Are interviews held with employees to prepare a report intended to deter a governmental authority from taking legal action privileged?
No, said Mrs Justice Andrews in May 2017 in SFO v ENRC. Yes, said Lord Justice Vos in the recently released decision of Bilta (UK) v RBS. I hope the latter is a good omen for the Court of Appeal's decision in the former.
Background: requirements for litigation privilege
Ever since the House of Lords declined to engage with the Court of Appeal's exceptionally narrow definition of the 'client' in determining the application of legal professional privilege in Three Rivers (No 5), communications with most of a corporate's staff are likely to be privileged only if the communication is for the dominant purpose of conducting adversarial litigation that is in progress or in contemplation (litigation privilege). That puts a premium on finding that dominant purpose when a problem arises and a corporate needs to find out what has happened from its staff.
SFO v ENRC
In SFO v ENRC, Andrews J held that interviews conducted with employees as part of an internal investigation while the SFO was investigating were not privileged and should be disclosed to the SFO. This was in part on the basis that litigation privilege did not extend to documents created to avoid potential criminal prosecution by the SFO.
Bilta (UK) v RBS
Vos LJ has now taken a different line.
Bilta is suing RBS for over £140m for alleged dishonest assistance and fraudulent trading in connection with VAT fraud. HMRC had previously denied VAT relief of £86m to RBS on the basis that RBS knew or should have known that the underlying transactions were connected with fraud. Bilta sought disclosure of employee interviews conducted on behalf of RBS in the context of the HMRC investigation, on the basis that the interviews were not conducted for the dominant purpose of litigation but to find out the facts and to persuade HMRC not to deny relief.
Despite apparent similarities with SFO v ENRC, Vos LJ held that, on the facts, these interviews were privileged and so RBS was not obliged to disclose them to Bilta. Vos LJ declined to "draw a general legal principle from [Andrews J's] approach" to the facts in SFO v ENRC and instead emphasised the importance of taking "a realistic, indeed commercial, view of the facts". Fending off HMRC's denial of relief was held to be "part of the continuum that formed the road to the litigation".
Onwards and upwards?
Vos LJ refused leave to appeal and, at the time of writing, it is not known whether Bilta will seek (or be granted) leave to appeal from the Court of Appeal. However, the appeal in SFO v ENRC is due to be heard later this year by the Court of Appeal. It is to be hoped that the Court of Appeal too takes "a realistic, indeed commercial, view" and restores the role of litigation privilege. Until then, litigation privilege will remain a hotly contested area.