Joint obtaining & multiple recovery: Some lessons from AHMAD and the Supreme Court ruling

On 21st November Abigail Coghill-Smith spoke at a 2-day Conference organised by The Serious & Organised Crime Exchange [SOCEX] in Nottingham.  Addressing well over 300 attendees involved in Fraud and Financial Investigation from Police Forces, HMRC, NCA and all government law enforcement agencies including policy makers, managers and practitioners.  Abigail focussed on the practical lessons that can be learnt from the implementation of the Supreme Court ruling and identified areas of best practice that arise, ranging from restraint orders, s.16 and s.18 statements in confiscation, to all aspects of enforcement of confiscation orders.

The SOCEX Conference is organised to disseminate best practice at the cutting edge of current and emerging threats in financial crime.

To instruct Abigail in any of the issues raised (http://33knowledge.com/barristers/abigail-coghill-smith/) please email acs@33cllaw.com or speak directly with her Practice Managers on +44 (0) 20 7440 9950 or via clerks@33cllaw.com .

Falling Between Two Stools: LPP and Internal Investigations

by Amanda Pinto QC and Catherine Collins

Legal Professional Privilege (‘LPP’) in the context of internal investigations has reached a critical point following two recent cases. Earlier this year, the RBS Rights Issue Litigation [2016] EWHC 3161 (Ch) (‘RBS Rights’) and The Director of the Serious Fraud Office v ENRC Ltd [2017] EWHC 1017 (QB) (‘ENRC’) highlighted the fine distinction between information sought in order to obtain or provide legal advice, and instructions given in order to obtain or provide legal advice. The current state of the law is that the former will not attract LPP protection whereas the latter will. Practitioners advising corporate clients face a tension between the incentive for organisations to self-report in an effort to avoid prosecution, and the current gulf between legal advice privilege and litigation privilege through which an internal investigation may be exposed to investigators.

Legal Advice and Litigation Privilege

Legal advice privilege can be broadly summarised as protecting a confidential communication between a lawyer and their client, where its dominant purpose is giving or seeking legal advice. Litigation privilege, on the other hand, protects communications between a lawyer and his client and also with third parties, once there is a reasonable prospect of litigation.

In the civil case RBS Rights, the claimants applied for disclosure of notes of interviews conducted with current and former employees in two internal investigations. The defendants claimed privilege. At the time of the interviews, litigation was not contemplated. The court rejected the defendants’ claim to privilege.

In ENRC, the company delivered a report in relation to its business to the SFO but asserted both litigation and legal advice privilege over the internal investigation. The Court held that:

“the reasonable contemplation of a criminal investigation does not necessarily equate to the reasonable contemplation of a prosecution. The investigation and the inception of a prosecution cannot be characterised as part and parcel of one continuous amorphous process…It is always possible that a prosecution might ensue, depending on what the investigation uncovers; but, unless the person who anticipates the investigation is aware of circumstances that, once discovered, make a prosecution likely, it cannot be established that, just because there is a real risk of an investigation, there is also a real risk of prosecution. The question whether the person anticipating a criminal investigation also contemplates that prosecution is likely (though not more likely than not) to follow the investigation, rather than just possible, must therefore be considered on a case by case basis.” §154

Providing more general guidance on the issue, the Court articulated the test and evidential threshold for a claim of litigation privilege:

“Adopting the test in USA v Philip Morris, ENRC must establish that, as at 19 August 2011, it was “aware of circumstances which rendered litigation between itself and the SFO a real likelihood rather than a mere possibility.” In my judgment, the claim for litigation privilege falls at the first hurdle because ENRC is unable to satisfy that test; but even if a prosecution had been reasonably in contemplation, the documents for which litigation privilege is claimed were not created with the dominant purpose of being used in the conduct of such litigation (which expression includes obtaining legal advice pertaining to the conduct of such litigation).” §149

Self-reporting

In order to benefit from self-reporting, the SFO guidance states that a company must be “genuinely proactive”, which includes disclosing the details of any internal investigation. The SFO has said this does not necessarily include a waiver of privilege. How does litigation privilege, as currently restricted, fit in with the SFO’s self-reporting guidance?

