The House of Lords reaffirms the importance of legal advice privilege - but practical problems remain

The House of Lords has today handed down its much anticipated judgment in the Three Rivers litigation: Three Rivers District Council and Others v The Governor and Company of the Bank of England . On 29th July 2004 the Lords allowed the Bank of England's appeal from the Court of Appeal's decision in relation to "presentational" advice. The Lords have today given their reasons for that decision, fundamentally rejecting the Court of Appeal's reasoning and re-emphasising the right to seek legal advice in confidence.

Disappointingly, their Lordships have not taken the opportunity to comment on the earlier Court of Appeal decision which had cast doubt on whether communications between a lawyer and the client's employees are covered by legal advice privilege (see post).

Presentational Advice

The appeal to the House of Lords concerned the question of whether communications between the Bank of England and its legal advisers for advice and assistance in relation to the Bingham Inquiry concerning the collapse of BCCI were protected by legal advice privilege. The Court of Appeal had held that legal advice privilege only protects advice as to legal rights and obligations, and that this did not include what it regarded as "presentational" assistance in putting relevant factual material before the Inquiry in an orderly and attractive fashion. In doing so, the Court of Appeal not only appeared to narrow the scope of legal advice privilege, opening up the need for difficult considerations as to whether a lawyer's retainer was for the dominant or primary purpose of genuine legal advice or mere "presentational" advice, but also went so far as to voice doubts as to the justification for legal advice (as opposed to litigation) privilege.

In unanimously rejecting the Court of Appeal's narrow application of legal advice privilege, their Lordships took the opportunity to reaffirm the public policy reasons for it. In comprehensive reviews of the authorities, both Lord Scott and Lord Carswell (who gave the two main speeches) stressed that the rationale for legal privilege is the need for a client to be able to seek advice from a lawyer with absolute candour, which is only possible where the lawyer can give unqualified assurance that whatever the client tells him in confidence will never be disclosed without his consent. In drawing those conclusions, their Lordships rejected the Court of Appeal's doubts as to its justification, emphasised the absolute nature of privilege, and concluded that the Court of Appeal had failed to accord legal advice privilege a wide enough scope.

In determining the proper scope of legal advice privilege, Lord Scott referred to Balabel v Air India [1988] 1 Ch 317 (which was generally referred to with approval by their Lordships), and to Taylor LJ's statement that legal advice includes "advice as to what should prudently and sensibly be done in the relevant legal context". While conceding that there would be marginal cases where it is difficult to determine whether the seeking or obtaining of advice took place in a relevant legal context so as to attract legal advice privilege, Lord Scott concluded that in cases of doubt, an objective test should be applied as to whether the advice relates to the "rights, liabilities, obligations or remedies of the client either under private law or under public law".

In the context of this case the issue was "not in the least marginal". The preparation of the evidence and the submissions to be made to the Bingham Inquiry were for the purpose of enhancing the Bank's prospects of persuading the Inquiry that its discharge of its public law obligations under the Banking Acts in relation to BCCI had been reasonable. Accordingly, although "presentational", the advice was given as to what should prudently and sensibly be done in the relevant legal context of the Bingham Inquiry and the Bank's public law duties under the Banking Acts. In Lord Scott's opinion, such advice fell "squarely within the policy reasons underlying legal advice privilege".

The other Lords made similar points as to the wide scope of the privilege. Lord Rodger putting it as "whether the lawyers are being asked qua lawyers to provide legal advice", or more prosaically, whether they were being asked to "put on legal spectacles". Lord Carswell noted that "presentational" advice of the type given to the Bank was part of "the classic exercise of one of the lawyer's skills", irrespective of the forum, provided that such advice is given in a legal context. Lord Carswell went further in concluding that the principle affirmed in the earlier case of Minter v Priest [1929] 1 KB 655 remained applicable, that case having held that privilege applies to advice within "the ordinary scope of a solicitor's business", and communications for the purposes of obtaining the professional advice of the legal adviser.

The opinions therefore amount to a clear rejection of the Court of Appeal's conclusions, not only in relation to the specific circumstances of advice in relation to the Bingham Inquiry, but also in relation to the apparent restriction in scope of, and even questioning the need for, legal advice privilege.

Employee communications

In an earlier application in the same case, the Court of Appeal held that legal advice privilege only protected communications between the legal adviser and the Bingham Inquiry Unit ("BIU") within the Bank of England as the "client". It did not protect documents generated by employees of the client for submission to the party's legal advisers, the employees being deemed to be third parties rather than the client for this purpose.

Permission to appeal that decision had previously been refused, and it was not technically in issue before their Lordships. However, given the concern expressed at the implications of that judgment, particularly for corporate clients who can only communicate through employees or officers, the House of Lords had been invited by the applicants, and by the Attorney General, the Law Society and Bar Council, to clarify the approach that should be adopted to determine whether a communication between an employee and his employer's lawyers should be treated for legal advice privilege purposes as a communication between the lawyer and the client.

Disappointingly, however, their Lordships declined to do so. Lord Scott noted that in the present case disclosure had already been given pursuant to the Court of Appeal judgment, so that the issue was moot. He also noted that it was a difficult issue with a dearth of domestic authority; that whatever views were expressed would not bind the lower courts; and that if the issue did come back before the House of Lords, a different view might then be reached. Lord Scott stated that "nothing that I have said should be construed either as approval or disapproval of the Court of Appeal's ruling on the issue". Lord Carswell, however, stated that he saw "considerable force" in the first instance judgment which had found the employee documents to be privileged, and also that "I am not to be taken to have approved of the [Court of Appeal's] decision … and I would reserve my position on its correctness".

Whatever may be drawn from Lord Carswell's comment as to any future decision, the law remains in this respect in an unsatisfactory state.

Comment

Subject to the issue as to employees, the judgment represents a welcome re-affirmation of the importance and breadth of legal advice privilege, and should ensure that parties and courts alike are able to apply a simple and objective test in determining whether a lawyer's correspondence with a client is made in a legal context. Legal advice privilege will apply whenever a lawyer is advising "in a legal context", "qua lawyer", or with his "legal spectacles on". As previously thought, privilege extends to advice as to what to do in such a legal context (including other correspondence within that continuum of correspondence), and is not restricted to advice solely as to "legal rights and obligations".

In relation to the status of employees, the refusal to give guidance in this area leaves companies and courts faced with what Baroness Hale referred to as "particular difficulties in identifying 'the client' to whose communications privilege should attach". Companies will face difficult issues as to who can be regarded as the lawyer's "client" whenever advice is sought from external legal advisers or in house lawyers. This will hamper the efficient and cost-effective gathering of information for the purpose of obtaining legal advice. The benefit of re-affirming the importance and breadth of legal advice privilege is severely reduced if significant practical doubts remain for corporates as to its applicability to communications with their employees.