The Hon Mr Justice Burnett:
Introduction
- The issue for decision in this claim for judicial review is whether the claimant and interested parties can assert joint interest legal privilege over eight emails and their attachments which were sent to them by Messrs Irwin Mitchell between February and June 2008. This case is not concerned with litigation privilege but only with legal advice privilege. Mr Ford and Mr Owen were directors of Keydata Investment Services Limited ["Keydata"] and Mr Johnson was its compliance officer. For convenience I shall refer to them as the 'executives'. Irwin Mitchell had been retained in December 2007 by Keydata to advise in connection with an investigation by the Financial Services Authority ["FSA"]. There is no doubt that the legal advice provided by Irwin Mitchell was privileged in the hands of Keydata. The executives assert that Irwin Mitchell were also advising them as individuals and not simply as directors and officers of Keydata. They say that was because it was obvious, and explicitly contemplated by them and Irwin Mitchell, that in time the executives would become vulnerable to investigation by the FSA. The common understanding was that the advice was personal as well as corporate. In due course the FSA did indeed open investigations into the executives. Keydata went into administration. The FSA was subsequently provided with the emails and attachments by the administrators of Keydata, who waived the company's privilege. The FSA has relied upon the content of those emails and attachments in formal investigation reports and warning notices served on the executives pursuant to the statutory regulatory scheme. The administrators explicitly did not, indeed could not, waive any privilege in the documents attaching to the executives. The FSA did not investigate with the executives whether they had privilege in the documents before they were used to inform the investigation reports and warning notices. In those circumstances, the executives contend that the FSA has acted unlawfully in using material that was in fact subject to legal professional privilege.
The communications over which privilege is claimed
- There are eight emails from Sarah Wallace of Irwin Mitchell addressed to the executives at their Keydata email addresses which are in dispute in these proceedings, together with their attachments.
i) 7 February 2008 at 09.57 with attachments from Grant Thornton UK LLP ["Grant Thornton"];
ii) 7 February 2008 at 17.22 entitled 'advice';
iii) 26 February 2008 forwarding an email from Grant Thornton;
iv) 3 March 2008 attaching a report from Grant Thornton;
v) 16 April 2008 attaching a report from Grant Thornton;
vi) 18 April 2008 attaching a note of a conference with counsel held the previous afternoon;
vii) 2 May 2008 forwarding an email from Grant Thornton;
viii) 19 June 2008 with attachments from Grant Thornton.
- Permission to apply for judicial review was granted in relation to these documents alone on the joint privilege issue. Other grounds had been advanced in the claim form, on which permission was refused. None has been renewed. In particular, an argument that the administrators had no power to waive the privilege of Keydata has not been pursued. It has become common ground that the administrators were entitled to waive the company's privilege and have done so effectively.
- Permission to apply for judicial review was granted by Mitting J in relation to the emails from Ms Wallace together with all the various attachments, or forwarded emails, from Grant Thornton. All of the matters emanating from Grant Thornton were headed 'subject to legal professional privilege'. It may well have been the belief of Ms Wallace that communications from Grant Thornton were covered by legal professional privilege, even though they did not contain legal advice and did not come from lawyers. Alternatively, it may have been thought that by attaching those documents to an email from a solicitor, or incorporating them within, they were provided with the cloak of privilege.
- It is as well to deal with the status of the material which came from Grant Thornton at the outset.
- In the skeleton argument filed on behalf of the claimant it was stated that he was not seeking to argue that advice received from an accountant is protected by legal professional privilege. In oral argument Mr Malek QC indicated that his client's concern was not with the Grant Thornton material, but with advice from Irwin Mitchell contained in particular in the second email of 7 February 2008 and the note of the conference with counsel sent under cover of the email of 18 April. He emphasised that these proceedings would not have been brought if all that was in issue was the Grant Thornton material. The claimant's case appeared to be that by attaching a document in which there was admittedly no privilege to an email in which there was (or might be), the attachment became clothed in privilege. However, whilst not formally conceding that the claimant could not assert legal advice privilege over the Grant Thornton material, Mr Malek did not press the point in argument. The Court of Appeal has recently reaffirmed that legal professional privilege 'only applies (apart from statute and an exceptional case such as Calley v. Richards 19 Beav 401) to communications with a member of a relevant legal profession': See R (Prudential) v. Income Tax Special Commissioner [2011] 2 WLR 50 at para [72] and [82] to [85] per Lloyd LJ. See also the discussion of Wheeler v le Marchant (1881) 17 Ch D 675 in the judgment of the Court of Appeal in Three Rivers DC v Bank of England (No.5) [2003] QB 1556 at paras [17] to [26]. That being so, none of the attachments to the emails which came from Grant Thornton, nor their advice which was forwarded by Irwin Mitchell attracts legal professional privilege.
Background facts and the circumstances in which privilege was waived by the administrators on behalf of Keydata
- Keydata was founded by the claimant in 1997. It started by providing marketing and sales information to independent financial advisers. It moved into the management of third party assets and in due course marketed and distributed financial products. Neither the background to nor the detail of the FSA's concerns regarding Keydata illuminate the legal professional privilege issue in this claim. In short, the reason for the appointment of FSA investigators into the affairs of Keydata on 18 December 2007 was that the FSA believed that Keydata may have contravened the FSA's Principles for Businesses and Rules in relation to one product in particular and the way in which it was sold and marketed. In January 2008 Irwin Mitchell were retained to advise Keydata. On 2 September 2008 the FSA notified the claimant and interested parties that they too were the subject of formal investigation. The notices of appointment of investigators into the conduct of the executives were issued on 29 August 2008. Having obtained instructions that the executives wished her to represent them in connection with that investigation, Sarah Wallace of Irwin Mitchell confirmed that to the FSA. It is in those circumstances that the FSA has throughout accepted that any communications between the executives and Irwin Mitchell from then on is subject to legal professional privilege. The investigation continued. Preliminary Investigation Reports were served on Keydata and each executive on 1 June 2009, to which they responded later that summer. On 8 June 2009 Keydata was put into administration by the Court on the application of the FSA and Price Waterhouse Cooper LLP ("PwC") were appointed as administrators. Irwin Mitchell ceased to act for the company. Thereafter, the claimant sought independent advice from Withers LLP (who have continued to advise and act for him) and the other two executives have acted in person in connection with the investigation and these proceedings.
- Unknown to the claimant (or the other executives), on 19 August 2009 the FSA used its statutory powers to compel PwC to provide an electronic copy of the claimant's email records. Those records contained all of the emails which form the subject matter of this claim. The FSA investigators realised that the material provided to them contained material which was subject to legal professional privilege. Before reading it, and thus taking it into account as part of the investigation, the FSA approached PwC in February 2010 with a request that they, as administrators, waive the privilege enjoyed by Keydata. The FSA confirmed that the request for waiver 'will not extend to any personal legal advice received by Mr Ford from Withers or others and the FSA will not review any material which appears to fall into this category…' After taking legal advice on 1 March 2010 PwC waived privilege in these terms:
" … we have now heard back from Freshfields and can confirm as follows:
1. we are claiming privilege in relation to communications between Keydata and its lawyers and documents produced by its lawyers.
2. we are willing to waive privilege to that material on a limited basis to the FSA and the FSCS;
3. the waiver is for the purposes of the ongoing FSA enforcement investigation into Keydata and its directors and the FSCS's investigations into the company for the purposes of compensating the investors; and
4. the waivers are provided on the basis that the FSA will keep the material confidential (not that we have any doubts on that front!)… "
- In the intervening months the FSA had been continuing with its investigation and considering the responses of Keydata and the executives to the Preliminary Investigation Reports. The executives had disputed the criticisms made of them and Keydata in those reports. The FSA was contemplating amending those reports and suggested to the executives that it was doing so. For example, on 8 December 2009 the FSA wrote to the claimant's solicitors indicating that some aspects of the original report would not form part of any enforcement action. On 18 March 2010, by which time the FSA had sight of the contentious emails, the claimant's solicitors were told that a new Preliminary Investigation Report would be with them by the end of May. That did not happen. On 13 August 2010 the FSA sent a draft Supplementary Investigation Report to PwC upon which they commented. Supplementary Investigation Reports were then served on the executives on 31 August 2010.
