The High Court recently handed down two notable rulings that impact on the application of legal professional privilege to investigations (see here for a previous article on privilege in investigations):

  1. In A v B and another[1] (see further details below), the court held that it is for auditors – and not their audit client – to determine whether documents disclosed to the auditor by the client attract legal professional privilege in the context of compelled productions to the Financial Reporting Council (the FRC).
  2. In PJSC Tatneft v Bogolyubov & Ors[2], the court confirmed that when assessing whether legal professional privilege can be claimed over communications with foreign lawyers it is “not necessary or relevant to consider the training and experience of an individual foreign lawyer” in determining whether the individual is acting in their professional capacity as a lawyer.

Further details of the cases are provided below.

Key takeaways

  1. Great care will need to be taken by audit clients when disclosing legally privileged documents to their auditors (for example updates from legal counsel on ongoing investigations).
  2. As is already common practice, it may be prudent to provide oral briefings to auditors and limit the production of privileged documents as much as possible (and where such documents are provided on a limited waiver basis, to make sure that it is agreed that the client will have an opportunity to explain why documents are privileged in the event of any request).
  3. In some cases, it may make sense to agree with an auditor that certain types of particularly sensitive documents are privileged before providing them.
  4. The Tatneft case will be of comfort to those conducting multijurisdictional investigations and litigation, although the narrow definition of “client” and the dominant purpose test for the purposes of legal advice privilege will continue to apply.

A v B & Anor

The proceedings arose in the context of an investigation being carried out by the FRC into the 2018 financial statements audit of a retailer (Retailer). The FRC is investigating the Retailer’s former auditors (Auditors) and one of its audit partners. As part of this investigation the FRC issued notices requiring the Auditors to produce certain documents but the Retailer asserted that some of the requested documents were protected by its legal professional privilege. The Auditors disagreed with the Retailer’s assertion of privilege in relation to some of the documents and the High Court was asked to consider which of the parties was in fact entitled to determine whether the documents were privileged.

The court held that it was for the Auditors themselves to independently determine whether the documents were privileged (rather than them simply relying on the Retailer’s submission that the documents were privileged). This conclusion was reached on the basis that the Auditors were the person who owed the duty to disclose documents to the FRC under the statutory notice. The Retailer would then be free to bring proceedings against the Auditors, including seeking an injunction, if the Auditors came to an incorrect conclusion.

PJSC Tatneft

This judgment stemmed from Russian oil company PJSC Tatneft’s claims against four individuals in relation to an alleged fraudulent scheme.

PJSC Tatneft’s assertion of legal professional privilege over communications between its employees and members of its in-house legal department was challenged on the basis that Russian in-house lawyers were not members of the Russian Bar under Russian professional standards and that legal professional privilege did not apply because they were therefore not ‘appropriately qualified’. The Court disagreed, stating that it would “not enquire into how or why the foreign lawyer is regulated or what standards apply to the foreign lawyer under local law.”

The court confirmed that the only requirement when assessing whether legal professional privilege can be claimed over communications with foreign lawyers is that the individual is acting in their professional capacity as a lawyer in connection with the provision of legal advice. It was therefore “not necessary or relevant to consider the training and experience of an individual foreign lawyer”.

The authors would like to thank Sophy Lelliott, for her assistance in preparing this blog post.

[1] A v B & Anor [2020] EWHC 1491 (Ch)

[2] PJSC Tatneft v Bogolyubov & Ors [2020] EWHC 2437 (Comm)