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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Serious Fraud Office (SFO) v Eurasian Natural Resources Corp. Ltd [2018] EWCA Civ 2006 (05 September 2018 ) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2018/2006.html Cite as: [2018] EWCA Civ 2006, [2018] WLR(D) 578, [2019] 1 WLR 791, [2018] Lloyd's Rep FC 635, [2019] Crim LR 44, [2019] 1 All ER 1026, (2019) 35 Const LJ 99, [2019] WLR 791 |
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Neutral Citation Number: [2018] EWCA Civ 2006
Case No: A2/2017/1514
IN THE COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
THE HONOURABLE MRS JUSTICE ANDREWS DBE
Rolls Building
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
Date: 5 September 2018
Before:
SIR BRIAN LEVESON, PRESIDENT OF THE QUEEN’S BENCH DIVISION
SIR GEOFFREY VOS, CHANCELLOR OF THE HIGH COURT
and
LORD JUSTICE McCOMBE
- - - - - - - - - - - - - - - -
THE DIRECTOR OF THE SERIOUS FRAUD OFFICE
Claimant / Respondent
and
EURASIAN NATURAL RESOURCES CORPORATION LIMITED
Defendant / Appellant
and
THE LAW SOCIETY
Intervener
- - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - -
Mr Jonathan Fisher QC, Mr James Segan and Mr Eesvan Krishnan (instructed by Eversheds Sutherland LLP) appeared for the Respondent
Ms Dinah Rose QC and Mr David Pievsky (instructed by Reed Smith LLP) appeared for the Interveners
Hearing dates: 3 rd , 4 th and 5 th July 2018
- - - - - - - - - - - - - - - -
Judgment Approved
Sir Brian Leveson, President of the Queen’s Bench Division, Sir Geoffrey Vos, Chancellor of the High Court, and Lord Justice McCombe:
Introduction
1. This appeal raises important issues as to the proper scope of legal professional privilege. The defendant, Eurasian Natural Resources Corporation Limited (“ENRC”), had asserted that certain documents generated during investigations into its activities by its solicitors and forensic accountants (the “Documents”) were the subject of legal advice privilege and/or litigation privilege. The Documents related to fraudulent practices allegedly committed in Kazakhstan and Africa, which had been notified to ENRC by a whistle-blower, and included notes made by ENRC’s outside solicitors of some 184 interviews (including with its current and former employees). The Director (the “Director”) of the Serious Fraud Office (the “SFO”) claimed declarations that the Documents were not the subject of legal professional privilege. Mrs Justice Andrews essentially granted the declarations sought.
2. ENRC submitted that Andrews J was wrong because she misinterpreted the Court of Appeal’s decision in Three Rivers District Council and Others v. Governor and Company of the Bank of England (No. 5) [2003] QB 1556 (“ Three Rivers (No. 5) ”) as to the kind of documents that could be the subject of legal advice privilege. She ought not to have held that communications with a client for these purposes were only those with an employee who was specifically tasked to seek and obtain legal advice. Instead, the judge ought to have held that, to attract legal advice privilege, all that was necessary was that the employee in question was authorised by the client to provide the information to the company’s lawyer. The ratio decidendi of Three Rivers (No. 5) was that only communications between client and lawyer were privileged. It was not necessary for the Court of Appeal there to decide which representatives of the client could claim privilege, because the client was the Bingham Inquiry Unit, not the Bank of England itself. The dicta concerning employees in Three Rivers (No. 5) were, therefore, obiter . In any event, ENRC submitted that the judge ought to have regarded certain of the Documents as privileged as lawyers’ working papers. The SFO submitted in response that, even if Three Rivers (No. 5) were to be interpreted as ENRC claimed, it was now well-established that legal advice privilege could only be established where the dominant purpose of the communication was to obtain legal advice, which was not the case here, since the solicitors’ primary engagement was to undertake an investigation into the facts.
3. In relation to litigation privilege, ENRC argued that the judge wrongly held that (i) no criminal prosecution was reasonably in contemplation [1] and (ii) none of the Documents was created with the sole or dominant purpose of defending anticipated criminal proceedings. On the facts, the judge was also wrong to hold that the Documents had been created on the understanding that they would be provided to the SFO. The SFO, on the other hand, contended that the judge’s conclusions were amply justified on the facts.
Factual background
5. ENRC is a company incorporated under the laws of England and Wales. It is part of a multinational group of companies operating in the mining and natural resources sector. It was a public limited company until 14 th January 2014, and a FTSE-100 listed company between 2007 and 2013. Until 2009/2010, its principal operations were carried out through a wholly-owned subsidiary, Sokolov-Sarbai Mining Production Association (“SSGPO”), in Kazakhstan. At the same time, it was diversifying its operations through acquisitions of companies operating in various parts of Africa. It is undoubted that ENRC and its subsidiaries operated in countries perceived as being high risk in terms of public sector bribery and corruption (see Gross LJ at paragraphs 4-5 in R (Soma Oil and Gas Ltd) v. Director of the Serious Fraud Office [2016] EWHC 2471 (Admin)).
7. In 2009/2010, ENRC became aware of allegations of criminality on the part of certain African companies that it was seeking to acquire. In particular, its mid-2010 acquisition of a company called Camrose Resources Limited (“Camrose”) gave rise to litigation (which has since settled) with a Canadian company, First Quantum Minerals (“FQM”). FQM alleged that a copper mine had been unlawfully appropriated by the government of the African country in question and sold to a company allegedly linked to a friend of that country’s President. The buyer had then procured the sale of that company to ENRC as part of the Camrose deal. It was ENRC’s recorded view in August 2010 that those allegations were “in large part unsubstantiated, but bearing in mind the low threshold for suspicion it is not possible to discount them completely”.
“I think you and the other members of the Audit Committee need to be careful not to be too bullish about regulatory risk, especially … given where we are reputationally post-Camrose (I can sense from GC 100 [an association of 100 large companies’ general counsel] meetings with the MoJ and the SFO that we are firmly on the radar and I expect an investigation in due course, which is why I have upgraded our dawn raid procedures recently).”
“The internal investigation at SSGPO relates to conduct that is potentially criminal in nature. Adversarial proceedings may occur out of the internal investigation and, in our view, both criminal and civil proceedings can be reasonably said to be in contemplation. There is a possibility that this view may be challenged by third parties in the future, but if this is accepted, litigation privilege will apply.”
“… We would remind you that we believe litigation to be in reasonable contemplation and as a result litigation privilege applies to the work we have asked you to undertake. Should you be contacted by any party regarding this matter, we would ask you to assert this position robustly and contact us immediately …”.
18. It is worthwhile interposing some salient aspects of the Guidelines as follows:-
“Discussions with business and professional advisers have revealed a lot of interest in a system of self reporting cases of overseas corruption to us. We have been asked for any additional guidance we can give with respect to our policies on this and in particular on the benefits to be obtained from self reporting.
As will be seen from this Guide, the benefit to the corporate will be the prospect (in appropriate cases) of a civil rather than a criminal outcome as well as the opportunity to manage, with us, the issues and any publicity proactively. The corporate will be seen to have acted responsibly by the wider community in taking action to remedy what has happened in the past and to have moved on to a new and better corporate culture. …
The term ‘corporate’ is used in this Guide for convenience. As the context requires, it can refer to the group, a UK company or an overseas subsidiary. It is not to be construed restrictively …
2. A key question for the corporate and its advisers will be the timing of an approach to us. We appreciate that a corporate will not want to approach us unless it had decided, following advice and a degree of investigation by its professional advisers , that there is a real issue and that remedial action is necessary. There may also be earlier engagement between the advisers and us in order to obtain an early indication where appropriate (and subject to a detailed review of the facts) of our approach. We would find that helpful but we appreciate that this is for the corporate and its advisers to consider . We would also take the view that the timing of an approach to the US Department of Justice is also relevant. If the case is also within our jurisdiction we would expect to be notified at the same time as the DoJ.
