Saul Goodman, the dodgy American attorney in “Breaking Bad”, maintains extensive connections with the criminal underworld; removing evidence, money laundering and otherwise facilitating his clients’ nefarious activities. Saul always insists on a small initial retainer to ensure that his schemes are cloaked with the protection of attorney client privilege. Saul’s English counterparts may not be as sleazy or as flamboyant, but in some cases share his willingness to misuse legal professional privilege.
The renowned jurist Jeremy Bentham regarded lawyers as an obstacle to the administration of justice and believed legal professional privilege turned the lawyer into the accomplice of his client.
The Serious Fraud Office (SFO) and the National Crime Agency (NCA) also consider that legal professional privilege is being abused and appear to be determined to make inroads into this doctrine to ensure that its application is as limited as possible.
David Green QC the director of the SFO has recently alleged that companies are impeding investigations by using legal professional privilege as a smoke screen, stating that “claims of privilege can transcend extravagance and amount to a strategy of deliberate obstruction, a strategy we will always challenge. But individuals, corporates and their lawyers need to understand that we will make progress and we will not go away.”
Green has pledged that the SFO “is prepared to challenge head-on the claims of privilege that we believe are ill-founded”.
Privilege is different from confidentiality
Lawyers have a professional obligation to keep their clients’ affairs confidential however confidentiality can be, and is often overridden by the courts to assist investigations. There are two main methods by which the Court will enforce this; Disclosure Orders and Production Orders, a search warrant is hardly ever appropriate against a professional person.
Disclosure orders
A disclosure order will require the lawyer to provide documentation or information to the investigator which would otherwise be confidential. A disclosure order can be obtained by an investigator under s357 Proceeds of Crime Act 2002, if there are reasonable grounds for believing that the information provided will be of substantial value to an investigation and that it is in the public interest for the information to be given.
Production orders
A production order allows investigating officers to request documents and other information in relation to an investigation and requires the lawyer to produce those documents and/or disclose information, including answering questions. A production order can be obtained by an investigator under s345 Proceeds of Crime Act 2002 or Schedule 1 Police and Criminal Evidence Act 1984, or by a Revenue investigator under s20BA Taxes Management Act 1970.
However, regardless of which approach is taken by the court, a client may still resist the compulsory disclosure of information by claiming legal professional privilege.
Legal professional privilege will often inhibit investigators’ access to sensitive “key” documentation which may be very relevant to the investigation. It is for this reason that the investigating authorities are pushing for greater scrutiny of such claims.
What information is covered by legal professional privilege?
Legal professional privilege can be broadly divided into two categories: legal advice privilege and litigation privilege.
Legal advice privilege: covers communications between a lawyer and his client which satisfies the following criteria:
1. It is a direct communication between the lawyer and his client,
2. It is created for the purpose of obtaining or giving legal advice; and,
3. It is confidential in nature.
The fact that a lawyer is copied into a correspondence, or is present at a meeting does not, in itself, mean that the information attracts legal advice privilege.
Litigation privilege: extends privilege to confidential communications between a lawyer (his client) and third parties, as long as it is in relation to the proceedings and its primary purpose is to:
1. seek or give of advice in relation to the proceedings;
2. obtain evidence to be used in the proceedings; or,
3. obtain information leading to the obtaining of evidence to be used in the proceedings.
Interestingly, no privilege attaches to communications between an individual and his medical or spiritual adviser. In Wheeler v Le Marchant (1881) 17 Ch 675, Sir George Jessel MR stated:
“In the first place, the principle protecting confidential communications is of a very limited character… There are many communications which, though absolutely necessary because without them the ordinary business of life cannot be carried on, still are not privileged … Communications made to a priest in the confessional on matters perhaps considered by the penitent to be more important than his life or his fortune, are not protected.”
Further, following the decision in R (on the application of Prudential PLC & Anor) v Special Commissioner of Income Tax & Anor [2013] UKSC1, it has been established that legal professional privilege cannot be claimed in relation to communications with accountants.
In the Prudential case the Supreme Court had cause to examine and analyse the limitations of legal professional privilege, and there was no unanimity. Lord Sumption and Lord Clarke saw no reason why legal advice about tax law given by a lawyer should attract privilege and identical advice given by an accountant should not. The case is also of wider interest in relation to the examination of legal professional privilege. A review of the authorities highlighted that:
– Obtaining legal advice is “the oldest of the confidential communications known to the common law” Upjohn Company v United States 449 U.S. 383 (1981)
– Legal professional privilege belongs to the client and depends on the public interest in promoting his access to legal advice on the basis of absolute confidence.
