Bell Gully’s Sophie East, Partner, and Richard Massey, Senior Associate, discuss the recent UK Court of Appeal case ENRC v SFO. The judgment has relevance to the New Zealand courts’ approach to assertions of privilege over documents sought by regulators, they write.
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Last month, the UK Court of Appeal released its much-anticipated judgment in ENRC v SFO[1], a decision with significant implications for the scope of legal professional privilege in the context of regulatory investigations.
The judgment adopts a flexible approach to privilege, and is likely to inform (and possibly broaden) the New Zealand courts’ approach to assertions of privilege over documents sought by regulators.
Background
In 2010, global mining group Eurasian Natural Resources Corporation Limited (“ENRC”) was notified of various corruption allegations by a whistle-blower within a Kazakh subsidiary. In 2011, it appointed external lawyers (Dechert) to investigate, to interview ENRC staff about the matter, and to prepare a report.
Dechert’s report was finalised in 2013 and submitted to the UK Serious Fraud Office (“SFO”), who had approached ENRC following media reports about the alleged wrongdoing in 2011. Shortly afterwards, the SFO announced a criminal investigation and issued statutory notices seeking various documents, including Dechert’s notes of interviews with staff. ENRC withheld those notes and other documents on the grounds of privilege, which was duly challenged by the SFO.
The High Court heard that challenge last year.[2] At issue was whether the disputed categories of documents attracted:
1. litigation privilege, i.e. whether they were prepared for the dominant purpose of preparing for an apprehended proceeding; or
2. legal advice privilege, i.e. whether they constituted communications with a lawyer for the purpose of giving or receiving legal advice.
The High Court judge ruled that litigation privilege did not apply to the relevant documents because ENRC had failed to show that it was aware of circumstances which rendered litigation a real likelihood. The judge found that an investigation by the SFO does not amount to ‘adversarial litigation’ and viewed it as merely the first stage in assessing whether further steps would be taken, such that litigation could not have been in reasonable contemplation. The judge also held that, in any event, the documents were not prepared for the dominant purpose of constructing a defence in future proceedings.
The High Court also held that legal advice privilege did not apply. It referred to the seminal decision in Three Rivers (No. 5)[3] as authority for the proposition that, where a lawyer communicates with their client’s employees or agents (as Dechert had done, for its factual investigation), that could only attract legal advice privilege if those employees or agents were specifically tasked with seeking and receiving advice on the corporation’s behalf. As the interviewees did not meet that test, the interview notes were not privileged and ENRC was required to provide them to the SFO.
Court of Appeal
The Court of Appeal disagreed with the High Court’s finding in respect of litigation privilege. On the basis of a careful analysis of the available documents, it found that “the whole sub-text” of the SFO’s enquiries of ENRC was the possibility of criminal prosecution if it did not achieve a civil settlement.
Importantly, the Court also rejected a distinction the High Court had drawn between civil and criminal proceedings, noting:
“It would be wrong for it to be thought that, in a criminal context, a potential defendant is likely to be denied the benefit of litigation privilege when he asks his solicitor to investigate the circumstances of any alleged offence.”
The Court commented only briefly on legal advice privilege (having already established that litigation privilege applied) although its comments are significant. The Court accepted that it was bound to follow the position inThree Rivers No. 5, i.e. that an employee or third party must specifically be tasked with seeking and receiving legal advice for privilege to apply.[4] However, it expressed dissatisfaction with that approach, and stated “if it had been open to us to depart from Three Rivers (No. 5), we would have been in favour of doing so”.
In this regard, the Court observed that the narrow approach to legal advice privilege would disproportionately hinder large corporations and did not cater for “the modern world”.
The result is that, while the narrow approach to legal advice privilege – as opposed to litigation privilege – continues for now (at least until the issue can be determined by the Supreme Court), the judgment signals strong support for a widening of legal advice privilege to cover lawyers’ communications with those beyond a client’s “main board or those it appoints to seek and receive legal advice”.
New Zealand takeaways
The Court’s comments in ENRC v SFO may influence the development of the law of privilege in New Zealand, as codified in the Evidence Act.[5] The decision supports a flexible approach to litigation privilege, confirming that it can arise before a regulator has taken a formal decision to litigate[6] and holding that it should arise equally readily in both civil and criminal contexts.