The Dispute over Privilege
- The Supplementary Investigation Report referred to the content of the contentious emails and their attachments. It was only on receipt of this report that the claimant became aware that material which he (and his fellow executives) considered privileged in their hands, as well as those of Keydata, was in the possession of the FSA. The Supplementary Investigation Report was served upon the claimant at the end of August 2010 when the FSA knew that his solicitor would be away until 6 September. There was an accompanying bundle of some 5,000 pages. The deadline for a full response was set at 28 days. On 6 September an extension of time was refused by the FSA because a date had already been set for the Regulatory Decisions Committee ["RDC"] to meet on 6 October to consider the report and the executives' responses with a view to deciding whether formal warning notices should be served on any of them. That forms the next step in the regulatory disciplinary process. Such notices might warn of the possibility of financial and other sanctions, including whether an individual might be prevented from working in financial services.
- The immediate concern of Withers was to find out the circumstances in which the FSA came to be in possession of and rely upon what the claimant regarded as material privileged in his hands. Its secondary concern was to attempt to resolve the question of privilege before the RDC considered the next stage in the process. If material had been relied upon in the Supplementary Investigation Report which should not have been there, the claimant wished to have that excised before the RDC looked at the matter. Having conducted a preliminary review of the material served on 31 August, Withers wrote to the FSA on 10 September asking for clarification of the basis upon which the privileged material had been provided. In reply, the FSA indicated that the material had been produced by PwC in response to a statutory requirement and that they had waived privilege. The FSA position was encapsulated in this way:
"Accordingly, the FSA considers that it is free to use these documents in any regulatory action concerning your client. The FSA does not consider that any of the documents you have referred to in your letter contains legal advice given to Keydata's senior management in their individual capacities (as opposed to legal advice given to Keydata itself). We have also seen no evidence to suggest that Irwin Mitchell was retained by any of the individuals, as opposed to Keydata prior to September 2008…"
- A few days later on 15 September the FSA provided Withers with the statutory request made of PwC in August 2009 for copies of the claimant's emails. The covering letter also indicated how the FSA investigators had ensured that they did not see any privileged material before privilege was waived by PwC. Their IT specialists were asked to conduct keyword searches designed to identify any email that may be subject to legal professional privilege. Those identified were then 'tagged' and not read by the investigators.
- Thus, it was on 15 September 2010 that the claimant became aware of the process which had led to the contentious emails being relied upon in the Supplementary Investigation Report. Neither the FSA nor PwC thought it necessary to inform the claimant that his email account was being copied nor to involve him in the question of the waiver of legal professional privilege. Mr Malek drew a contrast between the approach of the FSA in this case, and the careful way in which material which is potentially privileged is treated by police forces which have used their powers to seize material (including computers) under the Police and Criminal Evidence Act 1984 or by the Serious Fraud Office when it requires the production of material pursuant to its statutory powers. In broad terms those procedures ensure that such contentious material is not seen by investigators and are designed to ensure, so far as possible, that any dispute relating to privilege is resolved in advance of the material being read or relied upon. Although Mr Malek submits that this case provides an opportunity for the Administrative Court to determine whether the FSA should adopt procedures developed in those similar environments, there was no argument on the point, no analysis of the different statutory regimes involved or of the authorities relating to them. In those circumstances it is not appropriate to do so. However, it does not go too far to suggest this. Questions relating to joint interest privilege are likely to arise commonly in connection with relatively tightly controlled companies where the directors and the company are in reality one and the same. It is desirable that any potential dispute about privilege should be resolved before the material is considered by investigators and relied upon in the course of regulatory activity. For that reason the FSA might usefully review what is done by the Serious Fraud Office and Police to deal with potentially legally privileged material to determine whether similar practices might be adopted.
- Withers sought and received confirmation from Freshfields on 24 September of the circumstances in which privilege had been waived.
- On 28 September 2010 Withers wrote to the RDC in an effort to secure their second objective, namely halting any further consideration of a warning notice until the dispute over privilege had been resolved. The method proposed by Withers was that the RDC should itself consider the question of privilege, in effect, as a preliminary issue. It became apparent that a second meeting of the RDC had been planned for 19 October. There was an inconclusive exchange of correspondence followed by a threat of judicial review on 18 October if the RDC did more than consider the privilege issue at its meeting the following day. Correspondence continued in the following days but, in the result, the RDC issued warning notices on the basis of the reports which included reliance on the contentious material. Judicial review proceedings followed promptly. No dissemination of the contentious material has occurred. Mitting J ordered that the court file could not be inspected. Whilst most of the hearing of the claim was conducted in public it was necessary to hold in private those parts during which the contentious material was discussed. Counsel structured their submissions in a way which reduced reference to that material to a minimum, as did the interested parties who each made submissions in person.
Joint Interest Legal Professional Privilege
- Both claimant and defendant approached the question of joint interest privilege from a common starting point, namely the summary in chapter 6 of the Law of Privilege, edited by Bankim Thanki QC and the exposition in Phipson on Evidence 17th edition, edited by Hodge Malek QC. They are leading counsel respectively for the defendant and claimant in these proceedings. In short, joint interest privilege can arise in two circumstances. First, when two or more legal persons jointly retain the same lawyer. Secondly when, even though there is no joint retainer, the parties have a joint interest in the subject matter of the communication in issue at the time that it comes into existence. As Mr Thanki puts it in his book: "… the document must have come into being for the furtherance of the joint purpose or interest." It is common ground that such an interest may arise between a company and its directors. Whilst the broad principle there articulated was not in issue, it is striking that neither counsel has cited any English authority which establishes the criteria against which this second aspect of joint interest privilege should be considered. It is only the second aspect which is of relevance in this claim, because the original retainer letter from Irwin Mitchell to Keydata was written in terms that showed that the company was the client. The executives were not mentioned as clients. Arguments were developed by counsel by reference to Australian and American authority. Mr Malek submits that on the evidence before the court, which has not been contradicted and which the FSA did not seek to challenge by way of cross-examination, it is clear that at the material time Irwin Mitchell were advising both the company and the executives in their personal capacities. He further submits that joint interest will be established if the person seeking to rely upon it had a reasonable belief at the time the communication came into being that it was for the purpose of giving him (albeit with others) legal advice. In support of that submission he relies upon a line of authority in New South Wales. Mr Thanki submits that such an approach is altogether too loose. He submits that joint interest privilege should not be available to directors or executives of a company which has entered into a retainer with solicitors unless the individuals concerned satisfy the test adopted in the Courts of the United States. That, he submits, has five elements:
i) He must show that he approached the lawyer for the purpose of seeking advice;
ii) He must demonstrate that when he approached the lawyer he made it clear that he was seeking legal advice in an individual capacity, rather than as a director;
iii) He must demonstrate that the lawyer saw fit to communicate with him in that individual capacity, knowing that a possible conflict with the company could arise;
iv) He must show that the communications with the lawyer were confidential;
v) He must show that the substance of the communications with the lawyer did not concern matters within the company or the general affairs of the company.
These elements are derived from the decision of the Federal Court of Appeal (Third Circuit) In the matter of Bevill, Bresler & Schulman Asset Management Corporation 805 F2d 120.
- The consequences of a joint interest being established are the same as if there were a joint retainer giving rise to a joint interest. They were described by Rix J in The Sagheera [1997] 1 Lloyd's Rep 160:
"Parties who grant a joint retainer to solicitors of course retain no confidence as against one another: if they subsequently fall out and sue one another, they cannot claim privilege. But against all the rest of the world, they can maintain a claim for privilege for documents otherwise within the ambit of legal professional privilege; and because their privilege is a joint one, it can only be waived jointly, and not by one party alone. These principles are, I believe, well established: see for instance Rochefoucauld v. Boustead (1896) 65 L.J.Ch. 794, Cia Barca de Panama S.A. v. George Wimpey Y Co. Ltd., [1980] 1 Lloyd's Rep. 598, In Re Koninsberg (A Bankrupt), [1989] 1 W.L.R. 1257. "
- The origins of joint interest privilege can be seen from nineteenth century decisions of which Gourard v. Edison Gower Bell Telephone Co. of Europe Ltd. (1888) 57 L.J. Ch is an example. Shareholders in the defendant company challenged a claim to privilege advanced on behalf of the defendant on the basis that when the directors obtained the advice in question, they did so on behalf of the company as a whole. They could not, therefore, assert privilege in the advice as against the shareholders. Chitty J held that the shareholders were entitled to discovery of the documents in question by analogy with the practice that applied in partnership cases (and those concerning trustees and beneficiaries) where advice had been obtained for the benefit of the partnership or trust estate. The rationale of such cases is that there is no distinction between the interests of the partnership and the individual partners and the trust and its beneficiaries. Rochefoucauld v. Boustead (cited by Rix J in The Sagheera) was a case which involved a joint venture between two individuals. The first invited the second to consult a solicitor on their joint behalf. There were proceedings against both. The first waived privilege but the second was entitled to insist upon it.
