Judgments - Three Rivers District Council and others (Respondents) v. Governor and Company of the Bank of England (Appellants) (2004)

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    55.  Despite its long pedigree the Court of Appeal in this case appear to have been less than enthusiastic about the very notion of legal advice privilege. In particular, they thought that it was not clear why it should attach to matters such as the conveyance of real property or the drawing up of a will: [2004] QB 916, 935, para 39 per Lord Phillips of Worth Matravers MR. I do not share these doubts. A client's financial or tax position, or the financial or tax position of members of his family, may well be relevant to the way in which he asks his solicitor to structure a property transaction. Or else, for example, the client may have private worries about his son's ability to fend for himself which explain why he conveys a more valuable property to his son than to his more able daughter. People have a legitimate interest in keeping such matters private. The case for confidentiality is, if anything, even more obvious when it comes to the preparation of a will. Rightly or wrongly, the provisions are often shaped by past relationships, indiscretions, experiences, impressions and mistakes, as well as by jealousies, slights, animosities and affections, which the testator would not wish to have revealed but which he must nevertheless explain if the solicitor is to carry out his wishes. Divulging the provisions during the testator's lifetime or disclosing the reasons for them after the testator's death could often cause incalculable harm and misery. The public interest lies in minimising the risk of that happening. In these circumstances it is, in the words of Sir George Mackenzie, Works vol 2, p 45, the interest of the commonwealth "not to unseal the Secrets of private Persons and thereby to render all Trust and Commerce suspect."

    56.  More often than not the lawyer will be advising his client on legal matters that relate to his own position - whether his public law or private law rights and obligations. Legal advice privilege also applies to advice on criminal matters, which it may not always be easy to characterise as relating, strictly speaking, to rights and obligations of the client. Mr Pollock QC accepted that legal advice privilege would apply in all these cases. In other cases, such as that of an objector at a public inquiry, the advice sought may relate partly to the client's own legal position and partly to the position of someone else, such as the developer. But clients may also legitimately consult their lawyers simply about someone else's legal position. Most obviously, a concerned parent may consult a lawyer about the potential repercussions for their adult child of some step which that child is contemplating. In all these cases the client would be inhibited in obtaining proper advice from his lawyer if there were any risk that either of them might require to reveal what had passed between them. So legal advice privilege applies.

    57.  In the present case the Court of Appeal proceeded, [2004] QB 916, 932, on the basis that "the dominant role of Freshfields was to advise on preparation and presentation of evidence for the Bingham Inquiry but that it is possible that they may have given some advice as to the Bank's legal rights and obligations" and that "the advice and assistance sought was primarily in relation to the presentation of evidence to the inquiry rather than in relation to the Bank's rights and obligations." Mr Sumption QC criticised that conclusion but, simply for present purposes, I am content to accept it without addressing those criticisms. The implication of the Court of Appeal's judgment that in these circumstances legal advice privilege is not engaged must be that, when the Bank were communicating with Freshfields in relation to the presentation of their evidence to the inquiry, they were not seeking legal advice from them.

    58.  In his important judgment in Balabel v Air India [1988] Ch 317, 331H - 332B, Taylor LJ seems to have thought that in the past the business of solicitors was more restricted than it is today and that there is therefore now more of a need to keep legal advice privilege within justifiable bounds. In the present case the Court of Appeal adopted that observation, [2004] QB 916, 933, para 30. As counsel for both parties accepted, however, what Taylor LJ says in that passage is, at best, an over-simplification. Especially in the nineteenth century, many solicitors or attorneys acted as "men of business". They not only gave legal advice and assistance but carried on business, for instance, as patent agents, as agents for insurance companies, as deposit agents for colonial banks, and as stewards or factors running estates. They would also lend money to their clients, sometimes in relation to the purchase of property. Until fairly recently indeed, Scottish solicitors had succeeded in keeping for themselves all the work of selling houses that estate agents were doing in England. Given the varied functions performed by lawyers, it is scarcely surprising that questions frequently arose as to the capacity in which the lawyer or firm was acting in a particular transaction. For example, in both Hagart and Burn-Murdoch v Inland Revenue Commissioners [1929] AC 386 and Minter v Priest [1930] AC 558 the House had to decide in what capacity solicitors had lent money to clients. And one of the issues in Minter was, precisely, the application of legal advice privilege in that kind of case. Lawyers today may be instructed in situations in which they would not have been instructed in the past or which did not even exist in the past; equally, however, lawyers in the past were employed in situations in which they would not be employed today and which do not even exist today. In relation to legal advice privilege what matters today remains the same as what mattered in the past: whether the lawyers are being asked qua lawyers to provide legal advice.

