October 22, 2020

Volume X, Number 296

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Court Of Appeal Confirms That No Special Rules Apply To Regulators When It Comes To Documents Protected By Legal Professional Privilege

In a welcome and robust defence of the scope of legal professional privilege (LPP), the Court of Appeal in Sports Direct International Plc v Financial Reporting Council [2020] EWCA Civ 177,  reiterated last week that there are no exceptions to the protections afforded by LPP unless it is used to hide criminal actions or where a particular statute intends to modify the rule. This confirms that there is no authority for any general or wider principle that a regulator may be able to get around the usual rules on LPP and force disclosure of otherwise priviliged materials.

The Court of Appeal also reiterated that documents attached to emails protected by LPP will be disclosable if they themselves do not satisfy the well known criteria for LLP. The document cannot hide under the protection of the email.

Judge holding gavel in courtroom

Background

The Financial Reporting Council (FRC) was investigating the conduct of accountancy firm, Grant Thornton, in relation to its audit of Sports Direct International Plc’s (SDI) financial statements for 2015-2016. It was acting under its statutory powers in Schedule 2 of the Statutory Auditors and Third Country Auditors Regulation 2016 (SI 2016/649) (SATCAR).

FRC had issued a Notice under SATCAR requiring SDI to provide various documents and “all emails and attachments to emails in the possession and control of SDI” which related to the audit criteria. Some of those emails were headed “Privileged and for GT audit use only“. The Court at first instance ordered disclosure of various documents that SDI had argued were covered by LPP.

The Court of Appeal Judgment discussed at length the case law surrounding two issues – infringement and communication.

On infringement

Applying previous case law, the Court of Appeal concluded that it had to review and interpret the relevant statute to see whether Parliament intended to override LPP. In this case, they concluded that the wording of the SATCAR precluded any such implication. If Parliament had intended to apply an exception to the rule on LPP where the documents were being sought pursuant to regulatory powers, SATCAR would have been drafted differently.

On communication

The Court of Appeal had to consider whether the particular wording of FRC’s Notice should be interpreted so that a document not covered by LPP could nevertheless be deemed privileged when it was attached to an email that was protected by LPP.

The Court noted that the “ordinary civil procedure process requires the disclosure of all free-standing documents which are relevant to the pleaded issues in dispute between the parties, regardless of whether they have been attached to emails at any point“. But the FRC’s Notice differed slightly because it did not ask for free standing documents, only for emails and their attachments.

Upon consideration of the case law, the Court of Appeal determined that a distinction was not suitable. It commented that, in the circumstances, it is not the document that is privileged but the fact of the communication of that document to a legal adviser, and that distinction cannot pass the test for LPP.

Comment

This Court of Appeal decision may offer some comfort to those seeking to resist disclosure of privileged documents in response to a request from a regulator under the regulator’s statutory powers.  Indeed, we are increasingly coming across regulators asking to be provided with privileged documents by those who are under investigation by the regulator.

However, this case also highlights the risk of naturally assuming that LPP covers attachments to privileged emails and thus prudent signposting of privileged documents should be adhered to in order to avoid any confusion.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 58
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About this Author

Garon Anthony Litigation Attorney Squire Patton Boggs Birmingham, UK
Partner

Garon is a partner in the Litigation Practice Group. He advises clients across the full range of commercial dispute issues, including cyber liability/data breach, professional negligence, banking, pensions and insurance.

Garon regularly acts for clients who are subject to investigations or disciplinary proceedings by national and international regulators, including most recently the Financial Conduct Authority, the Financial Reporting Council and the Dubai Financial Services Authority.

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Rose Chaudry, Squire Patton, Commercial Litigation Lawyer, Tortious Contracts Attorney
Associate

Rose Chaudry is an associate in the Litigation team with expertise in general commercial litigation. Rose qualified in September 2015 after completing her training contract with the firm.

Rose regularly acts for a diverse client base, including individuals and companies, from SMEs to PLCs. Rose has experience advising on a wide-range of matters of both a contractual and tortious nature, including breach of contract, breach of warranty, debt recovery, professional negligence and insurance.

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