3. [The SFO, when contacted about these issues,] will assume that the corporate’s professional advisers are familiar with this Guide and our approach.
4. Very soon after the self report and the acknowledgement of a problem we will want to establish the following:
• is the Board of the corporate genuinely committed to resolving the issue and moving to a better corporate culture?
• is the corporate prepared to work with us on the scope and handling of any additional investigation we consider to be necessary?
• at the end of the investigation (and assuming acknowledgement of a problem) will the corporate be prepared to discuss resolution of the issue on the basis, for example, of restitution through civil recovery, a programme of training and culture change, appropriate action where necessary against individuals and at least in some cases external monitoring in a proportionate manner?
• does the corporate understand that any resolution must satisfy the public interest and must be transparent? This will almost invariably involve a public statement although the terms of this will be discussed and agreed by the corporate and us.
• will the corporate want us, where possible, to work with regulators and criminal enforcement authorities, both in the UK and abroad, in order to reach a global settlement?
5. A very important issue for the corporate will be whether the SFO would be looking for a criminal or a civil outcome. Without knowing the facts, no prosecutor can ever give an unconditional guarantee that there will not be a prosecution of the corporate. Nevertheless, we want to settle self referral cases that satisfy paragraph 4 civilly wherever possible. An exception to this would be if b oard members of the corporate had engaged personally in the corrupt activities, particularly if they had derived personal benefit from this. In those cases we would, in fact, be likely to commence our own criminal investigation. Professional advisers will have a key role here because of their knowledge of our approach. We shall look at the public interest in each case. We would in those circumstances be looking for co-operation from the corporate and would be prepared to enter into plea negotiation discussions within the context of the Attorney General’s Framework for Plea Negotiations. …
10. Subject to what has been said in paragraphs 8 and 9, the discussions with the SFO will be confidential. Any information received by us will be regarded as information acquired for the purposes of our powers under the Criminal J ustice Act 1987 and therefore only to be used in accordance with that Act.
THE INVESTIGATION
11. If both sides are satisfied with the answers to the issues in paragraph 4 above, then we will discuss the scope of any further investigation needed. Wherever possible, this investigation will be carried out by the corporate’s professional advisers . This will be at the expense of the corporate. We undertake to look at this in a proportionate manner and to have regard, where appropriate, to the cost to the corporate and the impact on the corporate’s business.
12. We appreciate that document recovery and analysis will be a very significant issue in any investigation. Electronic searches will be needed. We are able to discuss the methodology for this with the corporate and its advisers to ensure that the cost is proportionate to the amount and seriousness of the issues reported. We shall also be prepared to discuss the steps taken by the corporate and its advisers to ensure that material (and, in particular, electronic material) is preserved.
13. We will also want to be involved in regular update discussions concerning the progress of any further investigation. …
What happens if there is no self referral
24. Self referral together with action by the corporate to remedy the problem of corruption will reduce the likelihood that we may discover the corruption ourselves through other means. If this happens we would regard the failure to self report as a negative factor. The prospects of a criminal investigation followed by prosecution and a confiscation order are much greater, particularly if the corporate was aware of the problem and had decided not to self report.
25. Corporates will need to be aware of the length and expense of an investigation by the SFO. … Professional advisers will need to advise their corporate clients about the impact of these investigations . There is also a serious prospect that we will learn about the corruption issue from another agency … We will assume in those circumstances that the corporate has chosen not to self report. The chances of a criminal investigation leading to prosecution are therefore high [emphasis in bold italics added]. ”
“INTRODUCTION
…
The SFO could give no assurance that it would not undertake enforcement action and that ENRC should take the matter very seriously.
ENRC COMMENTS
[Mr Ehrensberger] stated that ENRC had taken the letter from SFO very seriously and that the Board were keen to ensure that as a Company they are fully compliant and that governance is properly applied across the group …
…
A full risk assessment was being pursued, covering a range of different countries that ENRC was involved in. Interviews with staff on “the ground” are being pursued to understand how all aspects of the business work.
The SFO made the point that intelligence and information suggested that the company indicated the production of false statements and paperwork generally.
The SFO stressed that the company needed to show that there was a commitment to get behind the documents and to satisfy the SFO that the company had ‘adequate procedures’.
…
The SFO invited [Mr Gerrard] to explain his role. [Mr Gerrard] confirmed that he was appointed by the Audit Committee [of ENRC] as part of their investigative policy …
A forensic analysis is taking place. They were reviewing a number of emails and DPA issues in Kazakhstan. They had been undertaking interviews and [Mr Gerrard] was looking to close enquiries in November. He will report to the company around his findings and the company were concerned about what exactly the SFO were worried about and where its focus was centred.
The SFO confirmed that it would not be advising the company. The company needed to satisfy the SFO that it has adequate procedures and were invited to make a disclosure at its earliest point.
…
The SFO will be proportionate and will need to speak with the company or its advisers on how we will get to the next level, once the Company Board have considered the issues.
CONCLUSION
The SFO made no assurances to the company that it would not take any other enforcement action.
The SFO made it clear that if the company were to make a self-disclosure it would be able to manage its discussion with the US Department of Justice. The company would need to consider how it would deal with any issue that it discovered that may have an impact on its FCPA obligations.
The company representatives were invited to present the position to the Board and to respond to the SFO with recommendations to take the matter forward.”
“… [Mr Gerrard] said that ENRC have literally an army of advisors on bribery act systems and procedures. The tests that have been undertaken on those systems have raised red flags. The company are keen to tackle the issue and be full and frank.
…
It was agreed that [Mr Gerrard] would meet with [Mr Thompson] and [Ms von Dadelszen] in December 2011 to discuss the scope of the review.
[Mr Alderman] appreciated that there were cultural issues within the company’s business. Those issues could be discussed. After [the meeting in December 2011] we would then have another meeting to track progress with the red flags.
It was agreed that [Mr Gerrard] is the contact point [with the SFO]. [Mr Gerrard] confirmed that the investigation had been going for some months now. Phase 1 has been a books and records review. This has been done in Africa, the UK and Switzerland. Phase 2 will be a deeper review. FRA will help with that review.
[Mr Gerrard] said the specific work being done in Kazakhstan concerned an allegation from a whistleblower regarding SSGPO (a subsidiary). A large number of people are alleged to be involved. It is a corruption and fraud allegation. [Mr Gerrard] has not seen any substantive evidence confirming the allegations yet …”.
“[Mr Ehrensberger] made the following comments:
· A board meeting was held on 9 December 2011;
· Anti corruption issues are a real focus of the board;
· [Mr Ehrensberger] has been given a mandate to disclose [to the SFO] anything he feels appropriate.
…
Dick Gould [of the SFO (“Mr Gould”)] then joined the meeting.
[Mr Gould] advised that timescales are very important and the onus is on the company to supply the relevant information.
[Mr Gerrard] was confident of “having something” within a month or two.
…
[Ms von Dadelszen] said the SFO would want something in writing. Perhaps by the end of February [2012].
[Mr Gerrard] said we have to find out what the issues are first. Can’t currently put anything into writing.
[Mr Gould] suggested that the company put together a presentation for the end of February.
[Mr Gerrard] agreed and said a presentation would be fine. Will deal with investigation review, the plan, milestones, interviews and a timetable going forward …”.
“[Mr Thompson] said he had concerns because it was the middle of June and no substantive report had been made. If the investigation had stalled or been obstructed this would be regarded very negatively. For a civil settlement to be entertained, it was essential that the investigation findings were disclosed in the near future …
…
[Mr Gould] said that the process had already taken too long and if [Mr Gerrard’s] investigation was being restricted in scope then the inevitable outcome would be a recommendation that a criminal investigation be commenced by the SFO …
[Mr Gould] also said that ENRC should consider submitting a proposal for the disposal of the case by way of settlement when they finalise their report …
…
[Mr Gerrard] then outlined progress made in respect of the Kazakhstan investigation … [He] said that progress had been good and they had almost finished …
In respect of Africa, [Mr Gerrard] said that progress had been limited … there were problems with the company’s fragmented IT architecture …
[Mr Thompson] asked further questions about the progress of the work. [Mr Gerrard] said that he was now reporting to the Special Investigation Committee and that Jones Day were no longer involved. The committee comprises … Mr Dalman, Terence Wilkinson (senior independent director) [(“Mr Wilkinson”)] and [Mr Ehrensberger]. [Mr Gerrard] is going to suggest that [Mr Zinger] replaces [Mr Ehrensberger].