- The Australian cases relied upon by the executives were concerned with circumstances in which the interests of companies and their directors overlapped but were not necessarily the same. The most authoritative of the cases cited is the decision of the Court of Appeal of New South Wales in Farrow Mortgage Services Pty Ltd (in Liq) v Webb and others [1996] 39 NSWLR 601. The defendants in the proceedings had all been directors of a company called C H Webb Bros Pty Ltd ["C H Webb"] before it was wound up. The plaintiff was the liquidator of a company that had made substantial loans to C H Webb, on which it defaulted. Under New South Wales law a director was personally liable if, at the time the loan was entered into, there were reasonable grounds to believe that the company would be unable to pay its debts when they fell due. C H Webb engaged solicitors, who in turn instructed counsel. They gave advice about a number of matters relating to the loan and to the distribution of financial liabilities amongst a number of companies in which the defendants (respondents in the appeal) held substantial interests. The judge at first instance, Young J, broke down the advice given by the solicitors into three categories:
i) the affairs of the company;
ii) the duties of the directors of the company; and
iii) the potential liability of the directors to third parties.
- The liquidator of C H Webb made the contentious documents available to the plaintiff, who in turn instructed an accountant. Relying in part of the documents, the accountant produced a report that concluded that the defendants should be personally liable for the loans originally made to C H Webb. The defendants applied to the Supreme Court of New South Wales for an order prohibiting the plaintiff from relying on the contentious documents on the ground that they held joint privilege in them and that the liquidator of C H Webb could not waive that privilege on their behalf. Young J acceded to that application. He did not accept the submission that there had been a joint retainer. However, he concluded that, despite the paucity of evidence, the advice was sought and given on behalf of both C H Webb and the defendants. Thus there was joint privilege. The plaintiff appealed. By a majority, the Court of Appeal dismissed the appeal. The judgment of the majority was given by Sheller JA. The learned judge reviewed the law of privilege and then rehearsed the facts in detail, including affidavit evidence filed by each of the directors, which had not been challenged. He continued (at p. 617):
"The respondents' unchallenged evidence was that they sought advice in relation to their duties and obligations as directors of CH Webb, their possible future personal liability to Farrow, the types of proceedings that might be instituted against them and the steps that they should take in accordance with the duties they owed to the company as directors in relation to various matters.
Young J said that there was no evidence at all from any of the (respondents) that they ever thought or had reasonable grounds to believe that Robilliard & Robilliard were their solicitors. Bearing in mind that the material in the affidavits was not to be taken as evidence of the capacity in which the solicitors were instructed, his Honour was unable to find 'that as a matter of fact the directors had the view that the communications from the barristers were communications to them as clients'. In this with the greatest of respect I think his Honour erred. There was evidence that Robilliard & Robilliard had been, since before 1988, each of the respondent's personal solicitors, that the directors had concerns about various matters and that Robilliard & Robilliard were instructed to advise them or obtain advice for them. A reading of the respondents' evidence and the contents of the eight documents in the schedule, in my opinion, supports the conclusion that throughout Robilliard & Robilliard were taking instructions not only from CH Webb or Ortex Australia or the Webb group of companies but also from the respondents in their personal capacity. In the absence of any cross-examination the inference seems to me inescapable that the respondents were themselves seeking advice and would naturally believe that they were being given advice as clients of Robilliard & Robilliard.
Young J found 'that the information was sought on behalf of both the company and the (respondents) and there (was) a joint privilege'. I am quite unable to separate the interests of the various companies in the Webb group from those of the respondents. They were inextricably tied together. As the various instructions and advices make plain, the particular proposals being examined, that is to say, whether construction contracts that CH Webb had the right to enter into could be entered into by a separate company, whether the business of Ortex Australia could be transferred offshore and OSI protected from the creditors of CH Webb by a non-recourse loan, or whether from 1991 new projects could be entered into by a new entity in place of CH Webb, despite the claims of Farrow, involved consideration of the respondents' concerns about their duties as directors. The appropriateness of each of these proposals turned upon that question.
I think Young J was correct in his conclusion that the contract was in each case between one or other of the companies and Robilliard & Robilliard. This is what Young J understood to be meant by retainer. Robilliard & Robilliard could not and did not look to the respondents for payment of their fees. But Young J was also right to conclude, in my opinion, that advice was being sought from solicitors not only by the companies but also by the respondents and the occasions of the seeking and giving of that advice were privileged in consequence. This left for consideration the question whether that privilege had been waived."
This passage contains a reference to the question whether the defendants had 'reasonable grounds to believe' that the solicitors were giving them advice in their personal capacity. That was one of tests applied by Young J, which he derived from one of his own earlier judgments.
- This long passage from the judgment of Sheller JA shows that he disagreed with the factual evaluation undertaken at first instance. The essence of his conclusion was that the solicitors were taking instructions at all times from the defendants in their personal capacity, and that the interests of the various companies and the defendants were inextricably linked. So he agreed with the conclusion of Young J but reached his own decision on a broad factual evaluation of the circumstances as they existed when advice was being sought and given. So much is clear from his conclusion found at p. 620G:
"The respondents … emphasised Young J's finding that the information and advice were sought on behalf of both C H Webb and the respondents. This meant that there was a joint privilege. It seemed to his Honour artificial to dissect the entities and say that the company alone had privilege in communications from lawyers, which the company intended should be obtained for the benefit of both itself and the directors.
In my opinion there was sufficient commonality of interest between C H Webb or other Webb companies on the one hand and the respondents on the other to give the respondents the protection of legal professional privilege in regard to the eight documents in the schedule. The evidence overwhelmingly supported Young J's conclusion that instructions were given and advice obtained on behalf of both the companies and the respondents. They joined in seeking it and for that reason it might be said that the privilege was a joint privilege. Clearly the evidence demonstrates that the interest of the company of C H Webb and the respondents in the various matters the subject of the eight documents was a shared one and common to all. "
- Waddell A-JA agreed with Sheller JA. Meagher JA dissented in a four paragraph judgment. He agreed with the summary of the facts given by Sheller JA but did not draw the same conclusion from them. Of the advice he said this:
"It was obtained by C H Webb, was paid for by C H Webb, and provided by a solicitor retained by C H Webb. The privileged documents certainly dealt with the legal position of C H Webb's directors, and it was doubtless in the company's interest that it should know how its directors stood. The directors were obviously "interested" in the privileged material in the lay sense, but in a legal sense they had no interest in it. Things would be otherwise if, as could have happened, the directors and the company jointly sought the advice. "
Meagher JA appears to propose the view that in the absence of a formal joint retainer the claim for joint interest privilege would fail. By contrast, I understand the majority to have determined that the question should be evaluated by reference to all the evidence available. Theirs was a search for the factual reality: were the directors seeking, and the solicitors giving, advice in their personal capacity? The totality of the evidence showed that they were. There is a reference in the judgment of Sheller JA to the 'reasonable belief' of the defendants, but he did not suggest that provided the answer to the question whether there was joint privilege.
- Pioneer Concrete (NSW) Pty Ltd v Webb (1995) ACSR 418 was decided by Simos J after Farrow had been determined at first instance but before the appeal. The defendant was once more Mr Webb claiming joint interest privilege in advice given pursuant to a retainer with C H Webb (the company). His argument had three bases. First, that the advice was given not only to the company as client, but also to him as client even though the company paid the lawyers' fees. Secondly, that he was entitled to claim privilege because he 'believed on reasonable grounds that, in giving the advices, the lawyers were acting for both' him and the company. Thirdly, he claimed common interest privilege: see page 420.
