Background - legal advice privilege
Legal advice privilege attaches to communications passing between a lawyer and client where the communications were prepared confidentially and for the purposes of seeking and/or receiving legal advice or advice in a relevant legal context.
Property Alliance Group (“PAG”) has brought a claim against the Bank in relation to four interest rate swaps entered into between PAG and the Bank between 2004 and 2008. The swaps used 3 month GBP LIBOR as the reference rate. Along with a number of other international banks, the Bank had admitted manipulating the Japanese Yen and Swiss Franc LIBOR rates and reached settlements with regulators and prosecutors in that regard. However, those settlements do not relate to GBP LIBOR.
PAG alleges that the Bank made misrepresentations about GBP LIBOR or that the swaps contained implied terms that the Bank would not manipulate GBP LIBOR for its own ends. As part of its defence, while the Bank admitted misconduct relating to the Japanese Yen and Swiss Franc LIBOR rates, it denied any other misconduct relating to LIBOR, including the 3 month GBP LIBOR. In the course of proceedings, the Bank claimed privilege in relation to documents either created by the Bank or in its control, relating to the previous investigations by, and settlement negotiations with, US and UK prosecutors and regulatory authorities in relation to LIBOR rate manipulation. PAG sought inspection of four categories of documents being withheld by the Bank and Birss J gave his judgment on this application on 8 June 2015.
The first of the four categories, the “ESG documents”, is relevant to the present decision. These documents relate to an Executive Steering Group (“ESG”), a committee formed by the Bank in 2011 at the height of the various investigations into LIBOR. The ESG was comprised of individuals from within relevant functions of the Bank, including Legal, HR and Compliance, and it liaised with the Bank’s external legal advisers on a regular basis. The Bank claimed that the ESG documents were protected by legal advice privilege. In order to determine the claim for privilege, Birss J ordered the bank to produce the ESG documents to the court for inspection to determine: (i) whether the Bank’s claim for privilege was well-founded; and (ii) if parts of the documents were privileged, whether any suitably redacted copies could be provided to PAG for inspection.
Snowden J, as the inspecting judge, reviewed 81 ESG documents which fell into two categories:
1. Memoranda in the form of tables prepared by the Bank's external legal advisers, informing and updating the ESG on the progress, status and issues arising in the regulatory investigations.
2. Notes and summaries concerning the discussions between the ESG and its legal advisers at the ESG meetings, again prepared by those external advisers.
The principles of privilege
Snowden J noted that the debate around the scope of legal advice privilege has tended to focus on the extent to which external legal advisers also offer other "business" services to clients and the fact that not all communications between a lawyer and client will be for the purpose of giving or obtaining legal advice.
He considered the key case-law on this issue, in particular the Three Rivers (No. 6)  UKHL 48 case, where the House of Lords (as it then was) considered a claim for privilege over communications which gave ‘presentational’ advice on how a matter should be put before an inquiry. The Court concluded, relying on the Court of Appeal decision in Balabel v Air India  1 Ch 317, that “legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context.”
Snowden J found that the regulatory investigations gave rise to a “relevant legal context”; the external legal advisers were engaged to provide advice and assistance in relation to a serious and complex matter involving a number of jurisdictions and potentially having severe consequences for the Bank in the form of fines, penalties and private actions.
However, Snowden J noted that, in Balabel, the Court of Appeal also held “Privilege obviously attaches to a document conveying legal advice from solicitor to client and to a specific request from the client for such advice. But it does not follow that all other communications between them lack privilege. […] There will be a continuum of communication and meetings between the solicitor and client […] Where information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach.”
Snowden J found that the ESG documents formed part of such a “continuum of communication and meetings” between the Bank and its external legal advisers. The purpose of the first category of documents was to provide a comprehensive and up-to-date summary of developments in the regulatory investigations as the basis for discussions between the ESG and its external legal advisers. In the second category of documents, the external legal advisers provided their impressions of various matters relating to the regulatory investigations, responded to the Bank’s questions and made suggestions as to next steps. The role of the advisers at the meetings was to convey information and to provide legal advice.
