England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		20th November 2015

Mr Justice Birss:

1. This is the second judgment dealing with issues arising at the hearing on 5^th-6^th November 2015 in these proceedings. This judgment deals with privilege. The earlier one ([2015] EWHC 3272 (Ch)) dealt with PAG's amendments to the Particulars of Claim to plead fraudulent misrepresentation and with disclosure.
2. The earlier judgment summarises the nature of the proceedings (see the judgment as a whole and paragraphs 1 to 18 in particular). In brief PAG contends that RBS mis-sold swap contracts to PAG in the period 2004-2008. The allegations include misrepresentations relating to LIBOR. PAG also contends that in breach of contract RBS transferred PAG into RBS's turnaround division (called the Global Restructuring Group ("GRG")). Certain misconduct relating to manipulation of LIBOR has been admitted by RBS but otherwise PAG's claim is denied. PAG terminated the swaps in 2011 by paying £8 million to RBS. The claim form was issued on 17^th September 2013.
3. The issues addressed in this judgment derive from RBS's application of 22nd October 2015, seeking:

(i) inspection pursuant to CPR r31.19(5) of certain audio recordings and transcripts of those recordings over which PAG has asserted privilege;

(ii) an order under CPR r31.20 granting permission for use by RBS of a document (the "Kilty/Rubens email") over which PAG claims privilege but which was inadvertently disclosed by PAG to RBS;

(iii) an order that PAG should re-review each claim to privilege made in its disclosed list of documents and produce a new list providing further particularity.

4. There was also an application for specific disclosure under CPR r31.12 of further audio recordings and transcripts but that was disposed of in evidence during the hearing. The evidence from PAG is that there are no further recordings and transcripts in the class sought and so there is no need to make an order.
5. I can deal with point (iii) at the outset. I agree with RBS that it is right and proportionate to require PAG to re-review each claim to privilege made in its list of documents. RBS made a number of criticisms of PAG's approach to privilege in the original list, many of which have been accepted expressly or implicitly by PAG. It is unnecessary to consider those criticisms in any detail. I will mention only the following points. First, the background to this matter is that in these proceedings PAG has already subjected RBS's claims to privilege to detailed scrutiny, leading as it did to inspection of certain privileged RBS documents by the court (see my judgment at [2015] EWHC 1557 (Ch) and the consequent judgment of Snowden J at [2015] EWHC 3187 (Ch)). RBS submitted that it is only fair that the other side should be held to the same high standard. I agree. Second, there have been real difficulties with each of the four categories of privilege claimed by PAG. Most stark was the claim to common interest privilege in certain documents when that claim was demonstrably misconceived, but there have been problems across the board. Third is PAG's disclosure report and EDQ, which do not mention the existence of audio files, even compendiously as the subject of a privilege claim (see below). Given that the claimant must have been well aware of their existence (see below), this is surprising. I will require PAG to re-review its privilege claim.

Issue (i) – the recordings and transcripts

6. The audio recordings and transcripts which RBS seeks to be allowed to inspect are recordings of meetings which took place between Mr David Russell, the founder and managing director of PAG and two individuals, Mr Matthew Jones and Mr Anthony Goldrick. Both were employed by RBS at the time that PAG entered into the swap contracts. At the time each met with Mr Russell they were no longer RBS employees.
7. Mr Russell made the audio recordings surreptitiously without telling Mr Jones or Mr Goldrick. His reason for doing this was to gather evidence for this claim. PAG asserts litigation privilege over these materials. RBS contends they are not privileged.

