23 January, 2017
If a company’s lawyers interview the company’s employees as part of an internal investigation, can legal advice privilege protect the contents of the interview and any notes taken by the lawyers from later disclosure to a regulator or in subsequent court proceedings?
Following the recent decision of The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch) (“The RBS Rights Issue Litigation”), it appears that legal advice privilege may not protect such interviews under English law in most cases. This legal development will obviously be of concern to parties who are based or do business in the UK, but it could also impact Singapore companies, particularly in situations where they are subject to litigation in the English courts or regulatory investigations by UK authorities. The RBS Rights Issue Litigation could also affect the development of legal advice privilege under Singapore law.
What is legal advice privilege under English law?
There are broadly two main types of legal professional privilege under English law: “litigation privilege” which can be claimed over certain communications and documents where litigation is extant or reasonably anticipated, and “legal advice privilege” (“LAP”), which covers communications between lawyers (including in-house lawyers) and their clients for the purpose of giving or receiving legal advice. Where a document is deemed to be subject to either litigation privilege or LAP, it will usually be protected from legal disclosure to a regulator or during court proceedings.
If a company seeks to resist disclosure of materials related to an internal investigation, and assuming either external or in-house lawyers were involved in the investigation, the company will often rely on LAP because there may not be any actual or anticipated litigation which would form a claim for litigation privilege.
LAP was considered extensively by the Court of Appeal in Three Rivers District Council v Bank of England (No 5) [2003] QB 1556 (“Three Rivers No. 5”). Following that case, it was generally considered that, in a corporate context, the definition of “client” for the purposes of LAP was narrow under English law, and therefore LAP provided companies with only very limited protection from legal disclosure. Not every employee of a company would necessarily be treated as the “client” for the purposes of lawyer-client communications. Instead, potentially only a limited group of employees, authorised by the company to seek and receive legal advice, would be treated as the client with respect to any particular matter.
The Court of Appeal decision received a decidedly mixed response from the House of Lords in a later appeal on a different point of law (Three Rivers No. 6 [2004] UKHL 48). The decision was also criticised and not followed in a number of other common law jurisdictions, including Australia, Hong Kong and Singapore. As a result, the scope and application of Three Rivers No. 5 under English law had become increasingly uncertain over the years. The RBS Rights Issue Litigation case, however, has now clarified the position under English law.
What were the facts in The RBS Rights Issue Litigation case?
In The RBS Rights Issue Litigation case, a group of RBS shareholders (the “Claimants”) brought proceedings against RBS (the “Defendant”) following a rights issue that took place in 2008, alleging that the prospectus for the rights issue contained untrue and misleading statements. As part of these proceedings, the English High Court was asked to consider whether notes of interviews between the Defendant’s current and former employees and its external lawyers carried out as part of prior internal investigations were protected by LAP.
The Defendant resisted disclosure of the interview notes on the basis of LAP, arguing that the information was gathered to enable the Defendant to seek legal advice from its external lawyers. The Defendant argued that all of the employees and ex-employees had been authorised to provide information to the external lawyers, and therefore the communications fell within the scope of LAP. The Claimants relied on the decision in Three Rivers No. 5 to assert that the information provided by employees were not protected by LAP and was disclosable. The Defendant in turn argued that, given the trenchant criticism Three Rivers No. 5 had received academically and in other jurisdictions, the Court should confine the application of Three Rivers No. 5 to the particular facts of that case.
Justice Hildyard, the judge at first instance, decided against the Defendant and ordered disclosure, concluding that the decision in Three Rivers No. 5 “was not confined to its own facts but is based on principles of general application, which… remain binding law in England”.
Who is the “client”?
Justice Hildyard, relying on Three Rivers No. 5, concluded “client” for the purposes of LAP consists of only those employees authorised to seek and receive legal advice from the lawyer. The fact an employee is authorised to communicate directly with lawyers, as opposed to being authorised to seek and receive legal advice, is not enough for them to be regarded as a “client” for the purposes of LAP. It was considered that LAP does not cover information provided by employees or ex-employees to or for the purpose of being placed before a lawyer.
In light of this, Justice Hildyard found that the interview notes were not privileged because “the individuals interviewed were providers of information as employees and not clients; and the [interview notes]… were not communications between client and legal advisor”.
