Diversity and Inclusion - best laid plans
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Out-Law Guide | 05 Aug 2011 | 4:05 pm | 10 min. read
There are two main types of privilege:
There are practical steps that companies can take to maximise the protection of confidential, legal communications by privilege as set out in the laws of England and Wales.
Who is the lawyer?
Privilege applies to advice given by external lawyers and also by in-house lawyers, provided that they act in their capacity as lawyer and not in an executive or compliance capacity and are qualified to practise under the rules of the regulator, which in England and Wales means the Solicitors Regulation Authority (SRA) or the Bar Council. For solicitors this means holding a current practising certificate.
Privilege extends to employees such as legal executives, trainee solicitors and paralegals provided that they are supervised by qualified lawyers.
Privilege will also extend to the advice given by foreign lawyers based abroad, provided that they are qualified to practise under their own regulatory body, and to foreign lawyers based in England & Wales qualified to practise under the SRA. Similar rules apply to foreign lawyers based in other jurisdictions in the UK.
There is an important exception: in the context of EU Commission competition investigations, and potentially certain other types of EU proceedings, only communications involving external, not in-house, lawyers entitled to practise in an EU or EEA member state can attract privilege.
Privilege does not apply to other professionals, such as accountants, who give legal advice.
Who is the client?
For legal advice privilege to apply it is important to establish who the client is. The current law is that the client will only include those individuals specifically tasked with seeking and obtaining legal advice either from in-house or external lawyers. The definition of the client does not extend to everyone within the organisation or even the whole department or division seeking legal advice. Note that communications between a lawyer and employees outside the designated client team or between the client team and employees outside the team will generally not be privileged, and sending privileged documents outside this team can result in privilege being lost.
It should also be noted that communications within the client team may not be privileged if they are not for the purpose of seeking and receiving legal advice. For example, communications between the client team commenting on the merits of a particular matter may not be privileged.
What is covered?
Legal advice privilege is not confined to advice on the law, but also covers ‘advice as to what should prudently and sensibly be done in the relevant legal context.’ This will cover presentational, commercial or strategic advice, provided that it relates to a client’s legal rights, liabilities, obligations and remedies. It will not apply to advice of a purely strategic or commercial nature which is not provided in a ‘relevant legal context’. Equally, it will not apply to the "fruits" of the legal advice, for example any agreement or conveyance drawn up. Lawyers’ working papers are privileged if, and only if, they would betray the tenor of, or give a clue as to, the legal advice.
Instructions or requests to lawyers seeking legal advice are also covered, as may be other communications in the chain of correspondence between client and lawyer for the purpose of obtaining that advice. However, 'raw materials' such as factual summaries or draft letters which are not produced for the dominant purpose of seeking legal advice will not be covered, even if they are subsequently passed to lawyers for advice.
A recent court ruling indicates that the giving or seeking of legal advice must be the dominant purpose, not just a purpose, of a communication in order for it to attract legal advice privilege. This is a particular issue for in-house lawyers, who may have a dual role within the business in that they perform both legal and commercial functions, or may be amongst the recipients of a communication which has both legal and commercial aspects. If the dominant purpose of a communication is to obtain commercial input rather than legal advice, even if legal advice is also being sought, it may not be privileged.
What does ‘litigation’ mean?
Litigation has to refer to adversarial proceedings meaning it will exclude, for example, internal grievance and disciplinary proceedings. It also excludes purely fact-finding inquiries and investigations.
Litigation has to be actual or ‘reasonably in prospect’, meaning it is more than a mere possibility. It is not sufficient that there is a distinct possibility that sooner or later someone might make a claim, nor is a general apprehension of future litigation enough.
The documents must be created for the dominant purpose of obtaining information or advice in connection with the conduct of existing or reasonably contemplated litigation. Documents which fall outside this, for example internal board discussions of a purely strategic nature which do not contain such information or advice or reveal the tenor of it, will not be covered by litigation privilege.
Often documents are created for more than one purpose. For example, a company may commission an investigatory report looking into the cause of an accident or how a fraud occurred, with a view to improving procedures and avoiding any repeat, but at the same time anticipating that litigation will be likely and that such a report is necessary for this purpose too. However, if the report is not prepared for the dominant purpose of litigation, litigation privilege will not apply.
The law regarding the privileged status of documentation produced as part of internal investigations has been the subject of intense debate in light of recent case law in which assertions of privilege over documents generated in the course of such investigations have been subjected to considerable scrutiny. The application of privilege in this area is likely to be highly fact-specific; courts will look closely at the evidence to consider, for example, whether litigation really was reasonably in prospect at the time of the investigation and whether this was the dominant purpose of the investigation.
The courts should take a realistic, commercial view of the facts of each case. For example, it appears to be recognised that documents may be created for multiple purposes, but that where it is clear that the dominant or overarching purpose was their use in litigation, privilege should apply. The highly fact-specific nature of a claim for litigation privilege in the context of internal investigations, however, makes the outcome of any such claim difficult to predict. Consequently, it is vital that specialist legal advice is sought before any investigation is undertaken if the chances of successfully securing litigation privilege are to be maximised.
Privilege cannot be attached retrospectively. Failure to consider it from day one may mean a claim of privilege cannot be successfully sustained against hostile third parties, including regulators, and the relevant documentation required to be handed over. The following steps help maximise the chances that privilege will apply.
Before seeking and receiving legal advice from internal or external lawyers or, if an in-house lawyer, when receiving requests for advice, establish who the ‘client’ is, for example:
Define and document who 'the client' is, preferably in the engagement letter if external solicitors are instructed, and in internal protocols. The list can be revised as the matter progresses.
Only 'the client' should deal with lawyers, whether in-house or external. This includes preparing briefing notes, letters of instruction, meeting agendas or minutes for the purposes of seeking and obtaining legal advice; employees who are not part of ‘the client’ should not take on this task. Make it clear to other employees that they should not create documents containing information relevant to the seeking of legal advice, or report to the client on the subject in question, without express clearance from the client. If written communications do have to be produced by non-client employees for the purposes of seeking legal advice, ensure that this purpose is recorded and that the content is kept factual.
Ensure that any advice sought or given on presentational, strategic or commercial issues is given in the context of the client’s legal rights and obligations and not as stand-alone advice.
If an internal investigation or review into an incident, issue or allegation is needed, instruct lawyers to commission this and report for the dominant purpose of anticipated litigation and on the basis that legal advice is needed, giving detail on the anticipated litigation. The report should principally look at the causes of the incident and any possible exposures as a result and then, as subsidiary issues, consider any other matters such as improvements for the future.
If an investigation is carried out with a view to proceedings which are not already afoot, always record the dominant purpose of the investigation and any document produced in the course of it, assuming it is the conduct of those proceedings. This can be done by specifying the proposed claimants or defendants to the anticipated litigation and the expected issues in that litigation; this should be in terms which you would be willing to deploy in support of a claim to privilege.
Diversity and Inclusion - best laid plans
Fintech meet up