As for legal advice privilege, the decision supports the view that privilege should apply to communications with employees or agents, for example where lawyers assist in gathering facts from the business regarding a possible regulatory breach. This is helpful because, while the Evidence Act confirms that legal advice privilege extends to communications with a client’s “authorised representatives”,[7] it is not yet clear how far that term stretches. Some cases have taken a narrow approach on the basis of earlier English authorities,[8] requiring express authority to seek legal advice, while other cases suggest a more flexible view.[9] In view of ENRC v SFO, it is expected that the courts will lean increasingly in favour of the latter.
The decision will give comfort to businesses, although it remains important to consider carefully how to ensure documents stay protected in internal investigations. It is often helpful to involve external legal advisers early on, so they can assist in both the investigation itself and the review and development of appropriate safeguards.
Sophie East is a litigation partner with particular expertise in commercial disputes, banking and finance litigation, class actions and companies and securities law. Sophie advises clients involved in commercial litigation and arbitration, including complex contractual disputes and disputes involving issues of company and securities law. She advises clients facing regulatory investigations and proceedings, including by the Commerce Commission, the FMA, NZX and NZICA. Sophie has acted as defence counsel in several high profile class action proceedings. She also has extensive international arbitration experience including acting for international organisations, military and defence contractors, and sovereign states. She regularly speaks and writes on arbitration-related topics and is an elected council member of the Arbitrators’ and Mediators’ Institute of New Zealand. Sophie holds a Master of Laws from Harvard Law School and worked for four years as an Associate in the international arbitration team at White & Case in New York. Sophie is recommended for dispute resolution by The Legal 500 Asia Pacific 2016 and Asia Pacific Legal 500 2015. Sophie also featured in the 2016 NZ Lawyer Hot List. Sophie co-authored the New Zealand chapter of the Class Actions Global Guide, published by Thompson Reuters. Contact Sophie at sophie.east@bellgully.com
Richard Massey has broad commercial litigation experience, including major regulatory investigations and complex High Court disputes, with a particular focus on competition, banking and consumer law. Richard has acted for domestic and international clients across a wide range of issues, including a number of major regulatory investigations and related court proceedings. He has represented clients in a variety of industry sectors including financial services, telecommunications, and construction, and has appeared in the High Court on a range of matters. Richard’s principal interests include competition, banking and consumer law issues, and he is a member of Bell Gully’s Credit Contracts and Consumer Finance Act Law Reform Committee. Richard has worked on secondment for in-house legal teams at Independent Liquor and Vodafone where he advised on various matters including compliance with the Fair Trading Act and other consumer law issues. Prior to arriving at Bell Gully, Richard worked at Slaughter and May in London from 2009 to 2012. Contact Richard at richard.massey@bellgully.com
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[1] Serious Fraud Office v Eurasian Natural Resources Corp Ltd [2018] EWCA Civ 2006.
[2] Serious Fraud Office v Eurasian Natural Resources Corp Ltd [2017] EWHC 1017 (QB).
[3] Three Rivers District Council and Others v Governor and Company of the Bank of England (No. 5) [2003] QB 1556.
[4] Noting that the Supreme Court had previously declined to revisit the narrow approach (Three Rivers District Council and Others v. Governor and Company of the Bank of England (No. 6) [2004] UKHL 48).
[5] The Evidence Act expressly provides that it may be interpreted having regard to the common law (section 10(c)).
[6] Commerce Commission v Caltex CL33-97.
[7] Section 51(4) of the Evidence Act.
[8] See Robert v Foxton Equities Ltd [2014] NZHC 726 where Kos J (citing Wheeler v Le Marchant (1881) 17 Ch D 675 – a decision which was central to Three Rivers No. 5) held that to be an authorised representative, or agent, for the purposes of privilege, an individual must be given authority to communicate with the solicitor to obtain legal advice and actually do so. In an agency context, his Honour indicated that the agent must be operating under an actual agency agreement that encompasses the acquisition of legal services on behalf of the principal. See also Aquaheat New Zealand Ltd v Hi Seat Ltd (in liq and rec) [2014] NZHC 1173 where Associate Judge Sargisson held that the interpretation of “authorised representative” in s 51(4) “should be as narrow as its principle necessitates.”
[9] E.g. Brandlines v Central Forklift HC WN CIV- 2008-485-2803, which was sympathetic to the view that a “less restrictive approach” applies in New Zealand – though also holding that an authorised representative “must have been authorised to assume – and must have assumed – the role of the client in communicating the information to the solicitor.”