- Mr Malek advances the first two of those arguments on behalf of the claimant in these proceedings and is supported in those arguments by the interested parties. There is no argument founded upon common interest privilege.
- Simos J was satisfied that joint interest privilege had been established on the evidence before him. He concluded (a) that Mr Webb believed that the communications were to him as client; (b) that on reasonable grounds he believed that the lawyers were his lawyers when giving advice; and (c) that the true substance of the arrangement was that advice was being given to the company and to the directors in their personal capacities : see page 422 line 45 to 423 line 11.
- Conclusions (a) and (b) of Simos J are described in terms which suggest, on one reading, that he considered the law of New South Wales would recognise joint interest privilege if they alone were established. Another reading is that he considered that the first two conclusions were strong pointers to the third, which encapsulated the real question: what was the true substance of the arrangement?
- Mr Malek cited two further Australian authorities which demonstrate that the question whether joint interest privilege exists engages a factual inquiry into the relationship between the lawyers and the legal persons involved: Doran Construction Pty Ltd (in liq)[2002] NSWSC 215; The Shed People Pty Ltd v Turner [2000] SASC 196.
- The American case of In the matter of Bevill, Bresler & Shulman Asset Managament Corporation was decided in November 1986. It concerned the insolvency of two associated companies with common directors or principals. The first company, referred to in the opinion of the Court delivered by Circuit Judge Seitz as AMC, filed for chapter 11 protection. The second, referred to as BBS, was put into liquidation. The District Court had ordered that the trustees of the debtor companies should be provided with the substance of the advice given by lawyers at meetings with the principals before the chapter 11 petition was filed. The principals argued that the order violated their attorney-client privilege because the lawyers were giving advice both to the companies and also to them as individuals in their personal capacities.
- AMC's petition for chapter 11 protection had been filed on 7 April 1985. On the following day the Security and Exchange Commission filed a civil complaint alleging fraud against AMC and its principals. Meetings had occurred involving various of the principals and the lawyers between 25 March and 4 April. These were the contentious meetings. The principals all asserted that they attended these meetings to secure personal advice. The lawyers explained the position in this way in a letter to the trustees of BBS:
"Our firm was initially consulted on Monday, March 25, 1985. On that date and during the week of March 25, 1985 we were consulted by officials of Bevill, Bresler & Schulman, Inc. on a confidential and privileged basis for the purpose of personal representation as well as corporate representation of Bevill, Bresler & Schulman, Inc. and other companies. We were not retained until Sunday, March 31, 1985 on which date we agreed to represent Bevill, Bresler & Schulman, Inc., the broker/dealer and its affiliated broker/dealer companies and to consider further the matter of representation for the individuals and other corporations. During the next few days we continued to be consulted by officials of Bevill, Bresler & Schulman, Inc. on a confidential and privileged basis for purposes of personal representation and to consider the need therefor.
Within a few days of March 31, 1985 we advised each individual official to retain separate and individual counsel…. "
- In coming to its decision the District Court relied upon the opinion of the Georgian State Court handed down in In re Grand Jury Investigation No 83-30557, 575 F. Supp 777 (N.D. Ga. 1983). It had articulated the five criteria relied upon by Mr Thanki (see para 16 above) but which it is convenient to reproduce here in the language of the Court:
"First they must show they approached [counsel] for the purpose of seeking legal advice. Second, they must demonstrate that when they approached [counsel] they made it clear that they were seeking legal advice in their individual rather than in their representative capacities. Third, they must demonstrate that the [counsel] saw fit to communicate with them in their individual capacities, knowing that a possible conflict could arise. Fourth, they must prove that their conversations with [counsel] were confidential. And, fifth, they must show that the substance of their conversations with [counsel] did not concern matters within the company or the general affairs of the company. "
- It had been argued by one of the principals that he had consulted counsel for the sole or primary purpose of securing personal legal advice. That contention was rejected by the District Court because there was an inadequate evidential basis to support it. The alternative submission was founded on the argument that it was impossible to distinguish the advice given to the corporation and the principals. The District Court accepted that submission with respect to the meetings that took place up to 31 March 1985. It rejected it for the following days. The trustees did not appeal the ruling in respect of the days up to 31 March. In respect of the period that followed the District Court found that once the lawyers had agreed to represent BBS, it was to them alone that they owed any duty. On the basis of the lawyers' knowledge of BBS and AMC when the chapter 11 petition was filed, the District Court said:
"[i]t is obvious that immediately after March 1985, Hellring, Lindeman turned its attention to the affairs of its corporate clients."
Finally the court stated that the only personal advice that had been identified was that relating to separate representation.
- The principals ran a subsidiary argument that the communications were privileged by "joint defense privilege", a type of litigation privilege, which was rejected on the facts. The District Court circumscribed its order to protect privileged matters by excluding from disclosure discussions concerning the separate representation of the principals or their personal liabilities, unless the communication also related to the assets or business of the companies or the roles of the principals in the companies. In short, to attract privilege the advice had to concern the principals alone. Judge Seitz's reasons for upholding the decision of the District Court on the question of joint interest privilege may be summarised in these propositions:
(i) Whilst attorney-client privilege exists to encourage frank communication between lawyer and client in the interest of good administration of justice, the application of the privilege in the context of corporations poses difficulties. That is because corporations can only communicate through human agents.
(ii) The Supreme Court in Commodity Futures Trading Commission v Weintraub 471 U.S. 345, 195 S.Ct. 1989, 1991 85 L.Ed.2d 372 (1985) had held that any privilege that exists as to a corporate officer's role and functions within the corporation belongs to the corporation and not the officer.
(iii) A corporate official may not prevent a corporation from waiving its privilege arising from discussions with lawyers about corporate matters.
(iv) The Supreme Court in Weintraub identified important policy considerations to circumscribe the availability of joint advice privilege which might result in corporate officers being able to prevent a corporation (or its successor) from waiving privilege. It would "defeat the Bankruptcy Code's goal of uncovering insider fraud" and prevent the investigation of possible misconduct by officers.
(v) There is no attorney-client privilege vested in corporate officers over communications made in their role as corporate officials. (see pages 120 - 125)
- The effect of the American jurisprudence is that once lawyers have been retained by a corporation, officers of that corporation cannot prevent it waiving privilege on advice concerning its affairs, even if the personal affairs of the officers are inextricably intertwined, and they are in fact being advised at the same time. That reflects the fifth criterion identified in In re Grand Jury Investigation.
- In urging that a similar approach should be adopted in this jurisdiction, Mr Thanki prays in aid a number of factors which he submits point to that result. First, once privilege is recognised it is absolute: Three Rivers DC v Bank of England No 6 [2004] 1 AC 610 at [25]. Therefore it should not be lightly recognised. Secondly, a finding of privilege constrains a company from waiving privilege when it might wish to do so to advance or protect its own interests. For example, in the regulatory environment disclosure to regulators of advice received by the company may be in the company's best interests. The same may be true in seeking to defeat a limitation argument in civil proceedings. Thirdly, in the absence of a formal joint retainer the lawyers may be placed in difficulty. If acting for more than one client, lawyers have a duty to identify potential conflicts of interest. Conflicts of interest may well arise in the context of FSA regulatory action. The duties of lawyers are primarily contractual. They might find themselves unexpectedly owing duties of care to individuals who they did not understand to be their clients. Fourthly, the interests of different directors and employees of a company frequently will not coincide.
- Mr Malek submits that these matters should carry little or no weight in identifying the scope of joint interest privilege, or the circumstances in which it arises.
- In my judgment the starting point in determining the circumstances in which joint interest privilege arises must be the underlying policy considerations which lead to confidential communications with lawyers being accorded protection from disclosure. They were comprehensively summarised in the opinions of the members of the Judicial Committee of the House of Lords in Three Rivers District Council & others v. Bank of England (No. 6), to which I have already referred, in particular those of Lord Scott and Lord Carswell. Lord Scott's summary of the position, with which all members of the committee agreed, and which was in its effect the same as Lord Carswell's, was as follows:
"23. It is impossible to express a coherent view about the issues which have been debated on this appeal without taking into account the policy reasons which led to legal advice privilege becoming established in our law in the first place and to the policy reasons for its retention in our law today. Before examining those reasons, however, it seems to me helpful to review some of the features of legal advice privilege in order to provide a context for the policy reasons underlying the privilege.
