On Thursday, 11 November 2004 the House of Lords finally handed down their Opinions on the scope of legal advice privilege in Three Rivers District Council and Others v. Governor and Company of the Bank of England. Although the actual decision was given at the end of a four-day hearing in June (in favour of the Bank), lawyers had to wait for the Lords' Opinions before they could assess the long-term consequences of the Judgment. In a very important respect, the Lords have re-established an old test for legal advice privilege. But there remain some areas of doubt that are likely to cause a few headaches for lawyers and clients in the future.
Before considering the Lords' Opinions, it is helpful to take a quick look at the history of this matter and also the specific categories of privilege that were relevant. Although there are a number of categories of privilege, only legal professional privilege is relevant to the Three Rivers decisions.
Legal Professional Privilege
What is legal professional privilege? This is the privilege that applies to certain types of legal communications. There are two types of legal professional privilege:
Legal advice privilege attaches to
- confidential communications
- between a client and his or her lawyer
- where legal advice or assistance is sought (or received).
Litigation privilege attaches to
- confidential communications
- between clients and lawyers or either of them and third parties
- with the dominant purpose of obtaining legal advice or assistance
- where litigation is anticipated or pending.
Litigation privilege is therefore wider than legal advice privilege.
Collapse of BCCI and the Bingham Inquiry
In 1991 BCCI collapsed leaving investors with substantial shortfalls. Bingham LJ was appointed to conduct an independent inquiry into the Bank of England's supervision of BCCI (under the Banking Acts 1979 – 1987). In order to prepare for the Inquiry, the Bank appointed three officials in the Bank to take responsibility for all dealings with the Inquiry, known as the Bingham Inquiry Unit or BIU. Freshfields were appointed by the Bank to advise on the Inquiry.
Following publication of the Bingham Inquiry Report, creditors of BCCI (the claimants) commenced proceedings against the Bank in an attempt to recover their losses in an action for misfeasance in public office. The claimants allege that the bank officials acted in bad faith in failing to take decisions that would protect the interests of the creditors. The trial is ongoing and during the course of the proceedings, the claimants sought disclosure from the Bank of a wide range of documents, including documents created by employees of the Bank for submission to Freshfields, in relation to the Bank's supervisory role over BCCI.
Three Rivers No. 5 – Who is the client?
Mr Justice Tomlinson – December 2002
Tomlinson J was asked to decide whether the Bank was entitled to claim privilege over the documents created by employees for submission to Freshfields. The parties agreed that the Bank's claim for privilege was limited to a claim for legal advice privilege because litigation privilege did not apply. This was based on the earlier case of in re L [1997] where the House of Lords held that litigation privilege could not be claimed in non-adversarial proceedings. The Bingham Inquiry was never considered to be "adversarial proceedings".
In his Judgment, Tomlinson J held that the documents were brought about with the dominant purpose that they were to be used to obtain legal advice and were, therefore, privileged from production. At this point, all seemed well. Few lawyers would have been particularly concerned by the decision, save for those interested in the use of the phrase 'dominant purpose' (an inherent part of the test for litigation privilege) in the context of legal advice privilege. It did not end there, however, as the claimants appealed. Given the approach taken by the Court of Appeal in some earlier cases on privilege it was, perhaps, not surprising.
The Court of Appeal – April 2003
In allowing the appeal, the Court of Appeal held that the only documents for which legal professional privilege could be claimed were communications between the BIU and Freshfields. The Court of Appeal also borrowed the term 'dominant purpose' when they found that documents created "for the dominant purpose of putting factual material before the Inquiry in an orderly and attractive fashion [were] not [created] for the dominant purpose of taking legal advice…". The House of Lords later referred to this as the "presentational" purpose.
The Court of Appeal also concluded that an employee of the Bank stood in the same position as a third party agents. In adopting that formulation, therefore, within the Bank, only the BIU was within the solicitor client relationship.
In light of the Court of Appeal's decision, the Bank petitioned for leave to appeal to the House of Lords, but it was dismissed.
