PAG v RBS: Appeal of privilege waiver decision not to go ahead

It appears that the appeal of the decision in Property Alliance Group (PAG) v Royal Bank of Scotland (RBS) will no longer go ahead, with the case removed from the Court of Appeal’s list.

The first instance judgment held that, while documents disclosed by RBS to the Financial Conduct Authority (FCA) retained their privileged status as against the rest of the world, RBS had waived that privilege by stating in its Defence:

“For the avoidance of doubt, there have been no regulatory findings of misconduct on the part of RBS in connection with GBP LIBOR”

PAG argued that this put in issue the underlying exchanges between RBS and the FSA. RBS characterised it as a mere mention of the findings, which were public anyway, given that the FCA had published a Final Notice in respect of its investigation. The judge rejected this analysis, holding that the bank’s defence advanced a positive point that the regulator had not made a finding of misconduct in respect of GBP LIBOR, the subject matter of the current dispute. In doing so, the bank had made the settlement discussions admissible evidence.

This part of the judgment was controversial, as RBS did nothing more than refer to the contents of the Final Notice, not the settlement discussions behind it. It is unthinkable that the FCA would make a finding of misconduct but then agree to omit that from the Final Notice as part of a settlement negotiation. The Final Notice is the regulator’s findings, but the judge appears to have treated the concept of findings more broadly, encompassing matters in the settlement discussions with RBS.

Where does this leave us?

The useful part of the first instance decision is the confirmation that disclosure of privileged material to a regulator can be on the basis of a limited waiver that does not waive privilege to the world. However, with no appeal to be heard, we are left in the position that any reference in a court pleading to the findings of an FCA investigation is likely to be met with an argument that any privilege in documents disclosed to the regulator has been waived.

Any regulated firm or institution involved in post-regulatory investigation litigation will need to think carefully about to what extent it can invoke any findings of the regulator in that litigation.

More on the first instance decision can be found in our article.