24. First, legal advice privilege arises out of a relationship of confidence between lawyer and client. Unless the communication or document for which privilege is sought is a confidential one, there can be no question of legal advice privilege arising. The confidential character of the communication or document is not by itself enough to enable privilege to be claimed but is an essential requirement.
25. Second, if a communication or document qualifies for legal professional privilege, the privilege is absolute. It cannot be overridden by some supposedly greater public interest. It can be waived by the person, the client, entitled to it and it can be overridden by statute (c/f R (Morgan Grenfell Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563), but it is otherwise absolute. There is no balancing exercise that has to be carried out (see B v Auckland District Law Society [2003] 2 AC 736 paras.46 to 54). The Supreme Court of Canada has held that legal professional privilege although of great importance is not absolute and can be set aside if a sufficiently compelling public interest for doing so, such as public safety, can be shown (see Jones v Smith [1999] 1 SCR 455). But no other common law jurisdiction has, so far as I am aware, developed the law of privilege in this way. Certainly in this country legal professional privilege, if it is attracted by a particular communication between lawyer and client or attaches to a particular document, cannot be set aside on the ground that some other higher public interest requires that to be done.
26. Third, legal advice privilege gives the person entitled to it the right to decline to disclose or to allow to be disclosed the confidential communication or document in question. There has been some debate as to whether this right is a procedural right or a substantive right. In my respectful opinion the debate is sterile. Legal advice privilege is both. It may be used in legal proceedings to justify the refusal to answer certain questions or to produce for inspection certain documents. Its characterisation as procedural or substantive neither adds to nor detracts from its features.
27. Fourth, legal advice privilege has an undoubted relationship with litigation privilege. Legal advice is frequently sought or given in connection with current or contemplated litigation. But it may equally well be sought or given in circumstances and for purposes that have nothing to do with litigation. If it is sought or given in connection with litigation, then the advice would fall into both of the two categories. But it is long settled that a connection with litigation is not a necessary condition for privilege to be attracted (see eg. Greenough v Gaskell (1833) 1 My & K 98 per Lord Brougham at 102/3 and Minet v Morgan (1873) 8 Ch. App. 361). On the other hand it has been held that litigation privilege can extend to communications between a lawyer or the lawyer's client and a third party or to any document brought into existence for the dominant purpose of being used in litigation. The connection between legal advice sought or given and the affording of privilege to the communication has thereby been cut.
28. So I must now come to policy. Why is it that the law has afforded this special privilege to communications between lawyers and their clients that it has denied to all other confidential communications? In relation to all other confidential communications, whether between doctor and patient, accountant and client, husband and wife, parent and child, priest and penitent, the common law recognises the confidentiality of the communication, will protect the confidentiality up to a point, but declines to allow the communication the absolute protection allowed to communications between lawyer and client giving or seeking legal advice. In relation to all these other confidential communications the law requires the public interest in the preservation of confidences and the private interest of the parties in maintaining the confidentiality of their communications to be balanced against the administration of justice reasons for requiring disclosure of the confidential material. There is a strong public interest that in criminal cases the innocent should be acquitted and the guilty convicted, that in civil cases the claimant should succeed if he is entitled to do so and should fail if he is not, that every trial should be a fair trial and that to provide the best chance of these desiderata being achieved all relevant material should be available to be taken into account. These are the administration of justice reasons to be placed in the balance. They will usually prevail."
- From this summary it is clear that for legal advice privilege to be established the person claiming privilege must have the relationship of client with the lawyer concerned. The communications claimed as privileged must be confidential. The question of privilege must be determined by reference to the circumstances which obtained at the time of the communication. Assuming the relationship to be confidential, the question is whether the person concerned was the client of the lawyer at the time. If the relationship of lawyer and client is established, the legal advice given will be privileged and inviolate from disclosure in the absence of waiver, or attenuation by statute. The common law of England recognises no balancing exercise of competing public interests in the determination of whether such communications remain privileged.
- The same principles apply to joint legal privilege but because the interests of persons other than the individual claiming privilege are in play their position must be taken into account when determining whether the joint privilege exists. I do not accept that the test whether the individual concerned 'reasonably believed' that he was the client of the lawyer provides a satisfactory test for joint interest privilege. It begs too many questions. Is it to be judged subjectively or objectively? And what are the factors which must be established before a belief can be reasonable? Does the belief have to be shared by the others entitled to joint privilege and by the lawyers?
- The circumstances in which joint privilege may arise are legion. In corporate bodies with a tight controlling management the legal interests of the company and its directors and senior employees will often coincide or overlap. This case arises in the context of financial regulation, yet very similar considerations might arise in other regulatory environments. For example, the possibility of regulatory action in the health and safety or environmental fields often engages legal questions for companies and potentially their directors personally. Public bodies take legal advice in contexts which engage the potential liabilities of officials and elected representatives. Corporate bodies seeking advice in connection with public inquiries may sweep within the ambit of the advice the conduct of their staff. The lawyers concerned may represent and advise the individuals or they may be separately advised. Examples could be multiplied. In the ordinary course one would expect the lawyers concerned to establish with clarity the identities of the persons to whom they are giving advice, not least because they owe professional duties to clients, which affect the nature and extent of their legal liabilities. Best practice would suggest that the retainer letter should make clear whether advice was being given to a corporate body alone or also to a number of identifiable directors or employees. If the position evolves after the initial engagement, best practice would suggest that any change is recorded. That course is likely to avoid a costly dispute of the nature that has erupted in this case. However, in the absence of a formal joint retainer or a clear contemporary record of the scope of the advice being given, a dispute about whether there was joint privilege requires a factual inquiry to determine the true position at the material time. I do not accept the defendant's submission that the American approach should be adopted in this jurisdiction, that is to say that once lawyers have been retained by a corporation, officers of that corporation cannot prevent it waiving privilege on advice concerning its affairs or those of its officers, even if the personal affairs of the officers are inextricably intertwined and they were in fact being given advice at the same time. The judgment of Judge Seitz makes plain that the approach has been informed by public policy considerations which form no part of the law in this jurisdiction. Indeed, an appeal to public policy considerations to circumscribe the absolute right to assert legal privilege was expressly rejected by the House of Lords in R v. Derby Magistrate' Court ex parte B [1996] 1 AC 487. An attempt to breach the privilege was made on the ground that it was necessary to avoid a wrongful conviction for murder. The House of Lords did not accede to a submission that a balancing exercise, akin to that performed when questions of public interest immunity arise, should be undertaken to determine whether disclosure of privileged advice was appropriate. Lord Taylor described legal professional privilege as
"… much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests … (and) a fundamental right protected by the European Convention for the Protection of Human Rights…"
- In searching for the true factual position at the time that the contentious communication was made it is necessary to distinguish between advice being given to an individual as client from advice which is being given to another, but in which the first individual is interested because it impacts upon his personal position. It is the former that supports a claim for joint privilege, not the latter. It is also necessary to recognise that if joint privilege exists it affects the rights of all those who share that joint privilege and also the professional obligations of the lawyers. For this reason statements of subjective belief by an individual claiming joint privilege without more are likely to be of little value. Joint privilege should not arise casually or accidentally. For joint privilege to arise it is necessary for the facts to demonstrate that all those sharing the privilege and the lawyers concerned knew, or from the objective evidence ought to have known, that they enjoyed legal professional privilege with the others. Evidence of an understanding by the lawyer of potential conflicts of interest may provide some evidential support for joint privilege, but it is not a necessary ingredient. It is not unknown for conflicts of interest to arise but those advising to be slow to appreciate their significance. In my judgment, apart from those cases in which there is no legal distinction between those claiming joint privilege (see paragraph [19] above) an individual claiming joint privilege with others in a communication with a lawyer, when there is no joint retainer, will need to establish the following facts by evidence:
i) That he communicated with the lawyer for the purpose of seeking advice in an individual capacity;
ii) That he made clear to the lawyer that he was seeking legal advice in an individual capacity, rather than only as a representative of a corporate body;
iii) That those with whom the joint privilege was claimed knew or ought to have appreciated the legal position;
iv) That the lawyer knew or ought to have appreciated that he was communicating with the individual in that individual capacity.
v) That the communication with the lawyer was confidential.
