Legal Advice Privilege and internal investigations - getting the basics right

The case of A v UBS AG highlights the issue of legal privilege in the context of investigations. There is a growing trend for financial institutions to commission external law firms to conduct internal investigations into complex issues. Maintaining privilege over documents produced during the course of an investigation is imperative to avoid disclosure of potentially damaging investigatory materials.

There are two main types of privilege which may protect information produced in the course of an investigation: legal advice privilege (LAP) and litigation privilege. A v UBS AG concerns LAP. To establish LAP, the communication must be between lawyer and client and for the dominant purpose of seeking and receiving legal advice in a relevant legal context. Gathering information in order to advise on an investigation, for example, in the form of an interview note, will not be covered by LAP. Recent case law has taken a narrow view when considering what is the ‘dominant purpose’ of an investigation.

Background

Ms A brought a claim before the Employment Tribunal against her former employer, UBS, for unfair dismissal, sex and disability discrimination. She claimed that UBS had failed to properly investigate an allegation of rape against her that she had previously reported to the bank’s HR department. During the Tribunal proceedings Ms A sought disclosure of an investigation report prepared by a partner from an external law firm, Freshfields, which detailed how HR had handled its investigation of the allegation. UBS sought to withhold disclosure of the report by asserting LAP. However, the Tribunal found that LAP did not apply to the report, as the external lawyer had not been instructed or asked to provide legal advice. On the facts, the lawyer had been retained because she was someone who was experienced in these matters and was ‘methodical’ and ‘forthright’. As the Tribunal noted, ‘the fact that she was a lawyer was an added extra’.

This ruling does not create any new precedent when it comes to LAP. It does, however, serve as a clear and sober reminder of the factors that will be taken into account by a court or tribunal when determining whether a document is subject to LAP. It is also a reminder of the steps that firms should take at the outset of an investigation to ensure that LAP applies.

The media has reported UBS being subject to scrutiny by the FCA in relation to how it managed this matter. Further, according to the media, the external lawyer who conducted the investigation for UBS is facing investigation by the SRA on the grounds that she may have misled Ms A during interview and failed to make clear her firm’s relationship with UBS.

Determining if LAP applies

The evidence considered by the Tribunal included contemporaneous documents and recordings comprising covert communications between Ms A, UBS employees and the external lawyer. The following points were particularly relevant:

• Ms A was informed that “…it’s unfortunate she’s a lawyer, because … [they are] coming in, in a very different capacity, doing a very different role”. Ms A was told that in terms of the investigation outcome, she would be informed of what UBS was going to change in their HR investigation process.
• Ms A was told that the external lawyer was hired for her experience of dealing with such situations and was not hired because she was a lawyer. Ms A was also told that “all the lessons learns [sic]” would be shared with her.
• The external lawyer stated to Ms A that she was not advising UBS “on the sort of … legal position or anything like that … because we’re independent … So, we’re not their lawyers …”. Rather, they would be conducting an independent review and making recommendations.
• There was no indication that the external lawyer provided an Upjohn warning to Ms A at the start of her interview. Upjohn warnings originated in the U.S. but are now common in England. The interviewing lawyer informs the employee of key relevant information, e.g. that they only represent the firm and that LAP applies.
• The external lawyer initially told Ms A that she could not share the investigation report with her because of an ongoing police investigation and data protection restrictions. When pressed further, the external lawyer stated that the information contained in the report was privileged, that privilege belonged to UBS, and the report could not be disclosed to Ms A.

The Judge considered witness evidence provided by UBS and the external lawyer, including evidence relating to the agreed scope of the investigation:

• The investigation scope document and the investigation objectives did not refer to Freshfields providing any legal advice to UBS or state that the review itself and/or its outcome would be subject to legal privilege.
• The external lawyer stated that any advice provided to UBS would attract privilege, so the report would be privileged and confidential but not all aspects of the review would necessarily attract privilege. She also stated that Freshfields were not instructed to advise UBS on the legal consequences arising from the independent review or the allegation reported by Ms A or “on any regulatory, litigation criminal, civil, or other exposure the Bank might have …”.
• Conflicting witness evidence was provided by the instructing lawyer for UBS, who stated that Freshfields were instructed to prepare a confidential and legally privileged report for the bank containing legal advice and recommendations. The UBS lawyer also stated that the external lawyer’s communication to Ms A stating that she was not advising UBS was inconsistent with this instruction.

The Judge held:

• The witness evidence provided by the UBS lawyer conflicted with other witness evidence and contemporaneous documents and was firmly rejected as being “… not correct”.
• The external lawyer was not instructed to conduct the investigation or produce the report using her “legal spectacles” or “to advise UBS on any rights, liabilities, obligations or remedies of [UBS] under either private or public law”. The external lawyer stated that she was not advising UBS on any regulatory, litigation criminal, civil, or other exposure the Bank might have …”.
• The investigation conducted by the external lawyer and any resulting advice was not undertaken within a relevant legal context and the report was not prepared for the purpose of enabling her to provide advice to UBS.
• The burden of proof rests on the party asserting LAP and, in view of the evidence considered, UBS failed to discharge this burden.
• Even if LAP applied to the report, it did not apply to the underlying interview notes.

This case illustrates that it is not straightforward to articulate a claim to privilege within an investigation context, to determine what type of privilege should be asserted and on what basis. In this case, mistakes were made entirely innocently – with serious consequences for the parties involved.

SIX STEPS TO PROTECT YOUR POSITION

To ensure fairness to interested parties, such as complainants, witnesses and investigation subjects, and to avoid being on the receiving end of unwelcome scrutiny or criticism from regulators or the media, firms should bear the following considerations in mind at the outset of an investigation:

1. Should the investigation be carried out under the protection of LAP at all? If not, then all steps should be carried out with this in mind: namely, that all material produced during the investigation is likely to be disclosable. Remember that once privilege is lost, it is lost forever and in relation to all material.

2. Check the terms of the engagement letter with the external law firm. This should clearly state that the investigation is being carried out for the purposes of providing legal advice and that any investigation materials will be subject to LAP.

3. Ensure that there is clear documentation to evidence that the scope and objectives of the investigation comprise the provision of confidential legal advice and that the output of the investigation will be presented in a confidential report subject to LAP.

4. Understand that while the investigation report and associated advice may attract LAP, interview notes will not.

5. Ensure that the nature of the external lawyer’s role is made clear to all interviewees. This can be achieved by giving an Upjohn warning at the start of the interview explaining the relationship between the firm the external lawyer. The Upjohn warning should also make clear that the matters discussed during the interview and any investigation report produced are confidential and subject to LAP, which belongs to, and can only be waived by, you (the firm).

6. Ensure that any interview note produced by the external law firm includes the words used to convey the Upjohn warning to the interviewee.

Assertions of legal privilege will often be challenged and while this cannot be avoided, following these steps will help mount a robust defence to that challenge.

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