| Date | 15 December 2004 |
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| Judgment | Three Rivers Council and Others v The Governor & Co of the Bank of England, House of Lords, 11 November 2004 |
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| The Issue | A client's right to refuse to disclose confidential information passing between itself and its lawyers. |
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| Implication |
A client may refuse to disclose confidential communications between itself and its lawyer where that communication has been prepared in a legal context or with potential litigation in mind. |
printThe recent decision of the House of Lords in the case of Three Rivers District Council v Governor & Company of The Bank of England has clarified the circumstances in which individuals or corporations can refuse to disclose confidential documents to third parties by claiming legal professional privilege. The starting point of this case was the collapse of the Bank of Credit and Commerce International in July 1991, with a huge excess of liabilities over assets. BCCI's depositors and shareholders stood to lose all of their deposits and investments. Under the UK Banking Acts, the Bank of England had a supervisory role in relation to banks and financial institutions carrying on business in the UK. Very soon the finger of blame was pointing at the Bank as to the manner in which it had carried out that role. To allay those concerns the Chancellor of the Exchequer announced in Parliament that Lord Justice Bingham would be appointed to head up an independent enquiry into the Bank's supervision of BCCI. The Bank engaged lawyers and set up its own internal unit, the 'Bingham Enquiry Unit', in order to respond to the enquiry. Lord Justice Bingham's report was published in October 1992. Not everyone was satisfied. By the following year over 6,000 depositors of the UK branches of BCCI had commenced an action against the Bank for the losses they had incurred as a result of the BCCI collapse. The success of their action against the Bank required that they would have to show not simply that the Bank had negligently performed its supervisory duties towards BCCI, but that it had acted in bad faith. As a consequence the claimants sought the widest possible disclosure of documents from the Bank that might assist them in establishing bad faith, including documents exchanged between Bank employees, the Bingham Enquiry Unit and its legal advisors during the period when the Bank was preparing its case for presentation to the enquiry. In response, the Bank generally maintained that any documents created for the purpose of dealing with the enquiry should be regarded as confidential and that it was entitled to claim legal professional privilege protecting it from any obligation to disclose those documents. Whilst this search for evidence may have been little more than a fishing expedition on the part of the claimants, the extent of the Bank's obligation to disclose material was nevertheless hotly contested. In essence there are two main types of legal professional privilege; litigation privilege and legal advice privilege. Litigation privilege arises only where litigation is contemplated or ongoing, with the effect that all communications produced for the sole or dominant purpose of the litigation are protected from disclosure, including all communications between a lawyer and his client and any independent third party such as factual or expert witnesses. The Bank recognised that in the context of the Bingham Enquiry it could not claim litigation privilege. It claimed however that legal advice privilege should apply to all confidential communications created in connection with the enquiry. In April 2003 the Court of Appeal handed down a judgment concerning the nature of documents to which the Bank could claim legal advice privilege. To the surprise of many lawyers it adopted a fairly narrow interpretation. In essence the appeal court decided that legal advice privilege was restricted to advice about legal rights and liabilities. This meant that where the Bank's lawyers had provided advice to the Bank on how best to present its evidence to the Bingham enquiry, that advice was not strictly legal advice and therefore not privileged. The House of Lords disagreed with the Court of Appeal's ruling. It considered that where the Bank's lawyers were providing presentational advice to the Bank on how to submit evidence to the enquiry, such advice continued to be legal advice to which privilege attached. It was noted 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". Lord Scott commented that it was "necessary in our society, in which the restraining and controlling framework is built upon a belief in the rule of the law, that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyer's legal skills in the management of their affairs, should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busy-bodies or anybody else". Lawyers will be relieved that the reach and importance of legal advice privilege has been confirmed in this decision. They will be less content that the House of Lords has failed to grapple with another key point made by the Court of Appeal. The Court of Appeal held that the 'client' for the purpose of establishing privilege was not actually the Bank and any of its employees, but was limited to the members of the internal 'Bingham Enquiry Unit' that the Bank had set up to deal with the enquiry. That decision meant that the Bank became obliged to disclose communications which had passed between its employees and its lawyers during preparation for the enquiry. This finding may drive a coach and horses through the concept of legal advice privilege for many large companies who have no option but to obtain and manage legal advice through a wide range of its employees. That point was not considered by the House of Lords, and accordingly the Court of Appeal's findings will remain binding. Companies should therefore be aware that where there is no pending litigation but confidential legal advice is sought, care should be taken in letters of instruction to external lawyers to define the client in the widest possible sense. Routing all communications through the company's in-house legal team will assist, but this alone may not guarantee that privilege is retained in every case.
CJ-0450
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