Internal investigations and legal professional privilege: an increasingly tricky area

24 March 2017

In March 2017, the Munich Public Prosecutor’s Office raided the German offices of the law firm Jones Day as part of its investigation into the Volkswagen emissions scandal. Volkswagen had instructed Jones Day to conduct an internal investigation following an announcement by the Environmental Protection Agency (EPA) that the company had installed illegal devices in its cars which were designed to circumvent EPA emissions tests. In October 2016, Volkswagen entered into a settlement with the DoJ and agreed to make a payment of $4.3bn in penalties.

It has been reported that this raid highlights the need for clarity in the law in Germany as to whether the work product of internal investigations is covered by legal privilege: a 2010 case ruled that internal investigation documents could be seized from a law firm in a criminal case, whilst a court in 2012 took a different approach and held that internal investigation documents collected by external lawyers and stored in their offices cannot be seized.  Another source interviewed said that minutes of interviews arising out of internal investigations do not fall within the scope of privilege.

It is not only German case law on privilege that leaves lawyers scratching their heads. Clarity over the status of documents prepared and collected as part of an internal investigation is needed in a number of jurisdictions, including our own. Recent cases involving internal investigations where litigation privilege does not apply demonstrate the courts are reluctant to accept claims to legal advice privilege over material without detailed examination of the purported status.

  • In Property Alliance Group v The Royal Bank of Scotland [2015] EWHC 3187 (Ch) it was argued that legal advice privilege could not attach to communications 'simply because' minutes had been taken by a lawyer who was present and had sent them to his client. The Court agreed and held:

A record of a non-privileged conversation, whether in the form of a verbatim note or a transcript, cannot itself be privileged if the underlying conversation was not privileged'.

  • More recently the RBS Rights Issue litigation [2016] EWHC 3161 (Ch) further narrowed the application of privilege in the context of internal investigations where litigation privilege was unavailable.

RBS had claimed that legal advice privilege applied to interview notes which were said to summarise interviews with RBS employees conducted by or on behalf of RBS as part of two internal investigations. In the circumstances, no claim could be made to litigation privilege and RBS sought to rely on legal advice privilege. The notes were prepared by RBS in-house lawyers in respect of one of the investigations and in respect of the second, the notes were prepared by a US law firm and a London-based firm acting as an agent of the US firm. The interviewees had been told that the interview notes would be confidential and subject to 'attorney-client privilege'.

RBS argued that any communication by an employee who is authorised to communicate with a legal adviser for the purpose of the employer seeking legal advice is privileged; that each of the interview notes recorded a communication between a lawyer and a person “authorized by RBS” to give instructions to its lawyers; and that the test for privilege does not require that the communication is of instructions rather than factual information. It argued that where the client is a corporation, statements made to the corporation’s lawyer by employees authorised (as a matter of fact) by the corporation to make them on its behalf constitute lawyer-client ‘communications’ for the purposes of legal advice privilege.

RBS sought to distinguish the current facts from the leading case of Three Rivers (No 5) on the basis that in Three Rivers (No 5) the communications were internal within the client corporation and only a defined client group in that case was specifically authorised to communicate with the client’s lawyers. In the current case the employees were communicating information to lawyers as authorised by their employer which was evidenced by the interview notes.

The Court disagreed and held that the individuals interviewed were “providers of information” as employees and not clients and the interview notes were not communications between a client and legal adviser even where the employee had authorisation from the client to communicate.

It further held that, in order to attract legal advice privilege, interview notes must contain “some attribute or addition such as to betray or at least give a clue as to the trend of advice being given to the client by its lawyer!. The burden of proving that the notes contain such a clue is on the party claiming privilege.

RBS had claimed that the notes revealed “the lawyers’ train of inquiry”. The Court said that there was a real difference between “train of inquiry” and “reflecting or giving a clue as to the trend of legal advice”. The court examined the responses provided by RBS to enquiries from the claimants in detail and found that RBS had failed to discharge the burden of proving privilege in respect of documents which it had claimed were “lawyers working papers”. The Court’s examination of the correspondence in respect of privilege highlights the importance of careful drafting in any responses to requests for disclosure.

Of course, these two cases relate to circumstances where there is a dispute over disclosure and the question of privilege is being litigated at court. Thankfully a “dawn raid” and seizure of material in the possession of a law firm is not common practice. Nonetheless the news from Germany is a reminder for lawyers in England and Wales to be mindful of the privileged status of material arising out of an internal investigation and take steps to preserve a claim to privilege wherever possible.

The Law Society recently published a practice note on Legal Professional Privilege which reminds lawyers of their duties to preserve and assert their client’s privilege. When advising individuals on whether to participate in internal investigations the privileged status of any notes arising from their interview will always be a key consideration. In the meantime, given that Three Rivers (No 5) remains good law and whilst we await an appeal of the RBS Rights Litigation, caution should be exercised  when the prospect of an internal investigation arises.

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Close Load more

Let us take it from here.

+44 (0)20 7814 1200

enquiries@kingsleynapley.co.uk

Skip to content Home About Us Insights Services Contact Accessibility