There was a discussion about the next steps and the timetable to be adopted. [Mr Gerrard] said that he felt that this was still a case where a settlement could sensibly be reached …”.
34. On 12 th December 2012, Dechert wrote a letter to Mr Gould saying that:-
“As you are aware we have prepared a draft report regarding our investigation into SSGPO, a subsidiary of ENRC.
ENRC entered into a corporate self-report process with the SFO under:
· the Attorney General’s Guidelines on Plea Discussions in Cases of Serious or Complex Fraud dated 18 March 2009; and
· the Approach of the Serious Fraud Office to Dealing with Overseas Corruption dated 21 July 2009.
We note that the SFO restated its approach to corporate self-reports on 9 October 2012 …
Given the restatement, we would like confirmation that ENRC is still part of the corporate self-reporting process prior to Dechert submitting our report on SSGPO. Any report submitted by Dechert to the SFO will be submitted under a limited waiver of legal professional privilege for the purposes of the corporate self report only.
Should an equitable settlement not be reached between the SFO and ENRC, please confirm that it is accepted that the report will not be used by the SFO as evidence of any wrongdoing or in any criminal proceedings against either ENRC, any subsidiary of ENRC or any employee or director of ENRC or its subsidiaries.”
That was the first time that ENRC or its advisers had expressly said to the SFO that they considered ENRC to be in a self-reporting process, and also the first mention to the SFO of legal professional privilege. The SFO submitted, in relation to this document, that it was clear at some point between 2011 and 2012 that self-reporting was actually taking place, and that nobody would have dreamt at that stage that ENRC would refuse to disclose its interview notes to the SFO.
“It is a matter for ENRC and its legal advisers as to which, if any, elements of the reports are covered by [legal professional privilege], and whether they waive any privilege that may attach.
However please be aware that in assessing whether a company has adopted “a genuinely proactive approach” the Guidance on Corporate Prosecutions states that “the prosecutor needs to establish whether sufficient information about the operation of the company in its entirety has been supplied … This will include making witnesses available and disclosure of the details of any internal investigation”.
In light of the fact that we have not seen these reports, no assurances can or will be given … that we accept [they are] subject to [legal professional privilege] …
No assurances can or will be given at this stage as to what use the SFO will make of any report that may be provided to it.
The SFO cannot and will not give any assurance in relation to underlying material, or evidence, upon which the reports are based, or which is provided in support of the reports.
We are concerned at the apparent lack of progress …
Therefore if we do not receive your report on Kazakhstan by close of business on Thursday 31 January 2013, we will have no option but to open a [formal] criminal investigation [under section 1(3) of the CJA 1987] into ENRC’s activities there, with a view to the exercise of our investigative powers.
Assuming your report is received, we can agree a timeline for … the report in relation to [the African country].”
36. On 29 th January 2013, Mr Dalman responded to Mr Rappo’s letter in the following terms:-
“I am both concerned and disappointed with your letter, in particular, your comments regarding the corporate self-reporting process. Dechert have been engaged to conduct an independent in depth investigation exercise, to which the company has devoted a very substantial amount of management time and resource at all levels, and alongside this we have been engaged in an ongoing programme considering and implementing appropriate remedial actions. The SFO have of course been kept well briefed along the way …
You will be able to gauge the volume of work that has been carried out when you read the draft report dated 12 December 2012 in respect of Kazakhstan (in the form requested in your letter) that we intend to deliver to you on or before 31 January 2013.
In relation to Africa, that extensive investigation is continuing, fully supported by me and the Board … We look forward to engaging with you on the timetable for submission of that report.
It remains our prime objective to reach an equitable settlement … and we want to engage with you to discuss a settlement in relation to Kazakhstan as soon as appropriate.”
Andrews J’s judgment
46. The judge then set out the four categories of Documents as follows:-
“ Category 1
27. 85 individuals were interviewed in respect of the Kazakhstan investigation …
Category 2
29 This category comprises materials generated by [FRA] as part of [the] “books and records” reviews they carried out in London, Zurich, Kazakhstan and Africa … The books and records work started on 12 May 2011 and continued until at least 11 January 2013.
30 The parties have agreed that the present claim in relation to Category 2 is concerned only with ENRC’s claim to litigation privilege in respect of this class of documents, and that ENRC retains the right to claim legal advice privilege in respect of any individual document falling within this category. These proceedings will therefore not determine whether any prospective claim for legal advice privilege in respect of specific documents falling within Category 2 would be justified. …
Category 3
32 This category comprises documents indicating or containing the factual evidence presented by [Mr Gerrard] to ENRC’s Nomination and Corporate Governance Committee and/or the ENRC Board on 14 and 15 March 2013. …
Category 4
34 This comprises 17 documents referred to in a letter dated 22 August 2014 sent to the SFO by Fulcrum Chambers …
47. The judge then dealt briefly with the burden of proof and nature of evidence generally required to establish legal professional privilege. She explained that ENRC was unable to adduce evidence from those whose state of mind was in issue, nor from Mr Gerrard, but said that she had some sympathy for the position in which the company found itself and, in any event, had to make her decision based on the evidence that was available.
“59. … I was referred by Mr Fisher QC, on behalf of the SFO, to [ Bailey v. Beagle ] … The judge, Goldberg J, decided that a document had been brought into existence for the purpose of being given to the opposing party (a trustee) in order to persuade him that a proposed settlement was an appropriate financial settlement. He held that the document was not subject to litigation privilege. He made these observations at para 11:
“One has to be careful about the use of the phrase ‘brought into existence for the purpose of the conduct of the litigation’, as a distinction should be drawn between bringing a document into existence for the purpose of conducting litigation by a party on the basis that the document will not be shown to the other party … and a document brought into existence during the course of litigation for the purpose of settling the litigation, which is intended to be shown to the other party. Properly characterised, it is not correct to say that a document is brought into existence for the purpose of conduct of litigation, and so is privileged from production, if it is brought into existence, albeit to try and settle the litigation, but for the purpose of being shown to the other side.”
I respectfully agree with and adopt that analysis, which must apply with equal force in a situation such as this, where litigation has not commenced.
“70. The question of who was the “client” … did not directly arise … in [ Three Rivers (No. 5) ]. However, the judgment of the Court of Appeal supports the proposition that where the party asserting privilege is a corporate entity, legal advice privilege attaches only to communications between the lawyer and those individuals who are authorised to obtain legal advice on that entity’s behalf. Communications between the solicitors and employees or officers of the client, however senior in the corporate hierarchy, who do not fall within that description will not be subject to legal advice privilege.
…
72. Mr Lissack [counsel for ENRC] relied on the way in which the judgment in the Three Rivers (No. 5) case was interpreted by the Court of Appeal of Singapore in the case of Skandinaviska Enskilda Banken AB (Publ) v Asia Pacific Breweries (Singapore) Pte Ltd [2007] 2 SLR 367, [2007] SGCA 9 [the “ Enskilda Bank case”] …
…
81. In [ In Re RBS Rights Issue Litigation [2016] EWHC 3161 (Ch) (“ RBS ”)] … Hildyard J concluded … that the decision in Three Rivers (No. 5) was based on principles of general application, which … remain binding law in England and Wales. He said, and I agree, that this was confirmed by the way that the decision was attacked by counsel and analysed by the House of Lords in Three Rivers (No. 6) [ Three Rivers District Council and Others v. Governor and Company of the Bank of England (No. 6) [2004] UKHL 48 (“ Three Rivers (No. 6) ”)].