The facts

8. Mr Jones had been employed by RBS from 1988 until October 2009. From 1992 to 2003, he worked in a group called Specialised Lending Services. This group later became the GRG. In 2003, Mr Jones moved to RBS's Corporate Real Estate Finance team, where he acted as relationship manager for a number of borrowers, including PAG.
9. Mr Jones left RBS's employment in October 2009 and took up a position at Barclays in January 2010. While at Barclays, he intended to target PAG as a potential client and was therefore actively in contact with Mr Russell. The two met several times during this period. Mr Jones left Barclays in January 2013 to take up a similar role at Santander in April 2013.
10. Shortly after Mr Jones had begun working for Santander he was contacted by Mr Russell, who asked if he would be available for a quick "catch up". This was on 25th June 2013. They met at an office owned by PAG at 39 Princess Street in Manchester, which was called Frank Rostron's, a shirt shop. Mr Russell arranged for the meeting to be recorded, unbeknownst to Mr Jones.
11. At the meeting, Mr Russell and Mr Jones discussed whether there might be opportunities for PAG and Santander to do more work together in the future. Mr Russell made it clear that he would prefer to work with Mr Jones if the relationship between PAG and Santander was to develop. Mr Jones subsequently spoke with his senior director about the meeting with Mr Russell. Mr Jones has stated in his witness statement that he did not consider that the content of the conversation was confidential.
12. Mr Russell arranged for a subsequent meeting under similar circumstances, which took place on 21st November 2013. This meeting was also recorded, without Mr Jones's prior knowledge or consent. During this second meeting, Mr Russell began discussing the hedging that PAG had entered into with RBS and asked Mr Jones if he would act as a witness for PAG in a claim against RBS. Mr Jones declined and sought to withdraw from the conversation.
13. The facts are similar with Mr Goldrick. Mr Goldrick worked in a variety of roles at RBS between 1982 and 2012 and set up a dedicated property lending team outside of London in 1999. In 2003 he was promoted as a regional Senior Director for Property Finance, which involved managing RBS's Corporate Real Estate business across the north of England. During this time, he was introduced to PAG and a number of other clients with whom he maintained a "high-level" relationship. Mr Goldrick became the Head of Real Estate Finance Portfolio Management for the north of England from January 2009 until he left RBS in September 2012 to set up his own consultancy business.
14. Between May 2012 and June 2013, Mr Goldrick communicated extensively with Mr Russell about acting as a consultant to PAG. Mr Goldrick met Mr Russell on 4 April 2013, where they discussed a potential role for Mr Goldrick as a consultant to PAG. Mr Russell subsequently asked Mr Goldrick to attend a meeting at Frank Rostron's on 25th June 2013. Mr Russell arranged for this meeting to be recorded but he did not reveal this to Mr Goldrick. At this meeting, Mr Goldrick recalls that hedging was discussed, especially in the context of the restructuring/refinancing discussions that PAG was having with GRG around this time. Following the meeting, Mr Goldrick sent Mr Russell a draft consultancy agreement. It is clear that he believed that the only intent and purpose behind the meetings with Mr Russell was to discuss the potential provision of his services to PAG as a consultant.
15. Mr Russell arranged for the recording of a further meeting, which took place on 21st November 2013. Again, Mr Goldrick did not know that he was being recorded. One of the things that Mr Russell told Mr Goldrick during this meeting was that PAG had instructed Cooke, Young and Keidan LLP in relation to a claim about the swaps. At a subsequent meeting on 19th November 2014 Mr Russell asked Mr Goldrick to assist PAG with its claim against RBS. Mr Goldrick declined. That meeting was not recorded.
16. It is clear that Mr Russell's true motive throughout was to seek information and evidence which might assist him in the claim which his company was going to bring against RBS. To further that end, Mr Russell deliberately deceived Mr Jones and Mr Goldrick about his motives. Mr Russell did not think either individual would meet him if he told them why he wanted to meet them and he was right about that. Mr Russell did not tell either of them that the meetings were being recorded because he thought Mr Jones and Mr Goldrick would be more likely to speak openly about RBS if they believed that they were speaking "off the record". He was obviously right about that too.
17. Mr Jones and Mr Goldrick both confirmed in their evidence that they believed the meetings were to discuss the furthering of their respective business relationships with PAG and both were disappointed when they discovered Mr Russell's deception.

The law

18. The essential requirements for establishing the existence of litigation privilege were summarised by Lord Carswell in Three Rivers District Council v the Bank of England (No.6) [2005] 1 AC 610 at paragraph 102, where he said that:

"communications between parties or their solicitors and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation are privileged, but only when the following conditions are satisfied: (a) litigation must be in progress or in contemplation; (b) the communications must have been made for the sole or dominant purpose of conducting that litigation; (c) the litigation must be adversarial, not investigative or inquisitorial."

