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The Court of Appeal clarifies legal advice privilege in investigations and litigation privilege for non-parties

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By Victoria Grantham, Richard Highley & Francesca Muscutt


Published 09 February 2024


For Accountancy firms facing possible investigation by their regulators, careful consideration needs to be given to whether or when litigation privilege applies over internal documents produced by the firm undertaking its own investigations. Ensuring there is a claim to legal advice privilege or litigation privilege over such documents becomes an important consideration. While regulators, such as the FRC, must respect privilege as a doctrine, whether or not documents actually attract privilege is an area of regular contention between regulators and those under investigation or review.

The recent Court of Appeal decision in Al Sadeq v Dechert LLP  provides helpful clarification on the scope of legal professional privilege.  In particular, it confirms litigation privilege is not confined to parties to the litigation and legal advice privilege can apply in an investigatory context if lawyers are instructed to provide legal expertise in the context of the investigation and the investigation itself is conducted in a legal context. 


The Al Sadeq case

Dechert, an international law firm, was engaged by the RAK government to investigate transactions carried out by subsidiaries controlled by Ras Al Khaimah Investment Authority ("RAKIA"). The terms of Dechert's engagement covering the lawyers supervising the investigation and the scope of the investigation were set out in two letters of engagement.

The investigations were substantial and resulted in civil and criminal proceedings being brought against individuals relating to allegations of fraud and misappropriation of public assets. Mr Al Sadeq, a senior executive of RAKIA brought proceedings against Dechert and former partners supervising the investigation (the defendants) alleging they had committed serious wrongs against him in the course of their investigation, including obtaining evidence by force and intimidation and being responsible for his unlawful arrest, unlawful detention, torture and inhumane treatment whilst detained in Ras Al Khaimah.     

The defendants resisted disclosure over their work product on grounds of privilege. Mr Al Sadeq's wide ranging application, which challenged the defendants' claim to privilege on three main points, was rejected by the High Court. He appealed to the Court of Appeal.


Iniquity Exception

Al Sadeq argued the "iniquity exception" to privilege applied. This long established principle provides that privilege will not protect communications which are made in furtherance of a crime or fraud or other equivalent conduct. The Court of Appeal clarified the exception will only apply where, on a balance of probabilities, there is a prima facie case of iniquity on the material available and the communication reporting or revealing the iniquity involves an abuse of the lawyer-client relationship.  Legal advice obtained to establish whether a crime/iniquity was committed will not be caught by the exception.


Litigation privilege

Litigation privilege covers confidential communications (usually) between lawyers and their clients  created for the dominant purpose of use in actual or reasonably contemplated litigation or other adversarial proceedings.


Al Sadeq argued the documents were not protected by litigation privilege because Dechert's clients were not a party to the proceedings in RAK.  The Court of Appeal disagreed and clarified that it is not a pre-requisite for the party claiming litigation privilege to be an actual party in the proceedings. It can apply to non-parties with a substantial interest including liability insurers, litigation funders and witnesses provided the dominant purpose test is met. The Court also clarified litigation privilege extends to cover any form of compulsory disclosure, such as disclosure to a regulator like the FRC or HMRC, and continues to exist after the litigation ends unless waived by the privilege holder.


Legal Advice Privilege

Legal advice privilege covers confidential communications between lawyers and their clients which are made for the dominant purpose of seeking or giving legal advice.

Al Sadeq argued that a large part of Dechert's work involved no legal skills or analysis such as searching premises, interviewing witness and providing material to (in this case) the public prosecutor.   He argued such work was not of a "legal nature" and therefore could not attract legal advice privilege.

The Court of Appeal disagreed.  It noted that for legal advice privilege to apply, the dominant purpose of a communication must be to obtain or give legal advice by or from a lawyer and that the advice must be legal advice, not commercial advice, given.  The advice must be "given with the benefit of the lawyer’s skill as a lawyer or “through a lawyer’s eyes”.  The terms of engagement of the lawyer, whilst not determinative, would assist in an assessment of the position.

The Court of Appeal concluded privilege applied. Dechert's appointment extended beyond advice on "black letter law" to advice on " the practical aspects of legal proceedings and preparations therefore, including advice as to what evidence can and should be sought in the legal context of its use in assessing liability and/or bringing proceedings". This included taking witness statements and assembling facts in the context of an investigation. A law firm (or in house legal team) engaged to advise on a regulatory investigation or an internal investigation may do so to bring lawyers' skills to the process and to conduct that investigation through "lawyers' eyes" 

It is worth noting Dechert accepted that communications for the purposes of public relations did not attract legal advice privilege (they may of course, depending on the context, still attract litigation privilege).


Conclusion and recommended steps

The Court of Appeal's decision is to be welcomed. It supports the fundamental rationale for litigation and legal advice privilege – that a client must be able to consult his lawyer in confidence and his lawyer must be free to give honest and candid advice without fear that his communications will be disclosed.  It provides both parties with a "safe space". While Regulators such as the FRC, may press for fuller disclosure, a decision to exercise the right to maintain privilege should not be the subject of regulatory criticism.

Legal advice privilege is narrower than litigation privilege and its application is more susceptible to challenge. Lawyers engaged to conduct an investigation at a time when it is not clear that there are, or may in the future be, adversarial proceedings must be careful to document the purpose and scope of the investigation. They must make it clear that the dominant purpose of their role and their communications is to give legal advice.  The mere attendance of a lawyer in a meeting or call will not guarantee privilege.  The courts have acknowledged, however, that there is a public interest in encouraging the internal investigation of allegations/issues which arise within an organisation which may lead to, for example, self reporting to a regulator[1].  Lack of protection by privilege could discourage any such investigation. 

Litigation privilege covers all documents created in contemplation of adversarial proceedings (which includes disciplinary proceedings) and would include investigation under the FRC's Audit Enforcement Procedure as soon as the FRC gives a Notice of Investigation under Rule 11.  However, for Accountancy firms, there are many occasions where internal investigations must commence before a regulatory investigation is announced, and where in consequence the applicability of litigation privilege is far from clear.


 Steps to consider include:

  • The involvement of legal advisors in the investigations. If the purpose and scope of the investigation is to obtain legal advice in the handling of the investigation, and on its potential legal implications, legal advice privilege will apply.  However, it is important to document the reasons for the involvement of the legal advisors, and to ensure that work product produced in the investigation is created in liaison with the legal team.
  • Identify a defined group of individuals within the accountancy firm to act as the ‘client’ for privilege purposes. This may include for example members of the internal legal team/risk team and all key individuals involved in the investigation.  This assists in ensuring that documents produced in the course of the investigation are for the purpose of seeking legal advice.
  • Remind partners or employees with knowledge of the matter under investigation to avoid the creation of any documents related to the investigation save in liaison with the legal advisors (for example internal voicemails and instant messaging along with emails and notes).
  • If the investigation is to be discussed do so with lawyers present.
  • Remind employees that all work product from the investigation should be marked “Privileged and Confidential: prepared for the purposes of seeking legal advice/in contemplation of regulatory, civil and other proceedings.”
  • Involve your legal team in any conversations with relevant employees related to the investigation and ensure the interviewee is informed that the meeting itself is confidential.




[1]  See for example the decision of the Court of Appeal in SFO v ENRC