The High Court has delivered an important judgment on the application of legal advice privilege to factual reports delivered by lawyers to their clients in the context of a regulatory investigation.
In the case of Property Alliance Group Ltd v The Royal Bank of Scotland plc1, the High Court has held that when lawyers are coordinating responses and other communications to regulators during multi-jurisdictional investigations, they must be able to give clients “candid factual briefings” as well as legal advice, with the knowledge that any such communications and records of their discussions and the decisions taken will not be disclosed without the client’s consent.
Whilst this judgment remains a High Court decision and is therefore not binding, the ruling is a welcome clarification of the law. The judgment confirms that legal advice privilege can be claimed over documents produced by lawyers when they are engaged by an organisation to fulfil a fact-finding role during investigations. This has been an area of much debate since Three Rivers2, and has been re-energised by recent public statements from the Serious Fraud Office (“SFO”) about its intention to challenge claims of privilege made by companies and their lawyers, which the agency says are “obstructing investigations by hiding behind” privilege3.
The High Court has also held that it is in the public interest for regulators to deal with experienced lawyers who can accurately advise their clients on how to respond to and coordinate complex multi-jurisdictional investigations.
This decision could be supportive of claims to legal advice privilege over factual reports created by lawyers during internal investigations where there is no external regulatory interest. The case does not alter the law that fact-finding reports produced by non-lawyers will not be privileged4 unless litigation privilege applies.
This case concerned a claim brought by Property Alliance Group (“PAG”) against the Royal Bank of Scotland (“RBS”) in the context of the alleged manipulation of LIBOR.
RBS claimed legal advice privilege over two types of documents prepared by their external lawyers for the RBS Executive Steering Group (“ESG”):
- Confidential tables which informed and updated the ESG on the progress, status and issues arising from regulatory investigations; and
- Confidential notes/summaries concerning the discussions between the ESG and its legal advisers at the ESG meetings.
The ESG was created in 2010 when RBS became the subject of several regulatory investigations in various jurisdictions including the UK and the US. Its purpose was to oversee the regulatory investigations and any related litigation that may arise, and to liaise with RBS’ external legal advisers.
PAG argued that:
- One of the functions of the ESG was to report on factual matters to senior executives, and that factual reports should be disclosed and any legal advice contained in the ESG documents should be redacted.
- The external advisers performed a number of administrative functions in addition to providing legal advice. PAG stated that, amongst other tasks, the external advisers (i) coordinated the responses to the investigations; (ii) played the role of central repository for key documents; and (iii) acted as the ESG’s secretariat by coordinating meetings, preparing agendas and taking minutes of the ESG meetings.
- The external advisers could not argue that legal advice privilege applied simply because they had attended the ESG meetings or performed administrative type tasks.
As explained further below, all of these arguments were rejected by the High Court.
What is legal advice privilege?
Legal advice privilege attaches to all confidential communications between lawyers and their clients created for the purpose of giving or receiving legal advice, whether or not litigation is pending or contemplated.5
Legal advice is not confined to telling the client the law and it includes advice as to what “should prudently and sensibly be done in the relevant legal context".6
Where a lawyer is being asked to provide advice in his capacity as a lawyer, legal advice privilege will apply. However, it does not apply where advice is being given by a lawyer on matters of business or finance in circumstances where the lawyer is not acting in his legal capacity as a lawyer.
In order to determine whether the advice took place in the relevant legal context, the court will consider whether the advice relates to the rights, liabilities, obligations or remedies of the client either under private law or public law.
Whilst it could be argued that litigation privilege applies in respect of regulatory investigations, the position where an internal investigation is initiated on the basis of a mere suspicion before regulator involvement is less clear. As the judgment delivered by Snowden J only dealt with legal advice privilege, it could be argued that the principles can be applied to situations in which internal investigations are being carried out by legal advisers.
In upholding RBS’ claim of privilege over the ESG documents, Snowden J held that he was “entirely satisfied” that RBS’ legal advisers had been engaged in “a relevant legal context”. He stated that RBS had “naturally wished to have the advice and assistance of specialist lawyers” to deal with and coordinate the communications and responses to regulators in various countries. The Judge acknowledged that the advice and assistance given by the bank’s legal advisers “undoubtedly related to the rights, liabilities and obligations of RBS, and the remedies that might be granted against it either under private law or public law”.