    59.  In Balabel v Air India [1988] Ch 317, 330 Taylor LJ reviewed the authorities and held that, for the purposes of legal advice privilege, "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." According to his terms of reference, Bingham LJ was to enquire into the supervision of BCCI under the Banking Acts and to consider whether the action taken by all the United Kingdom authorities was appropriate and timely. Therefore the Banking Acts formed the relevant legal context in which Freshfields were asked to act for the Bank. So far as the Bank were concerned, what Bingham LJ had to decide was whether or not the steps that they took to supervise BCCI had been appropriate, having regard to their powers and duties under the Banking Acts as they stood at the relevant time. The Bank's evidence to the inquiry was directed to that issue. It may be - the House was not told - that the BIU consulted other professionals, such as bankers, accountants or actuaries, about the presentation of the Bank's evidence. If so, the BIU would have expected them to bring their particular expertise to bear on the evidence and to comment accordingly - alerting the Bank, for instance, to any possible grounds of criticism, or to particularly favourable points which they noticed. Similarly, if - and there is no reason to suppose this happened - the BIU had sought advice from the modern equivalent of a rhetorician on how to make sure that the Bank's evidence would be presented to the inquiry in a way that made it easily understood and assimilated, it would have expected him to use his rhetorical expertise when making his comments on the drafts.

    60.  When, however, the BIU consulted the lawyers in Freshfields, and through them counsel, about the presentation of their evidence to the inquiry, it was not seeking their comments and assistance as bankers, accountants, rhetoricians or anything else: it was seeking their comments and assistance as lawyers professing expertise in the field. Either expressly or impliedly, the BIU was asking them to put on legal spectacles when reading, considering and commenting on the drafts. In other words it was asking them to consider, as lawyers, how the Bank's evidence could be most effectively presented to Bingham LJ, given that he was inquiring into the Bank's discharge of their legal responsibilities under the Banking Acts. Such advice could come in many forms. For instance, the BIU could have expected Freshfields to draw attention to any implications, favourable or otherwise, which a particular line of evidence on one aspect of the Bank's supervisory obligations might have for a different aspect of their responsibilities. Similarly, Freshfields would be in a position to point out matters which should not be laboured in evidence as they would be obvious to a senior judge like Bingham LJ with his ready grasp of the relevant law. Alternatively, they might highlight points that would be worth exploring more fully. Of course, your Lordships do not know which issues actually arose and were considered by the lawyers when reading the Bank's draft evidence - far less what comments Freshfields communicated to the BIU which eventually helped to shape the Bank's "overarching" statement to the inquiry. That does not matter. What matters is that the BIU was instructing the lawyers in Freshfields to carry out a function which necessarily involved the use of their legal skills if it was to be performed properly. The communications between the BIU and Freshfields were therefore concerned with obtaining "legal advice" in the broader sense in which, as Taylor LJ rightly said in Balabel v Air India, that term should be understood for this purpose. It follows that legal advice privilege applies to those communications. The appeal must be allowed.

