Property alliance group Ltd v The Royal Bank of Scotland Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Birss |
| Judgment Date | 19 February 2015 |
| Neutral Citation | [2015] EWHC 321 (Ch) |
| Docket Number | Case No: HC 2013 000459 |
| Court | Chancery Division |
| Date | 19 February 2015 |
[2015] EWHC 321 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Birss
Case No: HC 2013 000459
Tim Lord QC, Adam Cloherty and Kyle Lawson (instructed by Cooke Young & Keidan) for the Claimant
David Railton QC and Adam Sher (instructed by Dentons) for the Defendant
Hearing dates: 11th February 2015
In this judgment I give the reasons for making an order at a case management hearing on 11 th February 2015 about a document called Attachment C.
The Claimant (PAG) is a property developer with a portfolio worth about £200 million. This case concerns four interest rate derivatives or swaps which were entered into by PAG and the Defendant (RBS) between 2004 and April 2008. Each of the products used 3 month GBP LIBOR as a reference rate. One of the important aspects of this case is an allegation by PAG that various misrepresentations were made by RBS in connection with the setting of LIBOR which induced the swaps or that the swaps themselves contain implied terms in connection with the conduct of RBS relating to LIBOR.
As is now well known, a number of banks have been found to be involved in the manipulation of LIBOR rates. RBS is one of those banks. RBS has reached settlements with a number of regulators and prosecuting authorities including the US Department of Justice (DoJ) and the UK Financial Services Authority (as it then was). There is a Deferred Prosecution Agreement ( DPA) between RBS and the US DoJ dated 5 th February 2013 which came before the US District Court for the District of Connecticut on 12 th April 2013 before The Honourable Michael Shea, US District Judge. In the DPA RBS has admitted misconduct relating to the Japanese Yen and Swiss Franc LIBOR. The details are set out in Attachment A to the DPA.
In its Defence in these proceedings, RBS has formally admitted misconduct relating to Japanese Yen and Swiss Franc LIBOR in the same terms as that admitted in Attachment A to the DPA. In its Defence in these proceedings, RBS has denied any misconduct in relation to the setting of GBP LIBOR, including 3 month GBP LIBOR.
Given the nature and complexity of this dispute, the parties submitted that the case management of the proceedings would be best undertaken by a docketed judge. I was assigned to carry out that task and the first case management conference before me took place on 24 th November 2014. Directions were given to bring the dispute to a trial in a window between May and July 2016.
At that stage (24 th November) a major issue was the scope of the disclosure obligation applicable to RBS. I decided ( [2014] EWHC 4308) that given the wide scope of PAG's pleaded case, the disclosure obligation included all LIBOR currencies and tenors and was not limited to 3 month GBP LIBOR or to GBP LIBOR generally. Further consideration of disclosure was adjourned to a hearing to be fixed in early February 2015 with directions for RBS's legal team to carry out various tasks relating to disclosure in the meantime. The key difficulty appeared at that stage to be that RBS has in its possession a very large number of documents (tens of millions) which would need to be reviewed if one was to carry out a full scale standard disclosure exercise on the relevant issues. A full standard disclosure exercise appeared to be necessary and proportionate in respect of 3 month GBP LIBOR, since that was the rate and tenor which was the subject of the swaps and in practice that exercise would cover GBP LIBOR generally (i.e. all tenors). However neither party nor the court had any appetite for requiring RBS to embark on a similar exercise dealing with all the other currencies.
It seemed in November that a way forward would be for RBS to disclose internal reports, reviews and summaries relating to the allegations of LIBOR misconduct. There was no doubt these so called "high level documents" existed given the nature of the LIBOR manipulation itself and the regulated environment in which the bank operates. They would allow the parties and the court to direct a more focussed disclosure exercise in the light of the information revealed in them. A disclosure exercise could be properly tailored to the case in a proportionate manner.