The Evidence of Joint Privilege
- The search for the true substance of the arrangement relates to the two documents over which joint privilege is claimed which did not involve the repackaging of material from Grant Thornton. That is the email headed 'advice' of 7 February 2008 and the note of conference with counsel dated 18 April 2008.
- The Notice of Appointment of Investigators into Keydata dated 18 December 2007 was sent to Peter Johnson as compliance officer of Keydata, with whom the FSA had been dealing for some time in connection with the affairs of the company. The claimant explains in his witness statement that at that time Keydata was using external compliance consultants to advise in connection with the developing regulatory issues raised by the FSA. It was those consultants who advised that Irwin Mitchell should be instructed to deal with the investigation. In January 2008 the senior management decided to instruct Sarah Wallace of Irwin Mitchell. The claimant speaks of an introductory meeting at which Ms Wallace suggested that counsel experienced in FSA matters should be instructed. Javan Herberg was identified as a suitable candidate. The claimant describes Ms Wallace explaining at their first meeting that he, and the two interested parties, were particularly vulnerable to personal FSA investigations. Both interested parties echo that in their respective witness statements. The context of that discussion was the well-known intention of the FSA to proceed against individuals responsible for alleged regulatory transgressions as well as corporate bodies. In paragraph 29 of his witness statement the claimant says:
"We were seeking therefore a law firm that would act for the senior members of the Keydata management team as well as Keydata."
- On 7 January 2008 Ms Wallace had written to the claimant as managing director of Keydata. The significant passages in that letter included these:
"Dear Sirs
FSA Investigation
Keydata Investment Services Limited
Thank you for instructing Irwin Mitchell to act for Keydata Investment Services Limited ('Keydata'). The purpose of this letter is to confirm your instructions and to ensure that you are aware of and accept the terms on which we will act for you, and accordingly I enclose our standard terms and conditions…
Your instructions
You have instructed us that the firm is under FSA investigation. You have provided us with the correspondence to date with the FSA's supervision team regarding concerns that they had. You believe the Supervisors have referred the case to the Enforcement Division...
You wish this firm to advise and represent you in relation to the FSA's investigation that could lead to enforcement action being taken against the firm.
Please note that it is possible that the issues under investigation could widen and/or that FSA could start investigations against individuals as well as the firm."
- Ms Wallace's letter then went on to consider matters of strategy. It later mentioned the risk of parallel regulatory activity in the United States of America and advised against travel to America until the picture was clearer. Ms Wallace was alive to the importance of confidentiality and privilege. She said this:
"Any communications between your internal investigation case team should be copied to a lawyer (internal or external) to ensure that the communications remain privileged and confidential. We will discuss this further at our meeting. "
She also considered the question of conflicts of interest between Keydata and its staff:
"Conflict of Interest
At present our instructions are to act for the firm. It may be that we will also act for individuals employed by the firm. We have not taken detailed instructions from the directors, the compliance officer or other members of staff. At present your compliance officer has indicated to us that the interests of the firm in this matter are the same as the individual interests and on that basis my firm is able to act for you.
However, if instructions differ at any time (or information comes to our knowledge indicating that individuals' interests are no longer the same as the firm) and a conflict or a significant risk of conflict arises between your respective interests, then my firm will not be able to act for any individuals. Certain individuals who are requested to attend for compulsory interview may need separate representation. We will review conflicts with you on an ongoing basis."
- This letter from Ms Wallace, which also set out the fee structure and made clear that Keydata were paying, represents the best evidence of the position on 7 January 2008. There is no doubt that Irwin Mitchell were instructed by Keydata to advise in connection with the investigation into Keydata. The letter nonetheless foreshadowed the possibility of regulatory action against the individual executives and thus pointed out their potential need for individual advice. She was alive to the potential for conflict of interest between Keydata and its executives collectively or individually. Those potential conflicts of interest could, at any time, lead to the necessity of individuals seeking separate advice. Her need to seek an assurance from Mr Johnson that the interests of the executives and staff, on the one hand, and Keydata, on the other, were fully coincident stemmed from a proper concern that she should not seek to take instructions from any individual whose interests conflicted with that of Keydata.
- The engagement letter does not support the suggestion that from the outset Irwin Mitchell understood that they had been engaged to advise the executives as individuals. Indeed, the passage on conflicts of interest quoted above makes plain that in advance of detailed discussion with the executives Ms Wallace understood that she was acting for Keydata alone at that stage. Much Later, when the investigation widened formally to include the executives, Notices of Appointment of Investigators were sent to each in similar terms on 2 September 2008. They included this statement:
"As I explained in my telephone conversation on 29 August with Sarah Wallace of Irwin Mitchell, who I understand is your legal representative, should you wish to hold 'scoping' discussions, please let me know."
- Although at first blush this statement appears to be an unequivocal recognition by the FSA that Irwin Mitchell were already advising the executives as individuals, a series of emails between Ms Wallace and Jennifer Hepworth of the FSA explains how she came to understand that Ms Wallace was acting in the individual investigations. There was a telephone conversation between the two on 29 August 2008. Neither party has produced an attendance note of that conversation. In an email sent shortly after the conversation Ms Wallace indicated that she would contact the executives to ascertain from them whether her firm would act in relation to the personal investigations. That email also made it clear that the FSA had contacted her before letting the individuals know they were under investigation. There is no direct evidence from the FSA whether the approach to Ms Wallace was made because they assumed that Irwin Mitchell would in due course be instructed to act for the individuals, or worked on the assumption that, in the context of the Keydata investigation, those solicitors must have been advising them as individuals already. Equally, there is no evidence that the FSA had ever been told that Irwin Mitchell already acted for the executives. In reply Ms Hepworth indicated that she would copy material to Ms Wallace once she had confirmed that she was acting. Ms Wallace was unable to speak to all three that afternoon. She asked that the service of Notices should be deferred over the weekend to enable the three 'to consider collectively the change of circumstances and consider with us the instruction of legal representation'. Ms Wallace also observed that it would enable her to reflect upon conflicts of interest. On Monday 2 September Ms Wallace confirmed that Irwin Mitchell were acting for all three in the individual investigations.
- Whatever the position prior to 29 August, it was entirely appropriate for Ms Wallace to seek formal instructions before acting in connection with a formal investigation. Ms Wallace could not properly engage with the FSA on behalf of the individuals once formal investigations had been launched without those instructions. No new or separate letter of engagement was sent to the executives. The unspoken understanding was that this representation would be swept up within the earlier engagement letter, with Keydata picking up the bill.
- There are two written communications from Ms Wallace upon which the parties rely to illuminate the nature of the relationship with the executives before the individual investigations were started. On 29 June 2009 Ms Wallace wrote to PwC. She confirmed that Irwin Mitchell were no longer doing any work for either Keydata or the executives in relation to the FSA investigations and explained the nature and extent of documentation held by her firm. The dominant purpose of the letter was to seek payment of her fees. In that connection she said this:
"We acted for Keydata Investment Services Ltd in relation to an FSA Enforcement Investigation. The firm investigation widened into individual investigations against Stewart Ford, Mark Owen and Peter Johnson. We provided advice and representation to the individuals in relation to the investigation against them as part of the retainer with the firm."
- Mr Thanki submits that this observation suggests that Ms Wallace understood Irwin Mitchell to be acting for the executives only after the investigation widened in September 2008. By contrast Mr Malek submits that a short passage in a letter directed principally towards the payment of outstanding fees should not be construed as a legal instrument in circumstances where a precise description of the nature of the relationship with the executives before September 2008 would have been superfluous. That is because there was no conflict of interest and, as Mr Johnson made clear from the outset, the legal interests of Keydata and the executives were identical. The claimant relies upon a letter dated 21 September 2010 from Ms Wallace to Withers which, Mr Malek submits, states the true position with clarity:
"We acted for Keydata Investment Services Ltd in relation to the FSA Enforcement investigation. That investigation widened into FSA individual investigations against Stewart Ford, Mark Owen and Peter Johnson. We provided advice and took instructions through Keydata's officers and senior management. Before the FSA individual investigations were commenced, it was necessary to provide advice to the individuals in relation to their potential for individual liability as approved persons.
