Bilta v RBS: clarity on the ambit of litigation privilege?

As we have discussed in our recent blogs, privilege is a corner stone of justice and can exist both within and outside of a lawyer client relationship. There are two main types of privilege. Legal advice privilege protects communications between a client and lawyer for the purpose of giving advice and taking instructions. Litigation privilege subsists in documents which have been produced in circumstances where litigation is in progress or contemplation and for the sole or dominant purpose of seeking or giving advice in such proceedings.

A number of recent cases have addressed litigation privilege and its parameters however the exact scope has remained somewhat unclear, particularly in the context of internal investigations. The recent case of Bilta (UK) Limited (in liquidation) v Royal Bank of Scotland PLC [2017] EWHC 3535 (Ch) has helped to clarify some of this uncertainty.

In Bilta the court addressed whether litigation privilege applied in relation to documents created in the course of an internal investigation, including employee interview transcripts. The key issue was whether the documents prepared as part of the internal investigation were made for the sole or dominant purpose of conducting litigation.

During March 2012, RBS received a letter from HMRC indicating that they had sufficient evidence to deny a VAT reclaim worth nearly £90 million on the basis that RBS “knew or ought to have known” that various trades were concerned with an alleged MTIC fraud. In response, RBS instructed specialist external counsel to carry out an internal investigation including, amongst other things, interviews of current and ex-employees. A report was produced and provided to HMRC which argued that RBS did not know nor should have known that the transactions were fraudulent.

Bilta (UK) Limited (‘Bilta’), one of the companies alleged to be involved in the fraud, sought disclosure of the documents created in the course of the internal investigation from RBS. This was resisted on the basis that the requested documents were subject to litigation privilege. Applying the principles set out in Three Rivers (No 4)[1], Bilta accepted that litigation was in contemplation from the letter of March 2012 and that the litigation was adversarial, rather than investigative or inquisitorial.  The core issue was therefore whether the documents prepared as part of the internal investigation were made for the sole or dominant purpose of conducting litigation and, therefore, attracted litigation privilege.

RBS argued that, following receipt of the March 2012 letter and having instructed external counsel, the sole or dominant purpose of the documents was to defend HMRC’s allegation. They argued that the intention behind the creation of the documents, report and interviews was to resist the overwhelming probability that an assessment would follow. Bilta argued that RBS had not established whether any litigation purpose was the dominant one and heavily relied on the case of SFO v ENRC[2]  (this case is the subject of one our previous blogs Limits on Legal Professional Privilege).

In his judgment Lord Justice Vos ruled against Bilta and confirmed that litigation privilege did apply to the documents. He confirmed that the March 2012 letter was a “watershed moment” and that, in cases concerning litigation privilege, the principles must be applied taking a realistic and commercial view of all the circumstances of the case. On face value, this decision appears to cast doubt on the ruling in ENRC however important factual distinctions can be made between the two cases. The Court of Appeal is due to hear the appeal of ENRC later this year.

For now, the decision in Bilta provides some clarity in relation to the ambit of litigation privilege in relation to internal investigations. That being said, lawyers and companies must carefully consider the circumstances of any internal investigation before concluding whether or not documents produced within it will attract litigation privilege.

 

[1] [2004] UKHL 48

[2] [2017] EWHC 1017 (QB)

 

Charlotte Cullen, Paralegal
mailto:charlottecullen@bakerandpartners.com

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