The challenge of legal privilege and the role of good governance.

The ethical lessons from the Post Office Horizon Scandal should cause corporates and to reconsider how they handle internal investigations and the role of good corporate governance.

Professor Andrew Higgins and Professor Richard Moorhead of the Universities of Oxford and Exeter respectively have published a Working Paper which seeks to learn the ethical lessons from the Horizon Scandal.

WP9-Legal-Professional-Privilege.pdf

Their paper provides an eloquent explanation of how the scandal, and the inquiry into the incidents surrounding it, have exposed the problems of legal professional privilege, concluding it played a “deeply troubling role”. It represents a call to action to ensure these injustices are not repeated.

Legal privilege, when applied in accordance with the law, has a critical role to play in enabling the transparent discussion of issues between a lawyer and their client, whether that be external or internal legal counsel. This is a core principle of the judiciary system and within boundaries must be maintained.

However, in situations such as the Post Office when good governance breaks down there are damaging consequences for employees, consumers and other third parties.

Recommendations.

The Working Paper recommends a thorough review of legal privilege and its application, from first principles. Those responsible for organisations – the Board of Directors – can take responsibility for embedding good ethical practices* by seeking to:

1. Develop and maintain a tightly defined definition of the purpose of privilege.
2. Apply the appropriate tests to avoid the blanketing of information.
3. Strengthen ethical standards, policies and procedures to prevent abuse of privilege.
4. Ensure that privilege is only applied to documents created within the context of the rules and not in respect of information that could be identified through other means and which would not meet the standards for privilege.
5. Ensure documentation that was not originally presented as legal advice is outside of the scope of legal privilege.
6. Ensure privilege is only applied when litigation proceedings are genuinely in contemplation.
7. Raise awareness and education around the understanding of the rules and procedures associated with privilege – importantly beyond the legal function.
8. Eliminate the intentional incorporation of documentation within the protection of privilege to avoid disclosure of information or wrongdoing.
9. Ensure privilege rules do not create the possibility of the disclosure of information that is misleading through it being incomplete.
10. Ensure full disclosure of issues and information to those charged with governance, including discussion of the nature of any information that has been witheld.

The Working Paper creates the argument for further analysis.  It quotes the closing argument of the inquiry, “The real issue is the extent to which…from 2011 onwards… [POL sought] to use claims of legal professional privilege as a tool to cloak communication in privacy.”

Sadly, evidence from other sources, such as the whistleblowing charity Protect and Whistleblowing UK, suggests this is not an isolated situation. Cases have been brought before the courts to challenge assumptions of legal privilege, but all too often individuals face a David and Goliath task in doing so. The extended court case and deeper pockets of large organisations makes this prohibitive.

What should directors do?

The real question in all such scenarios is one of governance. Why do directors allow themselves to be blind-sided and focused in narrowly on evidence and information that hindsight proves to be incomplete and biased? Are questions asked about the integrity, ethical position, and conflicts of interest of the legal counsel? Or are they assumed to be above questioning? When an investigation report is provided, do the directors as the question of what has not been included within the scope and why?

BRAVE thoughts.

Avoiding risks of all forms manifesting, with unintended consequences requires forethought and the recognition that this could happen. We support organisations in:

• Creating policies that are made available to all employees explaining when and how legal privilege is applied.
• Training for critical individuals, including the Board, Senior Executive and those in second and third line teams who may find themselves involved in investigations or litigation support.
• Articulating and defining the questions to ask of legal counsel to ensure privilege is appropriately applied, regardless of the situation.
• Assessing the risks in any situation so that directors can take ownership and identify the documentation and enquiries they require.

For further information please contact us.

*In this article I have not considered the recommendations made for the courts or judiciary system.