Litigators to banks: Stop taking notes in meetings if you want privacy

City lawyers have started advising banks not to take notes in meetings in order to get around a landmark ruling on legal professional privilege handed down in the RBS Rights Issue litigation in December, The Lawyer has learned.

The ruling by Mr Justice Hildyard stated notes taken by the bank during meetings between them, their lawyers and any bank employees regarding an internal investigation can be disclosable in court.

It sent a ripple through the litigation and banking professions, particularly among lawyers who advise financial institutions in relation to corporate crime and regulatory investigations, and banks subject to prosecution or investigations, including Barclays, RBS, Lloyds, and Standard Chartered.

Now The Lawyer has talked to a number of City litigators who have in recent weeks advised their banking clients not to take notes in meetings regarding regulatory conduct concerning an individual employee.

Instead the lawyers take notes, which are subject to privilege, and can share them with the bank at a later date on the basis of common interest privilege.

Although there is nothing underhand about the tactic, one senior litigation source said it was a “device or stratagem to get round the RBS decision” and the Serious Fraud Office (SFO) “would take a very dim view of it and could seek to challenge it”.

When asked how the SFO could challenge the tactic, a source said the prosecutor “could say they see it as an element of non-cooperation and so are less likely to accept a self-report from the bank”.

“The SFO could be suspicious if they ask the bank for the underlying notes related to its interview with an employee during an internal investigation and there are none,” the source added.

The tactic is also not infallible. In cases where a bank has drafted in a law firm to advise an employee, at the bank’s cost, the lawyer’s obligations are to the individual, not to the bank.

One litigator familiar with the tactic said: “If the lawyer decides it’s not in the client’s interest to share the notes with the bank then they have no duty to do so.

“Where it gets dangerous is if the bank puts pressure on the employee to share the notes with them.”

The issue has manifested as a result of the Hildyard J ruling in which he gave renewed vigour to a previous decision in Three Rivers District Council v Bank of England in 2003 (known as the Three Rivers case). He decided that communications by corporates, even with lawyers, for the purpose of establishing facts do not necessarily attract legal advice privilege.

But the Three Rivers decision was less far-reaching. There was uncertainty following the case regarding whether the ruling was a result of special facts in the case, and the law on such privilege issues was left in that uncertain state for a number of years – until December 2016.

One litigator said the RBS privilege ruling “drove a coach and horses through existing privilege arguments” and raised serious issues for the conduct of banks during internal investigations.

A Clifford Chance briefing on the issue said the decision posed the question of “what notes lawyers should make in interviews” and was “an unfortunate decision that undermines the basis of legal advice privilege by making it difficult for lawyers to gather information in a manner that will be privileged”.

“The best and most commercial solution would be for Three Rivers and the RBS Rights Issue Litigation to be overturned or, at least, explained in a manner that gives greater recognition to the rationale of legal advice privilege,” the briefing continued.

But that looks unlikely – RBS’s lawyers Herbert Smith Freehills (HSF) were initially granted permission to appeal Hildyard J’s ruling and leapfrog it straight to the Supreme Court, but they have since decided not to pursue an appeal.

A source close to the case said the claimants in the rights issue litigation drastically scaled back their claims in January, revoking allegations related to RBS credit market exposures, RBS risk systems, and RBS’s acquisition of ABM Amro. The litigation will continue when it goes to trial in mid-May on other issues, including the pursuit of former RBS directors, but the documents that provoked such furore around their disclosure “are no longer relevant to the case”.

But even HSF’s other banking client’s aren’t happy the firm will not seek to challenge the privilege decision. A number of banks are understood to have contacted HSF litigators in the last few days to say they’re disappointed that the appeal won’t go ahead.

It’s likely they will stay disappointed. For the moment, the SFO is content with a High Court ruling on privilege that falls wildly in its favour, particularly given its very public campaign for disclosable evidence in a number of its investigations.

For now, corporate crime lawyers’ only recourse for their clients where privilege is concerned is to ‘lawfully subvert’ the ruling. Until the SFO decides to crack down, that is.

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