Privilege and disclosure of internal documents revisited

Disclosure battles continue in the interest rate swap litigation brought by Property Alliance Group Ltd against the Royal Bank of Scotland with two recent decisions about disclosure and privilege. The trial is due to begin in May 2016.

Earlier this year we looked at the guidance given by Birss J in Property Alliance Group Ltd v Royal Bank of Scotland Plc about disclosure of minutes of committee or board meetings and internal reports relating to events or investigations that subsequently give rise to litigation. Birss J did not accept RBS’s assertion that legal advice privilege applied to various categories of documents prepared by its lawyers relating to meetings of the bank’s Executive Steering Group (ESG), a high level committee of senior RBS employees set up in 2011 to investigate the extent of its own LIBOR misconduct. He ordered that another judge should inspect the ESG documents to decide whether they were privileged.

Snowden J has now given judgment upholding RBS’s claim to privilege over the ESG documents and it repays close attention. It explores the scope and purpose of legal advice privilege and the circumstances in which it will be proper for the court to inspect documents alleged to be privileged. It also reviews the status of board minutes in this context.

A week after Snowden J’s decision, Birss J ordered RBS to give disclosure of any relevant minutes and papers of the bank's board and any relevant committee of the board. This judgment also looks at issues concerning waiver of privilege. The details of the background to this litigation and analysis of Birss J’s earlier decision can be found in our earlier briefing, The vexed issue of claiming privilege over internal reports.

The correct approach to legal advice privilege

Birss J shared the Property Alliance Group’s view that it was unlikely that all of the ESG’s meetings, led by lawyers from Clifford Chance, were for the purpose of imparting legal advice. He thought that it was much more likely that one purpose of the meetings would have been to inform the bank factually about the outcome of the investigations the ESG was set up to oversee. While legal advice contained in a document would be privileged, he noted that “it does not follow from this that any factual summary in the document is privileged”.

Snowden J returned to the scope of legal advice privilege adopted by the House of Lords in Three Rivers (No 6). The House of Lords rejected the narrow definition of legal advice privilege endorsed by the Court of Appeal, following instead the approach taken in Balabel v Air India: legal advice is not confined to telling the client the law; it must also include advice as to what should prudently and sensibly be done in the relevant legal context. If the communications in question take place in the context of a lawyer/client relationship concerning a transaction etc, and form part of the continuum of communication and meetings whereby information is passed between solicitor and client so that advice may be sought and given when appropriate, those communications will be privileged. This will include, as was the case here, what Snowden J described as “candid factual briefings” as well as legal advice.

Applying these principles to the ESG documents, it was clear that they were created by Clifford Chance in a relevant legal context and formed part of the continuum of communications and meetings between them and RBS, the object of which was the giving of legal advice as and when appropriate. Snowden J accepted that at the meetings the lawyers led the discussions and there was “very substantial legal content”.

Clifford Chance prepared two types of document sent to the ESG before or after the meetings:

• Tabular memoranda summarising developments in the regulatory investigations as the basis for discussion at the ESG meetings. 
• Notes of the ESG meetings.

In deciding that all of the content of these documents was privileged, it was important that both types of documents were entirely focussed on the regulatory investigations and did not contain extraneous material. It was also critical that none of the documents had been prepared by the ESG itself, recording its deliberations or decisions.
 

The involvement of lawyers

The presence of Clifford Chance at the ESG meetings, the way in which the meetings were structured and their authorship of all the related documents made the claim to legal advice privilege extremely strong. It would be a mistake, however, to think that the involvement of lawyers in this way is sufficient to sustain a claim to legal advice privilege. Snowden J rejected the claim that Clifford Chance was in any sense acting as the secretariat for the ESG meetings in preparing briefing papers, agendas and minutes which were then sent to the client. These services were an integral part of their provision of legal advice and assistance to the ESG. Ensuring the presence of a lawyer at a meeting and getting them to draft the minutes would not confer privilege on the documents in the absence of the relevant legal context.
 

The status of board minutes

Board minutes are generally not privileged documents (see Financial Services Compensation Scheme v Abbey National Treasury Services Plc) and in the recent decision of Birss J in this litigation there is no discussion of arguments to the contrary. Snowden J considered another case concerning the disclosure of board minutes. In Atos Consulting Ltd v Avis Plc, Atos claimed sums from Avis relating to services they had provided concerning Avis’s Financial Systems and Procedures Project. Avis had redacted their board minutes to conceal irrelevant passages and Atos applied for unredacted copies to be provided. Atos argued that redaction, while appropriate for confidential or privileged content, should not be used to conceal irrelevant content in the board minutes. Ramsey J disagreed, having inspected the redactions, and refused to order disclosure of the redacted passages.
 

The status of internal reports

In Atos Avis applied for full inspection of drafts of a report prepared by Atos towards the end of the project in which Atos reported on the cause of delays that had arisen. Atos had given late disclosure of the drafts saying that they had been “redacted for privilege” on the ground that the redacted material was “the subject of legal advice”. Upon further investigation, it became clear that the draft reports had been produced by Atos employees and not lawyers. Atos stated that the redacted passages contained “legal advice reviewed, amended, approved and given by James Loughrey (Atos head of their UK legal department) in his capacity as legal advisor to Atos”.

Ramsey J was not happy with this explanation. Had the authors of the draft reports set out legal advice given by Mr Loughrey, they would be covered by legal advice privilege. The explanation given, however, suggested that the original text was produced by someone else and then reviewed by him. This raised concerns about whether the correct test for privilege had been applied, which were compounded by the fact that some of Atos’s other claims to legal advice privilege had been shown to be unfounded.

The judge inspected the drafts of the report and concluded that many of the redactions related to text that was not privileged. He commented that if the authors set out their views in a draft which was circulated generally as well as being sent to an in-house lawyer, or if they altered the draft as a result of obtaining legal advice, neither the original draft circulated by them generally nor the altered text taking account of legal advice would be privileged unless it set out the contents or gist of that legal advice obtained. In such a case, the advice would be privileged but the authors’ presentational advice, made taking into account the legal advice, would not be.
 

Conclusion

In our earlier briefing, The vexed issue of claiming privilege over internal reports, we concluded with a list of points to note about claims to privilege, whether litigation or legal advice privilege, over internal documents and board minutes. Those points remain valid but Snowden J’s judgment and that of Ramsey J in Atos v Avis add an important layer of contextual detail that sheds light on the complex role lawyers can play when it comes to the privileged status of internal documents.

Where the lawyers are fully engaged as legal advisors in the meetings they attend and they create all documents related to the meetings, the court will not sift through evidence in order to separate fact from legal advice. All documents created by the party’s lawyers in that context will attract legal advice privilege. However, as is more usual, where some documents are created internally by non-lawyers with some input from in-house or external lawyers, or they contain information relating to matters not relevant to the subject-matter of the subsequent litigation, claims to privilege become open to challenge.

Asserting privilege incorrectly over some documents inevitably brings into question the foundation of claims to privilege over others – if it looks as though the wrong test has been applied in some instances, the court is unlikely to accept that party’s word for it in others. The satellite litigation that can result, as has happened in these cases, is expensive and can be damaging to a party’s credibility. The broad Three Rivers (No 6) approach to legal advice privilege goes some way to avoiding this type of argument but, as RBS’s experience shows, it only works where lawyers are carefully placed at the heart of any internal investigations.