Serious Fraud Office (SFO) v Eurasian Natural Resources Corp. Ltd

Litigation privilege may protect documents produced during an internal investigation where adversarial proceedings are reasonably contemplated and the documents’ dominant purpose is to resist, avoid or settle those proceedings. A prosecution can be reasonably contemplated before a formal investigation begins and before a corporate defendant knows whether the alleged wrongdoing occurred.

Fact-finding undertaken to obtain legal advice about contemplated proceedings may form part of the litigation purpose. An intention to provide a final report to a prosecutor does not establish an intention to disclose interview notes or other underlying work product.

Under the binding corporate-client rule, legal advice privilege covers employee communications only where the employee is authorised to seek and receive the advice. Any reconsideration of that rule is for the Supreme Court.

The Serious Fraud Office sought declarations under section 2(9) of the Criminal Justice Act 1987 that documents created during internal investigations by the appellant’s solicitors and forensic accountants were not protected by legal professional privilege. The material included interview notes, books-and-records review documents and related reports. Andrews J substantially granted the declarations.

The company appealed, principally contending that criminal proceedings had been reasonably contemplated and that the documents had been created for the dominant purpose of resisting or avoiding them. It also challenged the application of the corporate-client rule derived from Three Rivers (No. 5), the treatment of communications with former employees and the test governing lawyers’ working papers.

The central questions were when criminal proceedings became reasonably contemplated, whether the investigation served the necessary dominant purpose, and which documents attracted litigation or legal advice privilege.

1. Appeal allowed in substantial part. Criminal proceedings were reasonably contemplated when the internal investigation began in April 2011 and, in any event, by receipt of the SFO’s August 2011 letter. The contemporaneous material showed a real prospect of prosecution if the self-reporting process did not produce a civil resolution. A corporation’s uncertainty about whether its investigation will confirm wrongdoing does not prevent prosecution being reasonably contemplated. Nor must a formal criminal investigation already have begun.

2. The interview notes and the forensic accountants’ documents were created for the dominant purpose of resisting or avoiding contemplated criminal proceedings. Legal advice intended to head off, avoid or settle such proceedings is protected just as advice directed to defending them. On a realistic and commercial assessment, investigating the alleged wrongdoing was part of preparing to deal with the threatened proceedings, rather than a separate purpose. Waugh and Highgrade were consistent applications of the same dominant-purpose test to different facts.

3. The fact that a final report might ultimately be shown to a prosecutor did not automatically remove privilege from the preparatory legal work. The company had indicated that it would cooperate and might make full disclosure, but it never agreed to disclose the interview notes or intermediate work product. Accordingly, Categories 1, 2 and 4 were protected by litigation privilege, apart from two October 2010 emails for which that privilege had not been claimed.

4. Three Rivers (No. 5) remained binding. It established that communications between a corporation’s employee and its lawyers do not attract legal advice privilege unless the employee is authorised to seek and receive legal advice for the corporation. Although the court saw considerable force in departing from that narrow rule, only the Supreme Court could do so. On that basis, the interview notes and the two October 2010 emails did not attract legal advice privilege. A former employee is equivalent to a third party for this purpose.

5. The court did not decide whether legal advice privilege has a separate dominant-purpose requirement or whether lawyers’ working papers are privileged only when they betray the tenor of legal advice. Those questions were unnecessary once litigation privilege was established.

6. Whether a company waives privilege may affect assessment of its cooperation and eligibility for a deferred prosecution agreement. That is distinct from whether privilege arose initially. Andrews J’s declarations were reversed for Categories 1, 2 and 4, save for the two emails; the appeal was otherwise dismissed.

1. Court of Appeal (Civil Division): Allowed the appeal against the declarations concerning Categories 1, 2 and 4, except for two October 2010 emails, and otherwise dismissed the appeal: [2018] EWCA Civ 2006 .

2. High Court, Queen’s Bench Division: Andrews J declared that Categories 1, 2 and 4 were not privileged, while accepting privilege for Category 3. No neutral citation is stated in the judgment.