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09 Jun 2014

Litigation privilege & investigations

The civil litigation initiated by the Tchenguiz brothers against the SFO had led to a number of important interlocutory judgments in the High Court and Court of Appeal. Last month for example Eder J delivered considered judgments on security for costs and discovery in the context of the inadvertent disclosure of documents by one side to the other.

For those concerned with the conduct of internal investigations the Court of Appeal’s judgment of last February in Rawlinson and Hunter v Akers [2014] EWCA 136 is particularly instructive. It concerns the ambit of litigation privilege. A fortnight after it was delivered the SFO Director, David Green QC, gave a speech about corporate self-reporting and DPAs.  Mr Green seldom gives speeches and so when he does they offer a rare glimpse of his thinking. Whilst he did not mention this judgment as it is not concerned with an internal investigation, it is probable that nonetheless he regarded it as the foundation for this observation about legal privilege in the context of such an investigation; “A waiver of privilege, where necessary. This applies particularly to privilege which is often claimed, dubiously, over accounts given by witnesses in internal investigations.” So Mr Green regards a claim of privilege in relation to lawyers’ records of what they were told by individual witnesses in fact finding interviews as dubious. His choice of this word suggests that firstly he believes the law requires clarification. Secondly he is warning that sooner or later the SFO is going to reject a claim of privilege made by a company under investigation and so force it to either abandon this claim or, assuming a section 2 notice had been served demanding production of these lawyers’ records, oblige it to seek a judicial review in order to attempt to have the notice quashed.

The SFO will wait for the optimum situation to arise. One likely to be selected as offering the best terrain for battle will be where firstly the records are plainly likely to be relevant to its investigation. A court should need little persuasion that witness interview records satisfy this condition. Secondly where the SFO cannot compel the witness to co-operate with it, for example because they are overseas in a country lacking developed mutual legal assistance arrangements with the UK. Thirdly where the documents were created by the company’s lawyers, there was no extant criminal investigation or civil litigation.

The first two of these conditions are scene-setters in that the Administrative Court will readily appreciate the potential for injustice to a putative accused or harm to the SFO’s investigation if the company’s claim for judicial review is upheld thus allowing the company to withhold the record of what the witness originally said . The third is by far the most important. The SFO will contend that notwithstanding that the records were created by the company’s lawyers in the course of their investigation and that they were relevant to their advice to the company, privilege does not attach. Not legal advice privilege because these records of interview contain nothing about this. Not litigation privilege because whilst their dominant purpose was to obtain legal advice, at the time of their creation there was no actual or anticipated litigation.

Focussing only on litigation privilege (assume that the records do not disclose advice), it may seem counter-intuitive to submit that despite the company hiring lawyers to conduct the interviews the dominant purpose test may not be satisfied. But this is exactly what the Court of Appeal held in Rawlinson and Hunter, upholding Eder J’s view that; “the mere fact that a document is produced for the purpose of obtaining information in connection with pending or contemplated litigation, or of conducting or aiding in the conduct of such litigation, is not sufficient to found the claim for litigation privilege. It is only if such purpose is one which can properly be characterised as the dominant purpose that such claim for litigation privilege can properly be sustained” (para 15).

Whilst this case did not concern records created by lawyers it is submitted that this quote is authority for the proposition that the involvement, even the authorship, of the company’s lawyers of the records of interview is of itself insufficient to satisfy the dominant purpose test. So if they are hired to conduct an investigation with a view to considering whether the company should make a self-report to the SFO or as a response to concerns that the company may have violated some external regulatory requirement or internal company rule then it would be a fallacy to believe that their records of work (excluding advice) are likely to be cloaked with the protection of legal privilege.

It may seem strange to argue that a report may not be privileged if prepared for the purpose of deciding whether to make a self-report to the SFO. Whilst it depends on what the company was hoping to achieve when it authorised its lawyers to investigate and what it then suspected about possible criminality, I think the decision alone to investigate with the possible goal of self-reporting in mind is not enough. The investigation might conclude by vindicating all concerned or if the picture is not so comforting then the company might intend to seek to persuade the SFO to take no action.

Furthermore even in a case of mixed motives, in that one of several reasons for hiring the lawyers was because of anticipated possible future litigation against the company, this would also be insufficient. The Court of Appeal’s emphasis is whether such litigation is the dominant purpose. On the evidence before it, it held that even references in the documents (for which litigation privilege had been asserted) to possible or potential litigation and defendants was insufficient to demonstrate the requisite dominance. What mattered to the Court was why these documents had been created, and whether they were part of an exercise which would have been carried out irrespective of whether litigation was in contemplation.  It was unimpressed by what it regarded as an attempt to elide the reasons for the exercise with those concerning a threat of litigation. It held that where there are mixed motives, it is incumbent upon the claimant to establish with “clarity and precision” that responding to this threat was the dominant purpose.

The growth of internal investigations means that it is increasingly likely that lawyers will discover information which is damaging to their client but and has become important in a subsequent SFO investigation. Spurred by this Court judgment, Mr Green has warned that the SFO will in relation to witness interview records demand them and contest any opposing claim of litigation privilege.  These events should emphasise to investigations lawyers that it has become more difficult to make a valid claim that legal privilege attaches to their work.  Indeed, where the SFO or the FCA are notified about an internal investigation, they are now attempting to assert much more control over how a company conducts that investigation; particularly with regard to the disclosure of the so called “first account” given by witnesses.

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