Company Confidential: When are employee documents not privileged against their employer?

This week’s TGIF considers what the UK decision of Simpkin v The Berkeley Group Holdings PLC [2017] EWHC 1472 means for insolvency practitioners seeking to access potentially privileged documents created by employees of appointee companies.

BACKGROUND

In September 2014, an employee was removed from his position as director of The Berkeley Group Holdings PLC (the company). He subsequently brought proceedings against the company after he was denied certain entitlements under long term incentive plans.

A preliminary issue arose regarding a “synopsis” document that he had prepared on his work computer a month or so before his dismissal. It contained an account of what he expected to receive under the long term incentive plans, which was inconsistent with the account he sought to advance in proceedings against the company.

The employee had prepared the document for the purpose of his ongoing divorce proceedings, and had attached it to a blank email sent from his work email account to his personal email account. His divorce lawyer confirmed the document was used for this purpose.

The company sought to rely on the content of the synopsis in the proceedings against the employee. The employee sought to restrain the company from doing so on the basis that legal professional privilege covered the synopsis document and the email to which it was attached.

DECISION

Garnham J of the High Court of England and Wales held that the synopsis and email were not privileged because they were not confidential as against the company.

His Honour held that it is a precondition to a claim of privilege that the document is confidential as against the person against whom the privilege is claimed. Together, four elements meant the synopsis and email were not confidential as against the company:

1. The company’s IT Policy stated all emails sent and received were property of the company, and the employee’s contract entitled the company to monitor his emails;

2. The employee had used the company’s financial information and IT system to create the synopsis document;

3. He had no reasonable expectation of privacy, as he had saved it on the company’s general servers without password protection or any indication on its face that is was privileged. Furthermore, it was not segregated from his work documents and his personal assistant had direct access to his email folders; and

4. The company’s general email footer stating that the document was confidential was to protect the company’s confidentiality against third parties, not protect employees’ confidentiality against the company.

Therefore, because documents were not confidential, they were not privileged and the company was free to rely upon them in proceedings against the employee.

WOULD A SIMILAR DECISION BE REACHED IN AUSTRALIA?

On these facts, a similar decision could well be reached in an Australian court. Confidentiality is a precondition to privilege in Australian law, and the features relied upon by Garnham J are present in the IT policies and practices of many Australian companies.

However, the decision does not mean privilege will never attach to a staff member’s documents held by a company. A different decision may be reached where a staff member makes greater effort to maintain confidentiality – by password protecting documents, by marking them privileged, or by segregating them from other work documents.

COMMENT

When insolvency practitioners are appointed over failed or failing companies, the books and records of the company will invariably include documents and emails that staff members would prefer remained out of the hands of those investigating the company’s demise.

This decision indicates that those staff members may not be able to assert privilege to restrain insolvency practitioners from relying on those documents in legal proceedings. Documents of this kind may be particularly useful in liquidators’ recovery proceedings – for instance, if a director has prepared documents regarding their own exposure to insolvent trading claims.

On the other hand, the decision is a reminder that while documents and emails on work servers may seem private, they will often be property of the company and open to scrutiny.