Court of Appeal upholds privilege in SFO case

On 5 September 2018, the Court of Appeal handed down judgment in the Director of the Serious Fraud Office v Eurasian Natural Resources Corporation [2018] EWCA Civ 2006. The decision was eagerly awaited by the legal profession and in particular the in-house community. It overturns Mrs Justice Andrew’s previous ruling that documents created by lawyers would not be subject to privilege as they had not been created before criminal legal proceedings were contemplated and reduces the hurdle for showing that litigation is contemplated.

Background

The matter arose from an application by the Serious Fraud Office (SFO) for a declaration that certain documents generated during investigations undertaken by solicitors and forensic accounts into the activities of the Defendants, Eurasian Natural Resources Corporation (ENRC), were not subject to legal privilege.

In December 2010, ENRC received an email alleging bribery, fraud and corruption of one of its subsidiaries in Kazakhstan and Africa. ENRC therefore instructed lawyers to carry out an internal investigation into the allegations to establish the facts.

In 2011, the SFO became involved and there was a period of constant contact between the SFO and ENRC whereby there was some confusion as to whether this was consistent with a self-report by ENRC. In any event, ENRC kept the SFO updated with the progress of their internal investigation and, in 2013, the SFO announced a criminal investigation would be commenced.

In the course of their investigation the SFO sought to compel ENRC to disclose a range of documents. ENRC refused to disclose 4 categories of documents on grounds of legal advice privilege, litigation privilege or both. These documents included interview notes taken by the solicitors from employees, former employees and third parties, accountant reports produced by the forensic accountants in order to identify system weaknesses, slides prepared by the solicitors to present the evidence to the board of ENRC and emails between senior executives and the head of mergers and acquisitions at ENRC (who was also a Swiss qualified lawyer.)

On analysis of the arguments before her, Mrs Justice Andrews founds that the majority of the documents did not attract privilege. In the course of her judgment, Mrs Justice Andrews followed the approach as set down in the RBS Rights Issue Litigation [2016] and found that the documents had been created before criminal legal proceedings were contemplated, that legal advice privilege only attached to communications between a lawyer and those who were authorised to obtain legal advice on behalf of the ENRC, that the notes prepared by the lawyers following interviews were not in themselves protected and would only be so if they would betray the trend of the legal advice. Finally, Mrs Justice Andrews held that the communications between senior executives and the head of mergers and acquisitions at ENRC were also not protected as, although qualified as a lawyer, the head of mergers and acquisitions was acting as a man of business rather than as a lawyer. Only the slides used by the lawyers to present to the board remained subject to legal advice privilege.

Permission to appeal was refused, and ENRC appealed to the Court of Appeal.

On appeal, the Court found that documents in three categories, including interview notes, and material created for the purpose of the review by forensic accountants, were covered by litigation privilege as criminal proceedings were reasonably in the contemplation of ENRC at the time of the creation of the documents. The Court also held that 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. In the course of the judgment the Court did not comment further as to whether the working papers would fall outside of legal advice privilege as set out in RBS Rights Issue Litigation [2016]. Instead the Court held that as they had already found that litigation privilege applied, it was not necessary to resolve that question, and that it would be better if it were considered in the context of the Supreme Court’s future consideration of legal advice privilege.

The Court also considered the ruling in Three Rivers District Council and others (Respondents) v. Governor and Company of the Bank of England (Appellants) (2004) which applied a narrow definition to the true “client” in respect of in house legal advice. Ultimately, the Court of Appeal decided that this was not an issue which had to be determined as part of this hearing, although it did comment that this may be an issue which needs to come before the Supreme Court in due course.

Analysis

The decision of the Court of Appeal will come as welcome relief to businesses who conduct internal investigations into whistleblowing claims or suspected misconduct with the help of lawyers. For now, it will give organisations piece of mind that they can continue to seek legal advice without fear that they will have to disclose it at a later date.