Nik Yeo and Tamara Oppenheimer © February 2019 Law of Privilege: developments relevant to in-house lawyers One step forward; two steps back? Nik Yeo and Tamara Oppenheimer © February 2019

SFO v ENRC [2018] EWCA Civ 2006 SFO had brought a civil claim under CPR Part 8 seeking declaratory relief challenging ENRC’s claims to LPP in respect of documents created in the context of an anticipated criminal investigation. Categories of documents included (i) interview notes produced by ENRC’s lawyers, Dechert; and (ii) reports and other materials generated by forensic accountants instructed by Dechert, FRA. ENRC claimed LP and LAP over the interview notes and LP over the FRA material. Mrs Justice Andrews rejected (save in one respect) all of ENRC’s claims to privilege.

CoA’s findings in ENRC – Litigation Privilege (1) Limb 1 – Reasonable contemplation of litigation: CoA found that ENRC had reasonably anticipated prosecution by the SFO, albeit ENRC still needed to investigate the truth of the allegations. The fact that there was uncertainty as to what the investigation might uncover did not mean that prosecution was not in reasonable contemplation. Key elements: (i) the SFO made clear that there was a prospect of criminal prosecution (through the self-reporting guidelines and specific communications) and (ii) external legal advisers were engaged. Reversal of approach of Andrews J, who had set bar higher for establishing LP in criminal context.

CoA’s findings in ENRC – Litigation Privilege (2) Limb 2 – Dominant purpose: CA confirmed that obtaining advice and assistance in order to head off, avoid, or settle reasonably contemplated proceedings is protected by LP. Reversal of Andrews J who had found that dominant purpose test not satisfied because ENRC were engaged in a co-operative dialogue with the SFO in which ENRC had promised to be full and frank with the results. Need to investigate corruption is a subset of contemplated proceedings. Compliance aspect to the FRA reports did not preclude LP from applying. As a matter of fact, ENRC had never agreed to disclose privileged material to the SFO.

CoA’s findings in ENRC – Legal Advice Privilege Disappointing (obiter) result on the Three Rivers 5 issue. ENRC had invited CoA to find that the orthodox interpretation of Three Rivers 5 is wrong and does not mean that LAP applies only to communications with someone authorised to receive or give legal advice, but can also extend to communications between a lawyer and any employee or ex-employee authorised by the client to provide information to the lawyer. CoA held that it was bound by the orthodox interpretation of Three Rivers 5. But the CoA set out a number of powerful reasons why the restrictive interpretation of LAP in Three Rivers 5 should be reconsidered. CoA also declined to examine the law on lawyers’ working papers.

Implications of ENRC: Litigation privilege (1) Reasonable contemplation of litigation: Stark distinction between hurdle for civil and criminal proceedings has gone. There can be protection for investigations where there is a real concern that the investigation could lead to litigation. No need for certainty that the investigation will uncover something. A well founded fear may be sufficient. Importance of whole factual matrix. Relevant factors include: (a) communication with prosecutor/regulator expressing concern and indicating possibility of prosecution/enforcement action; (b) instruction of external lawyers; (c) escalation to senior level; (d) nature of the allegations.

Implications of ENRC: Litigation privilege (2) Dominant purpose: Where a third party is engaged to conduct a report with a view to heading off prosecution, the dominant purpose test will be satisfied. Test will be satisfied even if, in addition to information gathering, it is intended as part of the process to be open and co-operative with the prosecutor/regulator. CoA recognised that a corporate might not broadcast the reason why it was commissioning a 3P report and might wish to emphasise e.g. compliance aspects of the report.

Implications of ENRC: Legal advice privilege (1) “The client” issue: Orthodox interpretation of Three Rivers 5 is still the law. BUT trenchant criticism by CoA (out of line with most other jurisdictions; unworkable in case of corporations) Will corporations be willing to claim privilege over interview notes and take the issue to the Supreme Court? A dominant purpose test for legal advice privilege?

Implications of ENRC: Legal advice privilege (2) Lawyers’ working papers Requirement that lawyers’ working papers ‘betray the trend of advice’ Articulated by Hildyard J in RBS Rights Issue Litigation [2017] 1 WLR 1991 and adopted by Andrews J in SFO v ENRC [2017] 1 WLR 4205. Originates from Lyell v Kennedy exception – collections of non-client documents. Wrongly imported to lawyers’ working papers? Difficulties in evidencing that a document betrays the trend of advice.

