Privilege and waiver

Should any privileged material be shared with third parties, including regulators and prosecutors? If so what and when? These are common questions when conducting investigations.

Several recent cases in the English courts highlight the dangers of getting this wrong and inadvertently waiving privilege. However, by putting in place certain safeguards it may be possible to circulate material beyond the client group, without loss of privilege.

Confidentiality is a key component; privilege only attaches to documents or communications which are confidential and if they cease to be confidential, privilege will be lost.

It is often not practicable to keep privileged communications to a very small “client group” within an organisation. It may be necessary to circulate legal advice beyond the ‘client’ group within a company in order for it to be discussed further or for action points to be carried out. The company may also wish to share privileged material with third parties such as accountants, auditors and regulators. Privilege can be protected in these circumstances but active steps should be taken.

Privilege is a substantive right and powerful tool under English law, granting individuals and corporate entities the right to resist disclosure of confidential and potentially sensitive material to third parties, including regulators and prosecutors. There are two main types of privilege under English law that may protect communications arising in the context of investigations:

1. communications between lawyer and client for the purposes of giving or receiving legal advice (legal advice privilege); and
2. documents prepared for the dominant purpose of litigation (litigation privilege).

A fundamental component of privilege is confidentiality. The key is to maintain confidentiality in the privileged material: if the privileged material is circulated too widely, there is a risk that confidentiality and so privilege will be lost. It is not just a matter of not communicating privileged advice in a public area, or of not posting privileged material online. Confidentiality may be lost by circulating legal advice to a wide group of people beyond the ‘client’ group, which for the purposes of legal advice privilege, comprises only those individuals within an organisation who are authorised to give instructions to and receive advice from the lawyer in relation to the issue at hand.

Accordingly, if a privileged document is to be circulated, it should not be circulated to more people than necessary. Further appropriate safeguards should be put in place (i) emphasising the privileged nature of the document, and (ii) where applicable, specifying the limited purpose for which the advice is being disclosed and to make clear that no waiver of privilege is intended as against the wider world.

In FM Capital Partners v Marino [2017] EWHC 3700 (Comm), the claimant instigated an investigation following a complaint received from its client, a Libyan sovereign wealth fund whose assets it managed, alleging breach of duty and unlawful conduct by the claimant’s then CEO (the first defendant in the instant proceedings). The investigation was conducted by accountants, who produced a report. The report was provided to the first defendant in advance of a disciplinary hearing which he failed to attend but was dismissed for gross misconduct. The claimant then began civil proceedings against the first defendant and added other defendants who were alleged to have dishonestly assisted him in breach of duty.

In an application by third defendant for disclosure of the investigation materials, the claimant sought to assert privilege.

In determining whether litigation privilege applied, the judge accepted that litigation was in contemplation and that the contemplated litigation was the dominant purpose of the investigation (any disciplinary issues were a lesser purpose). However, the Court also found that there had been a waiver of privilege in relation to the report and that the first defendant’s use of the report was not subject to any express or implied restriction. According to Leggatt J (at para.10):

“ ... if a privileged document is provided by A to B, the mere provision of that document, as is perhaps obvious, does not necessarily amount to a waiver of privilege. The extent to which there is any such waiver depends on to what extent there is an express or implied restriction on subsequent use of the document. I should say that, whilst the concept of waiver of privilege has a number of different meanings, it seems to me that the relevant concept here is that of confidentiality and the extent to which a document provided by one party to another ceases as a result of that communication to be confidential. The question, therefore, as I see it, is one of fact as to what were the express or implied terms on which the [accountants’ report] was provided to [the first defendant].”

This decision provides an important reminder of making clear the basis on which any privileged document is shared.

The case of Belhaj v DPP [2018] EWHC 513 (Admin) concerned the issue of waiver and related to privileged information communicated by the Government to the DPP under limited waiver.

In summarising the relevant legal principles, the Court noted that privilege may be waived for a limited purpose without being waived generally. However, the existence of waiver is not dependent on the party’s subjective intention but rather is to be judged objectively. The Court also highlighted the rule against cherry-picking: namely, that waiver of privilege regarding part of a document amounts to waiver of the whole. This will apply where there has been a “knowing, deliberate, deployment resulting in partial disclosure”.

On the facts, the claimant argued that the limited waiver was not effective to prevent the information being used in the subsequent judicial review proceedings because the process of deciding whether to prosecute and the subsequent review of that decision formed a single, composite whole such that waiver for one meant waiver for all. This argument was rejected by the Court: there was no nexus between the two and they were not a composite process. Accordingly the limited waiver was held to be effective.

The issue of limited waiver was also considered in the case of AL v XYZ Ltd [2018] EWHC 856. This case concerned a judicial review challenge against a decision by the SFO not to pursue a company for breach of a Deferred Prosecution Agreement where the company had refused to disclose interview notes on the basis that they were privileged. The defendant in the criminal proceedings (the claimant in the judicial review proceedings) sought disclosure of interview notes from the SFO which were held by the company. The company had refused to disclose these on the basis that they were privileged, although a summary had been provided to the SFO. Following an application in the Crown Court requiring the SFO to disclose the notes (which was dismissed on the basis that they were not in the SFO’s possession), the SFO asked the company to reconsider and when they refused, the SFO informed the defendant that it was taking no further action.

On the question of waiver of privilege, the Court considered whether the provision of a summary of the interviews had amounted to a waiver of privilege in the underlying documents, despite assertions to the contrary. The Court emphasised that waiver is determined objectively and cast doubt on the assertion that that there had not been a waiver in the circumstances. This was on the basis that: when the summaries were provided, the company knew (or must have known): (i) that it had already submitted a document to the SFO which was inculpatory of the Defendants; (ii) that the summaries were being made to further the SFO’s investigation into the Defendants; (iii) that it was a very real possibility/likelihood that the Defendants would be prosecuted; (iv) that there was a real possibility/likelihood that the summaries would be provided by way of disclosure to the Defendants; and (v), that the summaries were of material that XYZ Ltd was asserting privilege over.

Recent cases illustrate the importance of ensuring that express safeguards are in place when privileged material is circulated.

When circulating privileged material, it should be made clear that the document is marked as confidential and privileged, and that it should be treated as confidential and not be circulated any further. Unless the sender is an in-house lawyer giving legal advice, so far as possible the sender should refrain from providing any written commentary on the advice, as that commentary may not itself be privileged.

The same risks arise when circulating privileged material to third parties outside the corporate client, including to co-defendants, regulators and prosecutors. In addition to the above safeguards, it will be prudent to specify the limited purpose for which the advice is being disclosed and to make clear that no waiver of privilege is intended as against the wider world. Confidentiality agreements may also be appropriate.

Ultimately, however, labelling communications will only take things so far. As the Court in XYZ Ltd stressed, waiver is to be judged objectively: “[i]f objectively, a client waives privilege it cannot then claim that the waiver did not exist simply because it (subjectively) asserts there has been no waiver”. Accordingly, not only must the safeguards above be put in place, but a proper analysis carried out to ensure that there has not in fact been a waiver, notwithstanding assertions to the contrary.