Bilta (UK) Ltd v Royal Bank of Scotland Plc

[2017] EWHC 3535

An important judgment on legal professional privilege has been handed down by the High Court.  In Bilta (UK) Ltd v Royal Bank of Scotland Plc [2017] EWHC 3535 the Chancellor considered the scope of litigation privilege and upheld RBS’s claim to privilege over documents created in the course of an internal investigation following allegations made by HMRC in correspondence of tax carousel fraud.  Privilege was held to extend to notes and transcripts of interviews with employees.  The case is an important clarification of the law in light of the recent decision in Serious Fraud Office v ENRC, which has caused considerable difficulties for practitioners and corporate clients.  It should be noted:

1. It is possible for documents created in an internal regulatory investigation to be covered by legal professional privilege if the requirements of litigation privilege can be established, i.e. litigation is in reasonable prospect, the dominant purpose of the investigation is the conduct of the envisaged litigation, and the said litigation is adversarial. That the investigation occurs in a regulatory context is not an insuperable bar to privilege attaching.
2. In determining whether an investigation is covered by privilege, the Court is likely to look at the circumstances at the outset of the litigation – i.e. what triggered it and why was it undertaken. In Bilta RBS was able to demonstrate that HMRC’s letter making allegations of tax fraud was a “watershed moment” and that RBS’s reaction to that letter, including the investigation which was initiated, was all with a view to anticipated litigation with HMRC.
3. Clients are well advised to document the circumstances in which an investigation is undertaken. RBS was able to adduce evidence of its lawyer’s retainer letter from the outset of the investigation which referred to a “dispute” with HRMC together with internal emails and attendance notes recording the view of RBS personnel that litigation was now in prospect and that an investigation was necessary.

Whilst the Chancellor noted that all cases will turn on their facts, this is an important decision for banks, insurers and professional service firms who often require to undertake internal and regulatory investigations.

Michael Ryan appeared for the successful party, RBS Plc, in the application.  Michael was led by John Wardell QC and was instructed by Stuart Walsh and Alan Sheeley of Pinsent Masons.  Michael will appear at the trial of the action which is listed for 6 weeks later in 2018.

The full text of the judgment can be found here.