was the judge right to determine that, at no stage before all the Documents had been created, criminal legal proceedings against ENRC or its subsidiaries or their employees were reasonably in contemplation?
2: Was the judge right to determine that none of the Documents was brought into existence for the dominant purpose of resisting contemplated criminal proceedings against ENRC or its subsidiaries or their employees?
3: In the circumstances, which if any of the Category 1, 2 or 4 documents are protected by litigation privilege?
Found that proceedings WERE reasonably in contemplation:
Party anticipating possible prosecution will need to investigate before it can say that proceedings are likely, that uncertainty itself doesn’t mean that proceedings are not in reasonable contemplation
Whole background to the relationship between SFO and ENRC was the fact that prosecution likely if no civil settlement could be reached
Heading off:
Legal advice given to head off, avoid or settle legal proceedings is protected as much as advice on defending or contesting such proceedings
Even if document prepared with the intention of being disclosed to the other side, that doesn’t mean that the preparatory legal work loses the benefit of privilege
Declined to determine on legal advice privilege – no need to do so. However, non-binding view expressed on Three Rivers criticised – Js would have departed from the established position if had the choice (Three Rivers 5 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.
Large corporations at disadvantage if cannot seek advice under privilege as smaller ones.
Will there be a change soon?
As always, the issue will be whether the advice was given in their professional capacity as lawyers and "whether the advice relates to the rights, liabilities, obligations or remedies of the client either under private law or under public law“ (Three Rivers)