Property Alliance Group Ltd v The Royal Bank of Scotland Plc

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Birss
Judgment Date08 June 2015
Neutral Citation[2015] EWHC 1557 (Ch)
Docket NumberCase No: HC 2013 000459
Date08 June 2015

[2015] EWHC 1557 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

Mr Justice Birss

Case No: HC 2013 000459

Between:
Property Alliance Group Limited
Claimant
and
The Royal Bank of Scotland Plc
Defendant

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: 8th, 11th May 2015

Mr Justice Birss
1

This judgment deals with disclosure of documents and privilege. It follows from a number of previous judgments of my own in the same case ( [2014] EWHC 4308, [2015] EWHC 321, and [2015] EWHC 322).

2

Briefly, the claimant (PAG) is a property developer with a portfolio worth about £200 million. It entered into four interest rate swaps with the defendant (RBS) between 2004 and 2008. Each swap employed 3 month GBP LIBOR as a reference rate.

3

LIBOR rates are determined by a form of averaging based on rates submitted by banks which are members of a panel. As is now well known, a number of panel banks, including RBS, have been found to have been manipulating LIBOR. RBS has reached settlements with regulators including the US DoJ and CFTC and the UK Financial Services Authority (as it then was). RBS has admitted misconduct to the regulators relating to Japanese Yen and Swiss Franc LIBOR.

4

PAG alleges that RBS made misrepresentations about LIBOR which induced PAG to enter into the swaps or that the swaps themselves contains implied terms relating to the conduct of RBS relating to LIBOR. Essentially PAG's case is that by proposing LIBOR as a reference rate in the swaps, RBS represented that it was not rigging the rates for its own ends. In Graiseley Properties v Barclays Bank [2013] EWCA Civ 1372the Court of Appeal held that allegations based on implied misrepresentation relating to LIBOR of the same general scope as the ones made by PAG in this case were properly arguable and should not be dismissed summarily.

5

In its Defence in these proceedings, RBS has formally admitted misconduct relating to Japanese Yen and Swiss Franc LIBOR and has denied any other misconduct relating to LIBOR. In particular RBS denies misconduct in the setting of GBP LIBOR, including 3 month GBP LIBOR.

6

At the hearing on 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 (about 25 million) 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 focussed on 3 month GBP LIBOR, since that was the rate and tenor to which each of the swaps was referenced 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.

7

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. 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.

8

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 statement summarising the nature and extent of any manipulation of LIBOR. 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. The objections include various forms of privilege: legal advice, litigation, and without prejudice.

9

The matter came back to court on 11 th February 2015. That hearing did not address the privilege claims. PAG reserved its rights to challenge them. RBS was directed to file a Further and Better List addressing privilege. The disclosure list before the court in February referred to regulatory investigations but only in an unspecific way. The references needed to be more specific in order for the court and PAG to understand the nature of the claims to privilege (cf. West London Pipeline v Total [2008] EWHC 1729 (Comm) at paragraph 86, particularly 86(1)). RBS was free to supplement any other aspects of its privilege claims if it wished.

10

The matter came back again on 8 th May to deal with privilege and case management. The parties filed very full skeleton arguments, seven lever arch files of papers and two bundles of authorities. The hearing lasted two days. This is the judgment from that hearing. The first part deals with PAG's challenge to the privilege claims made by RBS. The second part deals with case management directions concerning LIBOR disclosure generally.

11

At the heart of PAG's objection to the approach taken by RBS are some simple points. There is an obvious and significant imbalance between the information available to PAG about LIBOR manipulation as compared to that available to the bank. If the LIBOR scandal had not come to light at all, PAG would be none the wiser. Aside from RBS, the only sources of information available to PAG are public findings of regulators. These show that RBS did manipulate Japanese Yen and Swiss Franc LIBOR. They show that RBS has been fined. The public regulatory findings show that other currencies were investigated. Two currencies which have been investigated, at least to some extent, are USD and GBP. These were both mentioned in court at the hearing before me without objection.

12

PAG is not a banking regulator and naturally enough it would far prefer not to have to pay its legal team to trawl through thousands of documents trying to work out what did or did not happen. PAG argues, attractively, that by now, some years after the relevant events the bank must know what happened. That must be so given the highly regulated environment in which banks operate and it must be so as a matter of common sense. Those managing an organisation like this bank in these circumstances will naturally have wanted to have been informed about what happened and what went wrong in some detail.

13

Thus PAG argues there must be documents in existence which summarise and report on what happened. It argues that these documents cannot all be privileged. Surely, submits PAG, the Board of Directors or some sub-committee of the Board must have received information about what happened in order to perform its function. That reported information would be in summary form.

14

Accordingly, submits PAG, one way or another there is something wrong with the claim to privilege by RBS. Perhaps a wrongly narrow view has been taken of the scope of the documents which were the subject of the January disclosure list so that the claims to privilege are well taken but there are other, non-privileged, summary documents in existence and which ought to be disclosed. The problem with that is that RBS does not suggest that there are any documents which include summaries or reports of what happened in which it does not claim privilege. So, PAG contends, the only alternative is that the privilege claim is wrongly made somehow.

15

It is against this background that the detailed privilege issues fall to be decided. There is no doubt that access to privileged summaries would enormously simplify PAG's task in these proceedings and would reduce costs substantially. However while this background may explain PAG's motives in bringing this application, it is important to state that these case management considerations do not give PAG any right to see privileged documents.

1

The claims to privilege by RBS

16

The law is as follows. A party disclosing documents is entitled to take proper objections to inspection on the grounds of privilege (see CPR r31.3 and r31.19(3)-(6)) but one way or another such objections are open to scrutiny by the Court in appropriate circumstances.

17

Beatson J summarised the principles governing the approach to challenging claims to privilege in West London Pipeline v Total at paragraph 86. The key points are as follows. The burden is on the party claiming privilege. The court must be careful to consider how the claim is made out. Affidavits should be as specific as possible without making disclosure of the very matters that the claim for privilege is designed to protect. An assertion of privilege in an affidavit is not determinative but it is difficult to go behind an affidavit at the interlocutory stage of proceedings. The affidavit is conclusive unless it is reasonably certain something has gone wrong. Where the court is not satisfied that a right to withhold inspection has been established, it has four options, three of which are relevant to the case before me. The three relevant options are an order for inspection, an order for a further affidavit dealing with the deficiencies or an order whereby the court may inspect the documents itself.

18

In paragraph 86(3)(a) to...

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