– Privilege could not be overridden “even if the information withheld was likely to be material evidence to exonerate a man charged with murder”. R v Derby Magistrates Court, Ex parte B [1996] AC 487.
Privilege had been considered previously by the House of Lords in March 2004 in the Three Rivers case: Lord Scott observed “that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers’ legal skills…, should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else is founded upon the rule of law.”
When doesn’t privilege apply?
Privilege does not apply to documents which themselves form part of a criminal or fraudulent act, or communications for the purpose of obtaining advice with the intention of carrying out an offence, regardless of whether the lawyer is aware that this is the intention.
The potential abuse of the doctrine of legal professional privilege was highlighted in Kuwait Airways (No 6) [2005] IWLR 2734 where it was found that “there was a widespread conspiracy to deceive the English court which was acted upon and has been proved to have led not only to perjury but to forgery and the perversion of justice on a remarkable and almost unprecedented scale.”
If a lawyer crosses the line and colludes with a client to put forward a false case supported by false evidence, his client cannot expect to enjoy the protection of legal professional privilege.
It is also important to note that legal professional privilege will not normally apply to legal transactional files, such as those relating to conveyancing; a limitation which is well known to SFO and NCA investigators.
In September 2014, the SRA announced that it would be working closely with the NCA to crackdown on money laundering. In his announcement, Paul Philip, chief executive of the SRA, stated that “The SRA will be taking a robust stance on anti-money laundering compliance and will deal promptly with any firm that that transgresses the rules.”
Areas highlighted by the SRA in it’s report following the partnership announcement as “particular vulnerabilities” were the failure by law firms to conduct appropriate identity checks and the failure to conduct due diligence on the source of funds and the beneficial owner, which fall under the ‘Know Your Client’ compliance provisions.
Know Your Client material will be required by investigators in response to production and disclosure orders and no legal professional privilege will attach to this. Under their new partnership, it will be standard practice for the NCA and SRA to scrutinise the Know Your Client procedures followed and where this material falls short of compliance the law firm will be left open to the risk of disciplinary action.
Conclusion
For now legal professional privilege remains secure. As Lord Taylor of Gosforth CJ in R v Derby Magistrates Court said “a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence … It is a fundamental condition on which the administration of justice as a whole rests.”
Saul Goodman could not have put it better.
Saul Goodman, the dodgy American attorney in “Breaking Bad”, maintains extensive connections with the criminal underworld; removing evidence, money laundering and otherwise facilitating his clients’ nefarious activities. Saul always insists on a small initial retainer to ensure that his schemes are cloaked with the protection of attorney client privilege. Saul’s English counterparts may not be as sleazy or as flamboyant, but in some cases share his willingness to misuse legal professional privilege.
The renowned jurist Jeremy Bentham regarded lawyers as an obstacle to the administration of justice and believed legal professional privilege turned the lawyer into the accomplice of his client.
The Serious Fraud Office (SFO) and the National Crime Agency (NCA) also consider that legal professional privilege is being abused and appear to be determined to make inroads into this doctrine to ensure that its application is as limited as possible.
David Green QC the director of the SFO has recently alleged that companies are impeding investigations by using legal professional privilege as a smoke screen, stating that “claims of privilege can transcend extravagance and amount to a strategy of deliberate obstruction, a strategy we will always challenge. But individuals, corporates and their lawyers need to understand that we will make progress and we will not go away.”
Green has pledged that the SFO “is prepared to challenge head-on the claims of privilege that we believe are ill-founded”.
Privilege is different from confidentiality
Lawyers have a professional obligation to keep their clients’ affairs confidential however confidentiality can be, and is often overridden by the courts to assist investigations. There are two main methods by which the Court will enforce this; Disclosure Orders and Production Orders, a search warrant is hardly ever appropriate against a professional person.
Disclosure orders
A disclosure order will require the lawyer to provide documentation or information to the investigator which would otherwise be confidential. A disclosure order can be obtained by an investigator under s357 Proceeds of Crime Act 2002, if there are reasonable grounds for believing that the information provided will be of substantial value to an investigation and that it is in the public interest for the information to be given.
Production orders
A production order allows investigating officers to request documents and other information in relation to an investigation and requires the lawyer to produce those documents and/or disclose information, including answering questions. A production order can be obtained by an investigator under s345 Proceeds of Crime Act 2002 or Schedule 1 Police and Criminal Evidence Act 1984, or by a Revenue investigator under s20BA Taxes Management Act 1970.
However, regardless of which approach is taken by the court, a client may still resist the compulsory disclosure of information by claiming legal professional privilege.
