Behind much of the day to day business we do is a ‘paper trail’, whether that be email communications, messages, board minutes or attendance notes. Often, it is only when that ‘paper trail’ is brought under the spot light that we notice whether or not it is helpful or appropriately protected.
A paper trail can be very helpful if you need to gather evidence to support a decision or pursue a claim against a third party, however, a paper trail can also result in confidential or sensitive information being released if it is not properly protected.
What can privilege protect?
Privilege can entitle a party involved in court proceedings to withhold a document from their opponent or to deny access to regulators and enforcement agencies. Whether a document is privileged will always depend on the facts, so it is helpful to know what the different categories of protection are, the requirements that must be met to attract the protection of privilege, how protection can be preserved, and how it can be lost.
Examples of internal communications which can come under the spot light
- Internal policies and handbooks
- Minutes of Board discussions
- Meeting or telephone attendance notes
- Email, WhatsApp and other electronic communications
- Accounting ‘books and records’
- Employee records
- Documents containing sensitive information
- Investigations into incidents or misconduct
An overview of the different categories of privilege
||Examples of what is NOT protected
Legal advice privilege
- Confidential communications
- Between lawyer and client
- For the purpose of seeking or giving legal advice
Legal advice which has been shared with third parties
Internal emails circulating legal advice to those outside the authorised group
A risk report produced by an in-house lawyer which does not contain the substance of any legal advice
Executive committee minutes which do not contain legal advice
- Confidential communications
- Between lawyer, client, third party
- Where litigation is in progress or is reasonably contemplated
- Created for the sole or dominant purpose of dealing with the litigation
- The litigation is adversarial, not investigative or inquisitorial
Minutes of board discussions about commercial settlement options
Internal/regulatory fact-finding investigations
|Privilege against self-incrimination
- Documents or information that would expose a person or their spouse/civil partner to a criminal charge or penalty
With regard to companies, the law is currently unclear as to whether directors, employees or agents could rely on this privilege to protect against incriminating the company.
- 1 or more clients retaining same lawyer – all entitled to invoke privilege and all parties must consent to waiver, OR
- Parties share a joint interest in a privileged communication (and could have instructed the same lawyer)
|Common interest privilege
- Communications between parties who share a common interest
|Without prejudice privilege
- Protects communications made in a genuine attempt to settle a dispute from being produced in court.
|Communications labelled ‘without prejudice’ which do not contain any genuine attempt to settle a dispute.
Legal advice privilege
A communication between solicitor and their client includes emails, telephone calls, instant messages, letters, meetings and file notes of calls. However, the communication must be for the purpose of obtaining or receiving legal advice,
Where the client is a corporate entity, it is likely that only those employees responsible for obtaining and receiving legal advice on behalf of the organisation will fall into the client definition. Anyone outside this group could fall into the same category of an external third party.
Incorrect assumptions about legal advice privilege
Just because a lawyer has had input or involvement with a document does not in itself mean that the document is protected by privilege.
In the case of A v B and Financial Reporting Council 2020 EWHC 1491 (Ch) there was an argument over whether Executive Committee Meeting minutes were protected by privilege. The court held that just because the legal adviser was the last person to edit the document, did not mean that the minutes were protected by legal advice privilege. The court looked to what was the function of the document and decided that it was not connected with legal advice.
In the same case the court held that the Risk Report was not produced for the dominant purpose of providing legal advice. It was held that it was an entirely conventional risk register prepared to mitigate business interruption events and that the document would only be protected if it makes clear or communicates in an obvious manner the substance of that advice.
Copying in your lawyer, a lawyer being present at a meeting, or a lawyer drafting the document, does not necessarily mean that privilege will be attached to the document created. The purpose of the communication or document must be to seek or receive legal advice.
If the advice received is from a legally qualified person, either an in-house lawyer or external lawyer, the legal advice privilege will be available. The challenge for in-house lawyers is that they are often consulted on commercial or operational business decisions which do not necessarily involve the giving of legal advice. It is therefore important not to assume that communications are privileged just because they are with the in-house lawyer. When legal advice is being given, it is sensible for this to be recorded or communicated in separate documents to those addressing purely commercial and operational issues.
It is important to note that legal advice privilege does not extend to advice from an in-house HR adviser or consultant and could therefore still be disclosable if a Subject Access Request (‘SAR’) is made by an employee for example.
