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Legal advice privilege in the context of a regulatory investigation

 

20 November 2015

In this case report, we consider the decision of the High Court in Property Alliance Group Ltd v The Royal Bank of Scotland plc [2015] EWHC 3187 (Ch) (5 November 2015). In the latest in a series of procedural decisions in this LIBOR follow-on case, Snowden J upheld the defendant's entitlement to claim legal advice privilege over a number of high level documents. These documents had been produced by the bank's external lawyers for meetings with an executive committee within the bank with oversight of the LIBOR regulatory investigations. There was sufficient relevant legal context in the backdrop of the active regulatory investigations to found a claim for privilege. While not exclusively containing legal advice, the documents formed part of the "continuum" of communications between lawyer and client, the object of which was the giving of legal advice as and when appropriate. The documents were therefore privileged in their entirety.

Background to the decision

The decision centred on whether certain "high level" documents (ESG Documents) produced by the bank's external lawyers for a body within the bank (known as the Executive Steering Group (ESG)) were properly the subject of a claim for legal advice privilege. 

Executive Steering Group

The bank had established the ESG as a standalone committee, comprised of individuals from Legal, HR, Compliance and senior business representatives. Its purpose was to oversee the bank's responses to the worldwide regulatory investigations into LIBOR and related litigation, liaise with legal advisors and provide instructions accordingly.

The ESG held regular meetings (via conference call) led by the bank's external counsel to discuss the status of the investigations. The bank's legal advisors provided advice and analysis on issues and next steps to enable the ESG to make decisions and provide further instructions as necessary.

Categories of document

There were two categories of the ESG Documents subject to the claim for legal advice privilege:  

  • Confidential memoranda, which informed and updated the ESG on progress, status, issues arising in the regulatory investigations and next steps. These formed, in essence, a briefing and agenda for the ESG meetings. Many entries were no more than a brief factual recital of recent or upcoming events; for example, references to matters in the public domain such as the commencement of a new investigation or litigation, or non-public matters such as non-privileged meetings with regulators.
  • Confidential summary minutes of the discussions at the ESG meetings.

All the ESG Documents were produced by the bank's external lawyers for the ESG, were marked "privileged and confidential", and were communicated by the bank's external lawyers to the ESG.

Legal advice privilege

The issue was whether legal advice privilege attached to the ESG Documents: whether they were communications made in confidence between solicitors and clients for the purpose of giving or obtaining legal advice.

In Balabel v Air India [1988] 1 Ch 317, Taylor LJ described the privilege as not confined to telling the client the law, but extending to "advice as to what should prudently and sensibly be done in the relevant legal context". The test in such instances is whether the communication (or other document) was made confidentially for the purposes of legal advice. That privilege will extend to all information that is passed between the solicitor and client "as part of the continuum aimed at keeping both informed so that advice may be sought and given as required".

In the seminal case Three Rivers District Council v Bank of England (No.6) [2005] 1 AC 610, Lord Scott reiterated that there must be a "relevant legal context" for privilege to attach to the advice. Lord Scott recommended that, in cases of doubt, the relevant inquiry was whether the advice "relates to the rights, liabilities, obligations or remedies of the client either under private law or under public law" and, if it does, whether the communication falls within the underlying policy justification for legal advice privilege.

Update on investigation was part of the continuum of communications

Snowden J was entirely satisfied that the bank had engaged their external counsel in a "relevant legal context": to provide advice and assistance as specialist lawyers and deal with communications with regulators. This was in circumstances where the bank was facing multiple regulatory investigations that could have (and in fact did) lead to pecuniary penalties, and consequent civil litigation. That advice and assistance "undoubtedly related to the rights, liabilities and obligations of RBS, and the remedies that might be granted against it either under private law or under public law".

Within that context, Snowden J was confident that both categories of the ESG Documents formed part of "a continuum of communication and meetings" between the bank and its lawyers, the object of which was the giving of legal advice as and when appropriate. In particular:

  • The purpose of the memoranda was to provide comprehensive and up-to-date summaries of developments in the regulatory investigation. Although they did not explicitly communicate or request advice, their overall purpose was to form the basis of discussion that would allow advice to be given at the ESG meetings. Therefore, these were properly viewed as part of the "continuum" of information passed with the aim of keeping the client informed so that advice may be sought and given as required.
  •  
  • The summary minutes demonstrated that at the ESG meetings the lawyers gave factual updates on meetings and communications with regulators on behalf of the bank. However, they also gave their impressions and responses to questions on those matters, and suggested next steps in the investigations. Snowden J found that the role of the lawyers at these meetings was to convey information to the ESG and to provide them with legal advice. Therefore, these documents included both factual update and legal advice and so were privileged.

Privileged entirely or to be redacted?

PAG submitted that even if legal advice privilege attached to some parts of the documents, it would not cover the documents in their entirety. In particular, reference to public events or dealings with regulators would not be privileged. By way of analogy with minutes of decisions taken by a board of directors, it was submitted that direct references to legal advice should be redacted, with the remainder of the documents disclosed.

