Legal Professional Privilege: What Aspiring Lawyers Need to Know

At the end of January, the Court of Appeal handed down its decision in Sports Direct International Plc v The Financial Reporting Council [2020] EWCA Civ 177, reaffirming the fundamental importance of legal professional privilege (LPP) in England and Wales.

Before considering the decision, it is useful to understand the principles underlying LPP and the circumstances in which clients may seek to rely upon it.

What is legal professional privilege?

LPP is a common law doctrine that protects the confidentiality of certain communications between lawyers and their clients. It is generally divided into 2 principal categories: legal advice privilege and litigation privilege.

Other forms of privilege exist, including common interest privilege, but these fall outside the scope of this introduction.

Legal advice privilege

Legal advice privilege protects confidential communications between a client and their lawyer where the purpose of the communication is the giving, seeking or receiving of legal advice.

The protection does not generally extend to communications with advisers who are not lawyers, such as accountants or tax advisers.

Litigation privilege

Litigation privilege protects confidential communications between a client and their lawyer, or between either of them and a third party, where the sole or dominant purpose of the communication is the giving, seeking or receiving of legal advice in connection with adversarial proceedings, or the gathering of evidence for use in those proceedings.

The proceedings must also be reasonably contemplated.

There is extensive case law dealing with the individual requirements of both forms of privilege. However, several principles are particularly important for aspiring lawyers.

Waiving privilege

For both forms of LPP, the relevant communication must remain confidential.

If privileged material is voluntarily disclosed to a third party who is not covered by the privilege, the protection may be lost.

For example, an email containing legal advice sent by a lawyer to their client may attract legal advice privilege. If the client then forwards that email to an accountant who is not covered by the privilege, confidentiality may be lost and the privilege waived.

The precise circumstances in which privilege is waived can be complex, so lawyers must take particular care when handling potentially privileged material.

Who is the client?

The definition of the client is particularly important when dealing with corporate clients.

In Three Rivers District Council v Governor and Company of the Bank of England (No 5) [2003] EWCA Civ 474, the Court of Appeal considered who constituted the client for legal advice privilege.

The decision adopted a relatively narrow approach, limiting the client to individuals within the organisation who were authorised to seek and receive legal advice on behalf of the company.

This can create practical difficulties.

For example, communications between a company's in-house lawyers and a commercial employee may not attract legal advice privilege if that employee does not have sufficient authority to seek legal advice on behalf of the company.

The narrow definition has attracted criticism, but at the time of this article it had not been overturned.

The issue is particularly relevant to legal advice privilege because that form of privilege is limited to communications between lawyer and client. Litigation privilege, by contrast, can extend to communications involving third parties where the relevant requirements are satisfied.

When are adversarial proceedings reasonably contemplated?

The Court of Appeal's decision in SFO v ENRC [2018] EWCA Civ 2006 provided important guidance on when adversarial proceedings can be regarded as reasonably contemplated in the context of white collar investigations.

The Serious Fraud Office (SFO) had opened a criminal investigation into ENRC. ENRC sought to assert litigation privilege over various internal interview notes prepared by its external lawyers before the formal investigation had begun.

The High Court concluded that adversarial proceedings were not reasonably contemplated when the interviews took place. The Court of Appeal overturned that decision.

It held that the prospect of adversarial proceedings could be sufficiently real from the point at which ENRC instructed lawyers in response to the circumstances it was facing.

The Court of Appeal confirmed that litigation privilege can protect legal advice intended to prevent, avoid or settle reasonably contemplated proceedings, rather than only advice concerned with defending proceedings once they have begun.

However, it is not enough to establish that adversarial proceedings were reasonably contemplated.

The party asserting litigation privilege must also establish that the sole or dominant purpose of the communication was the giving, seeking or receiving of legal advice in connection with those proceedings, or the gathering of evidence for use in them.

When do clients rely on legal professional privilege?

There are 2 principal situations in which clients may seek to assert LPP to prevent disclosure of documents: litigation or arbitration, and regulatory or criminal investigations.

During litigation or arbitration, parties are generally required to disclose relevant documents to the opposing party, whether those documents assist or harm their case. Documents protected by LPP are an important exception.

A similar principle applies during investigations.

An investigator, such as the SFO, may require the organisation or individual under investigation to provide relevant documents. Privileged documents may be withheld where the requirements for LPP are satisfied.

The question of whether a document is privileged can therefore become highly contested. Privileged or potentially privileged material may be significant to a party's position, making privilege disputes an important feature of both litigation and regulatory investigations.

Sports Direct v FRC: the decision

The case concerned an investigation by the Financial Reporting Council (FRC) into Sports Direct's auditors, Grant Thornton.

As part of the investigation, the FRC sought disclosure of documents from Sports Direct using powers granted under the Statutory Auditors and Third Country Auditors Regulations 2016 (SATCAR).

Sports Direct withheld approximately 40 documents on the basis that they were protected by LPP.

The FRC did not dispute that the documents were privileged. Instead, it argued that Sports Direct was nevertheless required to disclose them because the FRC was exercising a statutory power to request documents.

The Court of Appeal rejected that argument.

Rose LJ explained that there were 2 established exceptions to LPP. The first concerns communications made for a criminal purpose. The second arises where legislation has modified or abolished the right to privilege.

The Court concluded that SATCAR did not modify Sports Direct's right to assert LPP.

For legislation to override LPP, the court would require clear wording demonstrating that Parliament intended to interfere with the fundamental right. SATCAR did not contain such wording. Indeed, the Regulations contained provisions indicating that documents could be withheld from disclosure where LPP applied.

Why does the decision matter?

The decision provides an important reminder of the strength of LPP and the circumstances in which it can be overridden.

For aspiring litigation and regulatory lawyers, understanding LPP is essential. The doctrine can determine whether a document must be disclosed to an opposing party, regulator or investigating authority.

The decision in Sports Direct v FRC also demonstrates that a statutory power to obtain documents does not automatically override LPP.

The courts will require clear evidence that Parliament intended to interfere with the right before permitting privileged material to be disclosed.

LPP therefore remains an important protection for clients communicating with their lawyers, particularly where litigation, regulatory investigations or criminal investigations are involved.