    BARONESS HALE OF RICHMOND

My Lords,

    61.  I agree, for the reasons given by each of you, that this appeal should be allowed. I do sympathise with the Court of Appeal's anxiety to set boundaries to the scope of legal advice privilege. Legal advice privilege restricts the power of a court to compel the production of what would otherwise be relevant evidence. It may thus impede the proper administration of justice in the individual case. This makes the communications covered different from most other types of confidential communication, where the need to encourage candour may be just as great. But the privilege is too well established in the common law for its existence to be doubted now. And there is a clear policy justification for singling out communications between lawyers and their clients from other professional communications. The privilege belongs to the client, but it attaches both to what the client tells his lawyer and to what the lawyer advises his client to do. It is in the interests of the whole community that lawyers give their clients sound advice, accurate as to the law and sensible as to their conduct. The client may not always act upon that advice (which will sometimes place the lawyer in professional difficulty, but that is a separate matter) but there is always a chance that he will. And there is little or no chance of the client taking the right or sensible course if the lawyer's advice is inaccurate or unsound because the lawyer has been given an incomplete or inaccurate picture of the client's position.

    62.  This rationale extends much more broadly than to advice about legal rights and obligations strictly so-called. I understand that we all endorse the approach of the Court of Appeal in Balabel v Air India [1988] Ch 317, and in particular the observation of Taylor LJ at 330, 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". There will always be borderline cases in which it is difficult to decide whether there is or is not a 'legal' context. But much will depend upon whether it is one in which it is reasonable for the client to consult the special professional knowledge and skills of a lawyer, so that the lawyer will be able to give the client sound advice as to what he should do, and just as importantly what he should not do, and how to do it. We want people to obey the law, enter into valid and effective transactions, settle their affairs responsibly when they separate or divorce, make wills which will withstand the challenge of the disappointed, and present their best case before all kinds of court, tribunal and inquiry in an honest and responsible manner.

    63.  Given this rationale, there are particular difficulties in identifying 'the client' to whose communications privilege should attach in the case of a large organisation such as the Bank or a Government Department. As the point does not arise for decision in this case, I agree, for the reasons given by Lord Scott of Foscote, that we should not express any views upon the matter.

LORD CARSWELL

My Lords,

    64.  The relatively brief but active trading history of the Bank of Credit and Commerce International SA ("BCCI"), which commenced business in 1972, came to an end on 5 July 1991, when it presented a petition for the appointment of a provisional liquidator. The history of the rise and fall of BCCI has been fully set out in the report of the inquiry held by Bingham LJ and well documented in several judgments, and it is unnecessary to repeat it here. It is sufficient merely to refer for convenience to the summary contained in paragraphs 16 to 26 of the speech of Lord Hope of Craighead in the appeal entitled Three Rivers District Council and others v Bank of England (No 3) [2003] 2 AC 1, 240-243.

    65.  The respondents, who are creditors of BCCI and the liquidators of the company, have brought the present claim against the Bank of England ("the Bank") for misfeasance in public office. The essence of the claim is that the Bank through its officials acted in bad faith in the exercise its statutory responsibilities as a supervisor of BCCI as an institution licensed to accept deposits in the United Kingdom, in that it failed to take decisions that would protect the interests of depositors and potential depositors when it was aware that there was a serious and immediate threat that unless BCCI was rescued by the Abu Dhabi government it would collapse. The action, the hearing of which has now commenced before Tomlinson J, has spawned a mass of satellite litigation which has brought the parties on a number of occasions to the Court of Appeal and to your Lordships' House. The present appeal concerns documents in the control of the Bank, in circumstances to which I shall refer in more detail, and raises fundamental questions concerning the nature and ambit of legal professional privilege. That privilege is commonly classified in modern usage under the two sub-headings of legal advice privilege and litigation privilege (terminology which appears to owe its origin to the submission of counsel in Re Highgrade Traders Ltd [1984] BCLC 151, adopted by Oliver LJ at page 161h). The former covers communications passing between lawyer and client for the purpose of seeking and furnishing legal advice, whether or not in the context of litigation. The latter, which is available when legal proceedings are in existence or contemplated, embraces a wider class of communication, such as those passing between the legal adviser and potential witnesses. The relationship between these two classes of privilege formed the subject of much of the argument before the House.

    66.  The Government reacted quickly to the failure of BCCI, largely due to expressions of concern which had emanated from the financial community about the quality of the Bank's supervision of BCCI under the Banking Acts. On 19 July 1991 it was announced that an independent inquiry would be held into the exercise by the Bank of its statutory duty of supervision of BCCI as a licensed deposit-taker, and on 22 July 1991 Bingham LJ was formally appointed to conduct the inquiry. His comprehensive report on the affair was submitted in July 1992 to the Chancellor of the Exchequer and the Governor of the Bank.