Legal professional privilege will often inhibit investigators’ access to sensitive “key” documentation which may be very relevant to the investigation. It is for this reason that the investigating authorities are pushing for greater scrutiny of such claims.
What information is covered by legal professional privilege?
Legal professional privilege can be broadly divided into two categories: legal advice privilege and litigation privilege.
Legal advice privilege: covers communications between a lawyer and his client which satisfies the following criteria:
1. It is a direct communication between the lawyer and his client,
2. It is created for the purpose of obtaining or giving legal advice; and,
3. It is confidential in nature.
The fact that a lawyer is copied into a correspondence, or is present at a meeting does not, in itself, mean that the information attracts legal advice privilege.
Litigation privilege: extends privilege to confidential communications between a lawyer (his client) and third parties, as long as it is in relation to the proceedings and its primary purpose is to:
1. seek or give of advice in relation to the proceedings;
2. obtain evidence to be used in the proceedings; or,
3. obtain information leading to the obtaining of evidence to be used in the proceedings.
Interestingly, no privilege attaches to communications between an individual and his medical or spiritual adviser. In Wheeler v Le Marchant (1881) 17 Ch 675, Sir George Jessel MR stated:
“In the first place, the principle protecting confidential communications is of a very limited character… There are many communications which, though absolutely necessary because without them the ordinary business of life cannot be carried on, still are not privileged … Communications made to a priest in the confessional on matters perhaps considered by the penitent to be more important than his life or his fortune, are not protected.”
Further, following the decision in R (on the application of Prudential PLC & Anor) v Special Commissioner of Income Tax & Anor [2013] UKSC1, it has been established that legal professional privilege cannot be claimed in relation to communications with accountants.
In the Prudential case the Supreme Court had cause to examine and analyse the limitations of legal professional privilege, and there was no unanimity. Lord Sumption and Lord Clarke saw no reason why legal advice about tax law given by a lawyer should attract privilege and identical advice given by an accountant should not. The case is also of wider interest in relation to the examination of legal professional privilege. A review of the authorities highlighted that:
– Obtaining legal advice is “the oldest of the confidential communications known to the common law” Upjohn Company v United States 449 U.S. 383 (1981)
– Legal professional privilege belongs to the client and depends on the public interest in promoting his access to legal advice on the basis of absolute confidence.
– Privilege could not be overridden “even if the information withheld was likely to be material evidence to exonerate a man charged with murder”. R v Derby Magistrates Court, Ex parte B [1996] AC 487.
Privilege had been considered previously by the House of Lords in March 2004 in the Three Rivers case: Lord Scott observed “that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers’ legal skills…, should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else is founded upon the rule of law.”
When doesn’t privilege apply?
Privilege does not apply to documents which themselves form part of a criminal or fraudulent act, or communications for the purpose of obtaining advice with the intention of carrying out an offence, regardless of whether the lawyer is aware that this is the intention.
The potential abuse of the doctrine of legal professional privilege was highlighted in Kuwait Airways (No 6) [2005] IWLR 2734 where it was found that “there was a widespread conspiracy to deceive the English court which was acted upon and has been proved to have led not only to perjury but to forgery and the perversion of justice on a remarkable and almost unprecedented scale.”
If a lawyer crosses the line and colludes with a client to put forward a false case supported by false evidence, his client cannot expect to enjoy the protection of legal professional privilege.
It is also important to note that legal professional privilege will not normally apply to legal transactional files, such as those relating to conveyancing; a limitation which is well known to SFO and NCA investigators.
In September 2014, the SRA announced that it would be working closely with the NCA to crackdown on money laundering. In his announcement, Paul Philip, chief executive of the SRA, stated that “The SRA will be taking a robust stance on anti-money laundering compliance and will deal promptly with any firm that that transgresses the rules.”
Areas highlighted by the SRA in it’s report following the partnership announcement as “particular vulnerabilities” were the failure by law firms to conduct appropriate identity checks and the failure to conduct due diligence on the source of funds and the beneficial owner, which fall under the ‘Know Your Client’ compliance provisions.
Know Your Client material will be required by investigators in response to production and disclosure orders and no legal professional privilege will attach to this. Under their new partnership, it will be standard practice for the NCA and SRA to scrutinise the Know Your Client procedures followed and where this material falls short of compliance the law firm will be left open to the risk of disciplinary action.
Conclusion
For now legal professional privilege remains secure. As Lord Taylor of Gosforth CJ in R v Derby Magistrates Court said “a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence … It is a fundamental condition on which the administration of justice as a whole rests.”
Saul Goodman could not have put it better.