The redaction issue
PAG argued that, should the Court find that legal advice attached to some parts of the ESG documents, it should not attach to the documents in their entirety and they should be disclosed subject to relevant redactions. (Indeed, Birss J, in ordering the inspection process had indicated the likelihood of an outcome on this basis.) Snowden J rejected this argument, again relying on Balabel; documents forming part of the continuum of communications may be privileged even if they do not expressly refer to legal advice, so long as they are part of the “necessary exchange of information of which the object is the giving of legal advice as and when appropriate”. The types of documents which would not attract privilege were those unrelated to the obtaining of legal advice, for example, mere notifications from a client to his solicitor of a ‘fait accompli''such as the sale of a property, an authorisation from a client to his solicitor to offer certain terms of settlement, or an instruction from a solicitor to collect rent from a tenant. Snowden J distinguished these kinds of documents from the ESG documents, which were entirely focused on providing information concerning the regulatory investigations and did not contain extraneous material.
Snowden J also considered PAG’s argument that the external legal advisers were acting in a supervisory or ‘secretariat’ role and that, if the same briefing papers or meeting minutes had been produced by a Bank employee in this role, privilege would not attach to the parts of the documents not containing legal advice. He found that the external advisers’ secretariat role was in addition to their role as legal advisers and that all ESG meetings had a very substantial legal content. The external legal advisers were not organising, attending and taking minutes of the meetings solely or even primarily as an administrative support or function to the ESG. “The ESG meetings were being held so that the lawyers concerned could give information and legal advice to the members of the ESG”. That the external advisers took the minutes was not simply a matter of administrative convenience, but rather formed an integral part of the provision of legal advice and assistance to the ESG. In light of the above, the Court held that the entirety of each ESG document attracted legal advice privilege.
Snowden J concluded that the ESG documents fell within the policy justification for legal advice privilege, which was not limited solely to the need to encourage clients to make full disclosure of all relevant matters to their lawyers. Lawyers must in turn be free to communicate information to their clients that will allow the clients to make informed decisions as to what further legal advice should be sought and what to do. At the same time, when giving advice, the lawyer needs to be able to provide the client with an accurate record of his discussions with the client and any decisions taken. Without privilege protection, lawyers would be unlikely to commit these communications to paper, which would not be in the public interest and may lead to misunderstandings as to the facts, advice given and decisions taken. This policy justification applied equally in the context of a regulatory investigation.
This judgment represents an important reminder of the principles and policy underpinnings of legal advice privilege. It is particularly helpful for companies that are, or may be, subject to regulatory investigations. Previous case-law had suggested that documents or communications that do not contain actual legal advice would be disclosable to regulatory or prosecuting authorities and third parties in subsequent civil litigation or, where they did contain some legal advice, they would be disclosable after redaction of that advice. While only a first instance decision, PAG v RBS nevertheless confirms, based on principles referred to in higher court decisions, that the scope of legal advice privilege extends beyond pure legal advice to other information which forms part of the continuum of communication between lawyer and client to enable legal advice to be given. Factual summaries and briefings prepared by lawyers can attract privilege where they are created as part of that continuum, in a relevant legal context, even where they do not themselves contain, or solely comprise, legal advice.
The Court’s approach to legal advice privilege in this case reflects the practical reality of how regulatory investigations are conducted, including the often multi-faceted role of external legal advisors who lead and co-ordinate an investigation (as well as advising on the legal issues arising from it), while keeping the client up-to-date on developments and in a position to make a fully informed decision in light of the facts and law. It also highlights the advantages (in terms of potential privilege protection) of legal advisers preparing significant documents relating to the investigation and meetings at which internal decisions are taken.
For further information on this area, please contact the authors or your usual CMS contact.