High Court: Legal Privilege Can Apply To Internal Investigations On The Right Set Of Facts

Author:Mr Stuart Walsh and Alan Sheeley
Profession:Pinsent Masons LLP

Originally published by Out-Law.com

ANALYSIS: The High Court has confirmed that legal privilege can apply to investigations on the right set of facts, restoring some certainty to a position that has been up for debate since May 2017.

The decision by High Court chancellor Sir Geoffrey Vos in the case, Bilta & Ors v RBS & Anor, also serves as a reminder that large companies seeking to launch an investigation should seek specialist legal advice at the earliest opportunity. The fact that RBS had instructed a specialist tax litigation team at the outset to lead the investigation was one of three factors that led to the judge finding in favour of the bank.

Pinsent Masons, the law firm behind Out-Law.com, acted on behalf of RBS in the case.

The law regarding the privileged status of investigations has been in flux since the May 2017 decision in a case between the Serious Fraud Office (SFO) and Eurasian Natural Resources Corporation Ltd (ENRC). This was because part of Mrs Justice Andrew's judgment in that case suggested that investigations where the purpose was to equip "yourself with evidence that you hope may enable you (or your legal advisers) to persuade [a third party] not to commence proceedings against you in the first place" did not have a litigation purpose, and therefore litigation privilege might not apply to documents created during that investigation.

This meant that documents created during the course of an internal investigation might be subject to disclosure requirements during subsequent litigation. A decision-maker in a large organisation, faced with an allegation of wrongdoing from a third party, would not be able to go about investigating matters in the usual way.

The ENRC case is set to be appealed in July 2018, but the Bilta case goes some way towards addressing this uncertainty. RBS had received a letter from HM Revenue and Customs (HMRC) alleging that RBS had participated in various transactions connected with fraud and that HMRC had grounds to deny the bank's claim for VAT input tax. RBS conducted a large internal investigation. Bilta and various associated companies were interested in seeing the documents produced in the course of that investigation, especially the transcripts of various interviews conducted by RBS's legal representatives, Pinsent Masons. RBS maintained that the documents were covered by litigation privilege.

The test for whether litigation privilege can be claimed dates back to the 2005 Three Rivers...

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