This decision is perhaps of greater interest for the discussion on litigation privilege in the context of investigations – something which was not pleaded in the recent RBS litigation (dealing with the scope of legal advice privilege).
It was common ground that communications between parties or 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; and
- the communications are made with the sole or dominant purpose of conducting the anticipated litigation.
Adversarial litigation
The company argued that a criminal investigation by the SFO should be treated as adversarial litigation for litigation privilege purposes. The judge, however, rejected this argument as misconceived. The SFO has a dual function as investigator and prosecutor. An SFO investigation is only a preliminary step to uncover relevant facts before any decision to is taken to prosecute. At the investigation stage the process cannot be said to be adversarial. In the judge’s view, “[t]he policy that justifies litigation privilege does not extend to enabling a party to protect itself from having to disclose documents to an investigator”. There was even less reason for the court to hold that documents prepared as part of the internal investigation, before the SFO commenced its own investigation, could be protected by litigation privilege, since there was no evidence of the company expecting to find any incriminating material and it had previously promised to provide these to the SFO in the spirit of cooperation.
Litigation in contemplation
The judge recognised that the test as to when litigation can be said to be anticipated is “notoriously difficult to express in words”, but noted that the person seeking to claim litigation privilege must establish that it was aware of circumstances which rendered litigation between itself and the SFO a real likelihood rather than a mere possibility. The reasonable contemplation or onset of a criminal investigation by the SFO (which the judge held did not constitute adversarial litigation for litigation privilege purposes) did not necessarily equate to the reasonable contemplation of a prosecution: “[t]he investigation and the inception of a prosecution cannot be characterised as part and parcel of one continuous amorphous process … so that the reasonable expectation of the one necessarily involves the reasonable contemplation of the other”. 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. Here, there was no evidence that anyone at the company was ever aware – either before or after the SFO’s criminal investigation began – that a criminal offence had been committed. It could not therefore be said that anyone at the company reasonably contemplated litigation as a real likelihood rather than a mere possibility while the fact finding continued. A fear of prosecution on a “worst case scenario” was not enough to trigger litigation privilege.
Dominant purpose test
The judge went on to find that even if criminal proceedings were in reasonable contemplation, none of the documents in question were created for the dominant purpose of using in, or obtaining legal advice relating to the conduct of, such anticipated criminal proceedings. While the company argued that the dominant purpose of the documents was the obtaining of legal advice pertaining to the conduct of the anticipated criminal litigation, the judge was not persuaded that this was even a subsidiary purpose of the creation of the documents, let alone the dominant purpose. In the judge’s view, the primary purpose of the investigation was to find out if there was any truth in the allegations and then to decide what to do about it if there was. The dominant purpose of the accountants’ reports was to meet compliance requirements or to obtain accountancy advice on remedial steps as part and parcel of a comprehensive books and records review. On the evidence, the accountants’ engagement had little or nothing to do with the preparation of a defence to, or obtaining legal advice in respect of, prospective criminal litigation.
The judge also noted that any legal advice which was sought based on the outcome of the internal investigation would have been on how to minimise or avoid the risk of prosecution by the SFO, as opposed to on how to conduct a defence to a criminal investigation, and that avoidance of a criminal investigation cannot be equated with the conduct of a defence to a criminal prosecution for litigation privilege purposes. Although the judge conceded that it may be possible for documents to be generated for the dual purpose of assisting a company to persuade the SFO not to prosecute and also to help the company mount a defence to criminal proceedings if that failed, the judge held that the evidence in this case did not establish such a dual purpose, let alone that the latter purpose was the dominant one. The judge also added that documents created with the specific purpose or intention of showing them to the potential adversary in litigation are not subject to litigation privilege. Given that the company had committed to share the results of its internal investigation with the SFO, it could not, at the same time, claim litigation privilege over these materials.
For all of these reasons, the judge held that the claim to litigation privilege failed on all counts.
