The Court of Appeal has upheld a challenge to a High Court judgment ordering an international mining company to disclose privileged documents to the Serious Fraud Office.
Read the full judgment.
ENRC had appealed the ruling of Mrs Justice Andrews given in the High Court in May 2017. The judge had granted the application of the SFO for the disclosure of documents after ENRC had refused to release the documents during an SFO investigation, claiming that they were legally privileged. The SFO was interested in the documents as part of its investigation into allegations of fraud at subsidiaries of ENRC in Eastern Europe and Africa.
In summary of a complex situation, ENRC claimed litigation privilege in respect of (1) working papers and notes made by lawyers of interviews with ENRC’s employees and ex-employees, subsidiaries and other third parties; (2) materials generated by forensic accountants; (3) presentations to the company’s Board; and (4) internal communications between senior managers, one of whom was a lawyer. The company also asserted legal advice privilege in the alternative over most of the documents. The High Court allowed legal advice privilege only in respect of the category 3 documents, and rejected the claims for litigation privilege.
A key part of the judge’s reasoning on litigation privilege was that none of the documents had been created at a point when criminal legal proceedings against ENRC were in reasonable contemplation, neither were they brought into existence for the dominant purpose of mounting a defence against contemplated criminal proceedings.
Andrews J considered that for the purposes of litigation privilege the point had to be reached where the prosecuting authority could decide that there was a sufficient evidential basis prosecution and that the public interest test for prosecutions was met. She considered that the fact that there was simply the possibility of a charge at some future point would be too remote to satisfy the test.
This was the most controversial part of the judgment and has been the subject of particular concern for companies, in-house-lawyers and firms acting for corporations accused of white-collar crime.
On legal advice privilege, the judge followed the narrow definition of ‘client’ in Three Rivers (No 5).
The Law Society’s intervention
The Law Society, represented by Dinah Rose QC and David Pievsky (instructed by Eoin O’Shea of Reed Smith) intervened in the proceedings on the points of principle and public policy raised by the High Court judgment.
In its submissions, the Society criticised the judge’s findings on litigation privilege, pointing out that it would lead to practical difficulties because the point at which the privilege would arise at an unworkably late stage in criminal proceedings and certainly later than would be the case in civil proceedings.
The Society said that there was no justification for that distinction and urged the court to reverse the judge’s finding. The judge’s application of the ’in reasonable contemplation test’ curtailed the protection afforded by litigation privilege to corporations in particular, to the extent that they were deprived of the right against self-incrimination. This would undermine the rule of law.
The Society pointed out that the findings in respect of litigation privilege were detrimental to the right to consult a lawyer in private during the investigation process. The loss of privilege for communications between lawyers and third parties would run the risk of inhibiting corporations from seeking legal advice or engaging in the self-reporting process.
The Society also argued that Three Rivers (No 5) had been wrongly decided.
The Court of Appeal's finding
The court indicated that the principal issue in the case concerned litigation privilege. It ruled that the documents in categories 1, 2 and 4 were (with some specific exceptions) covered by litigation privilege.
The court did not accept that the judge had been correct to align the reasonable contemplation of litigation with a prosecutor’s decision that it had sufficient evidence to prosecute. The court also held that the dominant purpose test could be satisfied where the prosecuting authority indicates to a company that there is the prospect of a criminal prosecution and the company instructs lawyers in response.
The court said that the interview notes, the material associated with the review by the forensic accountants and all but two of the internal communications for which litigation privilege was claimed, had the benefit of litigation privilege. It therefore allowed the appeal against the ruling that none of the documents had been created before criminal legal proceedings were reasonably in contemplation.
The court also said that advice whose dominant purpose is to avoid legal proceedings, or which is given with a view to settlement is as much protected by litigation privilege as advice given for the purpose of defending such proceedings. This is an important finding.
The court felt bound to follow Three Rivers (No 5) and to apply the narrow definition of ‘client’; however it saw force in the Law Society’s arguments for departing from that decision and indicated that it would have done so if it could. So it remains the position that only the Supreme Court can overturn Three Rivers (No 5).