Following the High Court judgment in Serious Fraud Office v Eurasian Natural Resources Corporation Ltd  EWHC 1017 QB,  1 WLR 4205 (‘SFO v. ENRC’) in which Andrews J determined that documents prepared during the course of an internal investigation and by lawyers and forensic accountants were not covered by litigation privilege since a criminal investigation by the SFO was not ‘adversarial litigation’, the English Courts have continued to grapple with this issue.
In Bilta (UK) Ltd v Royal Bank of Scotland Plc  EWHC 3535 (‘Bilta v, RBS’) the High Court offered some initial hope to companies that litigation privilege may yet be successfully claimed over documents produced during the course of an internal investigation, however, the subsequent decision of Court of Appeal (Criminal Division) in R (for and on behalf of the Health and Safety Executive) v Jukes  EWCA Crim 176 (‘R. v. Jukes’) which endorsed the earlier ruling in SFO v. ENRC as to when litigation privilege may apply in the context of a criminal investigation, has suggested that such hope is premature
It is anticipated that the appeal in SFO v. ENRC, due to be heard in July 2018, will provide some much-needed clarity to this important issue.
BILTA v ROYAL BANK OF SCOTLAND
The question before the High Court in Bilta v RBS concerned the validity of RBS’ claim to litigation privilege in relation to documents that had been created during an internal investigation.
In 2009, HMRC opened an investigation into missing trader or carousel intra-community fraud in the UK in relation to the European Union Allowances (“EUA”) Market. It was alleged that companies who operated in the EUA market had failed to disclose VAT to HMRC and had instead paid these to third parties thus placing at risk input tax claimed by these companies.
In 2010 HMRC announced its investigation of RBS (alongside other companies) and requested documentation from the bank to assist HMRC with its decision as to whether to withdraw its assessment. Adopting a cooperative stance, RBS duly produced a report to HMRC, albeit excluding certain documents, such as employee interview transcripts, on the basis of litigation privilege.
The claimant, Bilta, issued a claim form against RBS challenging its claim of litigation privilege on the grounds that the bank’s report was not produced with litigation as their sole or dominant purpose, but rather to assist HMRC with its assessment and in accordance with RBS’ general duties as a taxpayer. The claimant, relying upon the decision in SFO v. ENRC, claimed that fact-finding exercises which were aimed at obtaining legal advice as to how to avoid an investigation could not be seen as being covered by litigation privilege.
In his ruling Sir Geoffrey Vos, Chancellor of the High Court, considered the decision in SFO v. ENRC but held that the exercise of determining what constitutes the sole or dominant purpose in each case is a determination of the facts of each case. He stated that whilst the circumstances in both Bilta v. RBS and SFO v. ENRC involved internal investigations by corporate entities in the face of government authorities’ enquiries, one “cannot simply apply conclusions that were reached on one company’s interactions with the Serious Fraud Office in the very different context of another company’s interactions with HMRC”.
The decision in Bilta v. RBS therefore drew the following conclusions:
- Documents created in an internal regulatory investigation may be covered by legal professional privilege if the requirements of litigation privilege can be established.
- When assessing whether an investigation may be covered by privilege, the Court is likely to consider the circumstances of the case when the litigation commenced.
- It is important that companies document the circumstances in which an investigation is undertaken so that they may be able to produce evidence at a later date of when they considered that litigation was in prospect.
R V JUKES
Following the decision in Bilta v. RBS, the subject of privilege in the context of internal investigations was considered by the Court of Appeal (Criminal Division) in R v Jukes which concerned a claim to privilege by an employee, Mr. Jukes, who had been convicted of a health and safety offence which had led to another colleague’s death. On appeal against his conviction, Mr Jukes challenged the admissibility of a statement he had made to the company’s solicitors as part of their internal investigation into the fatal accident. In this statement Mr, Jukes said that he had taken on formal responsibility for health and safety, which undermined a later prepared statement given to the Health and Safety Executive (HSE) and the police, and also his defence statement. One of the arguments advanced by Mr. Jukes was that this statement was covered by litigation privilege and therefore should not have been relied upon by the prosecution at trial.
In rejecting Mr. Jukes’ claim, the Court of Appeal found that whilst a HSE investigation was ongoing, no proceedings had yet been issued and there was no evidence that proceedings were in contemplation at the time the statement was made – which was some 16 months before the HSE and the police interviewed Mr. Juke. Further, it was rejected that any legal advice privilege applied since there was no lawyer-client relationship between Mr Jukes and the company’s solicitors.
What is perhaps most interesting about the judgment is that the Court of Appeal expressly endorsed the rationale of Andrews J in ENRC that “an investigation is not adversarial litigation” and that “the reasonable contemplation of a criminal investigation does not necessarily equate to the reasonable contemplation of a prosecution”. On that view, criminal proceedings are not said to be in reasonable contemplation unless the prospective defendant knows enough about what the investigation is likely to uncover, or has uncovered, 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”.
Further, the Court of Appeal in R. v Jukes decided that even if privilege could have applied, this privilege would have been for the benefit of the company and not Mr. Jukes since the solicitor acted for his employer and not for him individually.
IMPACT OF THESE DECISIONS
The tension between these two post-ENRC decisions is obvious. The High Court in Bilta v. RBS gave some reassurance to companies that their claims for litigation privilege in internal investigations are not automatically doomed to failure. This is particularly where the litigation in contemplation is civil in nature. thereby adopting a narrower view of SFO v. ENRC and confining that judgment to its own facts. However, shortly thereafter the Court of Appeal has reinforced the decision in SFO v. ENRC and, in doing so, rejected claims of litigation privilege in the context of criminal investigations by government authorities until such time as a prosecution has formally been commenced or there is sufficient evidence to provide a realistic prospect of a conviction.
The current, and arguably irreconcilable position, seems to be that a company threatened with civil litigation over allegations of misconduct may claim litigation privilege over documents produced during internal investigation (where conditions are met), but a company under criminal investigation for those same allegations cannot claim litigation privilege unless it is satisfied that there is sufficient evidence to provide a realistic prospect of securing a conviction. Whilst each case will ultimately be fact specific, it is hoped that the July 2018 Court of Appeal consideration of the appeal in SFO v. ENRC, will provide an opportunity for the Courts to offer some much needed clarity as regards the precise scope of the application of litigation privilege in both a civil and criminal context.