With regard to parent and subsidiary companies, communications between the in-house lawyer and any of the companies within the group which attract legal advice or litigation privilege, should be protected, however, it would be sensible to make it clear within any contract of employment that the in-house solicitor role extends to legal adviser for the group. As mentioned above, it is important that legal advice is sought and obtained from the in-house lawyer separately to general business and operations advice to avoid confusion over whether documents are protected or not.
Litigation privilege is designed to allow parties to prepare for litigation without the fear that documents produced for that purpose will have to be disclosed.
It has a wider reach than legal advice privilege because it will include communications between clients, solicitors and third parties provided it is created for the sole or dominant purpose of dealing with litigation.
The purpose of the document or communication is assessed at the time it was created and therefore documents which simply become relevant to the litigation later are not afforded protection. Marking the document as for the purpose of litigation at the point of creation can be helpful, however, the label alone will not determine the protection afforded.
Where litigation is not in progress there needs to be a real likelihood rather than a mere possibility of litigation. The point a which a matter becomes litigious can be hotly debated, especially when dealing with internal investigations. Once a formal complaint, or legal claim has been made it is generally accepted that the matter has become contentious, however, where fact finding investigations are being carried out in response to an incident occurring, care needs to be taken over the nature and communication of those investigations to ensure that sensitive information is protected where possible.
Once a document attracts litigation privilege, that privilege will continue, even if the litigation does not proceed or it is settled. For this reason, it is helpful to retain the confidentiality of those documents to preserve the protection – potentially for subsequent litigation, even if that litigation is not related or relevant to the original litigation.
One exception to litigation privilege is instructions to an expert witness where that expert’s report is produced in court or disclosed to the other side. An expert witness report should set out the nature of their instructions, but the instructions themselves can become disclosable once the report has been shared. This can include the main instructions and any subsequent emails to or communications with the expert. It is important to be mindful of the potential for disclosure when sending any communications to the expert.
Privilege against self-incrimination
This privilege protects a person from answering a question or releasing a document in civil proceedings if doing so would expose him or his spouse/civil partner to a criminal charge or legal penalty. The criminal charge needs to be ‘reasonably likely to be pursued’ and there must be a ‘real and appreciable’ danger of incrimination rather than a mere possibility.
It can be claimed by the person at risk of incrimination or on behalf of their spouse or civil partner. With regard to companies, the law is currently unclear as to whether directors, employees or agents could rely on this privilege to protect against incriminating the company.
How privilege can be lost
Once privilege is lost it cannot be reclaimed.
Privilege can be lost through:
- Waiver – deliberate or inadvertent (be careful of the impact this may have on other documents in the same category as the waiver of privilege in respect of one document could waive the privilege on all associated documents)
- Loss of confidentiality / placing the document in the public domain
- Making a copy of a privileged document for a purpose that is not privileged.
- Improper means – the court will usually grant an injunction to prevent the use of a document obtained through improper means
- Criminal or fraudulent purpose – if the document was created for a criminal or fraudulent purpose it is likely any otherwise associated privilege will be lost.
- Mistake – the court will consider whether it is obvious that the document was disclosed by mistake in deciding whether to let the receiving party use the document
Don’t inadvertently waive privilege
Privilege in a document belongs to the person for whom it was created. That person can assert the protection of privilege or agree to waive it, in which case the document loses its protection.
Privilege can also be accidentally waived if the document is disclosed to a third party or if the protected content is referred to. In the recent case of PCP Capital Partners v Barclays Bank  EWHC 1393 (Comm) the court held that, despite the position adopted in previous case law, it is not possible to draw a distinction between referring to the ‘effect’ of the legal advice and its ‘contents stating that there was no mechanical way to make that distinction.
In the case of Skymist Holdings Ltd v Grandlane Developments Ltd  EWHC 747 (TCC), draft legal documents were shared with third parties outside the direct client authorised to seek and receive legal advice. The court held that the sharing of such documents would lift the veil of solicitor client privilege leaving that party with only potential reliance on the protection of litigation privilege.
A common mistake made by organisations is the circulation of legal advice to a wider group of employees who are arguably not within the authorised group to seek or receive legal advice on behalf of the organisation. This can happen inadvertently where advice notes are circulated with board minutes, board minutes record discussions about the advice received, or employees forward emails on to other co-workers that fall outside the authorised group. This wider circulation can waive the privilege that otherwise attaches to the advice.
