Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2015]

In Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2015] EWHC 1557 (Ch) (08 June 2015) Mr Justice Birss’s judgment dealt with disclosure of documentation and privilege in an action which was a continuation of his previous judgments, from the same case.

The Claimant, a property developer with a portfolio exceeding £200m, between 2004-2008 dealt with the Defendant Bank in respect of four interest rate swaps which used “3 month GBP LIBOR as a reference rate”.

The Claimant alleged that misrepresentations made by the Defendant had persuaded them to use the interest rate swaps and that by putting forward LIBOR (the London interbank Offered Rate) as the reference rate the Defendant Bank was acting as if it had not been a party to the manipulation of rates. In the case of Graisely Properties v Barclays Bank “the 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”.

The Defendant Bank in its defence to the Claimant’s action admitted misconduct to matters relating to Japanese Yen and Swiss Franc LIBOR but not in respect of the setting of GBP LIBOR as well as 3 month GBP LIBOR.

The Defendant Bank had formed a special committee in 2011 called The Executive Steering Group (“ESG”) which had, during investigations, been a focal point for its own misconduct in respect of the LIBOR rates.

The Defendant Bank identified that many of the documents to be disclosed in the January list were also a large part of the ESG documentation which they argued they should be able to keep back on the grounds of legal advice privilege. Further they contended that part of the Claimant’s complaint was founded on a false assumption as they had asserted the Defendant Bank had claimed privilege in all ESG documentation.

Mr Justice Birss found the only documents thus far disclosed were high level documentation and therefore it was the high level ESG documentation that the claim to privilege referred to.

The Defendant Bank also claimed the right to withhold the inspection of correspondence between them, their lawyers and the FSA during the period of December 2012 and January 2013 which documentation had been marked “without prejudice” relating to negotiations with the FSA in respect of their final notice.

Out of the supplemental list, six of the documents had been identified as been seen or given to the regulators and for these documents legal advice privilege and litigation privilege was claimed by the Defendant Bank. The Claimants contended that privilege had been waived as the documentation had been seen or given to the regulators. The Defendant Bank argued that this was not waived as the documentation had been shown or handed over “on a confidential “non-waiver” basis”.

The Claimant’s case was that the agreements did not prevent the regulator disclosing matters as each of the documents allowed them to pass on and publicise documentation to third parties such as government agencies, the Claimant’s argument being that the Defendant Bank could not control what happened to the documentation.
The Judge was not satisfied that RBS’s claim to legal advice privilege in respect of the ESG Documents was correctly made. He ordered the ESG Documents to be produced to the court for a judge to consider the documents.

The judge accepted a right analogous to without prejudice protection rule applied when part of genuine settlement discussions but is not identical, to the communications, however the protection had been waived because the bank’s defence relied on the lack of any regulatory finding.

Mr Justice Birrs ordered inspection of the six documents “subject to a four week grace period” and considered the Claimant’s application for an order making all the ESG documentation high level. He did not think there was any point in making such an order as any of the ESG documentation not of a high level, which should be disclosed, would be disclosed in time anyway.

He also looked at LIBOR disclosure which he considered an important issue that had to be determined. He noted that the Defendant Bank had acknowledged that it had to give standard disclosure of GBR LIBOR, which Mr Justice Birrs was informed involved some 50,000 documents, but he further noted that “There is also some further common ground about certain classes of documents which I do not need to address”. What he had to decide was how to deal with the Defendant Bank’s obligations as to the disclosure of LIBOR for the other currencies.

Mr Justice Birss in considering the objectives and dealing with all matters in a fair and just way having regard to costs decided that the Defendant Bank proposal was the preferred way to proceed being

  • “An order to review the Regulatory Review Documents and disclose what is relevant from them (perhaps all of them) is likely to produce appropriate disclosure of the documents PAG is most interested in. The marginal cost, both in terms of money and time, of the alternative order requiring RBS to go over the store of 25 million documents, even electronically, is very significant indeed. I am not satisfied it is worth the likely return”.

He summarised his conclusions as follows:

  • “i) Order RBS to produce the ESG documents disclosed in the January list to the court for inspection;
    ii) Dismiss PAG’s application about litigation privilege;
    iii) Order RBS to produce the documents in Appendix B Part 3 in respect of which without prejudice privilege is claimed on the basis that that claim can no longer be maintained having regard to the way RBS has put its case in this action;
    iv) Order RBS to produce the six documents shown or provided to regulators in respect of which privilege is claimed on the basis that that claim can no longer be maintained having regard to the way RBS has put its case in this action;
    v) Direct LIBOR disclosure for currencies other than GBP to be based on the Regulatory Review Documents.”

The trial is due to commence in May 2016 for a period spanning 6-8 weeks.

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