Bilta (UK) Ltd v Royal Bank Of Scotland Plc & Anor

Litigation privilege applies where documents are created when adversarial litigation is in progress or contemplation, for its sole or dominant purpose. The dominant-purpose inquiry is factual and requires a realistic, commercial assessment of the circumstances when the documents were created.

Investigative, cooperative or settlement-related purposes may be subsumed within the litigation purpose where they form part of the continuum of preparing to resist an expected claim. An investigation conducted by litigation solicitors after a prospective claimant has identified the legal and factual basis of an expected assessment may therefore be privileged, even though it also responds to regulatory duties or seeks to avoid proceedings.

The claimants, companies in liquidation acting through their liquidators, sought disclosure under CPR Part 31 of documents created by RBS during an investigation into suspected VAT fraud connected with carbon-credit trading. RBS claimed litigation privilege over the investigation materials, including interview transcripts and documents underlying a report supplied to HMRC.

The parties accepted that litigation was in contemplation and that the proceedings would be adversarial. The issue was whether RBS had established that the documents were created for the sole or dominant purpose of conducting that litigation, rather than principally to investigate the facts, comply with tax obligations or persuade HMRC not to issue an assessment.

1. Application dismissed. The documents and interview transcripts were created for the sole or, at least, dominant purpose of anticipated litigation before the First-tier Tribunal concerning HMRC’s expected assessment. They were therefore protected by litigation privilege. Permission to appeal was refused.
2. The applicable test, stated in Three Rivers District Council v Governor & Company of the Bank of England (No 6) [2005] 1 AC 610, required: litigation in progress or contemplation; communications made for the sole or dominant purpose of conducting that litigation; and adversarial rather than investigative or inquisitorial litigation.
3. The burden rested on RBS. Whether litigation was the dominant purpose was a question of fact. Following Re Highgrade Traders [1984] BCLC 151, the court had to take a realistic and commercial view. A subsidiary purpose may be inseparable from, and subsumed within, the litigation purpose.
4. HMRC’s letter of 29 March 2012 was a watershed. It stated that HMRC considered there were sufficient grounds to deny substantial input VAT and analysed the legal and factual basis for doing so. The likely assessment was analogous to a claim, and the report prepared in response was comparable to a response to a letter before claim.
5. The cooperative nature of RBS’s dealings with HMRC, its tax obligations and its wish to persuade HMRC not to assess did not prevent litigation privilege. Those purposes formed part of the continuum leading to the expected litigation. The court distinguished the different factual circumstances in Serious Fraud Office v Eurasian National Resources Corporation Ltd [2017] 1 WLR 4205. The evidence, although not as comprehensive as it might have been, was sufficient to discharge RBS’s burden.

This was a first-instance application for disclosure and inspection under CPR Part 31. The High Court dismissed the application and refused permission to appeal.