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Can a company safely investigate internal wrongdoing?

A recent Court of Appeal decision clarifies the scope of privilege for internal investigations.

If a company becomes aware of potential wrongdoing involving its staff or agents (with potential implications for the company’s own liability) its first step is likely to be to want to investigate what has happened.  Only then can it properly consider its options and take full legal advice.

We reported last year on the first instance decision in SFO v ENRC where a decision of Mrs Justice Andrews created a potential problem in carrying out such an investigation by holding that, certainly in the context of a potential criminal prosecution, the circumstances in which one could carry out such an exercise under the cloak of privilege were very limited.

The decision attracted widespread concern at the time.  However, it has now been reversed by the Court of Appeal in SFO v ENRC [2018] EWCA Civ 2006 (5 September 2018).  The Court of Appeal held that provided a criminal prosecution was reasonably in contemplation, litigation privilege will apply and will protect documents from disclosure even if, at the time of their creation, there was no formal criminal investigation on foot.

This makes it much easier for companies and other organisations to carry out thorough internal investigations.  However despite the clarification of the scope of litigation privilege it will always be sensible to take legal advice either from external solicitors or in-house legal prior to starting such an investigation.