Litigation privilege for non-litigants: Al Sadeq v Dechert LLP

The Court of Appeal answered some important questions relating to privilege in Al Sadeq v Dechert. In brief, it concluded that:

1. Litigation privilege can apply where the person claiming the privilege is not a party to the contemplated litigation.

2. The test for whether privilege can apply based on the iniquity exception is on the balance of probabilities as to whether the iniquity exists. Documents that were brought into existence as part of or in furtherance of the iniquity, which can encompass documents created later which reveal or report upon the iniquitous conduct, will not be privileged.

3. The test for who is the "client" within a company from Three Rivers No.5 does not apply to litigation privilege: the definition of the client when considering litigation privilege is broader than just those with authority to give instructions to the lawyer.

The decision illustrates practical issues around challenging privilege claims, the scope of the iniquity exception and of legal advice privilege, and also a major development in the scope of litigation privilege.

Background

The Claimant is a Jordanian citizen and a Jordanian-qualified lawyer. He was employed as a legal advisor by the Ras Al Khaimah Investment Authority ("RAKIA"), the investment authority of the Emirate of Ras Al Khaimah ("RAK"), rising to Group Legal Director and then Deputy Chief Executive Officer. After he resigned from RAKIA, he moved to Dubai. He alleges that he was unlawfully arrested by men acting on behalf of the Ruler of RAK, taken from Dubai to RAK, where he has been detained ever since. He was subsequently tried, convicted of fraud, and sentenced to imprisonment in a number of cases in the RAK courts.

He contends that he is innocent of any wrongdoing, was wrongfully convicted in a politically motivated trial, and has therefore also been wrongfully imprisoned. The Defendant lawyers were instructed by the Investment and Development Office of the Government of RAK to assist with a wide-ranging investigation concerning alleged fraud and misappropriation of public assets in relation to transactions carried out by subsidiary companies of RAKIA.

An extension of litigation privilege

Many had predicted that the Court of Appeal would overturn Murray J's finding that a person with an interest in (but not party to) anticipated proceedings can claim litigation privilege if communications take place for the dominant purpose of those proceedings. Instead that has been upheld, representing a significant change in the law of privilege as previously understood: all three leading texts suggested litigation privilege could only apply to communications involving a party to the actual or contemplated proceedings. The Court held that the reasoning of Moulder J. in Minera Las Bambas SA v Glencore Queensland Limited [2018] EWHC 286 (Comm) at [31] was unsound where she held that it is an "established principle" that litigation privilege can only arise in favour of a person who is a party to the litigation in question.

A clearer test for the iniquity exception

One of the Claimant's allegations was that he had been threatened by lawyers at Dechert to force him to give evidence against another former officer of RAKIA. He sought disclosure of communications between Dechert and RAKIA, but the defendants refused to produce them on the grounds that they were covered by legal advice privilege.

The Claimant argued that the defendants had applied too restricted a test as to whether otherwise privileged documents might lose their privileged status due to the iniquity exception, which disapplies privilege where the communications were to further a criminal purpose. The documents in question were said to have been "generated by" or "reported on" conduct relating to the Claimant's allegedly illegal detention in Ras-Al Khaimah, and the conditions under which he was held.

At first instance, Murray J held that this was too broad and confined the exception to its traditional scope, namely to communications which were criminal or fraudulent in themselves or intended to further a criminal purpose. The Court of Appeal unanimously disagreed, holding that the evidential test to be applied by the person conducting the disclosure exercise is whether, on the balance of probabilities, the iniquity exception applies. The communication must have been brought into existence as "part of" the iniquity or to further it, which includes documents created after the iniquitous conduct that report on it or reveal it. The communications must also be an abuse of the lawyer/ client relationship and not, for example, seeking advice on the legality of the conduct.

Further limits to Three Rivers No.5

The Claimant argued that the definition of who is the client within a company that seeks legal advice taken from Three Rivers No.5 should apply in the context of litigation privilege. This effectively limits those within a company considered to be the client to those with authority to instruct lawyers for the company. At first instance there was no need to decide this, based on the judge's other rulings, but the Court of Appeal has offered clarity on the point. It held that the Three Rivers No.5 rationale for the definition of the client, much criticised ever since, does not apply to litigation privilege, which can apply to communications between a lawyer and a third party such as a witness or expert.

What does this mean for you?

The judgment presents a clearer test for when the iniquity exception will apply and force the disclosure of otherwise privileged communications. However, those managing disclosure exercises will rarely have the whole picture as to whether the lawyer/client relationship was being abused to further or cover up wrongdoing. Decisions when potential iniquity arises will remain difficult.

The extension of litigation privilege to non-parties is a major change. It often happens that in an investigation by a company into suspected wrongdoing, it is anticipated that proceedings, whether criminal or civil, may be brought against individuals or other companies. Previously, it was thought that only legal advice privilege was available to a company in that context, with all the difficulties of defining the client for the purposes of the Three Rivers No.5 test.

Post Al Sadeq, it is clear that litigation privilege is potentially available not only in relation to legal advice to those within the company who constitute the client, but also for witness interviews where the dominant purpose of those is for the contemplated proceedings. The dominant purpose test will, as ever, be key and it may be a narrow set of circumstances in which the dominant purpose of investigative work is proceedings in which the company will not be involved. But if, for example, the company is the victim of the crime and wants to volunteer evidence to assist the prosecution, or quantify its loss, the investigation into the matter may now be covered by litigation privilege. Where prospective litigation is the dominant purpose of legal work, it will be important to record that when lawyers are instructed.