knowledge 13 February 2018 |

Legal Professional Privilege - A Watershed Moment for Internal Investigations?

The substantive claim, brought by the liquidators of Bilta, alleged that RBS had played a role in a vast carbon trading tax fraud.

The claimants, Bilta (UK) Ltd, sought disclosure of certain documents held by RBS, including 29 transcripts of interviews with key RBS employees and ex-employees conducted by solicitors in the context of an investigation by HMRC. RBS asserted that these documents were subject to litigation privilege.

The parties agreed that the test for whether litigation privilege can be claimed was that stated by the Court of Appeal in Three Rivers District Council v Governor & Company of the Bank of England (No 6): ²

“(a) litigation must be in progress or in contemplation;

(b) the communications must have been made for the sole or dominant purpose of conducting that litigation;

(c) the litigation must be adversarial, not investigative or inquisitorial.”

The case hinged on the second limb of this test, whether RBS had established that the documents were prepared for the “sole or dominant purpose of conducting litigation”. The claimants, arguing that the claim to privilege must fail, relied heavily on the decision of Mrs Justice Andrews in SFO v ENRC, ³ which cast doubt on UK companies’ ability to claim litigation privilege in the context of potential criminal investigations. In the instant case,the claimants submitted that the dominant purpose of RBS’s investigation was not litigation but that RBS generated the documents:

• to inform itself of its position
• to supply a full and detailed account of the relevant facts to HMRC pursuant to its duties as a taxpayer and
• to persuade HMRC not to issue an assessment.

Vos LJ considered Andrews J’s dicta in ENRC but ultimately did not think it represented “the commercial reality of the present position”. The judge did not consider ENRC to be determinative of the question and noted that the decision was under appeal. Vos LJ concluded that the documents and interviews were brought into being by RBS and its solicitors for the sole or at least the dominant purpose of expected litigation.  The judgeheld that one has to take a “realistic, indeed commercial, view of the facts”, as is clear from the decision in Re Highgrade Traders ⁴ and from other Court of Appeal authorities. Vos LJ concluded that the interviews were covered by litigation privilege and refused the claimants leave to appeal. 

While this decision has been heralded as restoring some certainty to this area, the decision in SFO v ENRC remains under appeal and as such, companies conducting interviews in the context of internal investigations should exercise caution. Vos LJ emphasised that the determination of the sole or dominant purpose in each case is a question of fact, holding that one cannot simply apply conclusions that were reached on one company’s interactions with a government body to those of another.

The rule in Ireland regarding litigation privilege continues to stem from the decision of the Supreme Court in Gallagher v Stanley,⁵ where the court ruled that the proceedings must have been reasonably apprehended, if not actually underway, at the time the evidence was created or procured and that it would look to the dominant purpose behind the preparation of a document to decide if it is privileged. 

The Irish position vis-á-vis the availability of litigation privilege in criminal investigations is set out in the decision of the Irish Commercial Court in Quinn v IBRC,⁶ which confirmed that litigation privilege can apply where a document has been created for the dominant purpose of a regulatory or criminal investigation.