25/07/2018
Mrs Justice Andrews judgment in Serious Fraud Office v Eurasian Natural Resources Corp [2017] EWHC 1017 (QB) is soon to be appealed in the Court of Appeal. The case sent shivers of horror down the spines of in-house counsel and the legal profession in general last year, as it seemed to bring to a head the Serious Fraud Office’s (SFO) desire to obtain documents used in a company internal investigation.
The ENRC ruling impacts on all internal investigations, including ones resulting from a possible health and safety breach. Recent decisions of Bilta (UK) Ltd v Royal Bank of Scotland Plc [2017] EWHC 3535 and R(HSE) v Jukes [2018] EWCA Crim 176 have clarified the question as to when documents produced in an internal investigation are covered by litigation privilege, but the Court of Appeal’s ruling will be highly anticipated.
In her judgment, Mrs Justice Andrews said (at para 204):
‘ENRC repeatedly promised that it would give full and frank disclosure of the results of its internal investigations to the SFO, but then changed its mind. If the documents are not privileged, there is no reason why the Court should exercise its discretion in a manner that would enable ENRC to escape compliance with those promises.’
What is litigation privilege?
Litigation privilege provides protection against having to disclose documents created during internal investigations if they have been produced in circumstances where litigation is either in progress or where there is a reasonable expectation it will occur, and those documents were created for the purpose of the anticipated litigation.
Lord Rodger in Three Rivers (No 6) described the rationale behind litigation privilege as:
“litigation privilege… is based on the idea that legal proceedings take the form of a contest in which each of the opposing parties assembles his own body of evidence and uses it to try to defeat the other, with the judge or jury determining the winner. In such a system each party should be free to prepare his case as fully as possible without the risk that his opponent will be able to recover the material generated by his preparations.”
The general trend has been for the courts to narrowly confine the ambit of litigation privilege rather than extend it. In Waugh v British Railways Board [1980] AC 521, Lord Edmund Davies said:
“in my judgment we should start from the basis that the public interest is, on balance, best served by rigidly confining within narrow limits the cases where material relevant to litigation may be lawfully withheld. Justice is better served by candour rather than suppression.”
Legal advice privilege is different; this protects the confidential communications between a solicitor and their client made for the purpose of seeking or providing legal advice.
Decisions to make prior to an internal investigation to ensure litigation privilege is protected
Litigation privilege is an extremely complex matter. Simply stamping ‘privileged’ at the top of a document will not prevent a company having to hand it over to the other side.
Before beginning an internal investigation, a solicitor needs to establish the crucial fact of ‘who is the client’? Only by firmly establishing this can a strategy be prepared to ensure both litigation privilege and legal advice privilege is protected.
Mrs Justice Andrews made the distinction between the two very clear in ENRC when she said:
“Strictly speaking, and despite numerous references in the authorities to lawyer-client communications made for the dominant purpose of litigation as being within litigation privilege, or as covered by litigation privilege as well as legal advice privilege, this is wrong, as Three Rivers (No 6) made plain. If the communication is between client (or the client's agent) and lawyer for the purpose of obtaining legal advice in connection with anticipated litigation, it is covered by legal advice privilege rather than litigation privilege. If the communication is between the lawyer and someone other than the client, it will only be subject to legal advice privilege if it satisfies the test for litigation privilege. That is so whether the client is an individual, a partnership, an unincorporated association or a corporate entity. Communications between clients and third parties, such as professional advisers who are not lawyers, are not subject to legal advice privilege. Interposing a lawyer in the chain of communication will not improve the client's chances of claiming legal advice privilege”.
Problems arise when the board or a director instruct a solicitor to carry out an internal investigation. In this situation, the board or director is the client. However, employees of the company who do not sit on the board are not the solicitor’s clients and therefore what they say is not covered by legal advice privilege, unless litigation privilege is established. Therefore, companies need to make clear in their instructions to the solicitor that the investigation is being carried out to advise the company. This will ensure employees are protected by legal professional privilege.
Is litigation or prosecution in progress or in reasonable contemplation?
For litigation privilege to apply, civil litigation or criminal prosecution must be in progress or in reasonable contemplation. In the ENRC case, the regulatory body was the SFO. Fraud cases differ from health and safety and environment cases as the former has a reverse burden of proof and the latter contains many strict liability offences. Therefore, if there has been a workplace fatality, the burden of proof lies with the organisation, who can assume there is a real risk of prosecution. This is a very different situation from an SFO or FCA investigation, where the regulatory body has the burden of proving wrongdoing.
The importance of this distinction was recently illustrated in R(HSE) v Jukes.
Lessons from R(HSE) v Jukes
In February 2018, the court in R(HSE) v Jukes, applying the reasoning in ENRC, held that a statement given in the aftermath of a fatal workplace incident to solicitors acting for the company did not attract litigation privilege.
The Court of Appeal found that the witness statement given by an employee of the company statement did not attract litigation privilege. In order to successfully argue that litigation privilege is attached to documentation created during an investigation, it was stated that the parties will need evidence to prove that, at the time the document was created, they had ‘enough knowledge’ of the offences committed, for it to be realistic to expect the enforcement body to conclude, when applying the evidential test of the Code for Crown Prosecutors, that there is enough evidence to provide a realistic prospect of conviction against each defendant.
Solicitors conducting internal investigations must understand the scope of litigation privilege and how it relates to legal advice privilege. If they have failed to ensure their instructions are to advise the company, there is a possibility that legal advice privilege will not cover any statements taken from employees because the solicitor’s actual client is the board and/or directors. In which case, the solicitor has a duty to inform an employee who may be about to incriminate themselves of the consequences in making a statement. It is also imperative that solicitors ensure their notes and witness statements are kept separate during the investigation.
The question also has to be asked, “does a statement genuinely need to be obtained?”. Any questions relating to the health and safety or environmental law compliance systems will be contained in documents. The UK is one of the most surveyed countries on earth; huge amounts of material can be gathered from simply watching CCTV footage.
The fact is, witnesses to a traumatic event are notoriously unreliable. They are generally in shock and confused. An experienced emergency response and/or investigating solicitor knows when witness statements will add to the evidence and when taking such a statement could go against not only the company’s but the employee’s best interests.
Fisher Scoggins Waters is a London based law firm with expertise in construction, manufacturing, and engineering law. If you have any questions about health and safety matters or require an emergency response to an incident, please phone Michael Appleby on 0207 993 8264.