Three Rivers No. 6 – Presentational advice
Mr Justice Tomlinson – November 2003
The Claimants did not leave it there. Following the Court of Appeal's narrow interpretation of the meaning of legal advice privilege, they sought further disclosure from the Bank for communications between the BIU and Freshfields in August 2003, having previously accepted that they were protected by legal advice privilege. Tomlinson J had the unenviable task of interpreting the Court of Appeal's decision (No. 5) that overruled his previous decision. In his Judgment, he held that communications between the BIU and Freshfields were protected by legal advice privilege where they related to legal rights and obligations. However, in following the reasoning of the Court of Appeal, he found that if the dominant purpose of the advice in the communications were for the Bank to present itself to the Inquiry in the best possible light, so as to avoid criticism, he was bound to conclude that they would not be protected by legal advice privilege.
The Court of Appeal – March 2004
The Bank appealed and the Court of Appeal, in a brief review of the authorities, dismissed the appeal. As if that was not worrying enough, the Master of the Rolls, Lord Phillips of Worth Matravers said:
"We have found this area of law not merely difficult but unsatisfactory. The justification for litigation privilege is readily understood. Where, however, litigation is not anticipated it is not easy to see why communications with a solicitor should be privileged. Legal advice privilege attaches to matters such as the conveyance of real property or the drawing up of a will. It is not clear why it should. There would seem little reason to fear that, if privilege were not available in such circumstances, communications between solicitor and client would be inhibited. Nearly fifty years have passed since the Law Reform Committee looked at this area. It is perhaps time for it to receive a further review."
It is, in the light of the House of Lords decision, easy to criticise of the Court of Appeal. However, their approach indicated awareness of some of the wider issues relating to legal advice privilege at the present time. Whilst in Europe lawyers are battling with the European Commission and the EJC to recognise legal advice privilege for in-house lawyers, in England and Wales the accountancy profession has complained that legal advice privilege provides lawyers with an anti-competitive advantage in areas such as tax advice. The Court of Appeal also recognised that the role of a modern lawyer may not be confined to advice on the law. It may well be that the Court of Appeal was alive and sensitive to these issues when pronouncing its judgment. Indeed, it has to be accepted that legal advice privilege must have some boundaries in order to prevent its abuse.
Nonetheless, this time around, the Bank's petition to the House of Lords was allowed.
Three Rivers No. 6: The House of Lords – November 2004
Their Lordships were well aware that their Opinions would generate lengthy debate in legal circles. The Law Society, Bar Council and the Attorney General all intervened in the appeal. Submissions addressed the issue of 'presentational' issues raised in Three Rivers No. 6 and the issue of "who is the client?" raised in No. 5. Their Lordships have not answered all the questions raised by the earlier judgments, and in answering some of them, they have raised some new questions of their own. So what can be taken from their Lordships' Opinions?
Policy
Lord Scott considered why the solicitor/client relationship is given what he described as a 'special privilege' that is not available to doctors, accountants, partners, parents or even priests. His conclusion was that even where there is no litigation, a client must be encouraged to be frank with his or her lawyer. Further, it is in the public interest that clients are able to conduct their affairs in an orderly fashion and for that to happen, lawyers must be in possession of all the facts. This is by no means a new concept, but was succinctly described in R v. Derby Magistrates' Court ex p. B [1996]:
"A man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyers in confidence will never be revealed without his consent."
This raises the issue of the potential for a balancing act to be undertaken, when litigation ensues, between the courts having before them all relevant material against the need for the client to be able to consult his or her lawyer in confidence without fear that that correspondence will later be subject to judicial scrutiny. Lord Carswell in his Opinion quotes Lord Nicholls' definitive statement on that point from in re L:
"The public interest in the party being able to obtain informed legal advice in confidence prevails over the public interest in all relevant material being available to courts when deciding cases."
Further, the Lords made it clear that they did not share the concerns raised by Lord Phillips in the Court of Appeal as to whether or not there was a general need for legal advice privilege. Indeed, Lord Rodger went out of his way to highlight why examples cited by Lord Phillips still warranted the protection of legal advice privilege.