We consider that our instructions to Grant Thornton and Counsel and advice given by them and us to the company and individuals are subject to legal professional privilege. We believe that communications between Irwin Mitchell, Grant Thornton and Counsel with the company and individuals throughout our period of instruction would be 'protected items' as defined in s413 FSMA 2000."
Ms Wallace went on to express the view that a separate and later document from Grant Thornton was not covered by privilege.
- This letter was written in response to a request from Withers contained in a letter dated 14 September. Mr Thanki cautions against taking the assertion in Ms Wallace's letter at face value. It is fair to observe that Ms Wallace talks in very general terms without identifying precisely when she began giving advice to the executives as individuals. Yet her reference to instructing both counsel and Grant Thornton locates it at a time that would encompass the two communications that remain to be considered. Mr Thanki did not submit, nor could he, that the content of the letter did other than represent Ms Wallace's genuine recollection two and half years and more after the material events. But the point made on behalf of the FSA might be summarised in a rhetorical question. If that recollection was an accurate one, why was the position not reflected in the engagement letter of 7 January 2008?
- Before turning to the evidence of the claimant and the interested parties, I note than on 4 June 2008 Ms Wallace wrote to the claimant concerning interviews that the FSA had conducted with various members of staff and explained that they wished to interview him and Mr Owen. That letter went on to highlight her view of the increased risk of action against the executives as individuals with some discussion of the possible regulatory action they might face. The claimant does not suggest that such advice was otherwise than of keen interest to Keydata but he identifies it as an example of Ms Wallace giving advice which was communicated to him and his colleagues in a personal capacity. The consequences of regulatory action against an individual extend well beyond the interests of his employing corporation, because substantial personal financial liability may follow.
- The claimant owned no shares in Keydata. As I understand the position all of the shares in Keydata were owned by a company incorporated in Scotland of which the claimant was the majority shareholder. The position is inaccurately stated in paragraph 13 of his witness statement which missed out the Scottish corporation in the chain of ownership. Either way, despite the size of the business conducted by Keydata, its interests and those of the claimant were very closely allied. Between paragraphs 26 and 47 of his witness statement the claimant explains his dealings with Ms Wallace and Irwin Mitchell. He says that he and his fellow executives at all times believed that Ms Wallace was giving them advice in a personal capacity because, as he puts it, they were 'left under no illusion' about the potential for personal enforcement action. He was, from the outset, looking for legal advisers who could advise both Keydata and its executives. I have already referred to his memory of the first meeting. He believed that the advice not to travel to the United States was given to him personally. He had told Ms Wallace that it was his intention to travel to America in the near future and was conscious of the then relatively recent well-publicised case of three former employees of Natwest being the subject of extradition to the United States.
- The claimant says that on 'several occasions' he and Ms Wallace discussed the question of potential conflicts of interest in advising both Keydata and its executives and her particular concern about the position of Mr Johnson. The claimant says that 'she always assured me that she would continue to act for me as well as Keydata.' (para 31) he then went on:
"32. On each occasion, I expressed the view that for my part I could see there was no likelihood of a conflict of interest arising on the basis that the interests of all of us were fully aligned and therefore it was appropriate for Irwin Mitchell to continue to represent each of us as individuals as well as Keydata itself. Following those conversations, Ms Wallace seemed to have satisfied herself that there was no actual or potential conflict of interests between each of us and she therefore continued to advise each of us as individuals as well as Keydata. We for our part, continued to instruct her on that basis.
33. Had Ms Wallace informed us there was a problem, we would have taken steps to instruct separate lawyers to advise any of the individuals with whom she advised there was an actual or potential conflict. In any event my and Messrs Owen and Johnson's expectation was that there was joint privilege between each of us and our lawyers whether those lawyers acted for the same firm or not against the FSA. In no circumstances would the FSA be able to see our confidential communications with our lawyers, and we would be allowed to debate and exchange opinions with our professional advisers freely and without fear whether we had one law firm acting for us all or more than one law firm involved.
34. On that basis, from the outset and throughout the retainer of Irwin Mitchell, I and my fellow members of the Keydata senior management team (Messrs Owen and Johnson) understood that Irwin Mitchell would be not only advising Keydata, but also each of us as individuals and that Irwin Mitchell understood that joint retainer too. There was never any doubt about this, either on our part nor as far as I am aware on the part of our legal advisers. This is also evident from their correspondence with us from the start."
- The claimant then explains that although the engagement letter was addressed to him as Managing Director of Keydata, neither he nor Ms Wallace considered it necessary to have separate letters of retainer for each of the executives. He adds 'Ms Wallace addressed her correspondence to all three of us accordingly.' Keydata had another director who was not copied into the correspondence. The claimant says that there was a conference with counsel on 7 February between the executives, Ms Wallace and counsel. No record of such a conference was contained within the email records provided by PwC to the FSA and none has been produced since. There is no evidence before me to confirm that a note was produced. But the contentious email of 7 February opens with the words 'I have had a further conference with Grant Thornton and [counsel] today.' An earlier email foreshadowed a meeting later that day. There is no reason to doubt that such a meeting took place. The claimant explains in paragraph 40 of his statement that personal advice was directed to the three executives at that meeting. The claimant points to a substantial part of the email advice which followed later on 7 February being directed to 'the firm and [to] you as individuals…' What follows is advice relevant to both Keydata and the individuals. The claimant asserts that the purpose of the meeting on 7 February was to seek advice about the legal position of Keydata and the executives as individuals.
- The claimant was not physically present at the conference on 17 April 2008, he attended by telephone. Mr Owen was at the conference. Mr Johnson was not, although the note of the conference was sent to him as well as to the claimant and Mr Owen. The conference included advice about 'personal management regulatory liability' and included advice to the executives as approved individuals about their responsibilities under the FSA Principles. The claimant emphasises that Ms Wallace and counsel repeatedly explained the importance of privilege in protecting the advice that was being given from disclosure. The advice was confidential.
- Peter Johnson, in a long witness statement which sets out his complete dealings with Keydata and the FSA, confirms the claimant's account of dealings with Ms Wallace in all material respects. The similarity in the language of the statements of the claimant and the interested persons suggests that they have drawn from each other and have a common underlying draftsman. He explains that Ms Wallace contacted him from time to time to discuss the possibility of his needing separate advice given the potential for conflicts of interest to arise. He describes himself as being the primary point of contact between Keydata and both Irwin Mitchell and Grant Thornton. He explains that in preparing for his FSA interview he met Ms Wallace and one of her colleagues on a number of occasions. On each he says he was given personal advice of how to reduce his personal risk of regulatory action (paragraph 45). In an impassioned personal submission during the hearing of this claim Mr Johnson submitted that it was perfectly obvious that the three executives were being personally advised by Ms Wallace. If there had been any doubt about whether they were being given and receiving advice in a personal capacity (as well as on behalf of Keydata) he would have secured early separate advice.
- Mark Owen was the sales director of Keydata. He too confirms the claimant's description of early dealings with Ms Wallace and Irwin Mitchell. In his submission during the hearing Mr Owen explained that matters of regulation were within Mr Johnson's sphere of responsibility. The reason that Ms Wallace addressed her communications to the three executives was precisely because each was vulnerable to regulatory action. He regarded it as unreal to suggest that Ms Wallace advised him only as a director of Keydata, rather than in a personal capacity in addition.
- The evidence of the three executives and that of Ms Wallace in her September 2010 letter (albeit that her evidence is brief) provides powerful support for the proposition that by 7 February 2008 Irwin Mitchell and counsel were giving advice to both Keydata and the executives as individuals. Mr Thanki submits that all of the advice given in the two contentious documents, even when directed in terms to the position of the executives, was in reality being given to Keydata alone. In short, that whilst the executives were interested in the advice they did not have a formal joint interest in it. He recognises that the evidence of the executives and Ms Wallace suggests otherwise, but submits that caution should be exercised before accepting it. In that regard, Mr Thanki submits that Ms Wallace's second letter sits uncomfortably with her first, which refers only to representation of Keydata before the investigation formally widened to include the executives. He is correct in that, but it does not seem to me to be a sound basis to disregard her later letter which dealt directly with the issue of joint representation. In support of his submission that the claimant's evidence should be treated with circumspection, Mr Thanki draws attention to the judgment of David Richards J in Fieldglen Limited, Stewart Owen Ford v FSA and others [2009] EWHC 1939 (Ch) which arose out of the FSA investigation into Keydata. The issue was the validity of a notice served by the FSA on Fieldglen on the basis of the investigator's belief that there was material relating to Keydata on its server. At an early stage, Mr Ford had told PwC, who passed the information onto the FSA, that there was nothing of relevance on the server. In paragraph [27] of the judgment David Richards J said this:
"Although it is not directly relevant to the issue as to whether she reasonably considered it appropriate to issue the notices, it should be noted that the information provided by Mr Ford was seriously incorrect because, as I have mentioned, there was a very significant amount of information on the Fieldglen server which is directly relevant to the investigations."
