Singapore - Without Prejudice Privilege May Apply To Communications With Regulator.

Legal News & Analysis – Asia Pacific - Singapore – Dispute Resolution

7 March, 2016


Property Alliance Group Ltd v Royal Bank of Scotland plc [2016] 1 WLR 361




In the recent case of Property Alliance Group Ltd v Royal Bank of Scotland plc [2016] 1 WLR 361, the High Court of England (Chancery Division) (“Court”) confirmed that without prejudice (“WP”) privilege, which is usually applied in the context of civil litigation, may apply to communications with a regulator.


This appears to be the first time an English court has addressed this issue. The case also provides guidance to financial institutions on how privilege may be maintained over documents and communications exchanged in the context of regulatory investigations.




Property Alliance Group Ltd (“PAG”) entered into four interest rate swaps with the Royal Bank of Scotland plc (“RBS”), each of which employed a three-month GBP London Interbank Offered Rate (“LIBOR”) as a reference rate.


It subsequently brought a claim against RBS following findings by regulators that RBS manipulated the LIBOR. Essentially, PAG alleged that by proposing LIBOR as the reference rate, RBS represented that it was not rigging LIBOR rates for its own ends. 


Given the breadth of PAG’s pleaded case, RBS indicated that there were voluminous documents to be reviewed as part of its disclosure obligations. The Court therefore ordered RBS to disclose internal reports, reviews and summaries relating to the allegations of LIBOR misconduct.


Consequentially, RBS produced a disclosure list, but objected to providing inspection of the following categories of documents:


(a) Documents relating to the work of its Executive Steering Group (“ESG”), in relation to which RBS asserted legal advice privilege (“ESG Documents”);

(b) Communications passing between RBS and the UK Financial Services Authority (“FSA”), as it then was, and/or their lawyers. These were marked “without prejudice” and represented negotiations with the FSA relating to the FSA’s final notice imposing a penalty of GBP87.5 million on RBS. RBS asserted WP privilege in respect of this category (“WP Communications”); and

(c) Documents RBS shared with various regulators over which legal advice privilege and/or litigation privilege was otherwise asserted (“Waiver Documents”). PAG contended that any such privilege was waived by the acts of showing or handing over. RBS contended that privilege was not waived because every document was shown or provided on a confidential “non waiver” basis.




ESG Documents


With regard to the ESG Documents, the Court found that the information submitted by RBS did not enable the court to understand the basis on which the claim to legal advice privilege was made. 


RBS provided inconsistent accounts of the nature a result, the Court ordered the WP and role of the ESG. In correspondence, it stated Communications to be inspected. that the purpose of the ESG meetings was to allow RBS to receive legal advice from external legal advisers on the regulatory investigations. However, its skeleton arguments characterised the ESG in a different way, stating that the ESG was formed to oversee investigations and potential litigation concerning LIBOR.


The Court was therefore not satisfied that the claim to legal advice privilege was correctly made, and ordered that the ESG Documents be produced to the Court for inspection.


WP Communications


In respect of the WP Communications, the Court held that a firm which is the subject of an investigation by the Financial Conduct Authority (“FCA”), the successor to the FSA, “has the right to withhold inspection of communications which were part of genuine settlement discussions between that firm and the FCA”. The Court held that the right applies in civil litigation with a third party, whether or not settlement was reached. In this regard, the right arises by analogy with the without prejudice rule.


However, the Court held that the right cannot be maintained in civil proceedings if the basis on which the final notice was decided is itself in issue in the proceedings. In such a case, justice demands that the contents of the settlement discussions leading to the final notice be disclosed.


Having said that, the Court made clear that as long as the basis on which the final notice was reached is not in issue, there is no reason why the without prejudice communications should not remain covered by that rule.


In the circumstances, as RBS had pleaded, “For the avoidance of doubt, there have been no regulatory findings of misconduct on the part of RBS in connection with GBP LIBOR”, the court held that RBS’ formal defence advanced a positive point that the regulators had not found misconduct relating to GBP LIBOR.


In taking such a course, RBS had put in issue the basis on which the final notice was produced. As a result, the Court ordered the WPCommunications to be inspected.


Waiver Documents


With regard to the Waiver Documents, the Court found that the agreements between RBS and the regulators expressly provided that privilege and confidentiality were maintained. RBS was entitled to maintain the claim to privilege of documents which were only shown or provided to the regulators on a limited basis and despite the existence of legal rights or duties on the part of the regulators to use, act or even publish the documents pursuant to their regulatory powers.


However, the Court ordered that the Waiver Documents be inspected on account of RBS’ reliance on the absences from the regulators’ findings. The Court held that “RBS cannot have it both ways. It cannot on the one hand rely on absences from the regulators’ findings as indicating the limits of its misconduct and yet on the other hand seek to maintain as privileged what it put to them”.




This decision has yet to be considered by the Singapore courts. Nevertheless, the case highlights the following important points which financial institutions will want to take note of.


Financial institutions should clearly set out the mandate, or the terms of reference, of any committee which has been formed to manage regulatory or investigations. If the purpose of the committee is to receive legal advice from external counsel and/or to manage claims or litigation (actual or potential) against the financial institution, privilege is more likely to attach to documents relating to the work of such a committee. This is less so if the committee’s role is a general one of overseeing the investigation or to update senior management on the same.


Financial institutions are entitled to argue that WP communications exchanged with regulators should be privileged from disclosure. In this regard, in the conduct of their civil cases, financial institutions should take care not to put their WP communications with regulators in issue, or risk losing the right to maintain privilege. 


Financial institutions may also argue that as against third parties, legal advice privilege and litigation privilege may still be asserted over documents shared with regulators on a “non- waiver of privilege” basis, notwithstanding that the regulator may be obliged to disclose the documents. That said, insofar as any findings of misconduct have been made by the regulators, financial institutions must pay heed when relying on, or the absence of, such findings in civil proceedings to show “the limits of its misconduct as that may amount to a waiver of such privilege.


Drew & Napier

For further information, please contact:
Hri Kumar Nair, Partner, Drew & Napier