Corker Binning senior associate Nick Barnard
Nick Barnard of Corker Binning looks at recent cases on legal professional privilege in criminal and tax investigations
The purpose of legal professional privilege (LPP) in England & Wales is to allow a person to freely obtain legal advice, or advice in connection with litigation, safe in the knowledge that he will not be required to divulge it.
Amongst other things, LPP protects litigants, suspects and defendants in criminal or regulatory investigations from having to disclose the advice of their lawyers, or material gathered for the purpose of litigation.
Subject to narrow public interest exceptions (for example, where there is a risk of serious harm) or clear statutory intent, LPP is an absolute right. A court is not permitted to carry out a balancing exercise of the competing interests to decide whether LPP should be overridden. This is even the case where the privileged material might assist the defence of a person accused of murder.
This immutable status being accepted, challenges to LPP usually seek to establish that the privilege never existed in the first place, or else has subsequently been waived or lost. The last few years have seen a flurry of such challenges.
In two high-profile judgments on the general principles of LPP, Bilta v Royal Bank of Scotland (2017) and Serious Fraud Office v ENRC (2018) gave guidance as to how the ‘litigation privilege’ limb of LPP arises in tax litigation and criminal investigations, respectively.
In Bilta, the High Court concluded that a tax authority assessment notice was a ‘watershed moment’ indicating that litigation would likely follow, and as such the documents subsequently created were privileged. Similarly, in ENRC, the Court of Appeal overruled the High Court in concluding that documents created as part of an internal investigation into allegations made by a whistleblower were covered by litigation privilege, even though no criminal investigation was yet underway.
The fact that the documents might eventually have been shown to an investigating agency, or otherwise used to try to head off litigation or prosecution, did not deprive them of the protection, in a decision which brought much-needed clarity to the law on litigation privilege.
More recently still, the Addlesee v Dentons litigation confirmed in 2019 that LPP survives even where a company has been dissolved. As such, the legal advice given to the company whilst still active remained (prima facie at least) privileged. However, the Addlesee litigation went on in 2020 to explain and apply the circumstances in which an underlying unlawful or iniquitous purpose negates LPP (sometimes known as the ‘crime-fraud’ exception).
The High Court concluded that in Addlesee there was sufficient evidence that the purpose for which the dissolved company’s lawyers had been instructed was fraudulent, even if the company had been used as an unwitting stooge by a third party.
As such, the legal advice provided to the company in respect of the allegedly fraudulent transaction was caught by the ‘crime-fraud’ exception, and so was not privileged.
Statutory disclosure and privilege
Also in 2020, two cases involving the UK’s Financial Reporting Council (‘FRC’) examined the conflict between statutory compulsory disclosure powers and LPP.
In Sports Direct, the Court of Appeal overruled the High Court to conclude that, in the course of its investigation into an auditor, the FRC’s disclosure powers did not entitle it to demand LPP material from the auditor’s client, even if that material would only be held for the confidential purposes of the FRC investigation. In the same judgment, the Court of Appeal also confirmed that a non-privileged document attached to an otherwise privileged email does not acquire protection from disclosure.
More worrying for audit clients was the judgment in A v B, which held that where an auditor holds client documents, it cannot refuse to disclose them solely on the basis of the client asserting LPP. Rather, the auditor must come to its own view. As such, a client providing privileged documents to an auditor is at risk should that auditor become the target of a regulatory investigation.
PCP litigation considered
Finally, the very recent decision in the PCP v Barclays litigation highlights the risk of referring to legal advice whilst at the same time seeking to maintain LPP. The litigation arose from a £1bn claim against Barclays arising out of capital raising in 2008 from Qatari investors.
The High Court concluded that the defendant had sought to advance its case by implying that its actions had been supported by legal advice, although without referring to its substantive content. Nonetheless, by so referring to it, the defendant had waived privilege over that advice and became required to disclose it.
Although it may turn out to be of no value at all, the ‘hidden treasure’ of LPP material will always hold an allure. However, it is a powerful protection, and courts can offer no remedy to a valid claim, no matter how worthy the circumstances.
Nonetheless, as the recent parade of litigation proves, litigants and investigators will continue to take what points they can in the hope of defeating privilege.
Nick Barnard is a senior associate at Corker Binning
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