It is the perceived likelihood of a prosecution - rather than a criminal investigation or a dawn raid - that is necessary for a claim of litigation privilege over an internal investigation to succeed. In ENRC the Court held that, for litigation privilege to attach, the dominant purpose of the document in question had to be deployment in, or obtaining legal advice relating to, the conduct of anticipated criminal proceedings.  The practical consequences are troubling: if despite a self-report, the SFO decides to prosecute, an equally dominant purpose of the internal investigation is the preparation of the defence case. As matters stand, those conducting an internal investigation risk that litigation privilege will not necessarily protect all internal enquiries. There is now a real dilemma between seeking to avoid prosecution (by self-reporting) and providing the SFO with the evidence to prosecute the company (by self-reporting).  

Legal advice privilege offers equally scant protection for internal investigations. Legal advice privilege was defined as “not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context” (see Balabel v Air India [1988] Ch 317). But, following Three Rivers District Council v Governor and Company of the Bank of England [2004] UKHL 48 (‘Three Rivers (No 5)’) it does not extend to material which arises from advice being sought and which is relayed back to the legal advisor for further advice.

Identifying the client for LPP

Three Rivers (No 5) established a very narrow approach to LPP but the broad principles it decided were based on most unusual facts: an independent vehicle (the BIU) was specifically set up to provide a bridge between the Bank of England’s employees and its lawyers. No one other than the BIU, was authorised to communicate with the Bank’s lawyers. Because authorisation to communicate is required for LPP to attach, it followed that communications between the BIU and the Bank’s lawyers were properly subject to LPP; but, the Court held, that materials prepared by the Bank’s employees, for the dominant purpose of being shown to its lawyers were not. It held that material prepared by employees for a client’s lawyer, at the request of that lawyer and subsequently sent to that lawyer, were preparatory materials and did not attract legal advice privilege. So, the question is, who is the ‘client’?

A company can only communicate by its human agents. Currently, for the purposes of obtaining legal advice, the agent of the company must be authorised ‘to stand in the shoes of the client’. Frequently, a directing mind of the company will be the person communicating for the company, but this is not necessarily so for the purposes of seeking legal advice, for example, where the investigation relates to matters outside the knowledge of the directing mind. Where there a person is authorised to communicate with lawyers, but he/she cannot be said to be ‘standing in the shoes of the client’, legal advice privilege may not attach to their communications. There is a real risk that the information gathered or requested will fall outside LPP and within preparatory materials. Legal advice privilege will not attach in the absence of such authorisation even if the corporation’s lawyers are directly involved in gathering the information; moreover, in an internal investigation, with no civil action in sight, neither will litigation privilege. Since RBS Rights and ENRC, advisors must consider how the company’s authorisation to get legal advice can best be structured, to protect the client’s LPP. 

In an internal investigation, it is unlikely that notes and records of information provided to lawyers by unauthorised employees will fall within the narrow confines of legal advice privilege. In respect of lawyers’ working papers, both RBS Rights and ENRC impose a high threshold before privilege will apply. For example, privilege will not attach to a lawyer’s simple note of a meeting or record of an interview; there must be analysis or queries within the notes which demonstrate legal input on the material (per Upjohn Co et al v United States et al in the Supreme Court of the United States (1981) 449 U.S. 383, referred to in RBS Rights). Whether a privilege claim will succeed is a matter of evidence. The evidence must show something of the lawyer’s analysis of the documents and the purposes for which the ‘working papers’ were created.

As matters stand, the courts construe LPP in internal investigations very narrowly, with unwelcome consequences for companies. Clarity is required as to who precisely falls within the class of persons authorised to give instructions, be it by board resolution or otherwise. There will be circumstances where those who should be authorised to give instructions as the client will expand or change as matters develop.

