Episode 2, Investigations Unpacked: Check your privilege

Peter Richard:

Well, hello to all our listeners out there and welcome to this second episode in our Investigations Unpacked podcast series. I want to begin today by acknowledging the Gadigal people, Traditional Custodians of the land on which we are recording today, and pay my respects to their Elders past and present. And I extend that respect to Aboriginal and Torres Strait Islander peoples listening today.

Peter Richard:

For those of you who are new to our series, my name is Peter Richard, and I'm a counsel at Ashurst. My practice is in the area of dispute resolution and investigations. My guest today, Rani John, is a partner in the dispute resolution team at Ashurst and co-head of our firm's corporate crime practice with expertise in the area of regulatory and internal investigations. Rani, welcome.

Rani John:

Thanks very much, Peter. Great to be here.

Peter Richard:

So today's rather thorny topic is that of investigations and privilege. Rani, can you give us an overview of the sorts of privilege issues that are likely to crop up during an internal company investigation?

Rani John:

Sure, Peter. So, as we touched on in our first episode, a key consideration when you're deciding to investigate and how to investigate is whether or not that investigation will be conducted in a privileged way; that is, for the dominant purpose of giving or obtaining legal advice on the subject matter of the investigation. If a company decides that it does want to conduct an investigation in a privileged way, and it wants the report of an investigation to be protected by privilege, then that will affect how it goes about conducting the investigation, including whether or not to use external legal advisors, and it affects how you report on the investigation as well.

Peter Richard:

So if I can just jump in there, Rani, an investigation report is not automatically privileged?

Rani John:

Not necessarily, Peter. So in Australia, whether or not that's the case depends on the test that I just mentioned. Does the report satisfy the usual test of privilege which is: was it prepared in circumstances of confidentiality for the dominant purpose of giving or obtaining legal advice?

Rani John:

If a report is privileged, it won't ordinarily be available to regulators or to other third parties except at the discretion of the company. Privilege considerations will also impact on document review that's conducted in the course of the investigation. It will impact the interviewing of witnesses and it will impact on the preparation of the report. The company will also have to bear in mind waiver of privilege issues down the track if it does, later on, decide to disclose a report that has been prepared in a privileged way.

Peter Richard:

Okay, well, just hold that thought and we'll maybe unpack that as we move through this episode. I just want to touch on something again that you mentioned. At the outset of an internal investigation, a document review will often be undertaken to establish the facts. So once a company has commenced an investigation and identified the custodians of relevant documents, how would you suggest a company approach the review with a view to preserving privilege?

Rani John:

So firstly, it's important to consider who's going to be conducting that document review on behalf of the company for the purposes of the investigation. If there are likely to be privileged materials in the mix then, ideally, you would have that review conducted by lawyers who are well placed to identify privileged documents or parts of documents that are privileged. And there are a whole range of tricky issues that can arise when you're doing that.

Rani John:

So to give just one example, you might have legal advice that's been provided by an external advisor. That's pretty obviously the subject of legal professional privilege, but if it's then spread around to a large group of people internally by email, or indeed even sent externally, then that might impact on your ability to continue to claim privilege in that advice. And it might be that because of the way in which that advice has subsequently been treated, that you've lost privilege in it. Also, if you do identify documents that are privileged, but are relevant to the investigation, then there's a range of considerations about how you treat those documents when it comes to interviewing witnesses and ultimately writing up your investigation report.

Peter Richard:

So assuming you've been through the documents now and are ready to put them to witnesses in an interview context, what role will privilege play there? Are there particular things that an interviewer should be aware of when it comes to privilege?

Rani John:

Yes, absolutely. You might be interviewing a company employee and the interest of the company and the interest of the individual employee may not necessarily align. So it's important to establish some ground rules in relation to that. There can also be issues about whether or not you should show people the content of documents, which are the subject of privilege claims, if they weren't involved in those documents to begin with. But coming to setting up the parameters of an interview with an individual employee - usually what you would do is explain to them the general subject matter of the investigation, thank them for their cooperation and then I think it's good practice to deliver what American lawyers refer to as an Upjohn warning.

Peter Richard:

Yes, I remember that being done as a matter of course, on a matter I worked on some years ago with a USnexus , but the term and the practice isn't quite so entrenched in Australia, is it?

Rani John:

Yes, that's right. It's not strictly required in Australia. I tend to think it's a matter of good practice and it can assist in according procedural fairness to the individual that's being interviewed. So essentially, what you do is at the beginning of an interview, you inform the interviewee that first of all, the interview is confidential and that it might be subject to privilege. Secondly, and particularly if company lawyers are present, that the people who are there for the company are there to represent the company, they are not there to represent the individual employee. Thirdly, that any privilege that does apply to records of communications about the interview belong to the company and not to the individual. Then finally that the company is free to waive any privilege or confidentiality in those records and choose to disclose those records to third parties such as regulators or in litigation down the track.

Rani John:

That last point is significant because you might be conducting your internal investigation in parallel with a regulatory investigation (or in anticipation of one) and you want to reserve for yourself the ability to communicate with a regulator appropriately down the track. So it's desirable and I think fair to be upfront with an interviewee about that possibility, but it does have the downside that the interviewee might then be less willing to be forthright with you if they realise that it's possible that you're going to then pass on what they tell you to a regulator down the track.

Peter Richard:

So it's a bit of a balancing act in that regard.

Rani John:

That's right.

Peter Richard:

While we're on the subject of difficult situations that can arise in interviews, what would you say if a witness completely out of the blue and in the middle of an interview decided they wanted to ask for a lawyer?

