 House of Lords |
Session 2003 - 04
Publications on the Internet Judgments |
| Judgments -
Three Rivers District Council and others (Respondents) v. Governor and Company of the Bank of England (Appellants) (2004)
|
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE Three Rivers District Council and others (Respondents) v. Governor and Company of the Bank of England (Appellants) (2004) ON THURSDAY 11 NOVEMBER 2004 The Appellate Committee comprised: Lord Scott of Foscote Lord Rodger of Earlsferry Baroness Hale of Richmond Lord Carswell Lord Brown of Eaton-under-Heywood HOUSE OF LORDSOPINIONS OF THE LORDS OF APPEAL FOR JUDGMENTIN THE CAUSEThree Rivers District Council and others (Respondents) v. Governor and Company of the Bank of England (Appellants) (2004)[2004] UKHL 48LORD SCOTT OF FOSCOTE My Lords, 1. On 29 July 2004, the Appellate Committee announced that this appeal should be allowed. I now give my reasons for reaching that decision. Introduction 2. The actual issue for decision on this appeal is an apparently simple one that can be very shortly stated. Do the communications between the Bank of England, their solicitors, Freshfields, and counsel relating to the content and preparation of the so-called overarching statement submitted on behalf of the Bank to the Bingham Inquiry qualify for legal professional privilege? It is contended by the respondents, and was held by the Court of Appeal, that they do not. But the broader issues that have been debated on this appeal are not in the least simple. They have required your Lordships to consider the policy justifications for the existence of legal professional privilege in our law and, generally, the permissible scope of the privilege. In relation to what sort of communications can legal professional privilege be claimed? As to the scope of legal professional privilege, the focus has been, first, on the part, if any, that legal professional privilege should be allowed to play where the advice or assistance sought by the lawyers is not advice or assistance about the client's legal rights or obligations, and, second, on the criteria to be applied to determine whether communications between the lawyers and employees of the client can be treated for privilege purposes as communications between the lawyers and the client. 3. In order that the significance of the issues as I have broadly described them can be understood, it is necessary to provide a brief history of the events that have led up to this appeal. The history 4. The starting point is the collapse of BCCI in July 1991 with a huge excess of liabilities over assets. BCCI's depositors stood to lose a substantial part of their deposits. Shareholders in BCCI stood to lose their investments. Under the Banking Acts of 1979 and 1987 the Bank of England ("the Bank") has a supervisory role in relation to banks and financial institutions carrying on business in the United Kingdom. So the Bank had had statutory responsibilities and duties regarding the supervision of BCCI. 5. Very shortly after the collapse of BCCI the Chancellor of the Exchequer announced in Parliament that there would be an independent inquiry into the Bank's supervision of BCCI. Bingham LJ (as he then was) was appointed to conduct the Inquiry. Bingham LJ's terms of reference required him
In a letter to the Chancellor of the Exchequer written in July 1992, Bingham LJ described his terms of reference as calling for the consideration of five broad questions. These were -
6. It was clear to all that the Bank was the principal party to be investigated and shortly after the Inquiry had been established the Governor of the Bank appointed three Bank officials to deal with all communications between the Bank and the Inquiry. These officials, and other Bank personnel appointed to assist them from time to time, became known as the Bank's Bingham Inquiry Unit ("the BIU"). Freshfields were retained by the Bank to advise generally on all dealings of the Bank, its officials and employees with the Inquiry. Freshfields retained counsel to assist in that process. One of the main functions of the BIU was the preparation and communication of information and instructions to Freshfields to enable them to carry out their duties under their retainer. They (Freshfields) and counsel gave advice as to the preparation and presentation of the Bank's evidence to the Inquiry and as to the submissions to be made to the Inquiry on the Bank's behalf. Indeed, except for some routine administrative arrangements, all the Bank's communications with the Inquiry were the subject of extensive advice from Freshfields and counsel. 7. The Bingham Inquiry Report was published on 22 October 1992. In 1993 some 6,231 persons, each of whom claimed to be a depositor with United Kingdom branches of BCCI, and BCCI itself (by its liquidators) commenced an action against the Bank for the loss they had respectively been caused by the BCCI collapse. Section 1(4) of the Banking Act 1987 relieves the Bank of any liability "for anything done or omitted in the discharge or purported discharge of the functions of the Bank under this Act unless it is shown that the act or omission was in bad faith". It was, therefore, not possible for the action to be based merely on an alleged negligent performance by the Bank of its supervisory duties vis-à-vis BCCI. The various acts or omissions on the part of the Bank to which the collapse of BCCI was alleged to be attributable had to be "in bad faith". This requirement plainly placed before the claimants in the action (the respondents before your Lordships) a very high hurdle and it is not in the least surprising that they have been, and still are, seeking the widest possible discovery from the Bank in order to assist their efforts to jump it. 8. By an application notice dated 25 October 2002 the claimants sought disclosure by the Bank of a large number of documents which the Bank claimed it had the right to withhold on the ground of legal professional privilege. These were documents which had been brought into existence by employees of the Bank for the purpose of being passed to Freshfields. The parties were agreed that documents emanating from or prepared by independent third parties and then passed to Freshfields were not privileged. It was the status of documents prepared by Bank employees that was in question. 