The dominant purpose

Having identified the client, the purpose of the exercise must also be determined. If it is for the dominant purpose of mounting a defence to proceedings it will attract LPP protection, whereas if the dominant purpose relates to a criminal investigation, it will not.  With that in mind, recording the purpose(s) of an internal investigation may assist a claim to LPP; documents created as part of an effort to build a defence in the event of criminal proceedings are more likely to attract LPP than those which are created to dissuade the instigation of proceedings. In real life, matters are rarely so clear-cut.

LPP is fundamentally intended to protect not just clients but the proper operation of law. A gulf currently exists into which internal investigations will often fall, denying protection to clients seeking open and appropriate legal advice and undermining the public interest afforded by LPP. ENRC and RBS Rights emphasise that it is vital to identify who the ‘client’ is at the outset of an investigation and to keep it under review as it continues. Until the court defines the parameters of who the ‘client’ can be, practitioners are left with the problems posed by Three Rivers (No 5). If an effective internal investigation following potential corporate wrong-doing is to be encouraged, the boundaries of LPP must be properly set.

Amanda Pinto QC

 Catherine Collins

If you would like to instruct Amanda or Catherine, please contact the practice directors.

Chambers & Partners 2018 Rankings Released

Chambers again performs very well in Chambers and Partners, recommended in the Financial Crime and POCA sections. Chambers continues to be the only set recommended in Band 1 for POCA Work & Asset Forfeiture.

Individuals are also recommended in the Financial Crime and POCA sections as well as Ian Smith in the Civil Fraud section.

The clerking services of the Chambers have also been praised.

 

FINANCIAL CRIME

THE SET
A set that is highly regarded both for its practice in core financial crime and for its additional strength in asset recovery matters. Its barristers regularly win instructions from high-profile defendants, as well as from prosecutors both at home and abroad. Barristers from the set have been instructed by the SFO in a number of its highest-priority investigations, including the one into GlaxoSmithKline. Areas of particular expertise include money laundering and international corruption cases. According to one solicitor, "it is common knowledge that in the field of financial crime this is a set brimming with experienced practitioners."

Client service: Martin Adams, the practice director, is a "super helpful clerk." "He knows the area of law, which is invaluable, even the obscure areas, and he has worked alongside all of the biggest names."

SILKS

Andrew Mitchell QC
A well-known heavyweight silk who is a great choice of leading counsel for high-value matters connected with financial wrongdoing. His reputation has spread far and wide, ensuring he is instructed to advise on marquee matters both at home and abroad. He offers particular expertise in large-scale bribery and corruption investigations.
Strengths: "He is readily accessible and turns around advices promptly within agreed timescales. His approach is first-rate; he breaks down the issues to deliver straightforward and pragmatic advice." "A man of godlike status," "he is a very good defender and prosecutor."
Recent work: Acted as lead counsel for the SFO in its investigation of international corruption at GlaxoSmithKline.

Graham Brodie QC
A newer silk noted for his attractive presentation style in court and for being a good team player. He regularly advises on allegations of money laundering and overseas corruption, and he is also experienced in related POCA work. He provides expert counsel to a variety of corporate clients, and has a particular focus on cases with overlapping civil and criminal elements.
Strengths: "He has a very commanding presence while being quite friendly and laid back about things. It is clear that the court appreciates that he knows exactly what he is doing." "He produces really beautiful written work, so much so that he often wins an argument in a case before it gets into court."

Amanda Pinto QC
Acts for the prosecution and the defence in serious financial crime cases, including those involving misstatement of financial accounts, investment frauds and money laundering. Interviewees reserve special mention for her easy-going manner and clear commitment to obtaining the best result for her client. She also has experience of dealing with private prosecutions.
Strengths: "Her huge experience shines through and she shows great attention to detail." "She works very hard and is an inspiring leader to work with. The opposition fear her no-nonsense, straight-talking approach, which is liked by both judges and juries. She obviously brings a wealth of experience in financial crime to any case, and her perspicacity is of enormous value."
Recent work: Instructed in the defence of Sisse Bohart, a junior submitter who was charged in relation to the alleged manipulation of Euribor.

Alistair Webster QC
A barrister with great interpersonal skills who gets the best out of clients and the judiciary, and is noted for his attractive advocacy style.
Strengths: "A very experienced campaigner." "Extremely able and committed, he is good both in written argument and in his advocacy."

