Court proceedings

Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2017] EWHC 1017 (QB)

Documents created during criminal investigation not legally privileged

In December 2010, the defendant company (ENRC) received an email containing allegations of corruption and finical wrongdoing within its wholly-owned subsidiary. It instructed solicitors to investigate the allegations made. In August 2011, the Serious Fraud Office (the SFO) contacted the ENRC, stating that it was not carrying out a criminal investigation ‘at this stage’, but indicating that an investigation was being used as an incentive to co-operate. On 19 August, ENRC contemplated that there would be adversarial litigation. In April 2013, the SFO commenced an investigation into the ENRC’s affairs. As part of the investigation, the SFO exercised its powers, pursuant to section 2(3) of the Criminal Justice Act 1987, and issued notices against various entities and individuals, including ENRC, to compel the production of documents. ENRC contended that four categories of documents were subject to litigation privilege (LP), legal advice privilege (LAP), including lawyers’ work product (WP), or both. The first category comprised solicitors’ notes of the evidence given to them by individuals when asked about the events being investigated (category 1). The second category comprised materials generated by forensic accountants as part of books and records reviews, with a focus on identifying controls and systems weaknesses, and potential improvements (category 2). The third category comprised documents indicating or containing the factual evidence presented by a solicitor to ENRC’s committee and/or board (category 3). The fourth category comprised 17 documents sent to the SFO by solicitors (category 4). Fifteen of the documents comprised forensic accountants’ reports and emails or letters enclosing them, such that the claimants stood or fell with category 2. Two documents were email communications between ENRC officers, one a Swiss lawyer, asserted to record requests for, and the giving of, legal advice. The Director applied for a declaration that the documents were not subject to legal professional privilege.

The issues for determination were whether ENRC was entitled to resist production of the documents, or any of them, to the SFO on grounds of: (i) LP and (ii) LAP.

The court ruled:

(1) With respect to LP, the general trend had been towards strictly confining, rather than extending its ambit. It followed from the rationale underlying the privilege that, if a document was created with the express purpose of showing it to the prospective adversary, or with the intention or understanding that it would be shown to him, it could not be subject to LP. It might be subject to obligations of confidentiality, but they would arise for other reasons. LP did not extend to third-party documents created in order to obtain legal advice as to how best to avoid contemplated litigation, even if that entailed seeking to settle the dispute before proceedings were issued.

Further, a criminal investigation by the SFO should not be treated as adversarial litigation for LP purposes. An SFO investigation was a preliminary step taken, and generally completed, before any decision to prosecute was taken in accordance with published guidance after consideration of the results of the investigation. The policy that justified LP did not extend to enabling a party to protect itself from having to disclose documents to an investigator. Documents that were generated at a time when there was no more than a general apprehension of future litigation could not be protected by LP just because an investigation was, or was believed to be, imminent. The reasonable contemplation of a criminal investigation did not necessarily equate to the reasonable contemplation of a prosecution. The investigation and the inception of a prosecution could not be characterised as part and parcel of one continuous amorphous process, so that the reasonable expectation of the one necessarily involved the reasonable contemplation of the other. There might be cases in which an expectation of an investigation could be equated with a reasonable contemplation that the person with that expectation would be prosecuted, but that would depend on the facts. It was always possible that a prosecution might ensure, depending on what the investigation uncovered, but unless the person who anticipated the investigation was aware of circumstances that, once discovered, made a prosecution likely, it could not be established that, just because there was a real risk of an investigation, there was also a real risk of prosecution. The question whether the person anticipating a criminal investigation also contemplated that prosecution was likely, though not more likely than not, to follow the investigation, rather than just possible, therefore had to be considered on a case-by-case basis.

Whist a party did not need to have carried out a detailed investigation in order to appreciate that there was a problem which made criminal prosecution a realistic proposition, it would still be necessary to show that a party knew that there was a problem, regardless of what the investigation might uncover or, alternatively, that the problem emerged in the course of the investigation.