…
…
…
“97. In my judgment, the approach taken by Warren J [in Stax Claimants v. Bank of Nova Scotia Channel Islands Ltd [2007] EWHC 1153 (Ch)] and Hildyard J [in RBS ] is right, and the protection afforded to lawyers’ working papers is justified if, and only if, they would betray the tenor of the legal advice. A verbatim note of what the solicitor was told by a prospective witness is not, without more, a privileged document just because the solicitor has interviewed the witness with a view to using the information that the witness provides as a basis for advising his client. In other words, the client cannot obtain the protection of legal advice privilege over interview notes that would not be privileged if he interviewed the witness himself, or got a third party to do so, simply because he procured his lawyer to interview the witness instead.”
“102. … There is no evidence that in the period from the date of the Camrose acquisition in 2010 to around early April 2011, even whilst the litigation with First Quantum was being fought in the full glare of publicity, anyone at ENRC feared that any such investigation into the African acquisitions would uncover evidence of any behaviour by ENRC that could come anywhere near crossing the threshold for a prosecution to be initiated, still less evidence that such a prosecution was reasonably in contemplation.
…
…
…
“129. Between 26 September 2011 and March 2013 there were over 30 meetings and discussions between ENRC and/or Dechert and the SFO, during which Mr Gerrard and Mr Ehrensberger, among others, repeatedly assured the SFO that ENRC was committed to engaging openly with the SFO and giving them its full co-operation, and that they had a mandate from ENRC’s Board to do so. There were three major presentations to the SFO in Dechert’s offices, on 5 March 2012, 20 July 2012 and 28 November 2012, mainly focusing on Kazakhstan. There is evidence that the report into Kazakhstan was reviewed by Addleshaws for some considerable period before it was submitted to the SFO in December 2012. However, the SFO was never told about the results of Dechert’s investigations into ENRC’s African acquisitions.
…
“147. Although it would be possible, with the benefit of hindsight, to put a less charitable interpretation on ENRC’s behaviour during the period of dialogue with the SFO, no evidence has been adduced to support the thesis that ENRC and Mr Gerrard were pretending to engage in the self-reporting process to keep the SFO at bay … I will therefore approach the claim for LPP on the basis that ENRC and Mr Gerrard were acting in good faith throughout, and that they meant what they said when they repeatedly assured the SFO of their willingness to co-operate fully and to share the results of their internal investigations with them.
“149. Adopting the test in United States of America v Philip Morris Inc [2003] EWHC 3028 (Comm) [“ Philip Morris HC ”], ENRC must establish that, as at 19 August 2011 [which the judge had said at paragraph 131 was “the latest date at which, on ENRC’s pleaded case, criminal litigation was reasonably in prospect”], it was “aware of circumstances which rendered litigation between itself and the SFO a real likelihood rather than a mere possibility”. In my judgment, the claim for litigation privilege falls at the first hurdle because ENRC is unable to satisfy that test; but even if a prosecution had been reasonably in contemplation, the documents for which litigation privilege is claimed were not created with the dominant purpose of being used in the conduct of such litigation (which expression includes obtaining legal advice pertaining to the conduct of such litigation).
…
…
…
…
“177. The short answer to the alternative claim for legal advice privilege in respect of documents in Category 1 is that there is no evidence that any of the persons interviewed … were authorised to seek and receive legal advice on behalf of ENRC, and the communications between those individuals and Dechert were not communications in the course of conveying instructions to Dechert on behalf of the corporate client. The evidence gathered by Dechert during its investigations was intended by ENRC to be used to compile presentations to the SFO as part of what it viewed as its engagement in the self-reporting process. If and to the extent that it was also intended by ENRC to take legal advice on the fruits of Dechert’s investigations, and that was one purpose of making the interview notes, the documents formed part of the preparatory work of compiling information for the purpose of enabling the corporate client to seek and receive legal advice, and are not privileged.
178. … A claim for privilege over lawyers’ working papers will only succeed if the documents would betray the trend of the legal advice. That cannot be the case here, because on the evidence, the documents are merely notes of what the lawyers were told by the witnesses …
…
187. … I find that ENRC has made out its claim for privilege over the five Category 3 documents.
190. The objective evidence … establishes that Mr Ehrensberger was engaged by ENRC at the time of these communications not as a lawyer but as a “man of business”, with the effect that legal advice privilege did not attach to communications of this nature, even if legal advice was being sought and was given in the exchange. Mr Ehrensberger may well have felt that he was acting as a lawyer for most of the time that he was the head of M&A, because M&A work will often have a legal dimension … But that is not good enough for privilege to attach to the emails; at the time of this exchange, his professional duty was not to act as a legal adviser to ENRC. If the person sending the information to Mr Ehrensberger had wanted privileged legal advice he should have sent it to General Counsel. These documents are not privileged.”
The issues requiring determination
Litigation privilege
i) Issue 1: Was the judge right to determine that, at no stage before all the Documents had been created, criminal legal proceedings against ENRC or its subsidiaries or their employees were reasonably in contemplation?
ii) Issue 2: Was the judge right to determine that none of the Documents was brought into existence for the dominant purpose of resisting contemplated criminal proceedings against ENRC or its subsidiaries or their employees?
iii) Issue 3: In the circumstances, which if any of the Category 1, 2 or 4 documents are protected by litigation privilege?
Legal advice privilege
iv) Issue 4: What did Three Rivers (No. 5) actually decide?
v) Issue 5: Does a claim for legal advice privilege require the proponent to show that the information was obtained for the dominant purpose of obtaining legal advice?
vi) Issue 6: Was the judge right to conclude that none of the Documents was protected by legal advice privilege on the basis:
a) that the information they contained was not communicated to ENRC’s solicitor by anyone authorised to give or receive legal advice on behalf of ENRC or its subsidiaries?
b) that the information they contained was not communicated to ENRC’s solicitor for the purpose of obtaining legal advice, but rather for the purposes of that solicitor’s investigation of the facts?
c) that there was overwhelming evidence that ENRC had always intended and/or agreed to share the information they contained with the SFO as part of a self-reporting process?
vii) Issue 7: Are the answers to issue 6 above different if the employees in question are ex-employees at the time that the information is imparted?
viii) Issue 8: Was the judge right to hold that lawyers’ working papers are only protected by legal advice privilege if they would betray the tenor of the legal advice?
ix) Issue 9: If not, was the judge right to deny any or all of the Documents the benefit of legal advice privilege as lawyers’ working papers?
The basic parameters of legal professional privilege
62. In Regina v. Central Criminal Court Ex parte Francis & Francis [1989] 1 AC 346, [2] the House of Lords approved the principle that the various statutory definitions of legal professional privilege accurately reflected the common law. The parties agreed that the definition in section 10(1) of the Police and Criminal Evidence Act 1984 provided an appropriate example of this definition, as follows:-
“(1) Subject to subsection (2) below, in this Act “items subject to legal privilege” means—
(a) communications between a professional legal adviser and his client or any person representing his client made in connection with the giving of legal advice to the client;
(b) communications between a professional legal adviser and his client or any person representing his client or between such an adviser or his client or any such representative and any other person made in connection with or in contemplation of legal proceedings and for the purposes of such proceedings …”
63. The House of Lords in Three Rivers (No. 6) dealt with the submission that no fundamental distinction should be drawn between communications in connection with litigation and other communications (see Lord Carswell at paragraph 103). The House rejected that contention, accepting instead that “the cases establish[ed] that, so far from legal advice privilege being an outgrowth and extension of litigation privilege, legal professional privilege is a single integral privilege, whose sub-heads are legal advice privilege and litigation privilege, and that it is litigation privilege which is restricted to proceedings in a court of law in the manner which the authorities show” (Lord Carswell at paragraph 105), and “there is substantial force in the Law Society’s submissions, and a well-founded case has been made out for the retention of legal advice privilege in its present form” (paragraph 106). Legal advice privilege and litigation privilege, therefore, have different characteristics.
