Litigation Privilege Update

An Insight into the rationale for litigation privilege –

"The second category of legal professional privilege is wider than the first, but arises only when litigation is in prospect or pending. From that moment on, any communications between the client and his solicitor or agent, or between one of them and a third party, will be privileged if they come into existence for the sole or dominant purpose of either giving or getting legal advice with regard to the litigation or collecting evidence for use in the litigation." ("Documentary Evidence in Hong Kong", 16.001, Charles Hollander QC)

In Serious Fraud Office v ENRC Limited [2018] EWCA Civ 2006, the English Court of Appeal substantially allowed the company's appeal against a first instance judgment denying its claim to litigation privilege in respect of a substantial number of documents. The documents had (in the main) been prepared by the company's solicitors and forensic accountants engaged to investigate alleged fraudulent activities and advise on any report that should be made to the relevant prosecuting authority.

In allowing much of the company's appeal, the English Court of Appeal has attempted to restore litigation privilege to its traditional common law roots, which reflect the position in Hong Kong. Therefore, the judgment should be of significant interest in Hong Kong (insofar as it relates to litigation privilege).

While claims to litigation privilege are fact dependent, a number of key points emerge:

  • where a company and its legal representatives investigate allegations of wrongdoing and there is the prospect of a criminal prosecution, there are likely to be clear grounds for contending that legal proceedings are "in reasonable contemplation";
  • in a criminal context, it is wrong to state that proceedings are not "in reasonable contemplation" unless a prospective defendant knows enough to appreciate that there is a good chance of a prosecution. Uncertainty as to whether or not proceedings or a prosecution are likely does not prevent litigation being "in reasonable contemplation". Where a prospective defendant requests his or her legal representatives to investigate the circumstances of an alleged offence litigation privilege ought to apply;
  • in a civil and criminal context, documents prepared for the sole or dominant purpose of settling or avoiding contemplated proceedings are as much protected by litigation privilege as documents prepared for the purpose of resisting or defending such proceedings. This is also true for draft documents prepared by legal representatives with the ultimate intention that the final version be shown to an opposing party.

The rest of the judgment in SFO v ENRC is taken up with obiter comment dealing with the ambit of legal advice privilege under English law and the narrow meaning of "client" in a corporate context. Without any sense of enthusiasm (to put it mildly), the English Court of Appeal felt constrained by previous – albeit much criticised – appellate authority that (in a corporate context) purports to limit legal advice privilege to those employees formally tasked with seeking and receiving legal advice (Three Rivers (No. 5)); meaning that other employees' communications are not covered by legal advice privilege (although, they may be covered by litigation privilege).

This part of the SFO v ENRC judgment is not persuasive in Hong Kong, in light of the test for legal advice privilege as set out by the Court of Appeal in its landmark judgment in Citic Pacific Limited v Secretary for Justice (No. 2) [2015] 4 HKLRD 20. The common law of Hong Kong applies a controlling test of whether a communication or document is created for the sole or dominant purpose of receiving or giving legal advice. This is in line with other principal common law jurisdictions, albeit in any given case an issue can arise as to whether or not (as a matter of fact) a communication or document created by a corporate employee is confidential and attracts legal advice privilege.

For the time being, in-house lawyers should be mindful of which entities within a group structure they work for – particularly, in the context of cross-border disputes where different laws on privilege may apply.

At the time of writing, it is not known whether the judgment in SFO v ENRC will be appealed to the UK Supreme Court. The English Court of Appeal seemed quite keen on an appeal in order that the ambit of legal advice privilege in a corporate context could be reviewed. Whether or not there is a final appeal in SFO v ENRC, it is only a matter of time before the UKSC considers this issue (and the same is true for the Court of Final Appeal in Hong Kong).

Jurisdictions: 

Partner, RPC

Senior Consultant, RPC