One critical difference between civil proceedings and a criminal prosecution was that there was no inhibition on the commencement of civil proceedings where there was no foundation for them, other than the prospect of sanctions being imposed after the event. Criminal proceedings could not be started unless and until the prosecutor was satisfied that there was a sufficient evidential basis for prosecution and the public interest test was also met. Criminal proceedings could not be reasonably contemplated unless the prospective defendant knew enough about what the investigation was likely to unearth, or had unearthed, to appreciate that it was realistic to expect a prosecutor to be satisfied that it had enough material to stand a good chance of securing a conviction (see [54], [58], [61], [150], [151], [154], [157], [160] of the judgment).

The claim for LP fell at the first hurdle because ENRC was unable to establish that it had been aware of circumstances which had rendered litigation between itself and the SFO a real likelihood, rather than a mere possibility. However, even if a prosecution had been reasonably in contemplation, the documents for which LP was claimed had not been created for the dominant purpose of being used in the conduct of such litigation, which included obtaining legal advice pertaining to the conduct of such litigation.

In particular, whilst ENRC had anticipated that an SFO investigation had been imminent, and that such an investigation had been reasonably in contemplation when the SFO’s letter had arrived, that was not enough to make out a claim for LP. Such an investigation was not adversarial litigation. There was no evidence that there had anything beyond unverified allegations. ENRC’s management might have feared that there might be a problem, depending on what the investigators turned up, but nothing concrete had materialised by 19 August 2011. The difficulty for ENRC was that there was no evidence that it had ever been aware that it had a problem which made criminal prosecution a real, rather than fanciful, prospect or of anything more tangible than a fear that one might emerge. The totality of the evidence established that criminal proceedings had not been in the reasonable contemplation of ENRC at any material time, including the whole period of dialogue between ENRC and the SFO.

Accordingly, none of the documents in categories 1 and 3 satisfied the test for LP. So far as category 2 and the forensic accountants’ documents in category 4 were concerned, the dominant purpose of the documents created by the forensic accountant had plainly been to meet compliance requirements or to obtain accountancy advice on remedial steps as part and parcel of the comprehensive books and records review. That had had little or nothing to do with the preparation of a defence to, or obtaining legal advice in respect of, prospective criminal litigation, and had primarily been focused upon compliance and re-mediation (see [149], [151], [155], [161], [163], [172], [173] of the judgment).

Westminster International BV v Dornoch Ltd [2009] All ER (D) 37 (Sep) distinguished; Wheeler v Le Marchant [1881-5] All ER Rep Ext 1807 applied; Waugh v British Railways Board [1979] 2 All ER 1169 applied; Plummers Ltd v Debenhams plc [1986] BCLC 447 applied; United States of America v Philip Morris Inc [2003] All ER (D) 191 (Dec) applied; Three Rivers District Council v Governor and Company of the Bank of England [2005] 4 All ER 948 applied; AXA Seguros SA De CV v Allianz Insurance plc (t/a Allianz Global Risks) [2011] All ER (D) 202 (Mar) applied; Grant v Downs (1976) 11 ALR 577 adopted.

(2) With respect to LAP, if the communication was between a client, or the client’s agent, and a lawyer for the purpose of obtaining legal advice in connection with anticipated litigation, it was covered by LAP, rather than LP. If the communication was between the lawyer and someone other than the client, it would only be subject to privilege if it satisfied the test for LP.

Authority did not support the contention that, as a matter of policy, where a lawyer was carrying out, or directing others to carry out, a fact-finding or evidence-gathering exercise in circumstances where litigation was not in contemplation, the fruits of his labours should be privileged from disclosure, independently of any communication of them by the lawyer to the client, simply because the purpose of the exercise was to enable advice to be given to the client.

Where the party asserting privilege was a corporate entity, LAP attached only to communications between the lawyer and those individuals who were 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 did not fall within that description would not be subject to LAP. It would be expected that the requisite authority to obtain legal advice on a company’s behalf would be vested in the board of directors, although they might delegate authority to another group or person. It might also be persuasively argued that the company’s in-house lawyers or general counsel would have the necessary authority, by virtue of their office, to seek and obtain legal advice from external lawyers on behalf of the company. Whether they, or any other individual employee or group of employees, had such authority in a given case was a question of fact to be determined on the evidence.

With respect to WP, as a sub-species of LAP, protection afforded to lawyers’ working papers was 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 was not, without more, a privileged document just because the solicitor had interviewed the witness with a view to using the information that the witness provided as a basis for advising his client. The client could not obtain the protection of LAP over interview notes that would not be privileged if he interviewed the witness himself, or had a third party do so, simply because he procured his lawyer to interview the witness instead. A document, such as a witness statement that would not be privileged if it had been created by a non-lawyer did not acquire a privileged status just because a lawyer had created it.