Snowden J rejected these submissions. Although some elements of the documents would not ordinarily have attracted privilege on their own merits, here they formed part of the "necessary exchange of information" between lawyer and client, the object of which was giving legal advice as and when appropriate. The test was the "relevance and purpose" of the communication: the source of the underlying information was irrelevant.

Construing the exact role of the lawyer will be critical

PAG submitted that had the briefing papers or minutes been prepared internally (rather than by the external lawyers in a "secretariat" capacity), the documents would not have been privileged and would have had to be disclosed (with redactions for any legal advice). It was illogical to draw a distinction based on who had prepared the documents.

Snowden J drew a distinction between documents that were in fact passed between client and lawyer (as in this case) and secondary internal documents that merely recorded or summarised discussions, which included legal advice. Previous authorities for allowing redacted copies of documents to be disclosed applied only to the latter type of secondary documents. A person should not have to redact the primary documents that were actually sent to him by his lawyers. As such, these documents were privileged in their entirety. 

However, he reiterated that a court would not uphold a claim to legal advice privilege simply because the documents were prepared by a lawyer: if the lawyers were involved merely for convenience, rather than as lawyers, documents would not attract privilege. For example, if minutes of a business meeting with no legal content were simply taken by a lawyer and then sent to the client, or if a law firm was asked to send press cuttings from its own library to a client who could not find them.

However, he found that in this case the meetings had very substantial legal content and the lawyers led the discussions, as they were handling the regulatory investigations. The ESG meetings themselves were held for the purpose of the lawyers giving information and legal advice to the members of the ESG as to what to do about those investigations and claims. It was understandable that lawyers took the lead in deciding how to present the information, setting the agenda and co-ordinating meetings, leading discussions and preparing minutes: this was an "integral part of their provision of legal advice and assistance to the ESG".

Public policy justification fulfilled

Snowden J gave a robust exposition of the clear policy justification for legal advice privilege being applicable to the flow of information from lawyer to client (and not just from client to lawyer) including in the regulatory context. He specifically noted that where there is a regulatory investigation lawyers may need to brief the client on the factual situation to enable the client to decide what further advice to obtain and steps to take, or record the steps taken:

"There is a clear public interest in regulatory investigations being conducted efficiently and in accordance with law. That public interest will be advanced if the regulators can deal with experienced lawyers who can accurately advise their clients how to respond and co-operate. Such lawyers must be able to give their client candid factual briefings as well as legal advice, secure in the knowledge that any such communications and any record of their discussions and the decisions taken will not subsequently be disclosed without the client's consent."

Comment

The decision provides useful and timely clarification on the extent of legal advice privilege in the context of regulatory investigations: an area sure to be the subject of on-going interest in coming years.

The key message is that a claim to legal advice privilege depends on the relevance and purpose of the information contained in the broader context of the lawyers' advisory role. It therefore did not matter in this case what the source of the underlying information was or whether there was explicitly a request or exposition of legal advice. This decision is highly practical. It recognises that the targets of any regulatory investigation, in particular as wide ranging and extensive as the LIBOR probes, will need to take legal advice on their public and private law positions. There is a public interest in their doing so on a privileged basis.

To provide such advice, lawyers must often undertake extensive factual investigations to discern the relevant facts. They may conduct non-privileged meetings with regulators, and have regard to material in the public domain. External lawyers must then report on these matters regularly to a decision-maker at the client. This will include providing legal advice, discussing the client's broader strategy, and taking instructions on dealings with regulators. To bifurcate the provision of legal advice from the underlying communications between the lawyers and the clients in such matters would seem artificial.  

This decision assists these situations where lawyers perform an investigatory and co-ordinating role as an integral part of their legal services. This is particularly helpful in the light of the difficulties that can arise in determining when a regulatory investigation becomes sufficiently adversarial to attract litigation privilege. A broad application of legal advice privilege based on the ultimate purpose for which the communications occur will give comfort in situations where in civil proceedings litigation privilege may have been more clearly available.

Interestingly, the decision implies different treatment of documents depending on who has prepared them. On the one hand, the summary minutes of the ESG were privileged in their entirety; notwithstanding the fact that some of their content was not legal advice. Conversely, had the minutes been prepared internally by the client's non-legal staff, recording the same mixture of advice and non-privileged facts, the documents may have been disclosable with the redaction of the legal advice. Mr Justice Snowden acknowledged this point, but emphasised that this was because the "secretariat" function that the lawyers provided was an integral part of the legal assistance being given. This case therefore highlights the importance of the involvement of internal or external legal advisors in regulatory investigations. 

Case 

Property Alliance Group Ltd v The Royal Bank of Scotland plc [2015] EWHC 3187 (Ch) (5 November 2015).

This article first appeared on Practical Law and is published with the permission of the publishers.

For information and commentary on the latest trends, risks and developments in financial services investigations, please see Allen & Overy's Investigations Insight blog.   

 

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