Care needs to be taken when litigating parties discuss disputed matters in board or other internal meetings. Whilst the legal advice itself attracts privilege, the minutes of discussions at internal meetings do not because they would not satisfy the test for legal advice and have been created for the dominant purpose of litigation. Such minutes would likely therefore have to be disclosed and could reveal important points about the legal position adopted.
Privilege and subject access requests
The right of access (known as subject access) is a fundamental right of the General Data Protection Regulation (GDPR) which allows individuals to find out what data an organisation holds about them and to obtain a copy of that data.
In response to a subject access request (SAR) made to a data controller, an individual is entitled to (1) confirmation that the data controller is processing their personal data; (2) a copy of this personal data; and (3) other supplementary information (including the controller’s purpose for processing).
Subject access requests are often made by potential claimants seeking information which may support their claim. One of the exceptions to the requirement to disclosure under a subject access request is privilege and therefore a clear understanding of what documents must be disclosed and those which are protected is imperative. Please see our guide for further information on subject access requests.
Top tips for preserving privilege
- Limit dissemination;
- Label the document ‘Confidential and Legally Privileged’;
- Ensure in-house legal advisers keep legal advice separate to general business and operations advice;
- Ensure recipients that do receive a copy understand the importance of not sharing or adding to the document without care and knowledge of the risks;
- Keep sensitive issues separate to non-sensitive;
- Do not discuss privileged information or advice at board meetings which are being minuted alongside other business or operational issues. Hold a separate meeting with only the necessary people present or have a clear break in the agenda at which minuting stops and the privileged issues are discussed;
- Keep any comments on privileged documents separate as they do not attract protection;
- Do not circulate a copy of board minutes which discuss legal advice received to anyone who does not need to see it; and
- Exercise caution when disclosing to third parties such as auditors or insurers. If the document must be sent ensure that agreement is reached with the third party that it is being sent on the following basis before sending the privileged document to them:
- It is privileged
- Sharing it is not a waiver
- The limited purpose for which it is provided
- The documents are to be held in confidence and must not be disclosed to any other party (unless required by law or regulation)
- It will be destroyed or returned once the purpose has been completed
Internal investigations and privilege
Not all documents created as part of an internal investigation will attract legal privilege and being alive to this from the moment an investigation becomes necessary could help you to properly protect the communications that you need to.
Be mindful that:
- If an incident happens, your early communications during which you are collecting information to understand what has happened are unlikely to attract privilege – until litigation or ‘confrontation’ becomes a real likelihood, documents are not likely to be protected by litigation privilege.
- You should seek to invoke the privilege of solicitor client communications as early as possible so that you can:
- Understand and obtain advice on the risks and potential liability from the outset
- Identify that lawyers are being instructed with a view to establishing litigation privilege if available
- Take steps to support your position that litigation is reasonably contemplated – such asking employees not to destroy documents
- Identify the group of authorised persons to seek and receive legal advice and ensure any legal advice obtained is only shared with that group
- If you need to interview employees for information prior to litigation being in contemplation, taking any notes or recordings of the information gathered at this stage could be damaging if not protected by privilege and therefore instructing an external lawyer to assist in this process may be sensible to see whether any form of privilege may be invoked.
- Be careful of communications which take place in other jurisdictions which will form part of proceedings in England. The English courts will apply English law in respect of questions of privilege regardless of where the document was created. For example, EU law does not recognise professional privilege in respect of in-house lawyers and US law does not recognise limited waiver of privilege. This applies both ways so documents created by subsidiaries in England will be the subject of US privilege rules if proceedings are commenced in the US.
Privilege and your legal and regulatory obligations
Can litigation privilege apply in the context of internal investigations?
Yes – the courts have confirmed that once proceedings were confrontational then the investigation can be considered adversarial and litigation privilege applied. This is therefore likely to be in the case in HMRC and Financial Reporting Council investigations and in criminal investigations, where a criminal prosecution is reasonably in prospect.
If you receive a request for documents from the regulator or the court, documents can still be withheld if they are protected by privilege, unless there is a specific statutory provision that says otherwise. In this situation it is helpful to obtain expert legal advice to ensure that the correct assessments are made of the documents and a strategy which in the company’s best interests is adopted, which may in some circumstances involve some voluntary disclosure of privileged material within controlled parameters.