Rani John:

Yes, it can happen in the middle of an interview, it has happened to me on occasions. So if possible, you should try to work this out before you get to the interview room. So you should try to work out whether there are any relevant company policies or legal entitlements, such that individual employees or former employees are entitled to company-funded independent representation. And even if there's no specific entitlement, is that something that the company wants to facilitate anyway? Depending on the answer to that, you should then make sure that interviewees know that they're able to access independent representation funded by the company, and they should have the opportunity to do that before they turn up to the interview.

Rani John:

If either they're not entitled or they have previously said that they don't want independent representation and then in the middle of the interview they have an epiphany and they change their mind, then I think usually the best practice is to terminate the interview at that point, facilitate their getting independent legal advice, and then resume the interview so that you don't have problems with procedural fairness or those sorts of considerations down the track. Obviously, any communications that then occur between that individual and their own lawyer are privileged as between them. They don't belong to the company.

Peter Richard:

So we've made it through the interview with some surprises perhaps along the way, once the interview's concluded, will it be the case that the written record of that interview is privileged?

Rani John:

Well, that depends. If an interview is being conducted by a lawyer for the company or under the direction of a lawyer and the notes record not only what the witness said, but also, let's say, instructions given to the lawyer or the interviewer's mental impressions of body language or other impressions of the witness and analysis, things of that nature, then usually notes of that kind will be protected by privilege, at least in Australia. But if the interview is being conducted by a non-lawyer and not under a lawyer's direction, or if the notes are merely a transcript of the questions and answers and nothing more, then they're less likely to be protected by privilege.

Peter Richard:

And assuming that a regulator is investigating in parallel, could there be any expectation on the part of that regulator that they will also get to see a record of the interview?

Rani John:

Yes, often there will be, and there's a range of different approaches that a company can take in those circumstances. One might be to create two records. One of which is just a straight transcript, so a record purely of the questions and answers and separately, a note which records things like impressions or analysis and other thought processes of the lawyer and the latter is the document that is the subject of the privilege claim. Another option is to share privileged interview records with a regulator pursuant to what's usually described as a limited waiver arrangement.

Peter Richard:

So I think we've reached a point now in our investigation where documents have been reviewed, and those that may be potentially privileged have been identified. Witnesses have also been interviewed and privileged records of those interviews have been prepared and a report has been created and finalised to document the conclusions of the investigation. So does privilege still have a role to play?

Rani John:

Yes. So I think we're assuming now that the investigation report has been prepared by lawyers and meets the dominant purpose test that we talked about earlier. So yes, privilege is still relevant, particularly if there's any intention to share that report with the relevant regulator, for example.

Peter Richard:

So to ask a question that we're all thinking, why would sharing the report with a regulator be an option for your client?

Rani John:

So, often if a company shares an investigation report of an internal investigation that it's conducted with a regulator, it will do so because it's wanting to demonstrate cooperation with that regulator or to obtain what American lawyers refer to as 'cooperation credit'. If you have a strong record of cooperation with a regulator for any investigatory activity they're conducting, then that will be relevant for that regulator in determining whether or not to take enforcement action. And if the regulator does decide to take enforcement action, it can be relevant to mitigating penalties that might otherwise be applied to the company.

Rani John:

But I should emphasize that cooperation credit isn't usually given simply for meeting your legal obligations. So you need to go over and above your strict legal obligations to be considered by a regulator as cooperating in the relevant sense. Some regulators like the Australian Securities and Investments Commission actually have policies where they spell out exactly what they expect in terms of cooperative behavior. Whether or not a company decides to go down the path of proactive cooperation (for want of a better description) - that's an important strategic decision, and it can have a lot of dimensions. Probably more than we have time to talk about today, but how to treat privilege and whether or not you're going to waive privilege even in a limited sense or share a privileged report with a regulator is absolutely one of those dimensions.

Peter Richard:

I suppose that brings us back to the question of whether it's possible to protect privilege over a report that a company may decide to provide to a regulator.

Rani John:

Yes, and the answer to this is going to vary a little bit with the jurisdiction that you're in. But in Australia, the best way to do that (or try to do that) is to enter into a limited waiver agreement with the regulator. And again, using ASIC as an example, they have a pro forma voluntary disclosure agreement for that kind of circumstance. Under that agreement, ASIC undertakes to notify the disclosing party of any applications by third parties to access confidential material that's been disclosed to the regulator in this way. So for example, third parties might try to use freedom of information requests. In litigation, they might seek to issue subpoenas to get hold of that kind of material. ASIC will undertake to keep confidential the relevant report that's been disclosed. So that gives you a degree of protection against an investigation report being produced, for example, in a subsequent class action. But you should note that ASIC itself does not commit to not challenging privilege claims that you make if ASIC itself thinks that you didn't make those claims in a valid way.

Rani John:

Another point to make is that while that limited waiver structure can work in Australia, it won't necessarily work in some other jurisdictions. So if the conduct that you've investigated and that you've got a report about has multi-jurisdictional elements, it would be a good idea to check out what is the consequence of that kind of disclosure to a regulator in Australia; does that blow up your privilege claims in other jurisdictions, for example.

Peter Richard:

So I suppose it's like so many aspects of dealing with regulators. It's a course that has its pros and cons.

Rani John:

Absolutely. I definitely would encourage people to get advice on what are the ramifications of sharing a privileged report in that way.

Peter Richard:

Well, thanks so much, Rani. It's been great chatting to you again. And that concludes episode two of Investigations Unpacked. Tune-in to our next episode, where Rani will speak to senior barrister, Kate Morgan SC, about managing a situation where an investigation uncovers potentially criminal conduct. That's one you definitely don't want to miss.

Peter Richard:

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