19. Elements (a) and (c) are clearly satisfied in this case. The point in issue between the parties relates to element (b). The debate is whether or not the recordings and transcripts can be said to have been produced for the "dominant purpose" of conducting the present litigation.
20. The requirement of dominant purpose emphasised by Lord Carswell in Three Rivers (No.6) was also discussed in the House of Lords in Waugh v British Railways Board [1980] AC 521 (see e.g. Lord Wilberforce at p533). At pages 543-544 Lord Edmund Davies approved the following passage from the judgment of Barwick C.J. in Grant v Downs (1976) 135 CLR 674 at p677:

"a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection."

(emphasis added by Lord Edmund Davies).

21. PAG submits that it is clear from this passage that the emphasis on dominant purpose focuses on the dominant purpose of the person who made or procured the creation of the communication or document. It cites a number of further authorities in support of its position: Guinness Peat Properties v Fitzroy Robinson Partnership [1987] 1 W.L.R. 1027; Winterthur Swiss Insurance Company v AG (Manchester) Ltd [2006] EWHC 839; and West London Pipeline and Storage Ltd v Total UK Ltd [2008] 2 CLC 258. It is sufficient to refer to Guinness Peat. There the Court of Appeal upheld a claim to privilege in relation to a letter from a firm of architects to their professional indemnity insurers. The letter gave notice of a potential claim against the firm and made a number of admissions. The Court of Appeal considered that the relevant purpose of the allegedly privileged document was that of the insurers who had requested the letter, i.e. to obtain notice of potential claims so that they could take legal advice. This purpose was privileged. The judgment of Slade LJ at p1037B emphasised the importance of viewing the dominant purpose of the relevant document objectively by reference to the evidence.
22. PAG contends that it is plain that the point of all this was to gather evidence of the case; the fact that Mr Jones and Mr Goldrick did not know of this purpose does not alter that. The recordings only exist because Mr Russell wanted them for the litigation and indeed the meetings only took place because Mr Russell wanted them to for the same reason.
23. RBS argues that what matters is the dominant purpose of the meetings and that was business not litigation. The fact that secret recordings were made for the litigation cannot help PAG if that was not the dominant purpose of the meetings.
24. RBS relies on a number of authorities from English and other common law countries' courts concerning the recording of conversations. The first two, English, cases are Grant v Southwestern [1975] 1 Ch 185 and Parry v News Group [1990] 141 NLJ 1719 (CA). These cases establish that a record of a non-privileged conversation, whether it is in the form of a recording, a verbatim note or a transcript, cannot itself be privileged if the underlying conversation was not privileged (see in particular Bingham LJ (as he then was) in Parry).
25. The next three are Telebooth v Telestra [1994] 1 VR 337, Crisford v Hazard [2000] 2 NZLR 729 and Woori Bank v KDB Ireland [2005] IEHC 451. These relate to surreptitious recordings.
26. In Telebooth Hedigan J in the Supreme Court of Victoria rejected the submission that the fact that a tape recording was made for the litigation meant it was privileged even though the conversation it recorded, which was between the parties to the claim, was not. The conversation was between Mr Harris of the claimant and Mr Kinchin of the defendant. Mr Harris secretly recorded the conversation for the purposes of the action. The essence of the judge's judgment can be seen from the following:

" […] The conversation that took place is admittedly non-confidential. In the circumstances here prevailing, it seems to me that it would be anomalous, contrary to the principle which drives legal professional privilege and an encouragement to inappropriate use of the client solicitor relationship, to conclude that the tape recording of the non-confidential conversation is privileged.

It is not necessary to consider whether or not a handwritten note taken of the conversation would be privileged in similar circumstances although I should say that there must be powerful arguments in support of the view that such a note taken for the purpose of giving it to the solicitor would not be privileged. […]

But the tape is not a note of the conversation, an impression of it or a description of it. It contains the actual conversation in electronic form. It evokes the voices of each party's agent, instantaneously encapsulating the non-confidential communications. It is the conversation. Kinchin was as much the author of it as Harris. The policy basis of legal professional privilege - confidentiality in the public interest - is wholly lacking when what is solely sought to be protected is the actual reproduction of the voices of the parties speaking in a non confidential mutual communication […]

The conversation itself is admitted not to be privileged. If the solicitor had been present it would not have been privileged. If Kinchin's statements had been made directly to Harris' solicitor, the conversation would not be privileged. The law should be slow to extend the boundaries of legal professional privilege so as to protect a known non-confidential communication simply because a record of it is made and deposited with the lawyer of one of the parties."

