Refereeing an ongoing dispute between Sports Direct and the Financial Reporting Council (FRC), the Court of Appeal has robustly defended the scope of legal professional privilege (LPP). Those seeking to resist disclosure of privileged documents in response to a request from a regulator under its statutory powers should feel reassured, provided the relevant statute does not override privilege.

Sports Direct is now not required to disclose privileged documents to the FRC for a regulatory investigation.

Exceptions to LPP

The Court of Appeal kicked off its decision with an emphasis on the long-established rule, "once privileged, always privileged". The Court confirmed that, unless waived by the client, privilege protection continues – subject to two exceptions:

• the iniquity exception (not relevant here); and
• the statutory override exception – where statute has modified or abrogated LPP (carefully considered in this case).

The Court of Appeal concluded that the statute giving the FRC information gathering powers contains no express or implied provision overriding LPP. The FRC seemed on the ropes when the leading Judge said, "on the contrary, there is an express provision dealing with LPP which appears to limit the FRC’s power and confirm the protection of LPP".

No special exceptions for regulators

The Court of Appeal rejected the FRC’s arguments that there are further exceptions to LPP for regulators to rely on.

The FRC unsuccessfully argued that where documents are handed over in response to a request made under a regulator’s statutory power there is either: (a) no infringement of LPP; or (b) any infringement is only technical and can be regarded as authorised by the relevant statute. The Court of Appeal was clear that neither the so-called "no infringement exception" nor the "technical infringement exception" exists.

Attachments to emails

But it was a game of two halves for Sports Direct – the Court decided the retailer must disclose certain standalone, non-privileged email attachments to the FRC.

The Court of Appeal confirmed that being attached to privileged emails did not confer privilege on either:

• the attached pre-existing document itself; or
• the fact that the document was sent to a legal adviser under cover of a privileged communication.

The Court of Appeal considered whether the attachments were responsive to the FRC’s request for documents. It concluded that, on a proper construction of the regulator’s disclosure request notice, the attachments did fall within the scope of the FRC’s request by virtue of being attached to emails within scope and must be disclosed.

Another rematch?

We understand that the FRC is seeking permission to appeal to the Supreme Court on the first issue (exceptions) and Sports Direct on the second (attachments to emails).

We await a possible round three!