WH Holding and West Ham v E20 Stadium [2018] EWCA Civ 2652 West Ham sued E20 over capacity of the stadium E20 claimed privilege in respect of 6 emails between E20 board / stakeholders discussing possible commercial settlement Three questions before the CA: Is that a qualifying “dominant purpose”? When should the Court inspect documents Did the trial judge apply the dominant purpose test? Norris J held that expert determination was not sufficiently adversarial to constitute “litigation” for LP. No appeal.

CoA’s conclusions in West Ham LP does not extend to communications concerned with settlement which neither seek advice or information for the purposes of conducting litigation, nor reveal the nature of such advice or information Internal communications of a company are not privileged per se. Bristol v Cox (1884) 26 Ch D 678 overruled. However they may be privileged if they fall within LP LP will apply if privileged info or advice cannot be disentangled General discretion to inspect documents. Although it should be cautious about doing so, Court does not need “reasonable certainty” before inspecting (cf Beatson J West London Pipeline [2008] 2 CLC 258, [86(3) & 86(4)(c)]) Norris sufficiently addressed dom purpose test

Dominant purpose of what? “for” or “of” actual or anticipated litigation “with a view to” … “in aid of”… (Tchenguiz [2013] EWHC 2297 [48(ii), 49]; Rawlinson [2014] EWCA Civ 136 [13]) “conducting” … “obtaining information or advice in connection with”… (Lord Carswell Three Rivers 6 [2005] 1 AC 610, [102]) “to settle” … (ENRC first instance and CA) or “to avoid” … (ENRC CA) “to prosecute or defend” or “preparing for the defence” “used in the conduct of” actual or anticipated litigation “deployment in” … Common ground in West Ham that the purpose must be for “the conduct of litigation”

Lord Carswell 3R6 in light of ENRC and West Ham … for the purpose of obtaining information [cf evidence] or advice …

Lord Carswell 3R6 in light of ENRC and West Ham … for the purpose of obtaining information [cf evidence] or advice … only when …for the sole or dominant purpose of conducting that litigation …

Lord Carswell 3R6 in light of ENRC and West Ham … for the purpose of obtaining information [cf evidence] or advice … only when …for the sole or dominant purpose of conducting that litigation … Includes settling or avoiding litigation

Lord Carswell 3R6 in light of ENRC and West Ham LP: client/lawyer 3P Who is “client” for LP? Exec director stakeholder Exec director NED Exec directors inter se

Internal corporate communications per West Ham West Ham: no principle that all internal commercial discussions of a corporate are privileged Mayor and Corporation of Bristol v Cox (1884) 26 Ch D 678, 682, overruled But: puts corporates at a disadvantage to individuals Esso Australia Resources Limited v The Commissioner of Taxation (1999) 201 CLR 49 [59] per Gleeson CJ, Gaudron and Gummow JJ, [162] per Callinan J; cf [109–110] per Kirby J. and creates inconsistency with WP privilege

West Ham v E20 – Implications Corporates are at a double disadvantage in LAP and LP This will tend to result in corporations only documenting internal settlement discussions in particular ways Works against good corporate governance, to the potential disadvantage of stakeholders / shareholders But clearly particular care needed with scope of privilege when applied to commercial communications to avoid litigation

Jet2.Com v CAA [2018] EWHC 3364 (Admin) Issues of legal advice privilege arising in context of JR claim. In-house lawyers giving advice on draft letter. Finding 1: Legal advice privilege is subject to a dominant purpose test. Finding 2: Multi-addressee communications: Is the dominant purpose of the email (or attachment) to seek or give legal advice? If not, does the email (or attachment) disclose or is it likely to disclose the nature and content of the legal advice given/sought?

Jet2.Com v CAA – Implications Emails and attachments to be considered separately, not as a single communication (see also FRC v Sports Direct) The approach to multi-addressee emails may mean that there is some of the “continuum of communication” between client and lawyer which will no longer be protected. In an in-house context it will be important to make clear that the main reason for the communication is to seek legal advice; and/or to identify the legal advice being sought or given Practical difficulties where in-house lawyers may not have an exclusively ‘legal’ role.

