LLP revisisted in the context of email attachments

Non- Privileged Email Attachments Not Covered By Legal Professional Privilege

• The Supreme Court has stated that non-privileged email attachments are not covered by legal professional privilege.  This is the case even if the email itself is protected.
• The UK’s highest court refused permission to appeal in Frasers Group Pls (formerly Sports Direct International plc) v The Financial Reporting Council Ltd after the retailer challenged the decision of the High Court and Court of Appeal that it had to disclose 21 email attachments.
• Permission to appeal was refused because the Supreme Court concluded Frasers Group’s application did not raise any arguable points of law.
• Background
• The Financial Reporting Council (‘FRC’), which regulates auditors, is involved in an ongoing investigation into the conduct of Sports Direct’s former auditors, Grant Thornton UK LLP and of a person working at the firm.  The investigation concerns the audit of the financial statements of Sports Direct and its subsidiaries for the year ending 24 April 2016 and in particular, the engagement by a subsidiary of Sports Direct called Sports Direct Retail of an entity called Barlin Delivery Ltd to provide delivery services to that subsidiary’s customers.  The relationship between the owners of Barlin and Sports Direct was not disclosed in the group’s accounts, and this resulted in a regulatory investigation being launched.
• During April and May 2017, the FRC issued notices to Sports Direct under para. 1 Schedule 2 of the Statutory Auditors and Third Country Auditors Regulations (‘SATCAR’) and rule 10(b) of the Audit Enforcement Procedure seeking certain categories of documents.  The relevant notice relating to the case was issued on 20 April 2017 (‘the Notice’).  It stated that for the purposes of the investigation, Sports Direct must provide in electronic format all emails and attachments to emails in the possession and control of Sports Direct which (i) relate to the audit; (ii) are held by one or more of five identified custodians; (iii) are dated within certain specified date ranges; and (iv) are responsive to one or more of 27 different specified search terms.
• Sports Direct provided around 2,000 emails but withheld 40 claiming they were subject to legal professional privilege (‘LPP’) as they comprised of emails and attachments sent to or by Sports Direct’s internal and external legal advisors.
• The FRC argued that although the emails did contain material that would normally be protected by LPP, they fell within a narrow exception recognised in case law meaning that in the particular circumstances of this request the handing over of the 40 emails would not prejudice Sports Direct’s privilege.  Alternatively, the FRC stated that any infringement would be a technical infringement only and would be authorised by the SATCAR regime.
• The High Court decision
• At first instance the High Court judge accepted the FRC’s arguments, ruling that even if the emails themselves attracted LPP, it did not necessarily follow that any attachments did.  This was based on dicta by Lord Hoffman in R. (on the application of Morgan Grenfell & Co Ltd) v Special Commissioners of Income Tax [2002] UKHL 21.  Sport’s Direct appealed, arguing that Lord Hoffman’s comments did not establish a principle that the production of documents to a Regulator was not always an infringement of the regulated person’s LPP.  The alternative argument was that there could be no override of even a technical breach of privilege implied into Sch.2, given the clear terms of the limitation on SATCAR's power to call for documents.
• The Court of Appeal decision
• Partially overturning the High Court decision, the Court of Appeal confirmed that under English law the only exceptions to LLP is where communications between a Solicitor and client is for a criminal purpose or where legislation makes clear by express words or necessary implication that LLP is excluded if particular circumstances apply.
• “… there is nothing in [the case law] that suggests that paragraph 1(8) of Schedule 2 to SATCAR means something different from exactly what it says. The recipient of a notice given by the FRC under paragraph 1(1) or 1(3) is not required to hand over privileged documents, whether the person entitled to the privilege is the auditor under investigation or the auditor’s clients.”
• The Court went on to say:
• “Moreover, if Parliament had intended to preserve some general exception applicable where documents are sought pursuant to regulatory powers, paragraph 1(8) would not have been drafted in the way it is.”
• There was also no justification for regarding Lord Hoffmann's comments as authority either for the existence of a "no infringement" exception to the protection conferred by LPP or for the application of some lower threshold for implying a statutory override on the ground that any infringement would be technical. 
• However, non-privileged documents attached to an email which is protected by LPP do not acquire LPP simply by virtue of being attached to the protected email.  Therefore, they must be disclosed.
• Comment
• Companies will welcome the fact that in denying the application to appeal the Supreme Court confirmed that exceptions to LLP are extremely limited and the Courts have no immediate desire to expand them.  However, care must be taken with non-privileged documents as these can still be requested even if they were attached to an email protected by LLP.
• Tanveer Qureshi specialises in white-collar crime and regulatory investigations and prosecutions.  If you require legal representation, please contact Tanveer directly at t[email protected] or via his chambers, 4-5 Gray's Inn Square. for more about Tanveer or to subscribe to his newsletters, please go to www.tqlegal.co.uk