9. Tomlinson J in his judgment of 13 December 2002 (Three Rivers District Council v Governor and Company of the Bank of England (No.5) [2002] EWHC 2730) held that all these documents were privileged. In paragraph 10 of his judgment, he described the documents as "generated for the purpose of providing information to the Bank's legal advisers to enable them to prepare submissions and/or to advise on the nature, presentation, timing and/or content of the Bank's submissions to, evidence for and responses to requests from the Inquiry". And he proceeded to consider the privilege issue "upon the assumption that the material which the Bank seeks to protect from disclosure is both relevant to and probative as to the issues in the trial". 10. The modern case law on legal professional privilege has divided the privilege into two categories, legal advice privilege and litigation privilege. Litigation privilege covers all documents brought into being for the purposes of litigation. Legal advice privilege covers communications between lawyers and their clients whereby legal advice is sought or given. In in re L [1997] AC 16 Lord Jauncey of Tullichettle described litigation privilege as "essentially a creature of adversarial proceedings" and held that the privilege could not be claimed in order to protect from disclosure a report prepared for use in non-adversarial proceedings (see p.26). Lord Lloyd of Berwick and Lord Steyn expressed their agreement. The Bingham Inquiry could not have been described as adversarial. It was, as inquiries invariably are, an inquisitorial proceeding. It was no doubt with in re L in mind that the Bank did not claim that the documents of which disclosure was being sought were entitled to litigation privilege. The Bank took its stand on legal advice privilege. As to that, the Bank claimed privilege for all documents prepared for at least the dominant purpose of obtaining or recording legal advice from Freshfields or counsel. In paragraph 30 of his judgment Tomlinson J accepted this claim. He said -
He therefore dismissed the 25 October 2002 discovery application. 11. In an addendum to his judgment given on 6 February 2003 after a further hearing Tomlinson J dealt with the question whether documents prepared by ex-employees or ex-officers of BCCI stood on the same footing for legal advice privilege purposes as documents prepared by current employees or current officers. He held that provided the dominant purpose test that he had formulated in his main judgment were satisfied, no distinction for privilege purposes was to be drawn. He said, in paragraph 6 -
12. The BCCI claimants appealed and on 3 April 2003 the Court of Appeal allowed the appeal. It is important to notice that Mr Gordon Pollock QC, counsel for the claimants, did not argue for disclosure of documents passing between the BIU and Freshfields nor for disclosure of any of Freshfields' internal memoranda or drafts. Mr Pollock accepted that the BIU was, for the purpose of the Inquiry, Freshfields' client and that communications passing between them were covered by legal advice privilege (see para.4 of the judgment handed down by Longmore LJ: Three Rivers District Council v Governor and Company of the Bank of England (No.5) [2003] QB 1556). 13. The Court of Appeal judgment (Three Rivers (No.5) succinctly summed up the rival submissions -
The Court of Appeal accepted Mr Pollock's submission and held that the only documents for which legal professional privilege could be claimed were communications between the BIU and Freshfields seeking or giving legal advice. The BIU, and no one else, was to be treated as Freshfields' client for privilege purposes. And in paragraph 37 of the judgment the Court of Appeal expressed the view that material prepared "for the dominant purpose of putting relevant factual material before the inquiry in an orderly and attractive fashion" was not prepared "for the dominant purpose of taking legal advice upon such material" and so could not attract legal professional privilege. The former purpose has, for convenience, been referred to as a "presentational" purpose. 14. As to the question of who, for privilege purposes, was to be regarded as Freshfields' client, the Court of Appeal said that information provided to solicitors by an employee stood in the same position as information provided by an independent third party (see [2003] QB at 1574 G/H) and, specifically, when considering whether information provided to Freshfields by the Governor of the Bank would have qualified for privilege, that "the BIU … is… the client rather than any single officer however eminent he or she may be" ([2003] QB at 1581 A/B). In allowing the appeal the Court of Appeal made a declaration that
15. The Bank's petition to this House for leave to appeal against the Court of Appeal's order was dismissed. 16. After the dismissal of the Bank's petition for leave to appeal the Bank began the task of disclosing documents whose disclosure was required under the Court of Appeal order. But the Bank disclosed none of the communications between the BIU and Freshfields or drafts of or internal memoranda relating to the overarching statement that had been submitted on behalf of the Bank to the Inquiry. These were withheld by the Bank from disclosure for two reasons. First, Mr Pollock had told the Court of Appeal that his clients were not seeking disclosure of any communications between the BIU and Freshfields; secondly, the Bank contended that the expression "legal advice" in the Court of Appeal's declaration should be interpreted widely so as to cover all advice and assistance from Freshfields or counsel relating to the evidence to be submitted and the submissions to be made to the Inquiry on behalf of the Bank ie. so as to cover advice given for presentational purposes. 