Mark Rainsford QC
Has superb legal knowledge and great judgement in how best to advance the client's cause. He regularly handles corruption cases and all manner of investment frauds, including those relating to Ponzi schemes. He draws on complementary expertise in confiscation matters and those with a civil fraud aspect.
Strengths: "A very easy leader to deal with. He thinks outside the box and is very client-friendly and very straightforward." "He's fantastic to work with."
Recent work: Acted for James Sutherland, who was acquitted on charges of money laundering relating to a large boiler room fraud.

JUNIORS

Faisal Osman
A careful barrister with great powers of factual recall and a highly supportive junior counsel, who adds clear value to proceedings. His experience includes advising on high-value allegations of tax fraud and international money laundering. He offers additional expertise in asset recovery, including those cases concerning highly complex, cross-border matters.
Strengths: "Exceptionally bright." "Organised, well prepared, and very good at written work and pleadings, he is approachable and places the client at ease." "He works so hard, is bright and is very good with the client. He is also proactive rather than reactive."

Christopher Convey
Recognised for the diligence, great attention to detail and fine advocacy skills that he brings to the defence of fraud and financial crime cases. Rate rigging and corporate theft matters feature highly in his caseload, as do complex money laundering matters.
Strengths: "A brave, intelligent and persuasive advocate who is equally skilled on his feet or on paper." "He is just very high-quality, as he's good on the detail and the law, and possesses good judgement."
Recent work: Instructed by Andrew Skelton, a former employee of Morrisons who leaked sensitive payroll data in order to damage the company, after he was disciplined for using its mailroom to distribute legal highs.

Keith Mitchell
Puts clients in stressful situations at ease and speaks to them in a style they can readily understand, according to those who instruct him. He frequently acts unled, acting for the defence in high-value cases. His caseload includes a number of tax fraud, corruption and trading standards matters.
Strengths: "Keith knows the game inside out. He is a consummate professional who is almost theatrical in court and is awe-inspiring when you see him in action. Other barristers defer to him and ask his advice." "A very sophisticated advocate who has seen and done it all."
Recent work: Acted for a defendant in Operation Galion, a trading standards investigation into an alleged cold-calling fraud committed by a publishing firm.

 


POCA WORK & ASSET FORFEITURE

THE SET 

The Chambers of Andrew Mitchell is unanimously recognised as the dominant set for proceeds of crime and asset forfeiture work. The chambers stands out thanks to its sizeable team of barristers who specialise in a wide range of POCA work, handling restraints, civil confiscations under POCA, fraud and money laundering cases amongst others. They regularly represent prosecuting authorities, defendants, regulatory bodies, receivers, companies and third parties. Such is the expertise on offer here that members have been involved in the complete re-drafting and implementation of the Bahamas Proceeds of Crime Act. 
 

Client service: The clerking team is led by Martin Adams. "Martin is good and works really hard. He is a good clerk with a good team."
 

SILKS 

Andrew Mitchell QC
Extensively experienced in POCA work, his practice covers a wide array of cases including those concerning money laundering, asset recovery, bribery and corruption. He is frequently instructed in high-profile and complex matters.
Strengths: "Phenomenal worker who is very user-friendly and always provides you with advice in a timely fashion."
Recent work: Instructed in Jakob International Inc v HSBC Private Bank advising with regard to a civil action against a bank to recover monies that the bank considers to be the proceeds of crime.

Graham Brodie QC
Acts for claimants and defendants in proceedings relating to allegations of commercial wrongdoing. He handles cases concerning restraint, freezing and confiscation of assets in both the civil and criminal spheres.
Strengths: "He is very strategic, very creative and a pleasure to work with. If you need to plan things out or have a difficult problem he will come up with ideas. He doesn't patronise and is very receptive to the process. He has a very commanding presence while being quite friendly and laid back about it. It is clear that the court appreciates that he knows exactly what he is doing."
Recent work: Represented a former Goldman Sachs banker in confiscation proceedings following conviction for laundering the proceeds of political corruption in Nigeria.

