This is the latest instalment in a round of disclosure scraps in the litigation between Property Alliance Group (PAG) and The Royal Bank of Scotland PLC (RBS) . The claims allege that the bank mis-sold various swap contracts. Previous judgments have looked at privilege in relation to regulatory investigations and the disclosure of materials relevant to LIBOR fixing.

In this case, PAG had inadvertently disclosed an email to RBS which revealed that it had met with two ex-employees of the bank and had secretly recorded them. RBS brought an application seeking inspection of the audio recordings and transcripts of those meetings. PAGargued that the documents were privileged.

Not the dominant purpose

Mr Justice Birss discussed the requirements for litigation privilege from Three Rivers District Council v the Bank of England (No.6)1:

  1. litigation must be in progress or in contemplation;
  2. the communication must have been made for the sole or dominant purpose of conducting that litigation; and
  3. the litigation must be adversarial, not investigative or inquisitorial.

Points a. and c. were clearly satisfied here. The argument was whether the recordings (and transcripts) had been produced for the “dominant purpose” of the litigation.

RBS contended that objective assessment of the dominant purpose was to be considered from the view point of a dispassionate observer, looking at the information that passed openly between the two parties. The meetings with the ex-RBS employees had been set up by PAG(misleadingly) as an opportunity to discuss potential future work. This is what the ex-employees thought they were meeting for and this must have been the dominant purpose of the meetings.

PAG argued that the dominant purpose must be considered from the perspective of the person who procured the creation of the communication or document. It said that the meetings and recordings only took place to gather evidence for the litigation. The ignorance of the ex-employees of the true agenda was irrelevant.

Mr Justice Birss concluded that there were two clear, but entirely divergent purposes, so that the deciding factor had to be the deception on the part of PAG. He held that the dominant purpose test was not made out: neither the meetings, nor the recordings or manuscripts, were privileged. RBS was entitled to inspect the documents.

The inadvertently disclosed email

The email which tipped off RBS to the meetings in the first place had been inadvertently disclosed. Both parties accepted that it was privileged, meaning that RBS had to apply to court for permission to use it (CPR rule 31.20). On this point, Mr Justice Birss permitted its use byRBS but noted that applications to the Court for permission to use a privileged document must be made promptly.

Dangers in evidence gathering

The judgment is a useful reminder of the key principles behind litigation privilege. The wider message is of the dangers of the, often delicate, exercise of gathering evidence from potential witnesses for litigation. Unsurprisingly, the courts will be slow to give parties the protection of privilege if that evidence is obtained under false pretences.