Investigating fraud: an expansion of legal professional privilege?

The judgment of Mr Justice Murray in Al Sadeq v Dechert LLP [2023] EWHC 795 (KB) addresses several important practical points concerning legal professional privilege which will be of particular interest for practitioners conducting investigations and advising victims of fraud.

Background

The claimant, the former Deputy Chief Executive Officer of the Ras Al Khaimah Investment Authority (RAKIA), had been convicted of fraud in the courts of the Emirate of Ras Al Khaimah (RAK) and sentenced to imprisonment. The defendants had acted for the Investment and Development Office of the Government of RAK to assist in what was described as a wideranging investigation concerning alleged fraud and misappropriation of public assets in relation to transactions carried out by subsidiary companies of RAKIA. The claimant contended that the defendants had committed serious wrongs against him in the course of their work on the investigation, including being responsible for his unlawful arrest, extended detention in unlawful conditions and being denied proper legal representation.

The claimant raised concerns about the nature of the disclosure exercise and the process for claiming privilege carried out by the defendants, in particular that the principles relevant to legal professional privilege had been misapplied in some fundamental respects.

Does legal advice privilege cover a lawyer’s conduct of an investigation?

The claimant argued that the defendants’ investigation work was distinguishable from the giving of legal advice and assistance: to the extent that the defendants were gathering factual information for their clients or providing that information to the RAK public prosecutor, such activities did not attract legal advice privilege. They would be for the dominant purpose of conveying factual information, without any prospect of legal advice being given.

In the court’s view, it was clear from the terms of the engagement and evidence of the work undertaken, that the defendants were engaged to advise and assist in their capacity as lawyers. It rejected an unrealistic and artificial distinction between “investigatory work” and legal advice and assistance. Where lawyers were engaged to conduct an investigation, it was a reasonable and fair assumption that the engagement encompassed the investigatory work and related legal advice and assistance as part of a continuum of legal service. Strong evidence would be required to rebut this.

On one view, this suggests that, where lawyers are engaged to assist with an internal investigation, all of their work will come under the umbrella of legal advice privilege. However, a note of caution should be sounded. Previous authority, in particular the Court of Appeal’s ruling in Serious Fraud Office (SFO) v Eurasian Natural Resources Corp. Ltd [2018] EWCA Civ 2006, highlights that a distinction may still exist when it comes to the conduct of investigations. In that case, the Court of Appeal held (among other things) that lawyers’ working papers will only be covered by legal advice privilege to the extent that they betray the tenor of legal advice. As a result, notes taken by lawyers of investigation interviews will not automatically be privileged by virtue of the fact the notes were taken by a lawyer.

In Al Sadeq v Dechert, the focus of the inquiry was on litigation privilege rather than legal advice privilege. Points such as those considered by the Court of Appeal were not in issue. Nonetheless, what the decision does underline is the importance of documenting the position in, for example, detailed engagement letters to help evidence the role of the lawyers and support a claim to legal advice privilege if needed.

Can litigation privilege extend to non-parties?

The claimant alleged that the defendants had incorrectly claimed privilege over documents created for the purpose of litigation to which their clients were not parties, namely criminal proceedings in RAK or other jurisdictions where they were not a party. The claimant relied on the decision of Moulder J in Minera Las Bambas SA v Glencore Queensland Limited [2018] EWHC 286 (Comm) at paragraph 31, where she held that it is an “established principle” that litigation privilege can only arise in favour of a person who is a party to the litigation in question.

The defendant argued that it was difficult to see why litigation privilege should be so limited if the test was otherwise met. If a person, although not a party or prospective party, had a sufficient interest in litigation so as to create documents for the dominant purpose of that litigation, why should litigation privilege not attach to those documents. A victim of fraud, as here, appointing a solicitor to investigate, gather evidence and advise for the purposes of reasonably contemplated criminal proceedings was a good example of such a person.

Mr Justice Murray commented that he had found this to be the most interesting and difficult issue raised by the application. He agreed with the stance taken by the defendant and said Moulder J was wrong to conclude in Minera Las Bambas that there was an established principle that litigation can only arise in favour of a person who is a party to the actual or prospective litigation in question. He noted that three of the leading textbooks (Charles Hollander QC, Documentary Evidence (Sweet & Maxwell, 14th Ed, 2021), Bankim Thanki QC, The Law of Privilege (Oxford University Press, 3rd Ed, 2018) and Colin Passmore, Privilege (Sweet & Maxwell, 4th Ed, 2019)) supported the proposition put forward by the claimant but that each relied on a different authority and, in his view, the authority in each case did not appear to support the proposition.

This element of the judgment is no doubt the most notable, challenging received wisdom on the scope of litigation privilege. After all, the classic formulation of litigation privilege says that the communication must be made for the sole or dominant purpose of conducting the litigation. Mr Justice Murray’s answer to this was that “conducting” was not meant to refer to anything more specific than attending to the interests of the person in relation to actual or prospective litigation.

The ruling is one likely to be welcomed by victims of fraud and their lawyers, offering greater latitude to the protection offered by litigation privilege. While the decision represents something of a departure (and time will tell whether it is overturned by an appeal court), one can perhaps follow the judge’s reasoning where, as here, a victim has to file a complaint with the prosecuting authority which will require prior investigation by the lawyers for the victim.

Critically, though, the greater latitude is subject to an important check: the person must have a sufficient interest in the litigation. As the judge noted, the instances where this arises may be relatively rare.

What is the correct test for the iniquity exception?

The claimant further challenged the defendants’ claims to privilege by reference to the iniquity exception. This provides that there is no privilege in documents or communications which are themselves part of a crime or fraud.

The claimant argued that the defendants’ approach (by looking at whether a communication was in furtherance of an iniquitous purpose) was too narrow and that it should encompass any documents which had been generated by or reported on the alleged iniquitous conduct. The defendants contended that the natural meaning of the words ‘in furtherance of’ concerned documents created as part of the iniquity for the purpose of obtaining or giving advice in order to facilitate the iniquity, rather than simply generated as a result of the iniquitous conduct. The claimant’s broad test was inconsistent with the exceptional nature of the principle.

The judge agreed and confined the exception to its traditional scope, namely communications that were criminal or fraudulent in themselves or intended to further a criminal or fraudulent purpose.

For the court to have held otherwise could have had significant practical ramifications. As the defendant submitted, in any case where iniquitous conduct by a client could be established, the test advocated by the claimant would potentially bring all communications between the client and their lawyer within the iniquity exception since those communications would be generated by the relevant iniquity regarding which the client was seeking the lawyer’s advice and assistance.

What is the correct approach to redacting parts of documents?

The defendant had redacted parts of documents on the grounds of legal professional privilege. The claimant argued that the way in which the defendant had done this obscured the meaning of the document in a manner which suggested that the dominant purpose test had not been properly applied. Where a document could not be divided into severable parts, the dominant purpose test must be applied to the document as a whole and, if it was not satisfied, the document should be disclosed in its entirety.

The judge rejected that submission, saying that he had not been able to discover any authority for the claimant’s proposition. In fact, the authorities appeared to be the contrary.

The claimant’s argument if successful would have significantly curbed the ability to redact when dealing with documents that are partly privileged. As the court noted, Thanki on Privilege says that the balance in fact falls in favour of withholding an entire document on privilege grounds if part of a document is not severable and so intertwined that redaction is not feasible.

Reproduced from Practical Law with the permission of the publishers. For further information visit www.practicallaw.com.