The judge had earlier referred to the evidence filed in support of the original urgent application, in which Mr Ford has said that so far as he was aware none of the data or information on the Fieldglen server belonged to Keydata. The Company Secretary of Fieldglen gave more detailed evidence at that stage of her belief that there was nothing relevant there. However, in a later statement she corrected that position.
- The judge concluded that the information given to PwC by Mr Ford was inaccurate, as the evidence filed on his behalf later recognised. There was no finding that the inaccuracy resulted from a deliberate untruth rather than a wrong, but genuine, understanding of the position. Since Mr Ford did not give oral evidence in those proceedings that is not surprising. In my judgment, the observation relied upon does not provide a proper basis for rejecting the evidence of Mr Ford, as claimant in these proceedings. Furthermore, it does nothing to undermine the accuracy of the evidence of the interested parties.
- Mr Thanki's primary submission (if accepted) that the full panoply of the American test for joint privilege should be recognised as representing the law of England and Wales would have delivered, at least arguably, a conclusion that there was no joint privilege here because the advice in question also concerned Keydata. For the reasons already set out, I do not accept that primary submission. Mr Thanki nonetheless invites the rejection of the evidence of the claimant and interested persons with the conclusion that the position they describe was not the reality. The FSA did not seek to cross-examine the claimant or the interested parties. The ordinary position is that it is necessary for a party to cross-examine the evidence of a witness if he wishes to submit that the evidence of that witness should be rejected. There can be exceptions, but as the editors of Phipson observe at 12-15
"The rule serves the important function of giving the witness the opportunity of explaining any contradiction or alleged problem with his evidence. If a party has decided not to cross-examine on a particular important point, he will be in difficulty submitting that the evidence should be rejected."
- The 'rule' is not immutable. But here the position of the FSA is that at no time was Ms Wallace giving advice to the executives as individuals despite what all concerned have said in witness statement or, in Ms Wallace's case, a letter. Before I could properly reject the evidence of the claimant and interested parties, fairness would require that they be cross examined and given an opportunity to deal with the suggestion that their accounts were either inaccurate (if honestly given) or fabricated. Whilst I accept that when the engagement letter was drafted its content suggests that on 7 January 2008 Ms Wallace understood herself to be instructed on behalf of Keydata alone (albeit that the executives may have believed the instructions to have been wider from the outset), the evidence of the executives is unequivocally to the effect that she soon became involved in advising them personally, and that she knew that she was doing so. The executives were the company for these purposes and so Keydata was aware of the position. In that they are supported by Ms Wallace's letter of 20 September 2010.
- My conclusion is that each of the criteria I have identified in paragraph [40] was satisfied as regards the email containing advice dated 7 February 2008 and the email dated 18 April 2008 containing a note of the conference with counsel the previous afternoon. I am satisfied that the claimant has established by evidence that he enjoyed joint legal advice privilege with Keydata in those two communications. It is accepted that PwC's waiver of privilege on behalf of the company did not impact upon the claimant's privilege. It follows that the FSA may not rely upon the content of those communications in the regulatory proceedings against Keydata or the executives.
- In describing the events, including brief reference to the contentious communications, it has been unnecessary to descend into the detail of those communications and risk breaching any privilege in the advice. It is thus unnecessary for this judgment to have a confidential annex. It is sufficient to say that the passages to which I have referred provide support for the claim to joint privilege. At the close of their submissions counsel indicated that it would assist the parties if, following circulation of this judgment in draft, they were given time to discuss the appropriate form of order and make representations on any ancillary or consequential matters. I will hear counsel further in writing or orally in the event that all such matters are not agreed.
Order: Ford, R (on the application of) v The Financial Services Authority [2011] EWHC 2583 (Admin) (11 October 2011)
UPON THE CLAIMANT'S APPLICATION for judicial review
AND UPON HEARING Leading Counsel for the Claimant, Leading Counsel for the Defendant and the two Interested Parties in person;
AND UPON having read the documents submitted on behalf of the parties
IT IS ORDERED that:-
- The Claimant's application for judicial review in relation to (1) an email dated 7 February 2008 at 17:22; and (2) the email dated 18 April 2008 attaching an attendance note of a conference at the offices of Keydata Investment Services Limited ("Keydata") on 17 April 2008 is granted.
- The Claimant's application for judicial review in relation to the emails (with attachments) from Sarah Wallace to the Claimants and others dated (1) 7 February 2008 at 9:57; (2) 26 February 2008 at 17:09; (3) 3 March 2008 at 10:32; (4) 16 April 2008 at 11:41; (5) 2 May 2008 at 10:52; and (6) 19 June 2008 at 12:02 ("the Grant Thornton material") is dismissed.
AND IT IS DECLARED that: -
- The Claimant and the Interested Parties enjoy joint legal advice privilege with Keydata in the documents referred to at paragraph 1 above.
- The Claimants and the Interested Parties did not waive their privilege in the documents referred to at paragraph 1 above.
- The Defendant may not rely upon the content of those documents in the regulatory proceedings against the Claimant, Keydata or the Interested Parties.
- Any further consequences as to the use and/or retention of the documents be dealt with at a remedies hearing.
AND IT IS ORDERED that: -
- The matter be listed for a remedies hearing.
- The Claimant's application for permission for judicial review in respect of the Protective Warning Notice dated 1 June 2011 (CO/8289/2011) be listed for a rolled-up permission and substantive hearing, to be heard at the same time as the remedies hearing. The Defendant is not required to serve Summary Grounds of Resistance.
- The remedies hearing and the hearing in respect of Claim No CO/8289/2011 be listed on an expedited basis for 1 day before Mr Justice Burnett, on the first date after 26 October 2011, subject to Leading Counsels' availability.
- The stay on the Defendant's timetable for responding to the Warning Notice dated 26 October 2010 and the Protective Warning Notice dated 1 June 2011 continue until further order of the Court.
- The Order of Mitting J, that pursuant to CPR r.54C(4)(d), neither the statements of case, nor any documents lodged with the Court for the purpose of this claim (including witness statements) are to be made available for inspection by the public, continue until further order of the Court.
- The Court makes the following directions:
12.1. By 12 October 2011, the Claimant shall provide to the Defendant a list of remedies that he seeks in respect of these proceedings and the proceedings in Claim Number CO/8289/2011.
12.2. The Defendant shall respond to that list by 14 October 2011 identifying which remedies are accepted and which remedies are in dispute.
12.3. The Defendant shall serve and file any witness statements by 21 October 2011.
12.4. The Claimant shall serve and file any witness statements by 28 October 2011.
12.5. The Claimant shall serve his skeleton argument on the Defendant and lodge it with the Court 14 days prior to the date of the remedies hearing and the rolled-up hearing of Claim Number CO/8289/2011.
12.6. The Defendant shall serve its skeleton argument on the Claimant and lodge it with the Court 7 days prior to the date of the remedies hearing and the rolled-up hearing of Claim Number CO/8289/2011.
12.7. The parties' Counsel shall compile a joint bundle of authorities which should be lodged with the Court at the same time as the Defendant's skeleton argument is filed with the Court.
12.8. Any applications for permission to appeal against any part of the substantive judgment of Mr Justice Burnett, or against any decision in respect of remedy, shall be made by either party at the conclusion of the remedies hearing. The time for filing any Appellant's Notice in relation to this Order be extended until 28 days after the remedies hearing.
12.9. The costs of these proceedings and Claim Number CO/8289/2011 be dealt with at the conclusion of the remedies hearing.
Dated this day of October 2011
