Property Alliance Group v The Royal Bank of Scotland plc: deception prohibits litigation privilege


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For further information, please contact Leigh Callaway, Senior Associate, Fladgate LLP (lcallaway@fladgate.com)


 

Property Alliance Group (PAG) brought a claim against The Royal Bank of Scotland plc (RBS) for misrepresentation of four interest rate swaps entered into between 2004 and 2008.  Whilst there have been no judgments on the substantive claims, the disclosure process has led to a number of interesting decisions; one of the most recent discusses litigation privilege and the impact of deception on the “dominant purpose”.

The decision involved an application by RBS to inspect recordings of meetings between Mr Russell, the founder and managing director of PAG, and two ex-employees of RBS.  Mr Russell arranged the meetings claiming PAG wanted to discuss future business relationships with these individuals.  However, in fact Mr Russell’s purpose was to gather evidence for PAG’s claim against RBS and he surreptitiously recorded the meetings.  PAG claimed the meetings and recordings were privileged.  Whether the meetings were privileged turned on whether the communications were made for the dominant purpose of conducting litigation.

It was determined that to evaluate the dominant purpose, the court must make an objective assessment taking into account all of the evidence, including the parties’ intentions.  In this instance, Mr Russell’s purpose was to gather evidence for the litigation.  In contrast, the ex-employees of RBS attended to discuss business opportunities.  In this case, Mr Justice Birss acknowledged it was nonsensical to distil a dominant purpose from two clear but entirely divergent purposes.

In deciding whose purpose should override, it was held that “the critical point” was that Mr Russell actively deceived the RBS ex-employees.  It was therefore fair and correct to assess the purpose of the meetings from their point of view.  As a result, the meeting was not privileged and accordingly neither were the recordings.  Notably, Mr Justice Birss stated that “if Mr Russell had not misled these two gentlemen then things might be different but that is not what happened”.

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