The RBS Rights Issue Litigation

JurisdictionEngland & Wales
CourtChancery Division
JudgeThe Honourable Mr Justice Hildyard,Mr Justice Hildyard
Judgment Date08 December 2016
Neutral Citation[2016] EWHC 3161 (Ch)
Date08 December 2016
Docket NumberCase No: In Claims entered in the Group Register

[2016] EWHC 3161 (Ch)



Royal Courts of Justice

Strand, London, WC2A 2LL


The Honourable Mr Justice Hildyard

Case No: In Claims entered in the Group Register

(HC-2013-000484 and others)

The RBS Rights Issue Litigation

Jonathan Nash QC and Hannah Glover (instructed by Signature Litigation LLP) for the SG Group of Claimants

Sonia Tolaney QC, Adam Johnson and Natasha Bennett (instructed by Herbert Smith Freehills LLP) for the Defendants

Hearing dates: 7 and 8 November 2016

Supplemental written submissions 11 November 2016

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Honourable Mr Justice Hildyard Mr Justice Hildyard

Scope of this judgment


This judgment concerns three issues arising in the context of RBS's claim for privilege in respect of two categories of document of which the Claimants now seek specific disclosure and inspection. There is no dispute as to the relevance of the documents in question. Only 'legal advice privilege' and 'lawyers' working papers privilege' are claimed.


Broadly stated, the three issues are:

(1) Whether, if English law, as the lex fori, applies to the issue, the decision and reasoning of the Court of Appeal in Three Rivers District Council and others v Governor and Company of the Bank of England (No 5) [2003] QB 1556 (" Three Rivers (No 5)") applies to preclude the claim for privilege: I shall call this "the Three Rivers (No 5) Point";

(2) Whether RBS is entitled to rely on the federal law of the USA as the law applicable to the particular issue, and if so, whether under that law the claim of privilege is maintainable: I shall call this "the Applicable Law Point";

(3) Whether, if under US federal law RBS would be entitled to maintain a claim of privilege, the English Court has a discretion and should exercise it to order that disclosure or inspection may be withheld, even if the issue is governed by English law: I shall call this "the Discretion Point".

Context of these interlocutory applications


These interlocutory issues arise in the context of what has become known as " the RBS Rights Issue Litigation".


The litigation, which comprises various actions all subject to a GLO, concerns a rights issue of shares in the Royal Bank of Scotland ("RBS") which was taken up between 15 May 2008 and 6 June 2008 ("the Rights Issue").


By the various actions, shareholders in RBS seek to invoke statutory remedies against RBS under sections 87A, 87G and 90 of the Financial Services and Markets Act 2000 (" FSMA") whereby to recover substantial investment losses incurred further to the collapse of RBS shares on the grounds that the prospectus for the Rights Issue was not accurate or complete.


In some of the actions the Claimants also seek recovery against certain of the key RBS directors responsible for that prospectus.


Many of those who had subscribed for shares pursuant to the Rights Issue claim to have suffered losses amounting to most of the value of their investment in the Rights Issue shares. The amounts claimed are very considerable indeed.


The actions are due to be heard in March 2017.

The categories of documents for which the claim of privilege is made


The two categories of documents of which disclosure and inspection are sought and the claims for privilege are made are as follows:

(1) Transcripts, notes or other records of interviews conducted by or on behalf of RBS with employees and ex-employees as part of 'Project Mortar', which was the name given by RBS to the investigation it undertook as part of RBS's response to two US Securities and Exchange Commission subpoenas relating (broadly) to RBS's sub-prime exposures; and

(2) Transcripts, notes or other records of interviews conducted by or on behalf of RBS as part of its investigation into allegations made by Mr Victor Hong ("Mr Hong") concerning RBS Greenwich Capital's marketing of Super Senior CDOs and other matters of which Mr Hong became aware during his employment at RBS Greenwich (the "Hong Investigation").


The transcripts, notes or other records ("the Interview Notes") fall into two categories: (i) Hong Investigation Review Interview Notes and (ii) 126 Project Mortar Interview Notes.


As part of Project Mortar and the Hong Investigation RBS interviewed 124 individuals across a number of divisions, locations and levels of seniority. RBS has provided a list of its interviewees to the Claimants.


