Privilege holds the line, for now.

The High Court's decision in Carter-Ruck v SRA has sparked considerable interest across the legal profession, confirming that the SRA cannot use its statutory information-gathering powers to compel law firms to disclose documents protected by a client's legal professional privilege (LPP) unless the client has waived that privilege. The ruling is a setback for the regulator, which argues that there is a real need for it to have the ability to consider privileged material in investigating, and potentially prosecuting, cases of alleged misconduct.  The SRA has already announced its intention to appeal the High Court decision. 

During the High Court case, the SRA argued that it should be able to obtain documents protected by a client's LPP for two reasons. 

First, the SRA argued that there was a statutory override: namely that section 44B of the Solicitors Act 1974 provides that power and overrides the client’s LPP. The Court disagreed.  LPP is a fundamental right which can be overridden in statute only by express words or necessary implication.  Section 44B does not expressly provide the SRA with the power to compel production of LPP material.  Moreover, while the Court acknowledged that access to LPP material might make the SRA’s job easier, such a power was not a necessary implication for the operation of a section 44B investigation.

Second, the SRA sought to re-open the comments made in Morgan Grenfell* on what cases have subsequently described as the ‘no infringement’ rule, which was put to bed following the decision in Sports Direct** which decided ‘there was no principle that where documents subject to LPP were handed over to a regulator there was no infringement or only a technical infringement of legal professional privilege’. Although the SRA accepted it is bound by the decision in Sports Direct, it contended that, in relation to legal regulators, the ‘no infringement’ reasoning remains applicable. The High Court found no basis for that proposition.  

This will be a difficult hurdle to overcome, particularly given the fact that the High Court emphasised that legal regulators should be in no different position from other regulators, and stressed the importance that clients must be sure that when they consult their lawyer, that, without their consent, there are no circumstances under which the privileged communications will be disclosed without their consent. As Lord Taylor CJ put it in Derby Magistrates***, the lawyer's mouth 'is shut forever'.

At the time of writing, the status of the appeal remains unclear. For now, however, the judgment reinforces a longstanding principle: legal professional privilege is a fundamental right, and law firms who subsequently receive a s.44B notice should carefully consider the content of clients’ files which are captured by the notice in the context of the High Court’s decision.

Written by Andrew Matheson and Stacie Bourton.

* R (Morgan Grenfell Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563

**Sports Direct International plc v Financial Reporting Council [2021] Ch 457

*** R v Derby Magistrates’ Court, ex p. B [1996] 1 AC 487