64. The requirements for litigation privilege were as stated by Lord Carswell in Three Rivers (No. 6) at paragraph 102 as follows:-
“ communications between parties or their solicitors and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation are privileged, but only when the following conditions are satisfied:
(a) litigation must be in progress or in contemplation;
(b) the communications must have been made for the sole or dominant purpose of conducting that litigation;
(c) the litigation must be adversarial, not investigative or inquisitorial.”
65. The elements of legal advice privilege, which was first recognised in Greenough v. Gaskell (1833) 1 My & K 98, are also set out in Lord Carswell’s speech in Three Rivers (No. 6) at paragraph 111 as follows:
“… After examining the authorities in detail, Taylor LJ said, at p 330 [in Balabel v Air India [1988] Ch 317 (“ Balabel ”)]:
“Although originally confined to advice regarding litigation, the privilege was extended to non-litigious business. Nevertheless, despite that extension, the purpose and scope of the privilege is still to enable legal advice to be sought and given in confidence. In my judgment, therefore, the test is whether the communication or other document was made confidentially for the purposes of legal advice. Those purposes have to be construed broadly. Privilege obviously attaches to a document conveying legal advice from solicitor to client and to a specific request from the client for such advice. But it does not follow that all other communications between them lack privilege. In most solicitor and client relationships, especially where a transaction involves protracted dealings, advice may be required or appropriate on matters great or small at various stages. There will be a continuum of communication and meetings between the solicitor and client ... Where information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach. A letter from the client containing information may end with such words as ‘please advise me what I should do’. But, even if it does not, there will usually be implied in the relationship an overall expectation that the solicitor will at each stage, whether asked specifically or not, tender appropriate advice. Moreover, legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context .”
In a later passage, at pp 331-332, relied upon by the Court of Appeal [2004] QB 916 as support for its conclusions Taylor LJ stated:
“It follows from this analysis that those dicta in the decided cases which appear to extend privilege without limit to all solicitor and client communications upon matters within the ordinary business of a solicitor and referable to that relationship are too wide. It may be that the broad terms used in the earlier cases reflect the restricted range of solicitors’ activities at the time. Their role then would have been confined for the most part to that of lawyer and would not have extended to business adviser or man of affairs. To speak therefore of matters ‘within the ordinary business of a solicitor’ would in practice usually have meant the giving of advice and assistance of a specifically legal nature. But the range of assistance given by solicitors to their clients and of activities carried out on their behalf has greatly broadened in recent times and is still developing. Hence the need to re-examine the scope of legal professional privilege and keep it within justifiable bounds.”
I agree with the view expressed by Colman J in Nederlandse Reassurantie Groep Holding NV v Bacon & Woodrow Holding [1995] 1 All ER 976, 982 that the statement of the law in [ Balabel ] does not disturb or modify the principle affirmed in Minter v Priest [1929] 1 KB 655, that all communications between a solicitor and his client relating to a transaction in which the solicitor has been instructed for the purpose of obtaining legal advice will be privileged, notwithstanding that they do not contain advice on matters of law or construction, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser of his client.”
A brief resumé of Three Rivers (No. 5) and Three Rivers (No. 6)
Three Rivers (No. 5)
69. The Court of Appeal was considering four categories of documents as follows:-
i) Documents prepared by Bank employees, which were intended to be sent to and were in fact sent to Freshfields;
ii) Documents prepared by Bank employees with the dominant purpose of the Bank’s obtaining legal advice but not, in fact, sent to Freshfields;
iii) Documents prepared by Bank employees, without the dominant purpose of obtaining legal advice, but in fact sent to Freshfields; and
iv) Documents prepared by ex-employees of the Bank.
72. Longmore LJ made a detailed analysis of the history of legal professional privilege by reference to the 19 th century cases. It is not necessary to track that history in this judgment. It suffices to say that he concluded with a detailed reference to the Court of Appeal’s decision in Wheeler v. Le Marchant (1881) 17 Ch D 675 (“ Wheeler v. Le Marchant ”), which he said was “a case of legal advice privilege”, and that “[i]n that context it was held that documents obtained from a third party to be shown to a solicitor for his advice did not fall within the privilege …”.
“It is said that as communications between a client and his legal advisers for the purpose of obtaining legal advice are privileged, therefore any communication between the representatives of the client and the solicitor must be also privileged. That is a fallacious use of the word ‘representatives’. If the representative is a person employed as an agent on the part of the client to obtain the legal advice of the solicitor, of course he stands in exactly the same position as the client as regards protection, and his communications with the solicitor stand in the same position as the communications of his principal with the solicitor. But these persons were not representatives in that sense. They were representatives in this sense, that they were employed on behalf of the clients, the defendants, to do certain work, but that work was not the communicating with the solicitor to obtain legal advice. So their communications cannot be protected on the ground that they are communications between the client by his representatives and the solicitor. In fact, the contention of the [Banks] comes to this, that all communications between a solicitor and a third person in the course of his advising his client are to be protected. It was conceded there was no case that went that length, and the question is whether, in order fully to develop the principle with all its reasonable consequences, we ought to protect such documents. Hitherto such communications have only been protected when they have been in contemplation of some litigation, or for the purpose of giving advice or obtaining evidence with reference to it. And that is reasonable, because then the solicitor is preparing for the defence or for bringing the action, and all communications he makes for that purpose, and the communications made to him for the purpose of giving him the information, are, in fact, the brief in the action, and ought to be protected. But here we are asked to extend the principle to a very different class of cases, and it is not necessary, in order to enable persons freely to communicate with their solicitors and obtain their legal advice, that any privilege should be extended to communications such as these”.
74. Longmore LJ concluded from that passage that:-
“Here Cotton LJ, unlike in his judgment in [ Southwark and Vauxhall Water Co v Quick (1878) 3 QBD 315 (“Southwark”)], considers each of the two categories of legal professional privilege and decides in terms that the documents in question do not fall within the first category because they are not communications between solicitor and client and not within the second category because litigation is not contemplated. This case thus makes clear that legal advice privilege does not extend to documents obtained from third parties to be shown to a solicitor for advice”.
“… the passage cited from Anderson’s case (1876) 2 Ch D 644 [“ Anderson ”] shows that information from an employee stands in the same position as information from an independent agent. It may, moreover, be a mere matter of chance whether a solicitor, in a legal advice privilege case, gets his information from an employee or an agent or other third party. It may also be problematical, in some cases, to decide whether any given individual is an employee or an agent and undesirable that the presence or absence of privilege should depend upon the answer”.
“These two citations show that information given by an employee to an employer or fellow-employee, or information given by an agent to a principal, stands in the same condition as matters known to the client and does not, of itself, attract privilege in the first of Mellish LJ’s two categories. This is so even though, on the facts, it is intended that it be shown to a solicitor”.
79. Longmore LJ’s first conclusion on legal advice privilege is at paragraph 21 as follows:-
“ We, therefore, conclude that the 19 th century authorities established that legal advice privilege was a well-established category of legal professional privilege, but that such privilege could not be claimed for documents other than those passing between the client and his legal advisers and evidence of the contents of such communications. …”
“We therefore conclude that the Bank is not entitled to privilege in any of the four categories itemised at the beginning of this judgment. Mr Stadlen asked what the position would be if the Governor himself had noted down what he remembered in relation to the supervision of BCCI with the intention of giving it to the BIU for transmission to Freshfields. No privilege has been claimed for any such specific document but, as it seems to us, Mr Pollock [counsel for the claimants] was right to say that on the evidence before the court, the BIU, which was established to deal with inquiries and to seek and receive Freshfields’ advice, is for the purpose of this application, the client rather than any single officer however eminent he or she may be. It follows that no separate consideration need be given to the position of ex-employees who are, obviously, in no better position for the purpose of any claim to privilege”.