Mark Rainsford QC
Handles specialised financial crime, proceeds of crime and asset recovery cases. He boasts particular expertise in money laundering matters.
Strengths: "A highly meticulous performer" who "presents reasoned and persuasive arguments of the greatest clarity." 
Recent work: Acted in £10 million confiscation proceedings where the defendant had been convicted of a £100 million fraud.

Kennedy Talbot QC 
Highly regarded silk who frequently handles civil recovery, restraint, receivership and confiscation cases. His clients include private individuals and financial institutions.
Strengths: "Kennedy Talbot is incredibly knowledgeable on proceeds of crime, as well as very down to earth and approachable."
Recent work: Instructed as joint confiscation counsel, representing a client who, whilst Governor of Delta State in Nigeria, laundered the proceeds of crime.

Martin Evans QC
Recently appointed silk who boasts expertise in both POCA and criminal fraud matters. He specialises in restraint, confiscation and civil recovery cases. He represents defendants, receivers, companies and prosecuting agencies amongst others.
Strengths: "He is very good and able."
Recent work: Acted in High Court enforcement proceedings in respect of a confiscation order, and representing a third party seeking to recover a loan secured by legal mortgage.

JUNIORS

Fiona Jackson 
Experienced criminal counsel who assists defence and prosecution clients with fraud, POCA and asset recovery matters. She is also regularly instructed in cases with international elements, including those relating to international mutual legal assistance and international regulatory work.
Strengths: "Professional, very knowledgeable and great at oral representation."
Recent work: Instructed by the SFO in Saleh v SFO. The case concerned allegations of bribery against Saleh, who was protected in the USA by diplomatic immunity. 

Ian Smith 
Commercial litigator and criminal lawyer who has a specialist knowledge of POCA. He is increasingly known for handling more general complex commercial cases with a fraud element.
Strengths: "He has a wealth of experience and provides robust and client-focused advice."

Christopher Convey 
Frequently acts for defendants and third parties in POCA proceedings relating to allegations of business crime and corporate wrongdoing. He has particular experience of advising offshore trusts on money laundering and compliance issues.
Strengths: "Extremely knowledgeable and someone who provides first-rate drafting and unambiguous advice."
Recent work: Instructed in high-profile restraint and confiscation proceedings regarding the manipulation of the Libor exchange rate by a former UBS and Citi trader.

Barry Stancombe 
POCA and asset forfeiture specialist with noteworthy experience in civil recovery and receivership. He acts for prosecuting agencies such as the SFO and FCA, as well as receivers, defendants and companies. Stancombe has had involvement in a number of cases that have helped to develop the law relating to asset recovery.
Strengths: "Fast worker who has a keen eye for detail and is a shrewd negotiator. He's very happy to engage with clients and explain things clearly."

Faisal Osman
Strong POCA practitioner specialising in the domestic and international civil recovery elements of commercial wrongdoing disputes. He regularly advises claimants and third parties on asset recovery matters, and also handles confiscation, fraud and regulatory enforcement.
Strengths: "Faisal Osman is a great all-round junior on both sides of asset forfeiture and freezing orders." "He has a very good style and proved effective when faced with a highly powerful Bench."
Recent work: Acted for the Metropolitan Police in cash forfeiture proceedings relating to ISIL terrorist fund-raising.

Penelope Small
Recognised for her specialist expertise in POCA proceedings, asset recovery and restraint orders in both the civil and criminal spheres. She represents prosecuting authorities, defendants and third parties.
Strengths: "She is very authoritative and has been in a lot of leading cases in this area of law." "She is lovely with clients, knowledgeable and super-responsive."
Recent work: Acted in R v Hartley, representing the wife of a defendant who had been denied service in restraint proceedings despite being acknowledged to have an existing claim to equity in a property held in the sole name of her husband.

 

CIVIL FRAUD

Ian Smith
A civil and criminal fraud specialist comfortable managing complex proceedings involving such issues as asset recovery and money laundering.
Strengths: "Ian is meticulous in his preparation." "He is an excellent communicator."