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24 May 2017

High Court limits ambit of privilege in internal investigations


In Director of the Serious Fraud Office v ENRC [2017] EWHC 1017 (QB) the High Court granted the Serious Fraud Office ("SFO") a declaration that certain documents, created by lawyers and forensic accountants in the course of an internal investigation into suspected fraud, bribery and corruption, were not subject to legal professional privilege.

In a number of important regards the judgment can be confined to its own particular factual context. However, the judgment does provide some important indications as to how the Courts will approach claims to privilege over documents generated in the context of an internal investigation and, in particular, in the context of anticipated criminal proceedings.

Accordingly, some lessons can be learned as to how an internal investigation should be characterised, structured and conducted, so as to improve the prospects of successfully asserting privilege over the product of any such investigation.

The ENRC Internal Investigation

From August 2011 to April 2013 ENRC ("the Company") was engaged in dialogue with the SFO, which the SFO characterised as engagement in a "self-reporting process", in accordance with the SFO's 2009 Self Reporting Guidelines.

In April 2013 the SFO terminated that dialogue and commenced a formal criminal investigation into the Company.

In the course of its criminal investigation the SFO sought to compel the production of documents, created during the course of an internal investigation, from the Company by issuing Notices under s.2(3) of the Criminal Justice Act 1987. The Company asserted that certain documents covered by the s.2(3) Notices were subject to privilege and were protected from disclosure.

The Company's Claim(s) to Privilege

The Company claimed both legal advice privilege and litigation privilege in respect of four categories of documents:

Category 1

Interview notes made by the Company's solicitors, during interviews with employees and former employees of the Company.

Category 2

Materials generated by forensic accountants as part of a "books and records" review, focused on identifying systems and controls weaknesses and potential improvements.

Category 3

Documents indicating or containing factual evidence presented by the Company's solicitors to the Company's Nominations and Corporate Governance Committee and / or Board.

Category 4

Reports by the forensic accountants, which conducted the "books and records review", and documents which referred to those reports (and were thus claimed, by the Company, to amount to "secondary evidence of privileged communications").

A claim to privilege was also made by ENCR under Category 4 in respect of email communications between in-house counsel and a senior executive.

The Outcome

The Company's claims of privilege were almost entirely rejected by the Court. The only documents in respect of which the Company's claim to privilege was upheld were slides used by the Company's solicitors to present factual evidence to the Board, which were found to be subject to legal advice privilege.

Key points:


Solicitors' Presentations to the Board can attract advice privilege

  • Slides used by the Company's external solicitors to present their advice to the Board were found to be privileged, even though they contained factual information (i.e. investigative findings) which would not otherwise be privileged.
  • Such documents were found to be subject to advice privilege as "part and parcel of the confidential solicitor-client communication", and were also found to be "within the ambit of the protection of solicitors' work product".

Interview notes: not privileged or protected from disclosure

  • The "Category 1" documents (notes of interviews of employees and former employees, conducted by external solicitors) were found not to attract privilege.
  • The claim to advice privilege in respect of the interview notes failed as none of the individuals interviewed was found to represent "the client"; accordingly communications between those individuals and external solicitors were not communications between solicitor and client, and thus not subject to advice privilege.
  • Furthermore, the interview notes were not privileged or protected from disclosure as "solicitor's work product". There was insufficient evidential basis to allow the Court to determine, on the balance of probabilities, that the interview notes would "give a clue as to the legal advice" given by external solicitors. There was no evidence that the notes included any of external solicitors' "qualitative assessment of the evidence, or any thoughts about its importance or relevance of the inquiry".

Litigation Privilege:

  • None of the categories of documents in issue were found to be subject to litigation privilege.

Criminal litigation not "a real likelihood"

  • The Court held that the documents were not produced at a time when litigation was "a real likelihood as opposed to a mere possibility".
  • At the time the documents were created, the Company may have anticipated a criminal investigation by the SFO. However, "such an investigation is not adversarial litigation".
  • The question of whether and when a criminal prosecution is "likely" must be determined "on a case by case basis".
  • However, unlike civil proceedings, criminal proceedings can only be commenced when there is a "sufficient evidential basis for prosecution, and the public interest test is met".
  • Accordingly, the Court found that criminal proceedings cannot be reasonably contemplated (and litigation privilege not engaged) unless and until "the prospective defendant knows enough about what the investigation is likely to unearth, or has unearthed, to appreciate that it is realistic to expect a prosecutor to be satisfied that it has enough material to stand a good chance of securing a conviction".

Documents not created for the "dominant purpose" of litigation

  • The Court went on to determine that the documents were not subject to litigation privilege as they were not created for the "dominant purpose" of prospective litigation.
  • The documents were created in the course of a fact-finding investigation, intended to prepare for, or avoid, criminal investigation and / or prosecution.
  • It was not intended that the investigation generate material that would be relied upon by the Company in its defence at trial.
  • Some or all of the documents were created with the express intention of handing those documents to the SFO; documents created to be handed to a potential adversary cannot, the Court found, be subject to litigation privilege.

Practical points

The circumstances in which this case came before the High Court are novel. The context of the dispute was not litigation, or even a formal criminal investigation, but rather a proposed "self-report" to the SFO; the seemingly extreme difficulties the Company faced presenting evidence to make out its claim to privilege may not be encountered in a majority of cases.

However, a small number of practical points can be drawn from the judgment, as to how internal investigations should be initiated, structured, documented, and conducted, so as to stand the best possible chance of making out a claim to privilege over work product generated in the course of an internal investigation:

  • Before the investigation is commenced it is of critical importance that external solicitors and the client / company establish which person or group of people will embody "the client", for the purposes of giving instructions to, and receiving advice from, external solicitors.
  • Also at the outset, it is essential to determine and document the purpose for which any investigation is being conducted; only documents generated for the sole or dominant purpose of litigation (which is reasonably in prospect) will attract the protection of litigation privilege.
  • Interview notes, which are no more than verbatim notes, will not generally attract advice privilege. Records of what was said in an interview, conducted by external solicitors, may attract advice privilege if incorporated into a note of presentation of advice by the external solicitors to the client (i.e. the Board, or other person / persons embodying "the Client").
  • The High Court in SFO v ENRC indicated that litigation privilege may not be engaged in the context of anticipated criminal litigation until evidence of wrongdoing is uncovered by an internal investigation. On that basis, it may be harder for companies to establish a claim to litigation privilege in the context of anticipated criminal proceedings than may be the case, for example, in the context of anticipated civil proceedings.
  • The point at which criminal litigation is reasonably in prospect will vary "on a case by case basis". Accordingly, any and all factors which may lead the company to consider that a corporate prosecution is a "real likelihood" should be documented, as potential evidence in support of a future claim to litigation privilege.
  • The question of whether and when criminal prosecution enters into reasonable contemplation should also be kept under constant review. Any event or discovery which alters the corporate view on the prospects of prosecution should be recorded, to support any future claim to privilege.


Alan Ward

Alan Ward
Senior associate

T:  +44 20 7809 2295 M:  Email Alan | Vcard Office:  London

Tony Woodcock

Tony Woodcock

T:  +44 20 7809 2349 M:  +44 7825 625 903 Email Tony | Vcard Office:  London

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