Three Rivers (No. 6)
83. Lord Scott said the following:-
“20. … The Bank plainly believe that the Court of Appeal order in Three Rivers (No 5) went too far. But the Bank’s petition for leave to appeal was refused and this is not an appeal against that order. Moreover the Bank has discharged the disclosure obligation required by that order. However, the narrow scope allowed by the Court of Appeal in the judgment now under appeal to “legal advice” has heightened the concerns of many about the approach to legal advice privilege inherent in the first Court of Appeal judgment. This explains in part the applications for leave to intervene in this appeal made by the Attorney General, by the Law Society and by the Bar Council. Each has been given leave to intervene …
…
84. Lord Carswell said the following on the same point:-
…
The litigation privilege issues
Issue 1: Was the judge right to determine that, at no stage before all the Documents had been created, criminal legal proceedings against ENRC or its subsidiaries or their employees were reasonably in contemplation?
87. In addition to its factual arguments, ENRC contended that:-
i) The judge wrongly failed to hold that the SFO investigation, which she had correctly found was under way by no later than 11 th August 2011, was properly to be regarded as adversarial litigation (see, for example, Tesco v. Office of Fair Trading [2012] CAT 6 at paragraph 44, and Re L (A Minor) [1997] 1 AC 16 at pages 26-27).
ii) The judge misunderstood that, once an SFO criminal investigation was reasonably in contemplation, so was a criminal prosecution (see Brooke LJ at paragraph 66 in United States of America v. Philip Morris [2004] EWCA Civ 330 (“ Philip Morris CA ”), Millett J at pages 454a-b in Plummers v. Debenhams [1986] BCLC 447, and Westminster International BV v. Dornoch [2009] EWCA Civ 1323 (“ Dornoch ”) per Etherton LJ at paragraphs 25-31).
iii) Even though a party anticipating litigation may need to establish further facts before it can say with certainty that proceedings are likely, that does not prevent that party satisfying the test that litigation is a real prospect ( Dornoch supra , and Axa Seguros v. Allianz Insurance plc [2011] EWHC 268 (Comm) at paragraph 43 per Christopher Clarke J).
iv) The judge’s distinction between criminal and civil proceedings failed to take account of the authorities already mentioned and the fact that the Guidelines show that a party may have a reasonable fear of prosecution even if it does not yet have concrete evidence of its own wrongdoing.
88. This aspect of the appeal is, in our judgment, primarily factual, but the judge did not see ENRC’s witnesses cross-examined. In these circumstances, it seems to us that the Court of Appeal could, in theory at least, be in as good a position as the judge to evaluate the facts (see Assicurazioni Generali SpA v. Arab Insurance Group (Practice Note) [2002] EWCA Civ 1642 per Clarke LJ at paragraphs 14-16, and Datec Electronic Holdings Ltd v. UPS Ltd [2007] UKHL 23 per Lord Mance at paragraphs 45-50).
89. We have taken full account also of the recent dicta of this court in paragraph 29 of Sales LJ’s judgment in Smech Properties Ltd v. Runnymede BC [2016] EWCA Civ 42, [2016] J.P.L. 677 approved in Regina (Bowen) v. Secretary of State for Justice [2017] EWCA Civ 2181, [2018] 1 WLR 2170 at paragraphs 70-73 per McCombe LJ. Sales LJ said this:-
“… Where an appeal is to proceed, like this one, by way of a review of the judgment below rather than a re-hearing, it will often be appropriate for this court to give weight to the assessment of the facts made by the judge below, even where that assessment has been made on the basis of written evidence which is also available to this court. The weight to be given to the judge’s own assessment will vary depending on the circumstances of each particular case, the nature of the finding or factual assessment which has been made and the nature and range of evidential materials bearing upon it. Often a judge will make a factual assessment by taking into account expressly or implicitly a range of written evidence and making an overall evaluation of what it shows. Even if this court might disagree if it approached the matter afresh for itself on a re-hearing, it does not follow that the judge lacked legitimate and proper grounds for making her own assessment and hence it does not follow that it can be said that her decision was “wrong”.”
i) In December 2010, ENRC received the whistle-blower email alleging corruption and financial wrongdoing within SSGPO and appointed DLA Piper to investigate the allegations.
ii) By March 2011, ENRC’s general counsel had made clear that he thought from his GC100 contacts that ENRC was firmly on the SFO’s radar and that he expected an investigation in due course, which was why he had “upgraded [ENRC’s] dawn raid procedures”.
iii) In April 2011, ENRC’s head of compliance predicted an “SFO dawn raid … before summer’s over”.
iv) In April 2011, Mr Gerrard wrote to Mr Barker saying that the “internal investigation at SSGPO [related] to conduct that is potentially criminal in nature” and that “[a]dversarial proceedings might occur out of the internal investigation and, in our view, both criminal and civil proceedings can be reasonably said to be in contemplation”.
v) When the SFO finally wrote to ENRC on 10 th August 2011, it said that the SFO was not carrying out a criminal investigation at that stage, but asked that ENRC consider the Guidelines carefully.
vi) The Guidelines expressly said that: “ no prosecutor can ever give an unconditional guarantee that there will not be a prosecution”; “professional advisers will have a key role”; any information received by the SFO would be for the purposes of its powers under the CJA 1987; wherever possible, the investigation would be carried out by the “corporate’s” own professional advisers; and participation in the self-reporting process would increase “the prospect (in appropriate cases) of a civil rather than a criminal outcome” by reducing the likelihood that the SFO would discover corruption itself .
vii) On 22 nd September 2011, Jones Day advised ENRC that, if it engaged in the voluntary disclosure regime, it would lose privilege in relation to the documents that it provided to the SFO. What is notable about this memorandum is the assumption at that time that legal professional privilege would otherwise attach to those documents.
viii) At the first meeting between ENRC and the SFO on 3 rd October 2011, the SFO said that could give no assurance that it would not prosecute.
ix) On 18 th June 2012, the SFO met ENRC and expressed concern at the absence of a report, saying that “[i]f the investigation had stalled or been obstructed this would be regarded very negatively. For a civil settlement to be entertained, it was essential that the investigation findings were disclosed in the near future”.
x) On 12 th December 2012, Dechert wrote to the SFO mentioning legal professional privilege and asking for confirmation that “if an equitable settlement [were not] reached between the SFO and ENRC, … that it [was] accepted that the report [would] not be used by the SFO as evidence of any wrongdoing or in any criminal proceedings against either ENRC, any subsidiary of ENRC or any employee or director of ENRC or its subsidiaries”. The reply gave no such assurances.
100. These conclusions are not, we think, invalidated by the Court of Appeal Criminal Division’s decision in R (for and on behalf of the Health and Safety Executive) v. Paul Jukes [2018] Lloyd’s Rep FC 157, [2018] EWCA Crim 176. In that case, the defendant had signed a statement shortly after a fatal industrial accident accepting that he was responsible for the company’s health and safety. The Court of Appeal (Flaux LJ, Nicola Davies J and HHJ Bidder QC) upheld the judge’s decision that the statement was not covered by litigation privilege, because criminal proceedings were not in contemplation, and any privilege would anyway have attached to the company, which had not asserted it. The Court did approve paragraphs 160-161 of Andrews J’s judgment, but did so having decided that no adversarial litigation was in progress when the statement was made to the company, because matters were still at an investigatory stage. That was a decision on the facts, where the defendant had not been interviewed by the Health and Safety Executive and the police until 16 months after the statement. The approval of Andrews J’s approach was, in our view, obiter. For the reasons we have given, Andrews J was not right to suggest a general principle that litigation privilege cannot attach until either a defendant knows the full details of what is likely to be unearthed or a decision to prosecute has been taken. The fact that a formal investigation has not commenced will be one part of the factual matrix, but will not necessarily be determinative.
Issue 2: Was the judge right to determine that none of the Documents was brought into existence for the dominant purpose of resisting contemplated criminal proceedings against ENRC or its subsidiaries or their employees?
“It appears to me that unless the purpose of submission to the legal adviser in view of litigation is at least the dominant purpose for which the relevant document was prepared, the reasons which require privilege to be extended to it cannot apply.”