Confidential investigations by the regulator
This will not constitute an infringement of any legal professional privilege of the clients of the regulated person in respect of those documents: The Financial Reporting Council Ltd v Sports Direct International Plc  EWHC 2284 (Ch)
In the recent decision of A v B and the FRC 2020 EWHC 1491 (Ch), the High Court held that the auditor should assess whether or not a document is privileged and therefore whether it should be disclosed as part of the reporting obligations to the Financial Reporting Council (‘the FRC’).
The audit client argued that they were the only party that possessed enough information to assess whether or not the document was confidential and for what purpose it was created, and therefore should be the party determining whether or not a document was protected by privilege. The court disagreed with this position and confirmed that it was ultimately the auditor that had a regulatory requirement to provide information to the FRC and would be the party in breach of that requirement if it failed to do so. The court noted that the auditor would usually inform the audit client of the documents it intended to disclose and therefore the appropriate action for the audit client, if it disagreed with the auditors on the question of privilege, would be to seek injunctive relief to prevent the disclosure.
It does therefore mean that if you have concerns about the release of a document by an auditor that you believe is privileged, urgent advice should be taken as to whether privilege attaches to the document and if so, whether injunctive relief should be sought.
Section 236(2) Insolvency Act 1986
All accountancy and legal professionals owe a duty of confidentiality to their client, however, confidentiality alone is not a bar to compliance with s236.
A solicitor or other professional is not able to rely on privilege in refusing to give disclosure if the insolvent company would have been under an obligation to provide the documents or information requested. i.e. statutory books and records belong to the company. The office holder is the agent for the company and must disclose what the company would have had to disclose.
Without prejudice privilege
Whilst without prejudice privilege falls under the privilege umbrella, it is a form of protection which applies to entirely different communications, being those communications between the parties in dispute, rather than the communications which are private and confidential to each party.
Without prejudice communications during a dispute
The long-standing principle of without prejudice communications is that communications which are made in a genuine attempt to settle an existing dispute should be protected from later use in court. This is to encourage parties to speak openly and frankly in discussions to see whether the dispute can be resolved without involving the court.
There are exceptions to the without prejudice rule, such as where disclosure is required to prove, or disprove, a fraudulent misrepresentation. When considering the application of any exception, the courts will always seek to balance the policy justification of the without prejudice rule on the one hand and the interests of justice on the other.
|The protection afforded and correct label
||What it means
|Open (or no label)
The content does not make any attempt at settlement or propose any concession in the interests of negotiating a settlement.
The content can be relied on at court, subject to any other privilege the document may attract.
The document cannot be relied on in court.
The content must relate to a genuine attempt at settlement.
‘without prejudice save as to costs’
The content must relate to a genuine attempt at settlement.
The document cannot be relied on in court when determining the dispute built can be referred to court when considering costs and who should pay them.
|‘without prejudice and subject to contract’
The content must relate to a genuine attempt at settlement but by adding the words ‘and subject to contract’ you are indicating that the settlement proposal being communicated is subject to finalisation and formally agreed terms, rather than it being capable of binding acceptance at that time.
The label ‘subject to contract’ on its own will not afford any form of privilege protection.
Genuine attempts to settle
Labelling a communication ‘without prejudice’ will not automatically mean that it is protected. The content of the communication must reflect a genuine settlement attempt, otherwise it will be treated as normal open correspondence. In the same way, the privilege is not necessarily lost simply because the label has not been used. It is, however, good practice to label communications correctly to avoid a later argument about whether or not it is protected.
Without prejudice privilege distinct from confidential information
Confidential information is information which is privy to only one party and is not shared with the other party. Without prejudice communications, however, are communications which pass between opposing parties, but which are labelled as such to prevent the other party from relying on the communication in court.
Parties sometimes use the term “off the record” when intending to speak on a without prejudice basis. Whilst the content of the communication ultimately determines the protection that the communication attracts, it is better to use the correct terminology so that the intention of the communication is clear to both parties. An ‘off the record’ communication may be considered to be mutually agreed as confidential between the parties, but this will not afford the higher level of protection unless the privilege test is met.
Waiver of without prejudice privilege
Without prejudice privilege belongs collectively to the parties to the without prejudice communication and can only therefore be waived by the consent of all parties.
Without prejudice offers of settlement, if accepted, then become binding contracts meaning that the privilege is lifted for the purposes of proving and enforcing the terms of the settlement.