17. The impasse regarding these documents led to a further discovery application by the claimants. The application was made on 1 August 2003. It sought "further documents from or relating to the Bingham Inquiry Unit arising from the judgment of the Court of Appeal dated 3 April 2003". Tomlinson J gave judgment on the application on 4 November 2003. He held that the rationale of the Court of Appeal judgment overturning his own previous decision was that Freshfields' advice sought or given for presentational purposes should not in general be categorised as legal advice of the sort which attracted legal advice privilege (see para.13). If, however, the dominant purpose of some particular communication between the BIU and Freshfields was the provision of advice as to the Bank's legal rights and obligations, as opposed to the question of how the Bank's evidence might be presented to the Inquiry so as to be least likely to attract criticism, then that communication, or the relevant part of it, would be entitled to privilege. 18. So Tomlinson J made an order dated 10 November 2003 declaring that the only documents or parts of documents that the Bank was entitled to withhold from disclosure on the ground of legal advice privilege were communications passing between the BIU and its lawyers for the purpose of seeking or obtaining "advice concerning the Bank's rights and obligations". 19. The Bank appealed and on 1 March 2004 the Master of the Rolls, Lord Phillips of Worth Matravers, handed down the judgment of the Court of Appeal dismissing the appeal (Three Rivers District Council v Governor and Company of the Bank of England (No. 6) [2004] QB 916. The judgment (Three Rivers (No. 6)) made clear the view of the Court of Appeal that for legal advice privilege purposes the advice being sought from the lawyers must be advice as to legal rights or liabilities. Advice as to how the Bank should present its case to the Inquiry so as to lead to a conclusion as favourable to the Bank as possible did not qualify for privilege. 20. The Bank has now appealed to your Lordships. It is important to emphasise the narrowness of the actual issue. It is whether the communications between the BIU and Freshfields or counsel relating to the Inquiry are protected by legal advice privilege. The Bank plainly believe that the Court of Appeal order in Three Rivers (No. 5) went too far. But the Bank's petition for leave to appeal was refused and this is not an appeal against that order. Moreover the Bank has discharged the disclosure obligation required by that order. However, the narrow scope allowed by the Court of Appeal in the judgment now under appeal to "legal advice" has heightened the concerns of many about the approach to legal advice privilege inherent in the first Court of Appeal judgment. This explains in part the applications for leave to intervene in this appeal made by the Attorney-General, by the Law Society and by the Bar Council. Each has been given leave to intervene by written submissions, including leave, if so advised, to submit a written reply at the conclusion of the oral hearing. Their Lordships are grateful for the written submissions they have received from the interveners. 21. The written submissions from the interveners, and particularly that from the Law Society, make clear their concern that the Three Rivers (No. 5) Court of Appeal judgment may have gone too far in treating communications between Freshfields and employees of the Bank, other than the BIU, as being for privilege purposes communications between Freshfields and third parties. Your Lordships have been invited to clarify the approach that should be adopted to determine whether a communication between an employee and his or her employer's lawyers should be treated for legal advice privilege purposes as a communication between the lawyers and their client. This is of particular importance for corporate clients, who can only communicate through employees or officers. 22. The employee/client point does not, however, arise as an issue on this appeal. It did arise on the Three Rivers (No. 5) discovery application, and the Court of Appeal's view that only communications between the lawyers and the BIU could be regarded as communications qualifying for legal advice privilege was the basis on which disclosure by the Bank pursuant to the Court of Appeal order of 3 April 2003 has taken place. The disclosed documents have included communications between the Bank's lawyers and those Bank employees and officers who were not members of the BIU. Since then, and well before the hearing of this appeal, the hearing of the action before Tomlinson J commenced. Mr Pollock opened his case on the basis, inter alia, of the documents disclosed pursuant to the 3 April 2003 order. He expressed before your Lordships on this appeal a natural concern that if your Lordships gave any ruling indicating that some of the disclosed documents ought to have been held to be privileged, serious complications affecting the trial might arise. However Mr Sumption QC, on behalf of the Bank, gave the Bank's undertaking that reliance by the claimants on the documents already disclosed would not, whatever view your Lordships might express on the employer/client point, be resisted on privilege grounds, and that it would not be suggested that Tomlinson J's knowledge and sight of the contents of those documents constituted any reason why he should recuse himself. The point is, therefore, so far as the current litigation between the claimants and the Bank is concerned, strictly moot. Nothing turns on it. Nonetheless your Lordships have been asked to express on a view on the point. I will return to it. Policy 23. It is impossible to express a coherent view about the issues which have been debated on this appeal without taking into account the policy reasons which led to legal advice privilege becoming established in our law in the first place and to the policy reasons for its retention in our law today. Before examining those reasons, however, it seems to me helpful to review some of the features of legal advice privilege in order to provide a context for the policy reasons underlying the privilege. 