“What, then, was the purpose of the reports? The learned judge found a duality of purpose because, he said, the insurers wanted not only to obtain the advice of their solicitors, but also wanted to ascertain the cause of the fire. Now, for my part, I find these two quite inseparable. The insurers were not seeking the cause of the fire as a matter of academic interest in spontaneous combustion. Their purpose in instigating the enquiries can only be determined by asking why they needed to find out the cause of the fire. And the only reason that can be ascribed to them is that of ascertaining whether, as they suspected, it had been fraudulently started by the insured. It was entirely clear that, if the claim was persisted in and if it was resisted, litigation would inevitably follow. The claim had been made and there was no indication that it was not going to be pressed, particularly after Mr MR’s acquittal. It is, as it seems to me, entirely unrealistic to attribute to the insurers an intention to make up their minds independently of the advice, which they received from their solicitors, that the claim should or should not be resisted. Whether they paid or not depended on the legal advice which they received, and the reports were prepared in order to enable that advice to be given. The advice given would necessarily determine their decision and would also necessarily determine whether the anticipated litigation would or would not take place. The learned judge (I have already quoted this passage from his judgment) said ([1983] BCLC 137 at 148):
‘In my view, the reports were commissioned for two purposes: (a) to enable Phoenix to make up its mind about whether to resist the insurance claim on the ground that the fire was or was probably caused by the insured and (b) to place evidence of the cause of the fire in the hands of the solicitors if the reports should suggest with some probability that the fire was caused by the insured.’
He seems here, as I read his judgment, at this point to have been of the opinion that Waugh established that it was only if the documents were brought into existence for the dominant purpose of actually being used as evidence in the anticipated proceedings that privilege could attach and that the purpose of taking advice on whether or not to litigate (which is, in substance, what the decision to resist the claim amounted to) was some separate purpose which did not qualify for privilege. That, in my judgment, is to confine litigation privilege within too narrow bounds and it reproduces what I believe to be the fallacy inherent in the note in the Supreme Court Practice to which I have referred. No doubt the purpose was ‘dual’ in the sense that the documents might well serve both to inform the solicitors and as proofs of evidence if proceedings materialised. But, in my judgment, the learned judge failed to appreciate that the former purpose was itself one which would cause the privilege to attach.”
105. Similarly, in Bilta (UK) Limited (in liquidation) v. Royal Bank of Scotland [2017] EWHC 3535 (Ch) (“ Bilta ”), the Chancellor concluded that RBS was not spending large sums on legal fees for the primary purpose of dissuading HMRC from issuing an assessment against it, if that could even properly be regarded as a purpose distinct from the litigation purpose.
“The instant case is not, in my judgment, on all fours … with [ Waugh ]. In … [ Waugh ] the documents in question would, in any event, have had to be produced for the Board’s internal purposes in connection with railway safety. Those seem to me to be quite different circumstances from those of the instant case where there was no purpose for bringing the documents into being other than that of obtaining the professional legal advice which would lead to a decision whether or not to litigate …
… it seems incontrovertible on the facts of this case that the insurers had very early and very justifiably formed the view that litigation was probable and that Mr Speyer’s further advice would be required to enable them to present their solicitors with the full material required to enable them to give proper advice on the insurers’ future conduct in relation to the claim.
For my part, therefore, I would hold that the specific documents sought by the liquidator are, in the circumstances of this case, the subject matter of privilege. I emphasise the words ‘in the circumstances of this case’ for it is, I think, clear from [ Waugh ] that, whenever the question arises, the court is concerned to determine the actual intention of the party claiming privilege and, where it discerns a duality of purpose, to determine what is the dominant purpose.”
“9. ENRC originally instructed [DLA Piper] … and subsequently Dechert … to investigate allegations of wrongdoing at ENRC’s subsidiary, SSGPO, in Kazakhstan. That investigation had nothing to do with the SFO, but was initiated by ENRC’s Audit Committee for corporate governance reasons …
10. The need to investigate serious wrongdoing by the management of ENRC and its subsidiaries remained a key motivation for retaining the Defendants independent of the self-reporting process with the SFO …
83. … (2) … The risk of UK criminal investigations or proceedings was not a material factor in ENRC’s decision to instruct Dechert to investigate the Kazakhstan Allegations …”.
i) The Guidelines themselves, which the SFO sent to ENRC at the outset, gave the clear impression that the self-reporting “corporate” would be in receipt of professional legal advice, both before and during the process.
ii) On 7 th October 2011, four days after the first meeting between ENRC and the SFO, an internal SFO email recorded that Mr Gerrard had said that ENRC would make a voluntary disclosure the following week. In fact, it never did so.
iii) The note of the second meeting between the SFO and ENRC on 30 th November 2011 recorded that ENRC was “keen to tackle the issue and be full and frank”. This frankness never totally materialised.
iv) The note of the third meeting between ENRC and the SFO on 20 th December 2011 recorded that Mr Ehrensberger had been “been given a mandate to disclose [to the SFO] anything he feels appropriate”. Again, this did not happen.
v) At the fifth meeting on 10 th May 2012, Mr Dalman informed the SFO of the ENRC board’s commitment to transparency, co-operation and openness, but the SFO expressed concern that progress had been slow and that nothing substantive had yet been reported by ENRC to the SFO.
vi) The note of the 18 th June 2012 meeting recorded the SFO as saying that “[f]or a civil settlement to be entertained, it was essential that the investigation findings were disclosed in the near future”. It does not appear that, at least at that stage, even the SFO was expecting voluntary disclosure of all Dechert’s work product.
vii) The PowerPoint presentations of 20 th July 2012 and 28 th November 2012 gave the SFO detailed updates on the progress of the interviews and investigations, and confirmed ENRC’s “commitment to [a] full and frank process”, but did not actually disclose either concrete results or statements of any sort.
viii) On 12 th December 2012, Dechert wrote to the SFO suggesting for the first time that it was engaged in a self-reporting process pursuant to the Guidelines, and asking, given the withdrawal of the Guidelines on 9 th October 2012, for “confirmation that ENRC is still part of the corporate self-reporting process prior to Dechert submitting our report on SSGPO”. ENRC also said that: “[a]ny report submitted by Dechert to the SFO will be submitted under a limited waiver of legal professional privilege for the purposes of the corporate self report only”. Whilst it is true, as the SFO submitted, that one could conclude from this document that self-reporting had begun at some stage between August 2011 and December 2012, in fact, Dechert and ENRC had promised nothing in relation to the interview notes and lawyers’ work product. Moreover, after this stage, Dechert was expressly asserting legal professional privilege, and even the 28 th February 2013 disclosure of Dechert’s report on the Kazakhstan investigation was the subject of a specific waiver of legal professional privilege.
114. The same can be said of the FRA documents in Categories 2 and 4. The books and records review was commissioned at around the same time as the Dechert investigation, and FRA’s work formed part of that investigation from, at the latest, 15 th July 2011 (when FRA was formally instructed by Dechert). The judge’s conclusion that the dominant purpose of the review was compliance and remediation (which itself might have been intended to avoid or deal with litigation) sits uncomfortably with that background, and is also in stark contrast to the evidence of Messrs Duthie and Spendlove. In our judgment, the judge failed to adequately explain at paragraphs 173-176 why she rejected that evidence. She did not specify any of the “wealth of contemporaneous documents” that she said supported her conclusion. She seemed to rely mainly on the absence of contemporaneous evidence pointing in the opposite direction, even though ENRC’s submission, which she recorded at paragraph 174, [3] provided a plausible explanation for the absence of such evidence. In those circumstances, her conclusion cannot stand.
Issue 3: In the circumstances, which if any of the Category 1, 2 or 4 documents are protected by litigation privilege?
The legal advice privilege issues
Issue 4: What did Three Rivers (No. 5) actually decide?
