The ENRC and the RBS Rights Issue Litigation

ENRC and RBS Rights Issue Litigation: where are we now? 

Update: Permission to appeal the decision in Director of the SFO v ENRC was granted on 02 October 2017. We will publish further updates as the appeal proceeds.

I have been meaning to write a blog on this for some weeks now, having witnessed an extraordinary level of interest within the disputes community in London in the ENRC decision. So here at last are my thoughts which, given how much has already been written and spoken about these decisions, I will keep to some high level reflections of where we seem to be coming out.

The first thing to say is that the effect of these two decisions is to cut off all escape routes under English law from the consequences of the Court of Appeal’s decision in Three Rivers (No.5). In other words, when we are dealing with a corporate and only legal advice privilege is available, it is now clear that the only privileged communications that an English court will recognise are those between the corporate’s lawyers (whether in-house or external) and those employees who are charged with getting their legal advice. If anyone else, in a situation where litigation privilege is not available, communicates with the lawyers about the legal advice being sought, even if it is to provide factual information that the lawyers need in order to advise, then those communications will not be privileged.

It is a pity (but understandable) that RBS did not take their adverse decision in the rights issue litigation to the Supreme Court, so we have to hope that ENRC will be allowed to appeal, although at the time of writing I understand that permission to appeal is still awaited. Unless and until it is, we appear to be stuck with the consequences of these decisions for some time unless any other litigation comes along and provides a basis for challenging Three Rivers (No.5).

The second consequence of these decisions is that notes of witness interviews undertaken where litigation privilege is unavailable are very unlikely to be covered by legal advice privilege in the form of “work product” privilege. Thus, it follows from these two decisions that verbatim notes or summary notes and even notes that contain a “mental impressions” rubric will not without more be regarded as within the scope of the privilege. It is evident (see the RBS Rights Issue Litigation decision at paragraph 125(2)) that rather more is now needed to get these form of notes within the scope of the privilege. Andrews J in ENRC suggested that a note which records the note-takers own thoughts and comments on what he/she is recording with a view to advising his client would be within the privilege - but on a practical level this is very difficult to achieve.

This means that in most situations that have not yet become adversarial - even if the lawyers anticipate that litigation in some form or another will follow down the line - the recording of interviews potentially creates unprivileged material which under English law at least may need to be disclosed where it is relevant.

I confess that, despite discussing this with many practitioners, I can’t see a way round this other than trying to record a note which at the end of almost every sentence in some way contains some sort of mental impression, reflection, commentary or whatever from the lawyer. I am afraid this is not consistent with current practice and I can’t really see that practice changing because it will both lengthen the time and increase the cost of taking interviews.

Furthermore, some criminal practitioners are suggesting that employees should no longer co-operate with their employers by giving interviews at this stage, given that what they say may not be privileged. It will be interesting to see if that idea takes off - but it will not help the corporate’s Board to understand what is going on if it does. Some lawyers have also suggested that they don’t take any notes of the interviews and just try to memorise in broad terms what they have been told (which is surely impractical especially if, as in the RBS case, you are interviewing 120 plus people); but in any event if you do this as a lawyer you are still open to compulsion by our regulators and criminal justice bodies to come for an interview to disgorge what you can recall.

Currently, under English law matters became even worse, because in the ENRC decision we now have a ruling which says that it is very difficult to anticipate adversarial criminal proceedings just when you are at the stage of undertaking an investigation to try to work out whether the corporate has any potential criminal prosecution exposure. The ENRC decision appears to suggest that mere anticipation of an SFO (or police) investigation is not enough to cause litigation privilege to kick in in such circumstances, and nor is the issue of a s.2 Criminal Justice Act 1987 Notice going to be enough. Incredibly, Andrews J appears to suggest that the only way to get round this hurdle is for the corporate, in making its assertion of privilege before the Court, to demonstrate in its evidence that its enquiries have indicated that the corporate really does have something to worry about which might give rise to criminal liability. This rather sounds like incriminating oneself in order to get within the scope of privilege.

Conceptually, a lot of this seems to run against the rationale for privilege on which we have all been brought up over many years. Isn’t the whole purpose of privilege to allow clients to unburden themselves in order to get the best possible advice which may or may not indicate either that the client has a problem or that the client doesn’t have a problem and so can confidently defend itself? And why, as Andrews J seemed to find, is it not within the scope of the privilege in order to undertake an investigation in order to persuade the criminal justice authorities that there is no case to answer?

There are other detailed issues arising out of these cases which cry out for appellate scrutiny. For example, in both cases there are judicial musings on the position of in-house lawyers when they seek legal advice externally; as well as in the RBS Rights Issue Litigation musings as to whether those within the corporate who can seek legal advice have to been part of, or a delegated part of, the directing mind and will of the company. None of this is helpful and it only serves to increase the concerns that corporates and their lawyers have as to how they can safely get legal advice.

I am in little doubt that privilege is under attack. I don’t think this is right and I hope that at some point soon the English appellate courts can really have a look at this. One thing they will need to bear in mind is that English law is now out on a limb as against the position in Singapore, Hong Kong, Canada, Australia and the United States of America. I hope we can get back in line quickly.

If you would like to know more about these decisions, do get in touch with me. Otherwise, do have a look at some of the articles on our Elexica website which can be found here.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.