24. First, legal advice privilege arises out of a relationship of confidence between lawyer and client. Unless the communication or document for which privilege is sought is a confidential one, there can be no question of legal advice privilege arising. The confidential character of the communication or document is not by itself enough to enable privilege to be claimed but is an essential requirement. 25. Second, if a communication or document qualifies for legal professional privilege, the privilege is absolute. It cannot be overridden by some supposedly greater public interest. It can be waived by the person, the client, entitled to it and it can be overridden by statute (c/f R (Morgan Grenfell Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563), but it is otherwise absolute. There is no balancing exercise that has to be carried out (see B v Auckland District Law Society [2003] 2 AC 736 paras.46 to 54). The Supreme Court of Canada has held that legal professional privilege although of great importance is not absolute and can be set aside if a sufficiently compelling public interest for doing so, such as public safety, can be shown (see Jones v Smith [1999] 1 SCR 455). But no other common law jurisdiction has, so far as I am aware, developed the law of privilege in this way. Certainly in this country legal professional privilege, if it is attracted by a particular communication between lawyer and client or attaches to a particular document, cannot be set aside on the ground that some other higher public interest requires that to be done. 26. Third, legal advice privilege gives the person entitled to it the right to decline to disclose or to allow to be disclosed the confidential communication or document in question. There has been some debate as to whether this right is a procedural right or a substantive right. In my respectful opinion the debate is sterile. Legal advice privilege is both. It may be used in legal proceedings to justify the refusal to answer certain questions or to produce for inspection certain documents. Its characterisation as procedural or substantive neither adds to nor detracts from its features. 27. Fourth, legal advice privilege has an undoubted relationship with litigation privilege. Legal advice is frequently sought or given in connection with current or contemplated litigation. But it may equally well be sought or given in circumstances and for purposes that have nothing to do with litigation. If it is sought or given in connection with litigation, then the advice would fall into both of the two categories. But it is long settled that a connection with litigation is not a necessary condition for privilege to be attracted (see eg. Greenough v Gaskell (1833) 1 My & K 98 per Lord Brougham at 102/3 and Minet v Morgan (1873) 8 Ch. App. 361). On the other hand it has been held that litigation privilege can extend to communications between a lawyer or the lawyer's client and a third party or to any document brought into existence for the dominant purpose of being used in litigation. The connection between legal advice sought or given and the affording of privilege to the communication has thereby been cut. 28. So I must now come to policy. Why is it that the law has afforded this special privilege to communications between lawyers and their clients that it has denied to all other confidential communications? In relation to all other confidential communications, whether between doctor and patient, accountant and client, husband and wife, parent and child, priest and penitent, the common law recognises the confidentiality of the communication, will protect the confidentiality up to a point, but declines to allow the communication the absolute protection allowed to communications between lawyer and client giving or seeking legal advice. In relation to all these other confidential communications the law requires the public interest in the preservation of confidences and the private interest of the parties in maintaining the confidentiality of their communications to be balanced against the administration of justice reasons for requiring disclosure of the confidential material. There is a strong public interest that in criminal cases the innocent should be acquitted and the guilty convicted, that in civil cases the claimant should succeed if he is entitled to do so and should fail if he is not, that every trial should be a fair trial and that to provide the best chance of these desiderata being achieved all relevant material should be available to be taken into account. These are the administration of justice reasons to be placed in the balance. They will usually prevail. 29. In paragraph 39 of their judgment in Three Rivers (No. 6) the Court of Appeal commented that
As to the justification for litigation privilege, I would respectfully agree that the need to afford privilege to the seeking or giving of legal advice for the purposes of actual or contemplated litigation is easy to understand. I do not, however, agree that that is so in relation to those documents or communications which although having the requisite connection with litigation neither constitute nor disclose the seeking or giving of legal advice. Communications between litigant and third parties are the obvious example. This House in in re L [1997] AC 16 restricted litigation privilege to communications or documents with the requisite connection to adversarial proceedings. Civil litigation conducted pursuant to the current Civil Procedure Rules is in many respects no longer adversarial. The decision in in re L warrants, in my opinion, a new look at the justification for litigation privilege. But that is for another day. It does not arise on this appeal. |
| continue |