RBS carried out the necessary review and produced a disclosure list signed by Paul de Gruchy, Senior Legal Counsel of RBS on 12 January 2015. This list includes a number of high level documents of the kind envisaged. However the only documents which RBS has produced for inspection by PAG from that list are ones which do not include any summary, report or review of any manipulation or misconduct relating to LIBOR at all. There are other high level documents in the disclosure list but they are all covered one way or another by objections to inspection taken by RBS. A party disclosing documents is entitled to take proper objections of this kind (see CPR r31.3 and r31.19) but one way or another such objections are open to scrutiny by the Court in appropriate circumstances.
Appendix B to the disclosure list summarises the documents in RBS's list for which an objection to inspection is taken. The appendix is divided into 5 sections. The objection taken in sections 1, 2 and 3 is on the ground of legal privilege: legal advice privilege in section 1, litigation privilege in section 2 and without prejudice privilege in section 3. PAG reserves all its rights to challenge these privilege claims and a further hearing has been scheduled ideally in late March or early April 2015 to deal with the application PAG is going to make on that issue. One of the matters I dealt with at this hearing was a direction that RBS must file a Further and Better List addressing the privilege claims. Currently they refer to regulatory investigations but only in an unspecific way. Those references need to be more specific in order for the court and PAG to understand the nature of the claims to privilege (cf. Beatson J in West London Pipeline v Total [2008] EWHC 1729 (Comm) at paragraph 86, particular 86(1)). That is why the Further and Better List is required. RBS will also be free to supplement any other aspects of its privilege claims if it wishes.
Sections 4 and 5 of Appendix B deal with reports submitted by RBS to two foreign regulators. RBS objects to inspection of those documents as a result of the obligations it believes it owes to the foreign regulators in question. PAG does not accept that RBS is entitled to withhold inspection of any of those documents. A separate judgment also given today deals with the documents in section 4. That hearing was held in private having regard to a letter from the relevant foreign regulator. The dispute about section 5 has been adjourned to allow the parties to investigate it further.
This judgment deals with the status of Attachment C to the DPA. That attachment is a list of benchmark rates in addition to Japanese Yen (JPY) and Swiss Franc (CHF) which are (or at least were at the relevant date) the focus of an ongoing investigation by the US DoJ.
Attachment C will indicate which other benchmark rates are the subject of ongoing investigation by the DoJ. That would be of real significance in this case and Attachment C therefore is clearly a document which would and should be listed in a standard disclosure list from RBS encompassing all LIBOR rates and tenors. Moreover and in addition, the document would be likely to assist this court and the parties in focussing the future disclosure exercises relating to other currencies beyond JPY and CHF.
A satellite dispute before me was whether Attachment C should have been listed in the disclosure list produced on 12 January 2015. The parties could not agree whether the order I made on 24 th November should have expressly referred to Attachment C in that 12 January list. I do not have to resolve that dispute and I decline to do so.
What is clear is that the obligations of disclosure (documentary discovery) of RBS in this action which I ruled upon on 24 th November 2014 are such that Attachment C ought to be in a disclosure list from RBS at some stage in these proceedings. RBS objects to inspection of Attachment C and so, recognising the scope of its disclosure obligations, brought an application before me in relation to Attachment C to resolve the issue of inspection. The application is for an order that RBS is not required to permit inspection of the document. PAG resists the application. This judgment deals with it.
RBS believes that it is obliged by its obligations to the US DoJ to object to inspection of Attachment C and that to allow inspection would put RBS at risk of being in criminal contempt of an order of Judge Shea in the US.
The applicable legal principles are common ground and can be found in Health Secretary v Servier Laboratories [2013] EWCA 1234 (Civ) (Court of Appeal). Orders for discovery of a document in this court (or for inspection of a document already disclosed) are procedural in nature and the law governing them is the lex fori, i.e. the law of England and Wales. The fact that a party objects to disclosure or inspection on the ground that to comply with such an order would put the party at risk of prosecution under a foreign law provides no defence to the making of the order. The English court retains jurisdiction under its local law to make such an order although it has a discretion whether to do so in the particular circumstances. The English court is entitled to take into account the risk of prosecution. In the two cases under consideration the judges who made the orders requiring disclosure had done so having found that a prosecution was highly unlikely. The Court of Appeal upheld those...
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