Précis - Intro
The High Court rejected RBS' claim that interview notes taken by the bank and its external lawyers in the course of two internal investigations were privileged. In doing so it confirmed the narrow approach taken to the definition of "client" in Three Rivers (No 5)1.
The litigation arises out of a number of FSMA 2000 claims brought by the claimants concerning a rights issue of shares in RBS, taken up between 15 May 2008 and 6 June 2008. These were brought with a view to recovering substantial investment losses incurred following the collapse of RBS shares and on the grounds that the prospectus for the rights issue was inaccurate or incomplete.
The claimants sought and RBS resisted disclosure and inspection of two categories of documents:
Transcripts, notes or other records of interviews conducted by or on behalf of RBS with employees and ex-employees as part of 'Project Mortar' (RBS' investigation in response to two US Securities and Exchange Commission subpoenas relating broadly to RBS' sub-prime exposures);
Transcripts, notes or other records of interviews conducted by or on behalf of RBS as part of its investigation into allegations by Victor Hong concerning RBS Greenwich Capital's marketing of Super Senior CDOs and other matters of which Mr. Hong became aware during his employment at RBS Greenwich;
(together the Interview Notes).
The issues before the court were:
Whether, if English law as the lex fori applies to the issue, the decision and reasoning in Three Rivers (No 5) applies to preclude RBS' claim to legal advice privilege;
Whether RBS could rely on privilege relating to lawyers' working papers;
Whether RBS could rely on the application of US law to resist disclosure and inspection of the documents; and
If RBS were entitled to maintain its claim to privilege under US law, whether the court could and should use its discretion to withhold disclosure and inspection notwithstanding that English law might be the lex fori.
By way of reminder, legal advice privilege covers communications between a client and its lawyer for the purpose of giving or receiving legal advice. The leading authority on its scope and application is found in Three Rivers (No 5). RBS sought to distinguish the facts of that case from the current ones (see further below).
Each of the Interview Notes, RBS said, recorded "a communication between a lawyer and a person authorised by RBS to give instructions to its lawyers", and was created for the purpose of enabling RBS to seek legal advice from its external counsel. As such the communications made (and evidenced in the Interview Notes) and gathered by RBS' lawyers from employees or ex-employees should be privileged.
Given their authority to communicate directly with RBS' external lawyers, the employees were described as an "authorised emanation of the client". RBS argued that Three Rivers (no 5) should therefore be distinguished because that case did not concern direct communication by employees with the corporation's lawyers, as here (Three Rivers (No 5) dealt with documents prepared by and communications between employees for the dominant purpose of the bank obtaining legal advice).
The claimants submitted that, on the contrary, the reasoning in Three Rivers (No 5) properly understood has a more general application. Accordingly, the gathering and communication of information by someone other than a corporate client is not privileged, even if that information is gathered and communicated by that person to his employer's lawyer "with the authority and at the request of the client and/or its lawyers, and even if the client is that person's employer".
Should Three Rivers be applied, and did legal advice privilege therefore attach to the Interview Notes?
The judge confirmed that Three Rivers (No 5) is not confined to its facts. The essence of the Court of Appeal's decision was that, in a corporate context, for the purposes of legal advice privilege information gathered from an employee is no different from information obtained from third parties, even if that information is collected in order to be shown to a lawyer to enable the provision of fully informed advice to the client, the corporate entity.
Further, the fact that RBS' employees were "authorised" to communicate directly with RBS' lawyers did not mean they were the "client", or a recognized emanation of the client, sufficient to distinguish Three Rivers (No 5). In any event RBS admitted that its employees or ex-employees did not have authority to seek or receive legal advice.
Accordingly, RBS's claim to the protection of legal advice privilege for the Interview Notes failed.
Could RBS rely on lawyers' working papers privilege in the alternative?
Lawyers' working papers are privileged under the legal professional privilege doctrine (see Balabel2 and Three Rivers (No 5)). RBS' main submission, for the application of this head, centred on the fact that the Interview Notes were more than verbatim transcripts, but were notes. This alternative claim also failed.
There is a real difference between a document reflecting a train of enquiry or a legal adviser's "mental impressions" on the one hand, and a document which reflects or "gives a clue" as to the trend of his or her legal advice (Sumitomo3 applied). The Interview Notes in this case were the former.
Should the lex fori be US law for the purposes of privilege and could the court exercise its discretion in this regard?
The judge re-affirmed that questions of privilege are for the lex fori.
RBS attempted to argue that the concept of legal professional privilege is a fundamental right as opposed to merely an aspect of evidence. As such the lex fori to determine the issue should be the law of the place where those documents are most closely connected or came into existence. On this basis RBS sought to rely on the US law test for privilege (the interviews were carried out by RBS' US lawyers and at least some came into existence in the context of US Securities and Exchange Commission investigations).
This argument was rejected, largely on public policy grounds. The proposed approach would be burdensome as it would require a court to inform itself as to whether privilege could be claimed in other jurisdictions which might be deemed relevant before it could be in a position to determine whether to uphold a claim to privilege. This was impractical.
In strictly applying the rationale behind the concept of "client" in Three Rivers (No 5), the decision enhances the prospect of a counter party obtaining copies of interview notes arising from internal investigations. It is also likely to lead to parties seeking to rely on and test the boundaries of litigation privilege (a head of privilege not relied on by RBS).
RBS recently dropped its planned appeal of the decision despite being granted a leapfrog certificate to appeal directly to the Supreme Court. Accordingly, the wait goes on for Three Rivers (No 5) to be revisited by the Supreme Court.
1 Three Rivers District Council and others v. The Governor & Company of the Bank of England (No 5)  QB 1556; Three Rivers District Council and others v. The Governor & Company of the Bank of England Rev 1  EWCA Civ 474.
2 Balabel and another v Air India  1 Ch 317.
3 Sumitomo Corporation v Credit Lyonais Rouse  CP Rep 72.
Parham Kouchikali is a partner at RPC specializing in high profile and complex finance dispute resolution. Parham has extensive experience conducting complicated investigations in corporate and contentious regulatory settings, acting for clients in significant enforcement actions by the Financial Conduct Authority (FCA). He represents a wide range of clients in the financial sector, including individuals requiring independent legal advice at financial institutions. Maria Petzsch is an Associate at RPC in the Commercial Disputes team, and has worked on regulatory Futures and Securities Commission (FSC) investigations following her time working with RPC in Hong Kong.In the UK she specializes in commercial litigation.