Snowden J rejected PAG’s argument that only the parts of the ESG documents containing legal advice were privileged. He held that documents which form part of the continuum of lawyer-client communications are privileged even if they do not expressly set out legal advice, saying that “the communication of information between a lawyer and a client can be privileged” if the information is communicated “in confidence for the purposes of the client seeking, and the lawyer giving, legal advice”.
Snowden J determined that:
- The purpose of confidential tables prepared by the external lawyers was to provide comprehensive and up to date summaries of developments in the regulatory investigations. The documents were used as a basis for the discussions at the regular meetings between the ESG and its legal advisers.
- The confidential notes/summaries prepared by the external lawyers were effectively minutes of the discussions between the ESG and its legal advisers at the ESG meetings. The Judge noted that the lawyers gave their impressions, responded to questions about RBS’ position and gave their suggestions as to what RBS should do next. The role of the external lawyers at the meetings was therefore to convey information to the members of the ESG and provide them with legal advice.
Snowden J noted that if the ESG documents in question had been prepared by ESG itself to record its deliberations or decisions, his decision might have been different. However, he explained that minutes of a business meeting would not simply be privileged because the minutes were taken by a lawyer who was present at the meeting, and then subsequently sent to his client. Snowden J reiterated that the key consideration was whether the lawyer was attending the meeting in a capacity to provide legal advice. This will be a question of fact and it is likely to be easier for external lawyers specifically instructed to assist with the investigation to argue that they attend meetings in a capacity to provide legal advice, than for in-house lawyers to demonstrate this.
Snowden J took the view that the external lawyers did not organise or attend the ESG meetings simply to provide administrative support to the ESG. Attending the ESG meetings was an integral part of the provision of legal advice and assistance to the ESG. In that legal context, it was acceptable that the external lawyers were preparing agendas, coordinating the meetings, leading the discussions and preparing the minutes.
Snowden J concluded by saying that the public interest will be advanced if the regulators can deal with experienced lawyers who can accurately advise their clients on how to respond and cooperate. He also stressed that 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". Snowden J’s statement will therefore provide support for claims to privilege over documents created by lawyers when they are instructed in a fact-finding role.
What this means
The judgment highlights a number of practical steps that can be taken to maximise claims to privilege:
- Companies that are the subject of investigations should consider appointing specialist legal advisers to assist them in managing and conducting investigations, particularly where claims of privilege are important. Where specialist legal advice is not available in-house, external legal counsel should be appointed.
- The law on privilege remains unchanged in relation to non-lawyers. If companies want to assert privilege over documents generated during an internal investigation, non-lawyers should refrain from interviewing staff and producing notes/reports as they will not be covered by privilege.
- Companies must think carefully about how to structure the flow of information and the capacity in which both in-house counsel and external lawyers are operating. In order to be able to assert a claim of privilege, the lawyers instructed must provide integral advice and assistance within the same communication, and must not play a purely administrative or secretarial role. For example, Snowden J stated that depending on the facts, a court might not uphold a claim to privilege in respect of the minutes of a business meeting simply because the minutes were taken by a lawyer.
- When conducting internal investigations, it may be prudent for companies to set up a specialist investigations committee tasked with overseeing the investigation. It will not be unusual for such committees to be composed of business executives and members of internal audit, compliance and legal. In order to be able to assert a claim of privilege, it is important for lawyers who attend any meetings (whether they are in-house or external lawyers) to be attending in their capacity as a legal adviser. To strengthen any claim to privilege, the minutes and notes of the meetings should record the fact that the lawyers are attending meetings in order to give legal advice, and should also record any legal advice given during the meeting.
This judgment will assist companies and their lawyers to assert a claim of privilege over documents created by lawyers when they are carrying out a fact-finding role during investigations, and supports the view that factual reports produced by lawyers in the context of an internal investigation may also be granted legal advice privilege. Snowden J recognised that “lawyers are often also given the task of investigating, or are in possession of, relevant information”, and that lawyers “must be able freely to communicate that information” to their clients to enable them “to make a fully informed decision as to what further legal advice to obtain, and what to do”, and that lawyers “must also be able to provide the client with an accurate record of the discussions and the decisions taken as a consequence”. Otherwise, this would be contrary to the public interest. It is arguable that such public policy arguments could be applied more widely to internal investigations in circumstances where regulators are not yet investigating the organisation.