News Business Crime & Financial Services 6th Sep 2018

Litigation Privilege Restored by Court of Appeal in ENRC v SFO

In a resounding defeat for the Serious Fraud Office the President of the Queen’s Bench Division, Sir Brian Leveson, has re-asserted orthodoxy in allowing ENRC’s appeal against the judgment of Andrews J in the High Court.

The facts of the case will be well known to most readers. The Serious Fraud Office had sought a Part 8 declaration that material produced in ENRC’s internal investigation by Dechert was not subject to legal professional privilege. Andrews J granted such a declaration in respect of three out of four categories of material, holding that material including interviews with employees and third parties and a books and records review by accountants was not privileged, despite it being part of an internal investigation by lawyers, where an SFO investigation was in express contemplation. Her judgment, in the eyes of many in the profession, reduced litigation privilege to vanishing point, certainly in the context of multinational internal investigations.

The Court of Appeal yesterday reversed that ruling in each of the three categories where a declaration had been granted.

The first 122 paragraphs of the Court’s judgment will be met with a  deep sigh of relief from all who engage in this type of work. The Court found that on the specific facts a criminal prosecution was in reasonable contemplation, and the documents were created for the dominant purpose of resisting or avoiding criminal proceedings, and were therefore protected by litigation privilege.

This meant that, no doubt to the disappointment of many, the Court did not have to reach a view on whether the documents were also covered by legal advice privilege. The question which many commentators, and indeed oral argument, had focused on, was the effect and correctness of the decision in Three Rivers (No. 5). The Court found that Three Rivers decided that “communications between an employee of a corporation and the corporation’s lawyers could not attract legal advice privilege unless that employee was tasked with seeking and receiving such an advice on behalf of the client.”

That decision was and remains controversial, but it difficult to argue with the Court’s interpretation. Given that the findings on litigation privilege were sufficient to allow the appeal, the Court thought it “highly undesirable to enter into unseemly disagreement” with Three Rivers.

 Having stated as much however, the Court promptly did exactly that at paragraph 130:

“If, therefore, it had been open to us to depart from Three Rivers (No. 5), we would have been in favour of doing so. For the reasons we have given, however, we do not think that it is open to us, so it is a matter that will have to be considered again by the Supreme Court in this or an appropriate future case.”

The judgment is very largely a reassertion of orthodox legal principles in assessing what material is covered by litigation privilege. It states, with commendable common sense, the value of legal professional privilege to individuals, small and large scale corporations, and to society, both in the context of encouraging internal investigations and the wider benefits. The decision in Three Rivers (No. 5) is largely eviscerated in terms of its practical effect and deviation from international common law, and yet miraculously left standing.

The stage is set it seems, for the Supreme Court. Until then, the lower courts are left with an unattractive interpretation of legal advice privilege, which remains law but has been wholeheartedly disapproved of by an exceptionally strong Court of Appeal. Yesterday’s judgment is undoubtedly to be welcomed, but it is far from the end.

Lewis MacDonald

Categories: News