“28. So I must now come to policy. Why is it that the law has afforded this special privilege to communications between lawyers and their clients that it has denied to all other confidential communications? In relation to all other confidential communications, whether between doctor and patient, accountant and client, husband and wife, parent and child, priest and penitent, the common law recognises the confidentiality of the communication, will protect the confidentiality up to a point, but declines to allow the communication the absolute protection allowed to communications between lawyer and client giving or seeking legal advice. In relation to all these other confidential communications the law requires the public interest in the preservation of confidences and the private interest of the parties in maintaining the confidentiality of their communications to be balanced against the administration of justice reasons for requiring disclosure of the confidential material. There is a strong public interest that in criminal cases the innocent should be acquitted and the guilty convicted, that in civil cases the claimant should succeed if he is entitled to do so and should fail if he is not, that every trial should be a fair trial and that to provide the best chance of these desiderata being achieved all relevant material should be available to be taken into account. These are the administration of justice reasons to be placed in the balance. They will usually prevail. …
30. The second sentence of the cited passage [from Three Rivers (No. 6) in the Court of Appeal] does, however, pose a question of great relevance to this appeal. It questions the justification for legal advice privilege where the legal advice has no connection with adversarial litigation. A number of cases in our own jurisdiction and in other common law jurisdictions have sought to answer the question. In R v Derby Magistrates’ Court, Ex p B [1996] AC 487, Lord Taylor of Gosforth CJ said, at pp 507, 508:
“In [ Balabel ] the basic principle justifying legal professional privilege was again said to be that a client should be able to obtain legal advice in confidence. The principle which runs through all these cases ... is that a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent ... once any exception to the general rule is allowed, the client’s confidence is necessarily lost.”
In R (Morgan Grenfell & Co Ltd) v Special Comr of Income Tax [2003] 1 AC 563, 607, para 7 Lord Hoffmann referred to legal professional privilege as “a necessary corollary of the right of any person to obtain skilled advice about the law” and continued:
“Such advice cannot be effectively obtained unless the client is able to put all the facts before the adviser without fear that they may afterwards be disclosed and used to his prejudice.””
126. Lord Scott also referred to passages to a similar effect in B v. Auckland District Law Society [2003] 2 AC 736 at paragraph 47 per Lord Millett, in Upjohn Co v. United States (1981) 449 US 383 per Justice Rehnquist in the US Supreme Court, in Jones v. Smith [1999] 1 SCR 455 per the Supreme Court of Canada at pages 474-475, in Baker v. Campbell (1983) 153 CLR 52 per Murphy J and Wilson J in the High Court of Australia at pages 89 and 95 respectively, in Commissioner of Inland Revenue v. West-Walker [1954] NZLR 191, and in A M & S Europe Ltd v. Commission of the European Communities (Case 155/79) [1983] QB 878, EU:C:1982:157 at page 913 per Advocate General Slynn. He then concluded his section on the rationale for legal advice privilege with the following at paragraph 34:-
“None of these judicial dicta tie the justification for legal advice privilege to the conduct of litigation. They recognise that in the complex world in which we live there are a multitude of reasons why individuals, whether humble or powerful, or corporations, whether large or small, may need to seek the advice or assistance of lawyers in connection with their affairs; they recognise that the seeking and giving of this advice so that the clients may achieve an orderly arrangement of their affairs is strongly in the public interest; they recognise that in order for the advice to bring about that desirable result it is essential that the full and complete facts are placed before the lawyers who are to give it; and they recognise that unless the clients can be assured that what they tell their lawyers will not be disclosed by the lawyers without their (the clients’) consent, there will be cases in which the requisite candour will be absent. It is obviously true that in very many cases clients would have no inhibitions in providing their lawyers with all the facts and information the lawyers might need whether or not there were the absolute assurance of non-disclosure that the present law of privilege provides. But the dicta to which I have referred all have in common the idea that it is necessary in our society, a society in which the restraining and controlling framework is built upon a belief in the rule of law, that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers’ legal skills in the management of their (the clients') affairs, should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else (see also paras 15.8 to 15.10 of Zuckerman’s Civil Procedure (2003) where the author refers to the rationale underlying legal advice privilege as “the rule of law rationale”). I, for my part, subscribe to this idea. It justifies, in my opinion, the retention of legal advice privilege in our law, notwithstanding that as a result cases may sometimes have to be decided in ignorance of relevant probative material.”
128. We were referred specifically in this connection to a decision of the Singapore Court of Appeal in the Enskilda Bank case, where Andrew Phang Boon Leong JA held at paragraphs 41-42 that the ratio of Three Rivers (No. 5) was that only the BIU was authorised to communicate with the bank’s lawyers, and that “since a company can only act through its employees, communications made by [authorised employees] would be communications “made on behalf of the client”, and can attract legal advice privilege”. In addition, in Citic Pacific Ltd v. Secretary for Justice [2016] 1 HKC 157, the Hong Kong Court of Appeal (Lam VP, Barma JA and Poon J) concluded that a dominant purpose test in legal advice privilege was to be preferred to the narrow definition of the “client” adopted in Three Rivers (No. 5) (see paragraphs 39-56 in the judgment of the court, and paragraphs 53-55 in the context of large corporations).
Issue 5: Does a claim for legal advice privilege require the proponent to show that the information was obtained for the dominant purpose of obtaining legal advice?
131. The SFO submitted that it should in any event be held that, if information passed to a company’s lawyers by employees who were not authorised to seek and receive legal advice could be the subject of legal advice privilege, a further qualification should be added, namely that the information must be shown to have been obtained for the dominant purpose of obtaining legal advice. This, submitted Mr James Segan for the SFO, was established by a line of cases including, for example, The Sagheera [1997] 1 Lloyd’s Rep 160 per Rix J at page 168, Three Rivers (No. 5) [2003] CP Rep 34 at first instance per Tomlinson J at paragraphs 20, 21, 26 and 30, and Philip Morris CA per Brooke LJ at paragraphs 43 and 77.
Issue 6(a): Was the judge right to conclude that none of the Documents was protected by legal advice privilege on the basis that the information they contained was not communicated to ENRC’s solicitor by anyone authorised to give or receive legal advice on behalf of ENRC or its subsidiaries?
Issue 6(b): Was the judge right to conclude that none of the Documents was protected by legal advice privilege on the basis that the information they contained was not communicated to ENRC’s solicitor for the purpose of obtaining legal advice, but rather for the purposes of that solicitor’s investigation of the facts?
Issue 6(c): Was the judge right to conclude that none of the Documents was protected by legal advice privilege on the basis that there was overwhelming evidence that ENRC had always intended and/or agreed to share the information they obtained with the SFO as part of a self-reporting process ?
Issue 7: Are the answers to issue 6 above different if the employees in question are ex-employees at the time that the information is imparted?
139. In our judgment, information obtained from ex-employees falls into the same category as that obtained from third parties, which ENRC accepts cannot be held to be covered by legal advice privilege at this level. An ex-employee is in all respects equivalent to a third party, and however desirable it might be that information obtained from such a person should be covered by legal advice privilege, we do not think that that is, on any analysis, the current law. As the SFO submitted, the only authority emanates from the USA, where there are two cases pointing in different directions. [4]
Issue 8: Was the judge right to hold that lawyers’ working papers are only protected by legal advice privilege if they would betray the tenor of the legal advice?
Issue 9: If not, was the judge right to deny any or all of the Documents the benefit of legal advice privilege as lawyers’ working papers?
143. For the same reasons, it is not necessary to answer this question.
Conclusion
[1] As opposed to a criminal investigation, which she held was in reasonable contemplation by no later than 11 th August 2011 (see paragraph 151 of the judgment).
[2] See Lord Goff at pages 392G-393C and 395D-E, and Lord Griffiths at pages 384H-385A. Lord Brandon agreed with the outcome proposed by Lords Goff and Griffiths, but did not mention the point about the statute reflecting the common law .
[3] See paragraph 55 above.
[4] Newman v. Highland (2016) 188 Wn 2d 769 and Upjohn Company v. United States (1981) 449 US 383