Court of Appeal decision on litigation privilege for non-parties, legal advice privilege for investigations, and the iniquity exception

A recent Court of Appeal decision clarifies a number of important points relating to legal professional privilege: Al Sadeq v Dechert LLP [2024] EWCA Civ 28.

Perhaps most significantly, the decision confirms that litigation privilege is not confined to parties to litigation but can sometimes apply to non-parties, such as the victim of an alleged crime (as in this case). Other non-parties referred to in the judgment as potentially benefitting from litigation privilege include liability insurers, litigation funders, those affected by group litigation, parties behind joint venture companies, and witnesses. For privilege to apply, however, the relevant document must have been prepared for the dominant purpose of seeking or obtaining legal advice, or information or evidence, in connection with litigation in reasonable contemplation.

In relation to legal advice privilege, the decision confirms that the privilege will apply where lawyers are engaged to conduct an investigation, so long as they are instructed for their legal expertise and the investigation is conducted in a legal context. Documents created as part of a purely investigative role, divorced from any legal role, will not be privileged.

The decision also clarifies the test for applying the iniquity exception to privilege. The Court of Appeal held that the exception will apply where a document was created as part of or in furtherance of an iniquity, and this includes documents which report on or reveal the iniquitous conduct - overturning the High Court's decision (considered here) that it was not sufficient that a document reports on the iniquitous conduct. However, the exception will only be engaged if there is a prima facie case of iniquity, which in this context means that the existence of the iniquity is more likely than not on the material available. Further, while the exception does not require that the lawyer was party to, or aware of, the iniquity, it will not apply unless there is an abuse of the lawyer/client relationship.

Finally, the case is of interest for the Court of Appeal's rejection of an attempt to expand the much-criticised Three Rivers (No 5) principle as to who is the "client" for the purposes of legal advice privilege (as clarified in SFO v ENRC [2018] EWCA Civ 2006, considered here) to the context of litigation privilege. The decision also notes that, while the court was bound by the Three Rivers (No 5) principle in the context of legal advice privilege, the defendant took a point on the correctness of that decision in order to preserve it for argument in the event of an appeal to the Supreme Court.

Background

The privilege dispute arose in the context of a claim by the former Deputy Chief Executive Officer of the Ras Al Khaimah Investment Authority (“RAKIA”) against the defendant international law firm ("the Firm") and three of its former partners. The Firm had acted for the Investment and Development Office of the Government of Ras Al Khaimah ("RAK"), and subsequently RAK Development LLC, in an investigation concerning alleged fraud and misappropriation of public assets at subsidiary companies of RAKIA. That investigation had led to the claimant’s arrest and conviction for fraud.

The claimant alleges that he was wrongfully arrested in Dubai and taken to RAK without proper legal process, and that he was wrongfully convicted and imprisoned following politically motivated trials. He contends that the defendants committed serious wrongs against him in the course of their work on the investigation, including being responsible for his unlawful arrest and abduction, extended detention in unlawful and degrading conditions, and torture, as well as forcing him to give false confessions.

The claimant challenged the Firm’s claims to legal professional privilege over various documents on a number of grounds, all of which were rejected by the High Court (Murray J). In summary, the judge found as follows:

1. Iniquity principle: the Firm had applied the correct test in concluding that privilege was not negated in respect of any documents due to the "iniquity exception", namely whether the document was brought into existence for the purpose of furthering an iniquity. The judge rejected the claimant's submissions in favour of a broader approach, which would have meant the exception was engaged for any documents which had been generated by or reported on the relevant categories of conduct.
2. Litigation privilege: the Firm's former clients were entitled to claim litigation privilege in relation to criminal proceedings in RAK despite the fact that they had not been party to the relevant litigation.
3. Legal advice privilege: the Firm was entitled to assert legal advice privilege in relation to documents created for the dominant purpose of its investigatory work, as it was clear on the evidence that the Firm was engaged to advise and assist in their capacity as lawyers.

The claimant appealed on all of these points. A further point raised by the claimant, which the judge had not determined, was that litigation privilege applied only to communications with the Firm or third parties by individuals who were authorised to conduct litigation on behalf of the Firm's client. The claimant argued that this was a principled extension of the Three Rivers (No 5) principle.

Decision

The Court of Appeal allowed the appeal in respect of the test to apply the iniquity principle but dismissed the claimant's other grounds of appeal. Popplewell LJ gave the leading judgment, with which Males and Underhill LJJ agreed.

