Last year’s High Court decision in SFO v ENRC [2017] 1 WLR 4205 caused widespread concern in the legal community as to a corporate’s ability to claim litigation privilege over the output of an internal investigation conducted in the shadow of a criminal investigation by the SFO. However, in Bilta (UK) Ltd v Royal Bank Of Scotland Plc & Anor [2017] EWHC 3535 (Ch), published this week, the chancellor of the High Court confirmed that, given the right set of facts, it remains open to parties to claim litigation privilege over documents created during an internal investigation.
In Bilta, an application was made for disclosure of documents created by RBS in the course of an internal investigation into an alleged tax fraud (the ‘investigation documents’), which RBS claimed were protected by litigation privilege. For a party to be able to claim litigation privilege, the following three criteria must be satisfied:
litigation must be in progress or in contemplation;
the communications must have been made for the sole or dominant purpose of conducting that litigation; and
the litigation must be adversarial, not investigative or inquisitorial.
RBS’s investigation had been commissioned following notice from HMRC that it was itself investigating the purported fraud and that it was considering recovery of c. £90m of input tax from RBS. However, Bilta alleged that the purpose of RBS’s investigation was not litigious, but rather to supply a full and detailed account of the relevant facts to HMRC and to persuade HMRC not to seek recovery of input tax. Bilta submitted that the investigation documents did therefore not meet the second limb of the test set out above.
In ENRC, Andrews J rejected a claim of litigation privilege over investigatory documents on the basis that said documents had been created for the purposes of a report that was to be shared with the SFO in the context of without prejudice discussions and at a time when ENRC’s relationship with the SFO was ‘collaborative rather than adversarial’. However, Sir Geoffrey Vos took a different approach in Bilta. He commented that one could not ‘properly draw a general legal principle from [Andrews J’s] approach’ in ENRC and advocated a ‘realistic, indeed commercial view of the facts’. While RBS’s investigation was conducted in the context of ongoing discussions with HMRC, those discussions were part of the continuum that formed the road to the litigation that was considered, rightly, as it turned out, to be almost inevitable. In those circumstances, RBS’s cooperation with HMRC did not preclude its investigation being conducted for the dominant purpose of litigation.
The controversial ENRC decision is due to be heard by the Court of Appeal in July 2018 and it may be that the approach taken in Bilta is a sign of the direction in which that appeal will be decided. In the meantime, it is important to remember that both are first instance decisions; given the uncertainty around this area, the safest approach will usually be to assume that documents created during an internal investigation will not be protected by litigation privilege. The application of litigation privilege in the context of internal investigations remains a tricky area on which corporates should continue to work closely with their legal advisers. ■
Jo Ludlam, Jonathan Peddie, Charles Thomson & Andrew Matheson, Baker McKenzie (bakerxchange.com)
Last year’s High Court decision in SFO v ENRC [2017] 1 WLR 4205 caused widespread concern in the legal community as to a corporate’s ability to claim litigation privilege over the output of an internal investigation conducted in the shadow of a criminal investigation by the SFO. However, in Bilta (UK) Ltd v Royal Bank Of Scotland Plc & Anor [2017] EWHC 3535 (Ch), published this week, the chancellor of the High Court confirmed that, given the right set of facts, it remains open to parties to claim litigation privilege over documents created during an internal investigation.
In Bilta, an application was made for disclosure of documents created by RBS in the course of an internal investigation into an alleged tax fraud (the ‘investigation documents’), which RBS claimed were protected by litigation privilege. For a party to be able to claim litigation privilege, the following three criteria must be satisfied:
litigation must be in progress or in contemplation;
the communications must have been made for the sole or dominant purpose of conducting that litigation; and
the litigation must be adversarial, not investigative or inquisitorial.
RBS’s investigation had been commissioned following notice from HMRC that it was itself investigating the purported fraud and that it was considering recovery of c. £90m of input tax from RBS. However, Bilta alleged that the purpose of RBS’s investigation was not litigious, but rather to supply a full and detailed account of the relevant facts to HMRC and to persuade HMRC not to seek recovery of input tax. Bilta submitted that the investigation documents did therefore not meet the second limb of the test set out above.
In ENRC, Andrews J rejected a claim of litigation privilege over investigatory documents on the basis that said documents had been created for the purposes of a report that was to be shared with the SFO in the context of without prejudice discussions and at a time when ENRC’s relationship with the SFO was ‘collaborative rather than adversarial’. However, Sir Geoffrey Vos took a different approach in Bilta. He commented that one could not ‘properly draw a general legal principle from [Andrews J’s] approach’ in ENRC and advocated a ‘realistic, indeed commercial view of the facts’. While RBS’s investigation was conducted in the context of ongoing discussions with HMRC, those discussions were part of the continuum that formed the road to the litigation that was considered, rightly, as it turned out, to be almost inevitable. In those circumstances, RBS’s cooperation with HMRC did not preclude its investigation being conducted for the dominant purpose of litigation.
The controversial ENRC decision is due to be heard by the Court of Appeal in July 2018 and it may be that the approach taken in Bilta is a sign of the direction in which that appeal will be decided. In the meantime, it is important to remember that both are first instance decisions; given the uncertainty around this area, the safest approach will usually be to assume that documents created during an internal investigation will not be protected by litigation privilege. The application of litigation privilege in the context of internal investigations remains a tricky area on which corporates should continue to work closely with their legal advisers. ■
Jo Ludlam, Jonathan Peddie, Charles Thomson & Andrew Matheson, Baker McKenzie (bakerxchange.com)
