Privilege in internal investigations: why the 'dominant purpose' test matters so much
Legal professional privilege works differently depending on whether a business is seeking legal advice or facing a regulatory probe, and getting the distinction wrong can expose sensitive material to disclosure.
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Two privileges, not one
Most people talk about legal professional privilege as a single protection. In practice it is two separate doctrines that behave differently, and the gap between them becomes critical the moment a company faces a regulatory enquiry, a whistleblower complaint or a potential prosecution.
Legal advice privilege covers confidential communications between a lawyer and client made for the purpose of giving or receiving legal advice. It does not require litigation to be in prospect at all. A routine email asking a solicitor whether a contract clause is enforceable is covered the moment it is sent.
Litigation privilege is different. It protects confidential communications, including those with third parties such as forensic accountants or witnesses, but only where litigation or a prosecution is reasonably in contemplation and the communication was made for the dominant purpose of that litigation. This second category is where internal investigations get complicated, because a company conducting a review after, say, a regulator’s letter or an internal complaint is rarely doing so for one single purpose.
Why ‘dominant purpose’ causes problems
When a business commissions an internal investigation, interviews are often held, documents gathered and reports written for several overlapping reasons: to understand what happened, to decide whether to self-report, to fix a control failure, to brief the board, and potentially to prepare a defence if enforcement action follows. Litigation privilege only attaches to material created with litigation or prosecution as the dominant purpose, not merely a possible or secondary one.
Courts have had to work through exactly this problem in cases involving companies facing scrutiny from bodies such as the Serious Fraud Office. The guiding principle that has emerged is that litigation privilege can cover investigation materials, including interview notes and fact-finding reports, where there was a real likelihood of a criminal investigation or prosecution at the time the material was created, and the dominant purpose of creating it was to prepare for that prospective litigation, even if settling or avoiding the dispute was part of the plan. Simply anticipating that a regulator might eventually ask questions is not automatically enough on its own; timing, the client’s own internal assessment of risk, and the stated purpose of the work all matter.
This means a company that launches a review purely to understand a problem and improve its systems may find that review is not privileged at all, even if a prosecution later materialises, because at the point the work was done, adversarial proceedings were not sufficiently in contemplation and legal advice was not the dominant purpose of the documents created.
Legal advice privilege has its own limits
Legal advice privilege avoids the dominant purpose problem but comes with a narrower scope. It protects the lawyer-client communication itself, not necessarily every document that feeds into it. Underlying factual material, working papers prepared by non-lawyers, and communications between the client and third parties are generally outside this category unless litigation privilege also applies. There is also a long-standing and often criticised rule, confirmed in case law, that the ‘client’ for privilege purposes can be interpreted narrowly within an organisation, meaning communications from employees who are not part of the specific team instructed to deal with the lawyers may not attract legal advice privilege at all, even if those employees hold relevant information.
Practical consequences for businesses and lawyers
This distinction is why experienced in-house teams and external advisers try to structure internal investigations carefully from the outset. Common practice includes instructing external solicitors at the earliest realistic point, setting a clear written purpose for any review that references the prospect of legal proceedings or regulatory action where genuinely anticipated, limiting the investigation team to those who need to know, and marking documents appropriately, though a label alone never determines privilege; substance and purpose do.
Regulators and prosecutors are also alert to these arguments. A business asserting privilege over investigation material may be asked to justify the claim, sometimes before a court, and may need to show contemporaneous evidence that litigation was genuinely in contemplation and was the dominant reason the material was produced. Getting this wrong can mean a company hands over interview notes or reports it assumed were protected, which is why firms advising on regulatory and investigations work treat the legal advice versus litigation privilege distinction as a live, strategic question rather than a technicality.
Where to check the detail
The underlying rules are a mix of common law and professional guidance rather than a single statute, and interpretation continues to develop through case law. Businesses and their advisers should consult current guidance from the Law Society and the Solicitors Regulation Authority, and take specific legal advice before relying on privilege in any investigation, since the application of the dominant purpose test is fact-specific and can turn on timing and documentation that only becomes clear in hindsight.