The RBS Rights Issue Litigation concerns a group claim against RBS over a rights issue announced by the bank in April 2008. This latest judgment concerns an application by the claimants for disclosure of materials relating to two internal investigations, and in particular notes of interviews by the bank’s solicitors with former and current RBS employees (the “Interview Notes”).
RBS resisted disclosure, asserting that the documents were protected by legal advice privilege, which applies to communications between a lawyer and a client for the purpose of giving or receiving legal advice. RBS argued that the documents were privileged because:
- If English law applied, the documents were privileged as record of lawyer/client communications for the purposes of giving or obtaining legal advice in accordance with the decision in Three Rivers (No 5)
- Alternatively, the documents were privileged as part of the lawyers’ working papers.
- If the court found that the documents were not privileged under English law, the English court should apply US law (not English law) to the question of whether the documents were privileged and the documents were clearly privileged under that law.
- Even if English law applied and the documents were not privileged, the court should exercise its discretion to order that disclosure should be withheld.
The judge, Mr Justice Hildyard, rejected RBS’s claim to privilege on all grounds, being bound by the precedent set by the Court of Appeal in Three Rivers (No 5). However, he granted urgent leave for a leapfrog appeal to the Supreme Court which will likely be heard early in 2017.
The parties accepted that the leading authority on legal advice privilege is the Court of Appeal’s decision in Three Rivers (No 5). In that case, the court held that the “client” for the purposes of legal advice privilege was limited to a three person inquiry unit (the “Unit”) which had been established to deal with certain legal issues. Information gathered from employees outside of the Unit was no different from information gathered from third parties in the context of legal advice privilege.
RBS argued that it was not contrary to Three Rivers that an individual who was authorised by the client corporation to communicate either instructions or factual information to the corporation’s lawyers, to enable the corporation to seek legal advice, should be treated as part of the client and protected by legal advice privilege. Furthermore, Three Rivers could be distinguished on the basis that it dealt with purely “internal” documents, whilst the Interview Notes reflected direct communications between the RBS employees and the bank’s lawyers. RBS also pointed to the extensive academic criticism of the decision and its disapproval in other jurisdictions, including Singapore.
Although the court acknowledged the criticism of Three Rivers, it was still bound by the decision. The court confirmed that “client” for these purposes is narrowly defined and held that:
- The client consists only of those employees authorised to seek and receive legal advice on behalf of a client corporation; and
- The authority to provide information to the lawyers is not sufficient for these purposes.
Therefore, the interviewees did not fall within the definition of “client” as defined by Three Rivers and the Interview Notes were not covered by legal advice privilege.
Lawyers’ working papers
The parties accepted that lawyers’ working papers are protected by legal advice privilege on the basis that they “give a clue” to the trend of advice being given to a client by its lawyer. Therefore, verbatim transcripts of a non-privileged interview would not be privileged. RBS argued that the Interview Notes were privileged because they showed the lawyers’ “mental impressions” and revealed their train of enquiry.
The court concluded that, on the facts, the evidence produced by RBS was insufficient to substantiate this claim to privilege.
Choice of law
It is a well-established rule that the English court will apply the law of the forum (in this case, English law) to matters of privilege. However, RBS proposed a new choice of law rule: the English court should apply the law of the place with which the relevant engagement or instructions had their closest connection, unless it would be contrary to English public policy to do so. Therefore, RBS argued, in this case US law would apply and the documents would be privileged.
The court accepted that it was likely that the Interview Notes would be privileged under US law but held that English law, as the law of the forum, would still apply to this case.
The court recognised that it had a discretion to withhold disclosure and inspection of the Interview Notes. However, it was likely to lean heavily in favour of disclosure unless there were “compelling grounds” not to do so. The court did not find such grounds in this case.
In defining the scope of privilege, the court is undertaking a difficult balancing exercise between fundamental rights. It is weighing an individual’s right to communicate in confidence with its lawyers – which is fundamental to ensuring access to justice – against the broader public interest in giving the court access to all relevant evidence. This tension is compounded by the practicalities of establishing a domestic regime that operates effectively across borders.
The decision in Three Rivers (No 5) arguably does not strike the right balance, defining the privilege too narrowly and without due regard for the practicalities and realities of how large businesses need to coordinate and organise themselves. Three Rivers (No 5) has long been a source of academic criticism and consternation, and has been explicitly distinguished or rejected in several other Commonwealth jurisdictions, most notably in Singapore, Hong Kong, and Australia.
The anticipated Supreme Court appeal against this judgment will provide the first opportunity in over a decade for the court to consider overturning Three Rivers (No 5), and redefining the scope (and potentially the fundamental nature) of legal advice privilege.
This article was co-authored by Hana Tawfik, a trainee solicitor in BLP’s Commercial Disputes team.
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