[p347 ln42 - p348 ln25]

27. In Crisford the New Zealand Court of Appeal rejected a claim to privilege in a tape recording of a conversation between the defendant and a possible witness, Ms Harris. After being contacted by the defendant but before speaking to him in detail, Ms Harris called the claimant's solicitor. The solicitor asked her to tape the conversation in case any statements would be of value in the litigation. She did so without telling the defendant. The claimant claimed privilege in the tape recording. The court held, applying Telebooth and Grant, that the tape was no more than an exact replica of the conversation which had taken place and that such a recording of a non-privileged conversation would not be privileged. The court also held that the conversation was not privileged and so the claim to privilege failed.
28. In Woori Finlay Geoghegan J sitting in the Irish High Court considered whether transcripts of secret recordings of conversations with witnesses (who did not know the purpose of the conversations) could be privileged. The judge ruled no such privilege could be claimed. Following Telebooth she found that a verbatim record of a communication would not be privileged simply because the recording was created for the purposes of the litigation; one needed to look instead at the underlying conversation and whether that was privileged. The judge held that the conversations were not confidential and so could not be privileged since it was common ground that confidentiality was a prerequisite for the claim to privilege.
29. PAG submitted that all of the cases referred to by RBS (with the exception of Woori) related to situations involving meetings between the parties to litigation, which should be distinguished from the situation in which Mr Russell met a potential witness (i.e. a third party). I do not accept that submission. In my judgment the relevant legal principle, which these cases illustrate, is that a verbatim recording or transcript of a non-privileged conversation is not privileged even though it can be said that the reason the recording was made was for use in the litigation. The fact that the conversation may have been a non-privileged conversation between parties to the litigation or a non-privileged conversation with a witness or possible witness makes no difference. If the recorded conversation was not privileged, then the recording is not privileged either. The question I have to decide does not concern private notes made of conversations, it concerns recordings.
30. So the question turns on whether the conversations themselves are privileged and that in turn depends on the application of the dominant purpose test.
31. Both parties submitted that dominant purpose is to be assessed objectively, however, they interpreted this in different ways. RBS contended that the term objective in this context meant from the point of view of a dispassionate observer who was aware only of the information which had "crossed the line" between the two parties, in other words, passed openly between them. So Mr Russell's secret purpose was irrelevant. The only facts known to an objective observer were the facts known to Mr Jones and Mr Goldrick. Looked at that way the purpose of the meeting was to catch-up or to discuss the possibility of working with PAG in the future.
32. PAG's argument is that the requirement for an objective assessment in this context does not mean what RBS refer to at all. It means that the decision is one for the court to arrive at objectively, taking into account all the evidence, including evidence of the parties' intentions. It is objective in the sense, for example, that the court is not bound to accept what a party says now in a witness statement about his intentions at the time. PAG submits that assessed this way it is manifest that what Mr Russell says now about his intentions at the time is true. From his perspective, viewed objectively, the purpose of the meeting was for gathering evidence that could be used in PAG's claim against RBS.
33. In my judgment PAG is correct about the nature of the objective test to be applied. The test is objective in the sense that the decision is one for the court not the parties. The decision is arrived at objectively, taking into account all the evidence. That includes evidence of what the persons involved say their intentions were. RBS's submission is in effect that the court is to imagine a sort of officious bystander. That seems to me to be unnecessarily complicated.
34. PAG submits that the legal analysis that applies here is indistinguishable from that in the situation in which a solicitor arranges a meeting with a potential witness in order to take a proof of evidence. The witness may have a variety of motives for agreeing to meet, but – provided litigation is reasonably in contemplation – the communications at the meeting (and any proof of evidence that is prepared) are privileged because the purpose of the solicitor will invariably be to gather evidence for use in, or in connection with, that litigation. For this PAG refer to the textbook Hollander, Documentary Evidence (12^th Ed 2015) at 17-30 and to China National Petroleum Corporation and Others v Fenwick Elliott [2002] EWHC 60 (Ch) at paragraphs 44 - 53. PAG submitted that privilege does not depend on whether the solicitor's purpose is communicated to the witness or not. The purpose of the meeting was to gather evidence and that is sufficient to attract privilege.
35. RBS submits that the deception which occurred in this case cannot be ignored and contends that the English courts do not generally find in favour of individuals who obtain evidence by deliberate deception. In Plummers v Debenhams [1986] BCLC 447 Millett J stated, obiter, that:

"it is not open to a party to litigation to withhold production to a relevant document by claiming that the purpose for which it was brought into existence was to obtain legal advice in connection with contemplated litigation, when that purpose was deliberately concealed from the other party, and when the document contains and its conclusions are based on evidence obtained from the other party only by suppressing the purpose for which it was required." [p459 a]

36. This was applied in a first instance decision by HHJ Toulmin QC (LFEPA v Halcrow Gilbert [2004] EWHC 2340 (QB)) the facts of which are similar to the present case. RBS also submits that the key rationale of litigation privilege, being that it encourages anyone who knows relevant facts to be able to state them fully and candidly (see the speech of Lord Wilberforce in Waugh v British Railways Board [1980] AC 521) has no application to the current case.
37. Finally the parties drew attention to a debate amongst the authors of textbooks about the question of whether a conversation has to be confidential in order to attract privilege. RBS says that the communications in issue cannot be privileged because the dominant purpose of the meeting was not litigation and the meeting was not subject to conditions of confidentiality (see Passmore Privilege (3^rd Ed 2013) at [3-005]). PAG referred to a passage in Thanki The Law of Privilege, (2^nd Ed 2011) (see 3.33) which suggests that the requirement of confidentiality does not require the existence of a legal duty of confidence but is better characterised in the words used by Aldous LJ in Bourns v Raychem [1999] All ER 154 p167-8 as something "not properly available for use". RBS maintained that in English law, confidentiality is a prerequisite for litigation privilege.
38. For reasons appearing below, I do not have to resolve the point on confidentiality. One can see why it can cause difficulties. A witness is free to speak to the lawyers for either side, or both. The fact they have spoken to one side cannot preclude a witness from speaking to or assisting the other. That is what the maxim that "there is no property in a witness" is referring to. On the other hand one can proliferate examples in which one side's lawyers give a witness information about the case which may be confidential. The fact that this can happen does not, logically, have anything to do with whether a proof of evidence prepared by the solicitor at the meeting would be covered by litigation privilege.

Assessment

39. I have considered the parties legal submissions in some depth in deference to the argument but in the end I believe the answer is clear.
40. Plainly, assessed objectively today, Mr Russell's purpose in arranging the meetings was to gather evidence for the litigation. Equally plainly, assessed objectively today, the purpose of the ex-RBS employees in attending the meeting was to catch up and discuss possible future business. I am bound to say that starting from just these facts, it does not make a lot of sense to pretend that one can distil a dominant purpose from these two clear but entirely divergent purposes.
41. In my judgment the critical point is that Mr Russell actively deceived Mr Jones and Mr Goldrick. Mr Russell induced them to attend and speak freely by representing to Mr Jones and Mr Goldrick that the meeting was a catch up and was concerned with possible future business. Mr Russell knew or it was obvious to him that they were only likely to attend and speak on that basis. It is the existence of this deception which distinguishes the circumstances from the example of the solicitor taking a proof of evidence relied on by PAG. In this case Mr Russell cannot complain if the court concludes that the fair and correct way of assessing what the dominant purpose of the meeting was, is to look at it from Mr Jones and Mr Goldrick's point of view. If Mr Russell had not misled these two gentlemen then things might be different but that is not what happened.
42. I find that the dominant purpose of the meetings was not for the purposes of the litigation. Therefore the meetings were not privileged and so neither are the recordings or the transcripts of the recordings. RBS is entitled to inspection.