Justice Hildyard therefore confirmed a narrow definition of the “client” for the purposes of LAP. His Honour also suggested that, in a corporate context, an employee might only be considered “authorised” to seek legal advice, and therefore constitute the “client” for the purposes of LAP, where they can be considered the “directing mind and will of the corporation”. If this is correct, then LAP under English law would be very restricted indeed.
When are the lawyers’ working papers privileged?
In the alternative, the Defendant claimed that the lawyers’ transcripts of the interviews were covered by privilege as under English law, lawyers’ “working papers” are protected under the doctrine of legal professional privilege.
As the interview themselves were not privileged, notes of such interviews would not be protected unless they were proven to betray or give a clue as to the “trend of advice being given to the client by its lawyer”. Justice Hildyard considered the question to be evidential – did the notes give an indication as to the legal advice given to the Defendant by its lawyers?
His Honour, in this instance, found that the Defendant did not meet the evidential burden on it and so could not rely on lawyers’ “working papers” privilege.
The application of The RBS Rights Issue Litigation to Singapore
In Singapore, the key case on LAP is the Court of Appeal decision in Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd [2007] SGCA 9 (“Skandinaviska”). A special committee comprising external auditors and lawyers was constituted by Asia Pacific Breweries (Singapore) to investigate and review the company’s control systems and procedures in light of unauthorised transactions that had taken place in the company.
Draft reports were prepared by auditors. The issue before the Court was whether these draft reports prepared by the auditors were protected by legal professional privilege.
On LAP, the Court considered the Three Rivers No. 5 decision, but ultimately declined to give effect to any restricted definition of ‘client’. Instead, the Court strongly endorsed the position of the Australian decision in Pratt Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 122 (“Pratt Holdings”). In Pratt Holdings, the Federal Court of Australia found that certain communications from third parties were protected by LAP by focusing on the nature of the function of the third party, rather than the nature of the relationship between the third party and the party that engaged it.
The Singapore Court of Appeal, however, did not finally rule on the scope of LAP in Skandinaviska, as the Court was able to dispose of the case by applying litigation privilege instead. It is possible that the Singapore courts could still follow the English law approach as decided in Three Rivers No. 5 and confirmed by The RBS Rights Issue Litigation given English cases are considered persuasive authority in Singapore. However, in light of the Singapore Court of Appeal’s comments in Skandinaviska and its endorsement of Pratt Holdings, it currently seems unlikely that the Singapore courts will adopt the more restrictive approach of the English courts in a future case.
The RBS Rights Issue Litigation case, however, could still have an impact on Singapore based companies. With increased globalisation as a result of cross-border legal dealings, claims for LAP by a Singapore company could be subject to English law rather than Singapore law in some circumstances. Per The RBS Rights Issue Litigation case, under English conflict of laws rules the question of LAP will usually be governed by the law of the forum in which any documents are sought. This means that, if proceedings are brought in England, the English Courts will apply English laws on privilege regardless of where the client or lawyer is located.
Further, the UK Serious Fraud Office and the Financial Conduct Authority (amongst others) have statutory powers to conduct investigations and may take regulatory actions in the UK. Where a UK company has a branch or registered office in Singapore, or a Singapore company has operations or a presence in the UK, it is possible that these regulatory bodies might seek documents from that company in the UK, including documents which are held by that company in Singapore.
In those circumstances, there may be arguments that, as a matter of English law, any claims of LAP are governed by English law not Singapore law.
The RBS Rights Issue Litigation decision reaffirms the application of Three Rivers No. 5. The decision has, however, been appealed to the UK Supreme Court and so it may be that their Lordships will take this opportunity to reconsider the law in this area.
Implications
Companies conducting internal investigations need to consider carefully whether they may wish to claim LAP over any materials created in the course of any investigation. To the extent they do, and there is a possibility that LAP may be subject to English law, such parties should take care not only to involve lawyers at an early stage, but also to structure the investigation to ensure any potential claims for privilege under English laws are preserved. This includes, for example, clearly defining the individuals within the company who are entitled to give instructions to any lawyers and to seek and receive legal advice from them. This “client” group should also be kept as small as possible and carefully documented.
For further information, please contact:
Celeste Ang, Baker & McKenzie.Wong & Leow
celeste.ang@bakermckenzie.com