Iniquity principle - evidential threshold for the iniquity

It was common ground between the parties that the relevant iniquities had to be established to the evidential threshold of a "strong prima facie case". However, it was apparent from the course of argument that the parties had very different ideas as to what that meant in practice. The claimant's position was that for the exception to apply (such that documents would not be treated as privileged) there had to be a real prospect of successfully establishing the relevant iniquities, ie that it was more than fanciful. In contrast, the defendant suggested that the test required a higher threshold before documents would no longer be treated as privileged, ie that it was more likely than not that the iniquities existed.

The court concluded that the relevant threshold was a "prima facie case", and that in the present context this is a balance of probabilities test: the relevant decision maker (whether the party or its legal adviser conducting disclosure, or the court on an application) must determine whether the existence of the iniquity is more likely than not on the material available. This test applies whether or not the iniquity is one of the issues in the proceedings.

The court considered that any lower threshold than a balance of probabilities test (ie involving a degree of probability lower than 50%) would be inconsistent with principle, as it would involve a party being required to disclose communications which, on the material available, were more likely than not to be privileged. As Popplewell LJ said:

"Since privilege, where it exists, is inviolable, and its loss irremediable, and as it has been described as a fundamental human right, that cannot be a satisfactory test."

Popplewell LJ added the proviso that there may be exceptional circumstances which could justify a court applying a balance of harm analysis, in which it would balance the harm to the disclosing party if disclosure is wrongly granted against the harm to the opponent if it is wrongly refused. However, he did not attempt to identify what circumstances these might be, and emphasised that they would be exceptional.

Applying the relevant test, the Court of Appeal was satisfied that the evidence clearly established a prima facie case of the three alleged iniquities relied on for the purposes of the disclosure application, namely: the claimant's unlawful rendition and detention; the conditions in which he was held; and his lack of access to legal representation.

Iniquity principle - relationship between the documents and the iniquity

Popplewell LJ noted that both parties were content to treat the test as whether a document was created "as part of or in furtherance of the iniquity", but they disagreed as to the meaning of this formulation.

The Court of Appeal accepted this as an appropriate formulation, if "part of" is taken to include documents which report on or reveal the iniquitous conduct, as well as those brought into existence in preparation for the iniquity. It rejected as too broad the claimant's submission that the principle should also encompass any document which would not exist but for the iniquity (save for those seeking bona fide legal advice about past iniquitous conduct). In the court's view this was too remote a connection to justify the application of the exception.

The court also rejected the defendant's submission that documents which merely revealed the iniquity should not be covered by the exception - at least in cases where the solicitor was being used as an innocent tool of the client's iniquity. In the court's judgment, such documents would fall within the exception and would have to be disclosed. Popplewell LJ gave the hypothetical example of a document which recorded information about unlawful conditions in which the claimant was being held. If that information came into the Firm's possession as an incidental consequence of its retainer, the Firm would be an innocent tool in their clients' iniquity and the exception would apply.

However, the court emphasised, for the exception to be engaged at all, there must be an abuse of the lawyer/client relationship. If in the above example the information had been provided to the Firm in order to seek its legal advice on whether or not the detention was lawful, it would not be disclosable. Although it would still reveal an iniquity, the iniquity exception would not apply because the relationship was not an abusive one.

Iniquity principle - conclusion

Because the court concluded that the wrong test had been used in applying the iniquity exception, the disclosure exercise would have to be redone. It was not possible to predict whether that would involve disclosure of further documents, as the court could not infer from the material available that any documents had been wrongly withheld as a result of the erroneous approach.

Litigation privilege - non-parties

The Court of Appeal confirmed that litigation privilege could extend to non-parties to proceedings. Provided the dominant purpose test was met, ie the document was prepared for the dominant purpose of litigation in reasonable contemplation, there was no principled basis for limiting the privilege to litigation to which a person was a party.

Popplewell LJ noted the two rationales for litigation privilege, namely that parties should be free to: (i) "unburden themselves without reserve" to their lawyers without fear that these communications might be relied on by an opponent; and (ii) prepare their cases as fully as possible, including by communicating with third parties, without the risk of having to disclose those communications to an opponent (sometimes referred to as the "safe space" rationale). He also noted that the effect of privilege is not limited to protection from disclosure to an opponent in litigation, but extends to any form of compulsory disclosure, such as disclosure to regulatory or tax authorities, and the privilege continues to exist after the litigation has come to an end.