RBS's evidence is that the only documents in existence within these categories are Interview Notes prepared by RBS's in-house lawyers (in respect of the Hong Investigation) and variously by Wilmer Hale, Travers Smith (as agents for Wilmer Hale) and non-lawyers within the RBS Group Secretariat (also as agents for Wilmer Hale) in respect of Project Mortar, each of which is said to summarise those interviews.


In the case of Mr Hong, the interview was carried out by Dickstein Shapiro LLP who were retained as external counsel by RBS. Mr Hong had his own attorney at the interview.


There is no dispute that RBS authorised each of the interviewees to participate in the relevant interviews. That is so in the case of Mr Hong, who was obliged to participate at the request of RBS under the terms of the agreement relating to the termination of his employment, as it is in the case of the other interviewees.


Nor is there any dispute that the interviewees were told that the Interview Notes would be, and be kept, confidential and would be subject to what was apparently described to them as "attorney-client privilege". (This was not initially expressly stated in the evidence; but evidence expressly confirming this was filed by RBS without objection on the second day of the hearing.)

The claim for privilege in outline


RBS resists the disclosure and inspection of the Interview Notes on the basis that they are subject to legal advice privilege, alternatively (in respect of all but those of the Interview Notes prepared by members of the RBS Group Secretariat, for which such privilege is not asserted) that the Interview Notes are lawyers' privileged working papers. No claim is made to litigation privilege.


As previously indicated, RBS also resists disclosure on the basis that the Court ought to apply the federal law of the United States of America ("US law") under which the Interview Notes are said to be privileged. RBS submits, and it seems plain, that if (as the Claimants contend) the Interview Notes are not privileged under English law, then US law provides a wider protection which the Court should uphold.

The claims to legal advice privilege elaborated


The basis of RBS's claim to legal advice privilege is that each of the Interview Notes records a communication between a lawyer and a person authorised by RBS to give instructions to its lawyers, and that as such those communications are privileged. As indicated above, those persons included both employees of RBS and ex-employees.


In relation to 21 of the Project Mortar interviewees, RBS alleges that members of its Group Secretariat (who were not acting as lawyers) acted as agents or "channels of communication" through which the interviewees provided instructions to RBS's lawyers.


RBS does not assert that the Interview Notes were part of a communication between RBS and its lawyers in which advice was sought or given. It does not suggest that the interviewees were themselves seeking or being provided with legal advice.


RBS accepts that the Interview Notes and their communication comprised information gathered from employees or former employees at the instance of RBS's lawyers for the purpose of enabling RBS to seek legal advice from its external counsel. Thus, for example, in his witness statement dated 26 October 2016, Mr Paul Robert Eckert ("Mr Eckert"), a partner in Wilmer Hale, described his firm's role in this context (and the connections with the US, which may be relevant in the context of the Applicable Law Point) as follows:

"Wilmer Hale's Washington DC office was instructed to advise RBS (including in the UK and in Connecticut) in respect of the first of these two investigations – Project Mortar. Without waiving privilege, Wilmer Hale's work in respect of this Project involved collecting relevant factual information from employees and former employees of RBS based in the United States of America and Europe. This information was collected for the purposes of advising RBS on their response to the two SEC subpoenas. Whilst Wilmer Hale were primarily responsible for advising RBS, RBS also instructed Travers Smith LLP in England…

…in order to collect the factual information necessary to advise RBS, interviews were conducted with certain current and former RBS employees. These interviews were carried out by Wilmer Hale in the US…and by Travers Smith (sometimes accompanied by a member of Wilmer Hale's team) and RBS Group Secretariat in the UK. The interviews carried out by Travers Smith and RBS Group Secretariat were conducted on the instructions and under the supervision of Wilmer Hale. I note for completeness that Dickstein Shapiro conducted the interview of Victor Hong in New York and that the prior internal review was conducted by RBS's US legal team in Connecticut."


RBS contends that, under English law as well as US law, any communication by an employee who is authorised to communicate with a legal adviser for the purpose of his or her employer seeking legal advice is privileged: and that it is no part of the test that the communication should consist of instructions rather than information.


Accordingly, RBS submits that the communication of factual information (in this case,...

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