Are documents generated in the course of an investigation protected by litigation privilege?
01 May 2018
Two recent cases concerning the applicability of litigation privilege to documents generated in the course of investigations show that it is easier to obtain that protection where the subject of the investigation is a civil rather than criminal matter.
In this High Court decision, Sir Geoffrey Vos rowed back from the position taken by Mrs Justice Andrews in her controversial decision in SFO v ENRC [see previous LS article]. The circumstances in the case were very similar to SFO v ENRC, involving documents created as part of an internal investigation by a large corporation in the face of scrutiny from a government authority.
Bilta had been a company trading in carbon credits, whose directors were implicated in a VAT fraud. RBS had placed the trades in question.
HMRC had been looking into the suspected fraud. In 2012, in the face of the interest from HMRC, RBS instructed external solicitors to investigate the matter. The lawyers interviewed the traders in question, and produced a report setting out why RBS was not liable to account to HMRC for any of the missing tax. That report was shared with HMRC on the overt basis that in doing so RBS was not waiving privilege in the materials underlying the report. Ultimately HMRC did commence tax assessment proceedings against RBS.
Bilta later went into liquidation. Bilta’s liquidators stated that RBS had wilfully shut its eyes to the fraud, and started proceedings against RBS for it to compensate Bilta. As part of those proceedings, Bilta’s liquidators sought disclosure from RBS of all of the documents created in the course the 2012 investigation, including the interview notes.
The key question was whether the investigation documents were created for the sole or dominant purpose of conducting the tax litigation with HMRC. Bilta relied heavily on the SFO v ENRC decision, stating that the investigation was really a fact-gathering exercise to persuade HMRC not to start an assessment.
Bilta’s arguments were rejected by the court, who found that the preparation and sharing of the report with HMRC was simply part of the “continuum which formed the road to litigation”. Although RBS had appeared ostensibly collaborative and cooperative, really it was gearing up for the litigation with HMRC, which RBS considered inevitable. Accordingly, the investigation documents were protected by litigation privilege. The court was at pains to point out that determining the dominant purpose for the creation of documents is a question of fact, which will depend on the circumstances in any given case.
By way of contrast, the Court of Appeal (Criminal Division) has upheld the main thrust of the decision of Mrs Justice Andrews in SFO v ENRC concerning the applicability of litigation privilege to documents created in investigations into potentially criminal matters or behaviour.
The finding in SFO v ENRC was that criminal proceedings could not be in reasonable contemplation, and thereby documents created in the course of an investigation could not be protected by litigation privilege, unless the person carrying out the investigation appreciated at the time it was instigated that the investigation would unearth or be likely to unearth material which would mean that a prosecutor would stand a realistic chance of securing a conviction.
Here, in a particularly tragic case involving a fatal accident at a waste and recycling plant, the company operating the plant called in solicitors in the immediate aftermath of the accident to interview witnesses, including the manager with responsibility for health & safety at the plant. The Health & Safety Executive (“HSE”) later decided to prosecute the health & safety manager, and sought disclosure of the statement that the manager had given to those solicitors immediately after the accident, as it was believed he had made compromising admissions in that statement. The manager sought to argue that the statement was protected by litigation privilege.
The Court of Appeal held that there could be no question of litigation privilege applying to the statement as, at the time the manager gave it to the company’s solicitors, there was no evidence that the company realistically expected the HSE to bring a criminal prosecution. Had litigation privilege applied, it would have been the company’s to assert in any event (as it had instructed the solicitors) rather than the manager’s.
For now, there remains a real difference in the potential applicability of litigation privilege to documents produced in the course of investigations depending on whether that investigation is into civil or criminal matters. Those setting up investigations into potentially criminal behaviour or actions need to give careful thought before doing so, and, if they decide to proceed, whether to seek to limit the documentation produced in the course of that investigation.
Whether that position will change or not will depend on the Court of Appeal, who are due to hear the appeal in SFO v ENRC in July, with the Judgment likely to follow later in the year. The Court of Appeal’s decision in Jukes does give an initial indication that they may not be inclined to interfere with Mrs Justice Andrews’ findings.