The scope of litigation privilege
As mentioned above, the Three Rivers decisions were limited to the scope of legal advice privilege by the operation of in re L. However, Lord Scott and Lord Rodger have now cast doubt over the correctness of that decision. In particular, Lord Scott has suggested that litigation under the current Civil Procedure Rules (introduced in 1998) is in many respects no longer adversarial. Their Lordships were not prepared to address the issue in this judgment. It appears that there may now be an opportunity for the boundaries of litigation privilege to be tested.
Dominant Purpose
References to the 'dominant purpose' test were notably scarce in their Lordships' Opinions. This was, it is hoped, deliberate to avoid the confusion created by the Court of Appeal in its earlier decisions. Certainly, it is not a constituent element of the test for legal advice privilege as set out below. Lord Carswell, however, seems less convinced. In his Opinion, it appears that there may be a place for the 'dominant purpose' test although he did not expand further on his views. For the time being in the absence of a clear pronouncement from the House of Lords there will remain some uncertainty but, if a party is obtaining 'legal advice' where it is to be construed widely, there may be few circumstances where there would ever be other or competing purposes for the communications that would give rise to a need to refer to the test.
The scope of legal advice privilege
Advice for the 'presentational' purpose envisaged by the Court of Appeal is protected by legal advice privilege. The House of Lords unanimously favoured the test set out in the earlier case Balabel v. Air India [1988] that:
"legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context."
Supporters of the Court of Appeal decision may argue that its views were not inconsistent with this test. Therefore, it is worth considering is some detail what is meant by 'relevant legal context'. Lord Scott suggests that in cases of doubt, the judge should ask "whether the advice relates to the rights, liabilities, obligations or remedies of the client either under public or under private law". In the case of the Bank, arguably the relevant legal context was its rights, liabilities, obligations or remedies in public law established by the Banking Acts. This test is not, perhaps, as narrow as is first sounds. A party will normally approach a lawyer for advice in relation to a certain course of conduct. If the party is seeking commercial approval of his proposed course of action this will not, of itself, be protected by privilege. However, if the party is seeking advice because, having taken a commercial decision, he or she wishes to understand how that decision may be influenced by the law, that would arguably relate to his or her rights, liabilities, obligations or remedies. An alternative approach to understanding the test is to consider the capacity in which the lawyer is advising. If he or she is advising, as a senior in-house lawyer may, in a commercial capacity, again, that advice is unlikely to be privileged. However, if the lawyer is advising as a lawyer (by using his legal skills in a relevant context) then that advice will be privileged.
Who is the client?
Unfortunately, their Lordships were not prepared to comment on the Court of Appeal's decision in Three Rivers No. 5. Therefore, we are left in doubt as to when communications within a body corporate relating to obtaining legal advice outside of litigation will be protected by privilege. Some comfort can be drawn from their Lordships' position that they neither approved nor disapproved of the Court of Appeal judgment. Lord Carswell went further in saying:
"I do not propose to express any opinion on [Three Rivers No. 5]. Having said that, I am not to be taken to have approved of the decision…, and I would reserve my position on its correctness."
Uncertainty, therefore, remains for corporate entities and their in-house legal advisers. Companies will now need to proceed with caution and be aware that not everything created for the purposes of obtaining legal advice will be protected by legal advice privilege. Clients are advised at the outset of a project involving internal and external lawyers to nominate whom within the organisation is "the client".
Conclusion
The test for legal advice has now been clarified as meaning advice within a "relevant legal context". There still remain, however, areas of uncertainty raised by the Three Rivers judgments. These may well give rise to disputes and satellite litigation. Ultimately, it will take another case to go to the House of Lords before there is any hope that these areas of doubt will be reconsidered. For the time being, lawyers and, particularly, in-house lawyers, will have to consider carefully how they should manage their legal communications so as to minimise the risk of later disclosure.