He listed a number of examples where he said a restriction of litigation privilege to the parties to litigation would produce unjust anomalies, including the following:

• A liability insurer would not be able to benefit from litigation privilege for the dominant purpose of gathering evidence where it had the conduct of proceedings to which its assured was party but it was not, which Popplewell LJ said would be "absurd". Similar issues would arise for other non-parties, such as litigation funders, who might play a significant part in the conduct of proceedings. The claimant's suggestion that insurers and litigation funders should be treated as “equivalent to” a party for the purposes of the privilege could have no principled basis except that they have an interest in the outcome, which could apply to other non-parties.
• Non-parties may have a part to play in evidence gathering for group litigation (eg where the claims are run via test cases, or collective competition cases where class members are not parties). The rationales for litigation privilege would be equally applicable in such cases.
• The same is true where the entities behind a joint venture company which becomes involved in litigation each wish to seek legal advice and gather evidence in relation to how the litigation should be conducted by the joint venture company (as to which they might not agree).
• Witnesses or potential witnesses, or non-parties against whom serious allegations are made in litigation between others, may wish to obtain legal advice in relation to the litigation. Such advice would be covered by legal advice privilege but Popplewell LJ said it would be anomalous, and contrary to principle, if communications with third parties for the dominant purpose of obtaining such advice were not also protected.

The Court of Appeal rejected the claimant's submission that litigation privilege should not apply to non-parties as they have no need for a "safe space" to prepare their case. As Popplewell LJ noted, the privilege does not only protect a party from disclosure to opponents in litigation, the safe space rationale might well apply, and in any event that is not the only rationale for the privilege.

Popplewell LJ explained that the availability of litigation privilege for non-parties did not mean that victims and witnesses would have privilege in communications with the police and prosecuting authorities, for two reasons. First, the relevant purpose is that of the person who procures the communication, which would usually be the police or public prosecutor, not the victim or witness. Secondly, the communications would lack the necessary quality of confidence, as the victim or witness would contemplate their being made public by their use in the proceedings.

At first instance, the judge found that there is not some separate requirement that the non-party have a sufficient interest in the litigation to justify extending privilege to them: what is necessary is that they have a sufficient interest to wish to seek legal advice in relation to the litigation and to communicate with third parties for that purpose. In contrast, the Court of Appeal left open the question of whether there is a separate "sufficient interest" requirement, over and above satisfying the dominant purpose test. The court noted that, if there was such a requirement, it was plainly satisfied in this case.

Litigation privilege - Three Rivers (No5) principle

The Court of Appeal rejected the claimant's submission that the Three Rivers (No 5) principle applied to litigation privilege. In the context of legal advice privilege, the principle provides that not all representatives of the client can communicate with the lawyer on a privileged basis, but only those who are tasked with seeking and obtaining the relevant advice. Popplewell LJ noted that the principle had received considerable criticism, but that it was binding in relation to legal advice privilege on all courts below the Supreme Court. Its rationale did not, however, apply to litigation privilege. Legal advice privilege is confined to communications between lawyer and client, and so there is a need to determine which individuals qualify as the "client" where the client is a legal entity. In contrast, litigation privilege extends to communications with third parties and so there is no similar need to determine which individuals qualify.

Legal advice privilege - application to investigations

The Court of Appeal also confirmed that legal advice privilege applied to documents created for the dominant purpose of the Firm's investigatory work.

The claimant argued that a large part of the Firm's work involved investigation activities which involved no legal skills or analysis, but were rather the types of activities ordinarily carried out by police or public prosecutors. However, Popplewell LJ said there could be no real doubt that the Firm was appointed as a law firm for its legal expertise, which extended: "not only to advice on black letter law and its application to particular facts, but also to the practical aspects of legal proceedings and preparations for legal proceedings". That was a legal context which would generally cover investigatory work such as interviewing suspects or potential witnesses and the presentation of evidence to a public prosecutor. Even if the work might also have been undertaken by a non-lawyer, that did not mean it fell outside the legal context in which the Firm was instructed as a global law firm.

The Firm accepted that any document created as part of a purely investigative role, divorced from their role as lawyers, would not be privileged. It had, for example, disclosed a number of communications with the public prosecutor, and it also accepted that communications for the purposes of public relations did not attract legal advice privilege. There was no reason to think the test for legal advice privilege had been wrongly applied.