Issue (ii) the Kilty/Rubens Email

43. The reason RBS found out about the existence of the recordings and transcripts of Mr Jones and Mr Goldrick is because they are referred to in a document, the Kilty/Rubens email, which was disclosed to RBS by PAG as part of its disclosure in the action. The email was between Mr John Kilty, a third party consultant engaged by PAG and Mr Philip Rubens, a partner at PAG's solicitors Cooke, Young and Keidan (CYK). The content of this email referred to the existence of at least two of the recordings and transcripts. By the email, Mr Kilty was sending comments on the transcripts to the solicitors and indicated that Mr Russell's observations would also follow.
44. PAG claims that the email is privileged. There was a debate about the privilege claim and RBS points out that the basis for it changed in correspondence, but RBS do not now dispute that it is a privileged document.
45. CPR r31.20 provides:

"Where a party inadvertently allows a privileged document to be inspected, the party who has inspected the document may use it or its contents only with the permission of the court."

46. Before me RBS sought permission under this provision to use the email for the purposes of its application above relating to the recordings and transcripts whose existence came to its attention only as a result of the email. PAG did not seriously oppose the grant of permission and I dealt with that during the hearing. Clearly permission to make the application was appropriate.
47. However that leaves open a dispute between the parties about what happened after the email was inadvertently disclosed. The circumstances are these. The email was included in disclosure provided for inspection on 15 June 2015 and discovered by Dentons in August 2015. On 28^th September RBS's solicitors Dentons wrote at length to CYK about the email. The letter includes a statement that Dentons anticipated that PAG might wish to claim privilege. CYK confirmed privilege was claimed and correspondence ensued about its basis. In its application notice dated 22^nd October, supported by a witness statement from Mr Coulthard of Dentons and also statements from Mr Jones and Mr Goldrick dated 14^th and 18^th October, RBS applied for permission under CPR r31.20.
48. The problem, PAG submits, is that it is plain that RBS and its lawyers made extensive use of the privileged email without the court's permission, contrary to CPR r31.20. In his witness statement Mr Coulthard admits that use was made of the email (which it plainly was). He states that the email indicated to RBS that there had been serious non-disclosure by PAG of relevant documents (that is of the recordings and transcripts, which I have held were not privileged) and that it was essential to speak to Mr Jones and Mr Goldrick. Mr Coulthard explains that the only use made was as part of the investigation into whether there was a proper basis for claiming relief under CPR r31.20. He states that RBS has made no other use of the email.
49. The difficulty I have with the stance taken by RBS in this matter starts from the email itself. On its face the Kilty/Rubens email is an email between someone at PAG (Mr Kilty's email address in the email is johnkilty@pag.local) to PAG's solicitor with conduct of this case. The date is 15^th November 2013, after the claim form was issued. The content of the email discusses evidence relating to the case with RBS.
50. It is clear that the solicitor for one side does not owe a duty of care to the other party: Al-Fayed v Commissioner of Police for the Metropolis [2002] EWCA 780 (Clarke LJ at paragraph 16). Nevertheless considering this particular email, it would have been obvious to any reasonable solicitor that the email was likely to be privileged and that a mistake was likely to have been made. Mr Coulthard's evidence does not address this at all. His evidence is focussed on what happened later, after the letter of 28^th September 2015 was sent to CYK. The evidence does not state when Mr Jones or Mr Goldrick were first contacted but it is apparent from the 28^th September letter that they had already been spoken to before it was sent to CYK. The email was obviously identified well before that date.
51. It is true that after 28^th September PAG's position shifted and the claim to privilege was confused but this has nothing to do with what took place before 28^th September and cannot retrospectively justify whatever took place, particularly when the claim to privilege in the email is now accepted.
52. The fact that the email indicated that there may have been serious non-disclosure by PAG of relevant documents does not alter the fact that RBS needed permission under r31.20 to use the email in order to do what was done. Given the nature of the Kilty/Rubens email a letter should have been written about it as soon as it was identified and if RBS wished to do what they did do, an application for permission to use it ought to have been made at the earliest opportunity. Neither step was taken when it should have been. The legal team for RBS did not have permission to use the email in the manner in which they did at the time and the stance taken on this application does not face up to that. What was revealed by the email itself, and PAG's subsequent change of position in correspondence, amount to mitigating factors but they do not justify the conduct of the RBS legal team in this matter. It seems to me that an appropriate sanction would be in costs and I will hear the parties about that when this is handed down.