Disclosure is becoming an increasingly big issue in employment disputes. The growing use of subject access requests under Section 7 of the Data Protection Act (DPA) 1998 means employers have to confront the issue of disclosure at an early stage. A key question is often the extent to which disclosure requests can be resisted on the grounds of legal professional privilege.
In Durant v Financial Services Authority (FSA), Lord Justice Auld stated categorically that the purpose of the subject access right is not to assist a prospective litigant to obtain discovery of documents. Nor should a court exercise its discretion under Section 7(9) of the DPA to enforce compliance with the request where that is a perceived intention of the data subject. Nevertheless, subject access requests are likely to continue to be made almost as a matter of routine, tacitly to assist with employment tribunal claims or other employment-related proceedings.
The Civil Procedure Rules (CPR) have also to an extent encouraged more frontloading of the disclosure process; under the old Rules of the Supreme Court it was uncommon for disclosure to be sought before the close of pleadings. Now, the ability to seek disclosure prior to the commencement of proceedings under CPR 31.16 remains a potentially powerful tool, despite the restraints imposed by the Court of Appeal’s decision in Black v Sumitomo. This is particularly the case where it is envisaged that the provision of those source documents will encourage or facilitate constructive settlement negotiations at an early stage.
These developments heighten the need to ensure that legal professional privilege is asserted where necessary and, more generally, to develop strategies for the devel-opment and management of privilege.
Legal professional privilege
The right to object to disclosure is generally described as legal professional privilege and has been taken for granted by lawyers for more than 100 years. Legal professional privilege comprises two distinct categories. The first, litigation privilege, protects communications between lawyer and client or a third party made in reasonable contemplation of litigation. The second, legal advice privilege, is afforded to confidential documents between the lawyer and client, the dominant purpose of which is the obtaining or giving of legal advice, whether on a contentious or non-contentious matter. However, long-held assumptions about the application of legal professional privilege now need revisiting.
As the creditors of BCCI begin the hearing of their groundbreaking claim against the Bank of England for its alleged misfeasance in its supervision of BCCI prior to the merchant bank’s collapse, it is arguable that the most significant legacy of this case has already occurred. Two decisions reached at a preliminary stage of the proceedings in connection with disclosure applications by the claimant creditors throw important new light on the scope of legal professional privilege.
In April 2003, the Court of Appeal’s decision in Three Rivers District Council & Ors v Bank of England appeared to limit dramatically the scope of who constitutes a client for the purpose of legal advice privilege. The critical point of the facts of that case was that the communications between the Bank of England’s Bingham Inquiry Unit (BIU) and other bank employees were not produced in anticipation of litigation and therefore not covered by litigation privilege – the Bingham Inquiry was essentially fact finding and not adversarial in nature. The crux of the decision was that only documents that passed between the BIU and its legal advisers were regarded as privileged. All other documents prepared by employees for the purpose of inquiry were not privileged and were therefore deemed disclosable. As a consequence, revised administrative arrangements may be helpful:
- there may need to be a wider range of individuals with authority to liaise with in-house lawyers or directly with external solicitors.
- Arrangements where a specific red-circled committee is established with authority to liaise with in-house counsel or external lawyers ought to be avoided.
- Where there is a dual purpose of the internal communications, the request should be couched in terms such that the legal advice purpose is the principal purpose.
- Internal communications where possible ought to be routed through in-house counsel and senior management to enable in-house counsel to give a preliminary legal view. This should help to support claims that both internal and external communications with the external lawyers are superseded by privilege. In retrospect, Three Rivers creates an added incentive for in-house lawyers to ensure that they are actively involved in all non-judicial contentious matters, for example investigations by the Health and Safety Executive, the Inland Revenue or the FSA.
In a separate High Court decision in Three Rivers (No 10), the issue of what constitutes legal advice was tackled. Once again, the previously conceived scope was diminished. Legal advice was given a strict interpretation and was held to encompass only advice on rights and obligations. It did not extend to advice on how evidence should be presented.
The decision creates difficulties for lawyers in private practice but is potentially a minefield for those in-house. The nature and purpose of in-house lawyer communications will often be manifold. It will often be difficult to distinguish between circumstances in which an in-house lawyer’s internal communications are provided in a legal capacity or in an executive or business capacity, with the latter not attracting privilege.
Therefore, in connection with non-judicial contentious matters, in-house lawyers will need to ensure that the correspondence they generate falls on the right side of this unfortunately blurred line. In contrast, historically the European Court of Justice (ECJ), at least in connection with competition authorities’ investigations, has not extended privilege to in-house lawyers. (But a reversal of that position may occur when the ECJ gives its decision in the Akzo Nobel case.)
In ordinary contentious circumstances involving a contemplated employment tribunal claim, litigation privilege will apply and attach to all communications, including those passing internally between client contacts, for the purposes of collecting or discussing information in connection with the contemplated litigation. Litigation privilege also attaches to communications with third parties such as witnesses and experts.
The definition of litigation for these purposes is a formal adversarial proceeding. It is therefore highly unlikely to apply in connection with internal employee disciplinary proceedings, unless of course by that stage formal tribunal or court proceedings are contemplated.
Close attention should also be paid to ensuring that preparation for the contemplated proceedings is the dominant purpose of any such communication. If the privileged purpose is merely an ancillary purpose of the communication, it is unlikely to be privileged.
Care should also be taken to ensure that evidence gathered for contemplated litigation is obtained lawfully. Privilege may be lost in circumstances where evidence is gathered unlawfully, for example through the activities of private investigators. From the decision of the High Court in Dubai Aluminium Co Ltd v Al-Alawi, it is clear that any privilege attaching to evidence obtained in breach of data protection legislation is likely to be lost.
Without prejudice privilege
The entering into of ‘without prejudice correspondence’ is a familiar practice to those who have been involved in negotiating settlements to employment disputes. There is, however, a common misconception that without prejudice communications, by simply labelling them as such, will in all circumstances remain privileged. A number of exceptions to the basic rule allowing without prejudice communications to be admitted in evidence were set out by the Court of Appeal in Unilever v Procter & Gamble (1999).
In particular, there is an Employment Appeals Tribunal decision suggesting that without prejudice communications might be admissible simply to rebuff any clearly inconsistent statement that is made in pleadings or open correspondence (see Knightstone Housing Association v Crawford).
It is therefore important to remember to be reticent in terms of the content of without prejudice communication and avoid any contentious details that are incidental or superfluous to the attempt to settle the dispute.
David Lipworth is a senior associate at Baker & McKenzie