News & what's on - Written by on Sunday, February 4, 2018 11:16 - 0 Comments

Opinion: The old rules still apply & always did. High Court rules litigation privilege applies in internal investigation post ENRC

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In a new case, just published on Thursday last week, the Court (Bilta (UK) Ltd v Royal Bank Of Scotland Plc & Anor [2017] EWHC 3535 (Ch)) has confirmed that litigation privilege applies in the context of an internal investigation for a company engaging with a regulator.

This should not be a controversial statement.

But. A judgment involving ENRC caused a furore last year when the High Court, on the facts of that case, held that litigation privilege was not available, notwithstanding that the company was under criminal investigation.

We have always thought that, as a general proposition, a company under criminal investigation must have the opportunity to avail itself of litigation privilege.  It is obvious that those subject to criminal investigation are at risk of criminal prosecution/litigation as a result.

Some commentators argued that, following ENRC, the mere claiming of litigation privilege when subject to investigation could amount to an admission on the part of the person or company claiming it.  The ‘logic’ went how could you contemplate litigation if you had not committed the underlying offence.

This was (and is) obviously wrong.

The factual threshold for prosecution is lower than that for conviction and happily not all prosecutions end in conviction in the UK.

It is perfectly reasonable to contemplate litigation if under investigation (Barry does) on the basis that even if a prosecutor ultimately decides to charge, the defence can defend.  Another statement which should not be controversial.

We await the ENRC appeal later this year, but we don’t, whatever the outcome of that litigation based on the somewhat unique facts of that case, expect it to change the principle which has applied for some considerable time in the context of litigation privilege in the UK namely that:

“(a) litigation must be in progress or in contemplation;

(b) the communications must have been made for the sole or dominant purpose of conducting that litigation;

(c) the litigation must be adversarial, not investigative or inquisitorial.”

Declaration of interest: My firm, Pinsent Masons LLP, represented RBS in this case.  As my colleagues explain in their article on the judgment posted:

“Vos LJ found that there was nothing special about investigations when first principles were applied. He found that the correct approach to assessing whether litigation privilege should be applied was “to take a realistic, indeed commercial, view of the facts”. While Vos LJ acknowledged that RBS’s documents may have been created for dual purposes, it was clear to him that the dominant purpose was for conducting litigation. Any other purposes that may have existed were subsidiary to their requirement for litigation.

The critical factors in Vos LJ’s were that:-

  • HMRC’s letter was a “watershed” moment as it was analogous to a letter before claim and the response produced by RBS was a close comparable to a response to a letter before claim.
  • RBS’s decision to instruct Pinsent Masons’ specialist tax litigation team at the outset “strongly suggest[ed] that RBS anticipated a claim and was gearing up to defend it”.
  • RBS’s collaborative and cooperative approach to interacting HMRC after receipt of HMRC’s letter did not change the fact that that bank was preparing for litigation. This was evidenced by the terms of the response provided to HMRC, being that it was the fruits of Pinsent Masons’ investigation which provided a detailed, legal and factual analysis explaining why HMRC was not entitled to deny RBS’s input tax claim.”

 

 

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