Information that would not ordinarily be privileged, even information which was already in the public domain, might fall under the umbrella of legal advice privilege if it was part and parcel of the continuum of confidential communication between lawyer and client whose purpose was the giving or receiving of legal advice (see [65], [67], [70], [92], [97], [178], [182] of the judgment).

The short answer to the alternative claim for LAP in respect of category 1 was that there was no evidence that any of the persons interviewed had been authorised to seek and receive legal advice on ENRC’s behalf, and the communications between those individuals and the solicitors had not been communications in the course of conveying instructions to the solicitors on the corporate client’s behalf. The evidence gathered by the solicitors during their investigations had been intended by ENRC to be used to compile presentations to the SFO. If and to the extent that it had also been intended by ENRC to take legal advice on the fruits of the solicitors’ investigation, and that had been one purpose of making the interview notes, the documents had formed part of the preparatory work of compiling information for the purpose of enabling the corporate client to seek and receive legal advice, and were not privileged. The fact that the notes had been made by the solicitors, rather than being verbatim transcripts, did not strengthen the claim for privilege under the present head. The documents would not betray the trend of the legal advice because, on the evidence, the documents were merely notes of what the lawyers had been told by the witnesses. ENRC’s submission that, because the notes had been taken by a lawyer, the process had inevitably represented the work of the lawyer’s mind and his selection of what should be written down, so that, taken as a whole, the matters had inevitably given a clue as to the trend of the advice, could not be accepted. The fact that a selection of information was made was not sufficient to ‘cloak’ the selected information with privilege. The question was ultimately an evidential one and, in the present case, the evidence did not establish, on the balance of probabilities, that the notes would give a clue as to legal advice or any aspect of legal advice given to ENRC. The evidence ENRC relied on failed to show anything substantial of its legal team’s analysis of the documents and failed to give examples of the sort of legal input into the document that would justify a claim to privilege.

With respect to category 3, the slides prepared by the solicitors for the specific purpose of giving legal advice to ENRC were plainly privileged, even if reference was made in them to factual information or findings from the investigation that would not otherwise be privileged. They were part and parcel of the confidential solicitor-client communication, and also fell within the ambit of the protection of solicitors’ work product. To the extent that there might have been verbal elaboration on what had been on the face of the slides, as part of the background to, or foundation for, the advice given to the client as to what it should do next, what had been said at the meeting, and any record of it, whether or not taken by a lawyer, had to be privileged, even if it had referred to information which would not otherwise be privileged. The result of the solicitors’ investigations and reports, any fact-finding made by them and the underlying data upon which they were based, would not be subject to privilege outside that specific context. Therefore, ENRC had made out its claim for privilege over the category 3 documents.

With respect to the two emails in category 4, the objective evidence established that the Swiss lawyer had been engaged by ENRC at the time of the communications, not as a lawyer, but as a man of business. The effect was that LAP had not attached to communications of that nature, even if legal advice had been sought and given in the exchange (see [177]-[180], [184], [185], [187], [190] of the judgment).

The SFO would be granted the relief that it sought in respect of all classes of disputed documents, except category 3 (see [205] of the judgment).

Parry v News Group Newspapers Ltd [1990] Lexis Citation 2653 applied; Three Rivers District Council v Bank of England [2003] All ER (D) 59 (Apr) applied; Three Rivers District Council v Governor and Company of the Bank of England [2005] 4 All ER 948 applied; Stax Claimants v Bank of Nova Scotia Channel Islands Ltd [2007] All ER (D) 215 (May) applied; Property Alliance Group Ltd v Royal Bank of Scotland plc [2015] All ER (D) 67 (Nov) applied; Re the RBS Rights Issue Litigation [2016] EWHC 3161 (Ch) applied.

Jonathan Fisher QC, James Segan and Eesvan Krishnan (instructed by Eversheds Sutherland (International) LLP) for the director.

Richard Lissack QC, Tamara Oppenheimer and Saaman Pourghadiri (instructed by Signature Litigation LLP) for ENRC.