2004 should prove to be an interesting year for the development of the law surrounding professional privilege at both a domestic and European level.
As many in-house lawyers will already be aware, an unexpected ruling of the Court of Appeal in April last year in the BCCI Creditors/Bank of England litigation means that the ‘client’, for the purposes of privilege, is now limited to the individual who instructs the lawyer, rather than the company. It also raises questions as to the status of legal advice received by the individual that needs to be circulated beyond the ‘client’ but within the company. More recent decisions of the Court of Appeal and the European Court of Justice have muddied the water still further.
The circumstances of the BCCI litigation are fairly unique, but the implications are far reaching.
In the wake of the collapse of the Bank of Credit and Commerce International (BCCI) in 1991, the Government set up the Bingham Inquiry to examine the role of the Bank of England as regulator of BCCI. To deal with the Bingham Inquiry, the Bank had established a three-person team, the Bingham Inquiry Unit (BIU), to collect information as to the Bank’s conduct in relation to BCCI and to liaise with the Bank’s lawyers.
Subsequently, creditors of BCCI commenced proceedings against the Bank of England for misfeasance in public office. During the course of those proceedings, the creditors challenged the Bank of England’s claim of legal professional advice privilege over internally created documents.
Privilege breaks down into two main elements - legal advice privilege and litigation privilege. Legal advice privilege applies to communications between a lawyer and his or her client for the purpose of obtaining legal advice and, therefore, many aspects of the lawyer-client relationship will fall into this category.
Litigation privilege applies to documents and other communications made between a client and his or her lawyer when litigation (meaning adversarial proceedings) has been either commenced or is contemplated. Both categories protect documents from disclosure to the other side in litigation and those documents continue to be privileged even after litigation is concluded.
Inquiries do not count as adversarial proceedings, so litigation privilege could not apply to the documents in question. However, in December 2002, the High Court agreed with the Bank of England that the documents were covered by legal advice privilege. Unfortunately, in April 2003 the Court of Appeal saw it differently.
In overturning the High Court’s decision that the documents were protected by legal advice privilege, the Court of Appeal made a curious distinction as to who was entitled to legal advice privilege. The Court asserted that its decision was merely restating existing law; we disagree and, unless overturned, it fundamentally affects the relationship between companies and their lawyers.
The documents at the heart of the challenge to privilege were documents created by employees or ex-employees of the Bank of England for the purpose of the Bank obtaining legal advice.
The Court of Appeal said that only direct communications between the BIU and the Bank’s external lawyers were covered by privilege. This very narrow definition meant that any documents created by employees or ex-employees of the bank intended to be communicated to the Bank’s external lawyers were not covered by legal advice privilege. In reaching this conclusion, the Court of Appeal saw employees in the same category as agents and third parties, where legal advice privilege would never apply.
The issue of legal advice privilege was complicated further when comments made by the Court of Appeal led the creditors to claim that they were entitled to see advice given by the Bank of England’s lawyers that related to presentational matters. In November, Mr Justice Tomlinson, whose earlier decision in favour of the Bank was overturned by the Court of Appeal, had the unenviable task of interpreting the Court of Appeal’s comments. Mr Justice Tomlinson found that where lawyers give advice on presentational matters, as opposed to advice on a party’s substantive rights and obligations, that advice is not privileged. He equated advice of this nature to advice that could equally be given by accountants or management consultants.
Leave to appeal the Court of Appeal’s April decision to the House of Lords was refused. However, Mr Justice Tomlinson’s November decision on advice on presentational matters is the subject of appeal. The appeal is welcomed and will, it is hoped, be taken to the House of Lords for a definitive review of legal advice privilege.
As direct communications between an individual and lawyer only may enjoy privilege, so all communications between a company’s employees and its lawyers would have to be made directly with external lawyers, rather than co-ordinated internally, at considerable expense to the company. Companies will have to be much more careful how documents are created and to whom they are distributed, creating an environment where essential information may not readily be provided to a company’s lawyer for fear that the method of communication is not protected by privilege.
Further, communications between clients and lawyers that are not strictly related to substantive rights and obligations may not be protected by privilege. Advice on matters of presentation is often intertwined with advice on a party’s rights and obligations and is rarely given by lawyers without regard to those rights and obligations. Yet, as the law stands the Court would not necessarily uphold a party’s claims to privilege over such advice.
Ironically, as the English Court has taken a narrow view on legal advice privilege, the European Court may be going in the other direction. In-house lawyers in England and Wales enjoy privilege to the same extent as those in private practice, with one exception. In relation to investigations by competition authorities, the European Commission has not respected claims of privilege by in-house lawyers. However, last November, the European Court of First Instance decided (on an interim basis) that a company’s claims to privilege over certain documents created by its in-house lawyers should be respected until the issue is finally decided by the Court, probably this year.
The concept of privilege must have some boundaries to prevent its abuse. But, at the time of writing, it is in a state of considerable uncertainty.
For further information please contact Guy Pendell at guy.pendell@cms-cmck.com.