FRC v Sports Direct [2018] EWHC 2284 (Ch) FRC is investigating GT’s audit of SD in respect of payments by SD to Mike Ashley’s brother, as part of a scheme to ensure VAT paid in UK not elsewhere Statutory Auditors and Third Country Auditors Regs 2016, Sched 2 para 1(3): listed company or person involved in activities of stat audit must provide information requested by FRC para 1(8)(a): unless entitled to refuse on grounds of LPP in English proceedings FRC sought documents from SD to shed light on what GT knew about scheme SD claimed LAP

Arnold J’s conclusions in Sports Direct SD unclear about extent of documents sought and basis for privilege (LAP); no specific evidence in support “Obfuscation and delay verging on obstruction” (1) Non-privileged attachments to emails passing between lawyer and client Not privileged – citing book. (2) SD’s disclosure to GT as auditor did not amount to a waiver as against GT’s regulator, but … (3) Production of documents to FRC would not infringe SD’s LPP

Parrying Parry: investigation exception to LPP Based on Parry-Jones v Law Society [1969] 1 AC 487 as interpreted by Lord Hoffmann in R (Morgan Grenfell) v Special Comm of Income Tax [2003] AC 563 [32]: Regulator may obtain “underlying-client-privileged documents” from lawyer for purpose of pursing an investigation into that lawyer Because? (i) (Obiter) Use by regulator does not infringe LPP since regulator is not able to use information other than for limited purpose of investigation; and/or (ii) (If statutory basis of document request) Because statutory power overrides LLP Must be first basis here, since SATCAR expressly preserves LLP

FRC v Sports Direct – Implications Arnold J extended the principle applicable to disclosure from the regulated entity to disclosure from the party whose privilege it is (“client”) [84] Query whether this is consistent with Lord Hoffmann’s treatment in Morgan Grenfell at [36] of R v IRC, ex p Taylor (No 2) [1990] 2 AER 409, 413-414 (disclosure from solicitor): Solicitor would be entitled to refuse to produce documents where the privilege was his own But documents were being requested from the regulated person Query when documents sought from client which are not being used against client Limited reasoning in judgment. On appeal (listed November 2019)

FRC v Sports Direct – Implications When facing investigation: if you are the regulated entity then seems that cannot rely on privilege in underlying-client-privileged documents if regulated entity and privilege is your own, or } await outcome of Sports Direct appeal if client and documents not being used against you }

Practical tips for in-house lawyers - Litigation privilege (1) Consider extent to which more senior people need to be kept informed: may be important to demonstrate seriousness of issues and reasonable apprehension of litigation Importance of contemporaneous documents – where possible document decisions and thought processes. Take care with potentially dual purpose documents – eg accident reports Take care when documenting purely commercial discussions as to settlement (or avoidance of litigation). Expressly tie discussions into any relevant legal advice on which that discussion proceeds.

Practical tips for in-house lawyers - Litigation privilege (2) NB disclosure to substantiate claim to LP may give rise to issues of collateral waiver. Standalone documents may avoid problems of collateral waiver but more likely to be regarded as self-serving and of less probative value. Keep position under review – LP position is likely to be evolving.

Practical tips for in-house lawyers – Legal advice privilege (1) No easy answers! Solicitors’ attendance notes rather than verbatim transcripts of interviews (maximise chances of claiming that notes form part of lawyers’ working papers). Confine distribution of legal advice to a small circle. Consider whether of benefit to try to define the “client group” – but NB make sure to keep any protocol under review as ‘client group’ may need to change over time. Consider documenting who has authority to commission or receive legal advice

Practical tips for in-house lawyers – Legal advice privilege (2) Appetite to claim LAP and take issue to Supreme Court? More promising ground for claiming privilege over attendance notes while ‘the client’ issue remains as per Three Rivers 5? As client, query obtaining obligation on solicitors/accountants/etc to give notice of any request from regulator for disclosure of underlying-client-privileged documents, and seek to challenge regulator’s right (potentially to Supreme Court)

Nik Yeo and Tamara Oppenheimer © February 2019 Law of Privilege: developments relevant to in-house lawyers One step forward; two steps back? Nik Yeo and Tamara Oppenheimer © February 2019