It was common ground that communications between a party/ their solicitors and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation attract litigation privilege so long as
- The litigation is adversarial, not investigative or inquisitorial.
- Litigation is in progress or reasonably in contemplation.
- The communications are made with the sole or dominant purpose of conducting the litigation.
Litigation is adversarial
The High Court had held that criminal investigation by the SFO should not of itself be treated as adversarial litigation for litigation privilege purposes. The Court of Appeal did not specifically comment on this conclusion but it is clear from the judgment that it considers that adversarial litigation may – depending on the facts – be reasonably in prospect whether or not a formal SFO investigation has commenced or the SFO has been notified of the matter.
Litigation in contemplation
The High Court held that the reasonable contemplation or onset of a criminal investigation by the SFO did not necessarily equate to the reasonable contemplation of a prosecution. Further, the Judge took the view that even where allegations of criminal conduct were being investigated, prosecution only becomes a real possibility once it is discovered that there is some truth in the allegations.
The Court of Appeal rejected this approach, holding that the Judge had been wrong “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”. While the Court of Appeal cautioned that not every SFO manifestation of concern would properly be regarded as adversarial litigation, when the SFO specifically makes clear to a company the prospect of its criminal prosecution, and legal advisers are engaged to deal with that situation (as in the present case), there are clear grounds for contending that criminal prosecution is in reasonable contemplation. Further, they considered that whilst a party anticipating possible prosecution will often need to make further investigations before it can say with certainty that proceedings are likely, that uncertainty does not in itself prevent proceedings being in reasonable contemplation.
The Court of Appeal held that on the facts, litigation (i.e. an SFO prosecution) was in reasonable contemplation when the company initiated its internal investigation and certainly when it received a letter from the SFO in August 2011. Significantly, this was held to be so notwithstanding that the letter expressly stated that the SFO was not carrying out a criminal investigation at that stage but instead made reference to “recent intelligence & media reports concerning allegations of corruption and wrongdoing by [ENRC]” and urged the company to consider carefully the SFO’s 2009 Self-Reporting Guidelines whilst undertaking its internal investigations.
Dominant purpose test
At first instance, it was held that the primary purpose of the investigation was to find out if there was any truth in whistleblowing allegations and then to decide what to do if there was.
The Court of Appeal again rejected the High Court’s approach, holding that “where there is a clear threat of a criminal investigation, even at one remove from the specific risks posed by the SFO should it start an investigation, the reason for the investigation of … allegations must be brought into the zone where the dominant purpose may be to prevent or deal with litigation.” Indeed, the Court of Appeal stressed that nothing in the judgment should be taken to impact adversely on the operation of the Deferred Prosecution Agreements scheme set out in Schedule 17 of the Crime and Courts Act 2013, noting that it is obviously in the public interest that companies should be prepared to investigate allegations prior to going to a prosecutor without losing the benefit of legal professional privilege for the work product and consequences of their investigation. Were they to do so, the temptation might well be not to investigate at all.
Further, the Court commented that in both the civil and the criminal context, seeking to head off, avoid or even settle reasonably contemplated proceedings is as much protected by litigation privilege as resisting or defending such contemplated proceedings. This analysis reflects the approach in the earlier case of Bilta (in liquidation) v RBS  EWHC 3535 (Ch).2
Legal advice privilege
The High Court held the following to be correct
- The narrow definition of “client” per Three Rivers (No. 5), i.e. that only communications between lawyers and those individuals at the corporate client authorised to seek and receive legal advice on behalf of the corporate will be protected by legal advice privilege.
- The position taken in the RBS Litigation in relation to lawyers’ working papers, i.e. that legal advice privilege protection over lawyers’ working papers will only be justified if the working papers would betray the tenor of the legal advice.
Narrow definition of client
Notwithstanding extensive criticism of the Court of Appeal’s decision in Three Rivers (No. 5), the Court of Appeal in ENRC considered it could not ignore the Court of Appeal’s previous determination and held that the matter was for the Supreme Court to decide. The Court noted that English law is out of kilter with other common law jurisdictions on this point and stated that “had it been open to us to depart from Three Rivers (No. 5), we would have been in favour of doing so.”
Lawyers’ working papers
The Court of Appeal took the view that the question of whether lawyers’ working papers should be protected generally by legal advice privilege was a matter for the Supreme Court. In the meantime, legal advice privilege will only be justified if the working papers would betray the tenor of the legal advice (although there may be greater scope to argue that litigation privilege applies to such papers in light of ENRC).