    67.  The Bank considered it of great importance to make the most effective response to the Bingham Inquiry. For that purpose the Governor appointed a group of officials who became known as the Bingham Inquiry Unit ("BIU"), with the task of dealing with all communications between the Bank and the Inquiry. Messrs Freshfields and counsel were instructed and over a period of time gave extensive advice and assistance, the nature of which is described in detail in paragraphs 8 and 9 of the judgment of Tomlinson J given on 13 December 2002 in Three Rivers District Council v Bank of England (No 5) [2003] QB 1556 and the documents quoted therein. In the process the BIU and Freshfields generated a substantial volume of documents. It may be summarised very baldly as the gathering of the necessary information to enable the solicitors and counsel to advise on the way in which the Bank's case could be presented to the Inquiry, the furnishing of such advice and the preparation and amendment of draft witness statements and submissions to and responses to requests from the Inquiry. It is, however, worth adding to the material quoted by Tomlinson J the contents of paragraph 17 of the second witness statement made by Mr Philip Mark Croall, a partner in Freshfields Bruckhaus Deringer, which gives a useful synopsis of the type of work carried out by the BIU and Freshfields:

    "So as to ensure that the Bank's legal advisers were properly instructed and fully informed to advise and assist the Bank in preparing its evidence and more generally in relation to all its dealings with the Bingham Inquiry, there was a constant flow of factual information from the Bank to its legal advisers, usually channelled through the BIU. The BIU and the Bank's legal advisers effectively operated as a single team, with members of the BIU undertaking, or delegating to others within the Bank, tasks of research or fact-gathering for the purpose of review and/or advice by the Bank's legal advisers. Specific requests for factual matters to be investigated and reported (typically in the form of notes) to the legal team were sometimes made by the legal team itself to the BIU which then initiated work within the Bank. Sometimes such work was carried out by the BIU itself and sometimes by others elsewhere within the Bank commissioned to do so by the BIU. Fact finding and research based exercises were sometimes commissioned by the BIU itself of its own initiative in order to furnish information to the legal advisers. The purpose of carrying out all of this work was to provide information to the Bank's legal advisers to enable them to prepare submissions and/or advise on the nature, presentation and/or content of the Bank's submissions to, evidence for and responses to requests from, the Inquiry."

    It was originally intended that witness statements from employees of the Bank and other persons would be furnished to Bingham LJ on behalf of the Bank, but in the event this was not done and the witnesses were called to give evidence to the inquiry without written statements having been supplied in advance. It appears, however, that a substantial volume of communications came into existence in the course of gathering the evidence of witnesses. Moreover, an "overarching" statement of some 258 pages was prepared on behalf of the Bank and furnished to the inquiry, which set out its case and the material evidence in some detail.

    68.  The inquiry itself amassed a large volume of documentation, which has been given the title of the "Bingham archive". Much of the satellite litigation to which I have referred has been concerned with attempts by the respondents to obtain access to various categories of documents in order to ascertain if there was material which they could use in support of their case. The phrase "fishing expedition" has been used more than once during the course of the series of proceedings, but it is no less than fair to recall the comment of Tomlinson J at paragraph 72 of his judgment given on 31 May 2002 in relation to the Bingham archive:

    "If the Claimants are to be regarded as fishing, I am bound to say that they are fishing in waters which can be regarded as likely to be stocked, albeit not exclusively with fish likely to be to their taste."

    69.  The respondents brought two successive applications for disclosure of documents relating to the BIU. The first, the Court of Appeal decision in which is reported as Three Rivers District Council v Bank of England (No 5) [2003] QB 1556, is not directly the subject of this appeal, but an understanding of the issues dealt with in it is essential to consideration of the present proceedings. The second decision of the Court of Appeal, against which this appeal has been brought, is reported under the title of Three Rivers District Council v Bank of England (No 6) [2004] QB 916. I shall refer to these proceedings respectively as Three Rivers (No 5) and Three Rivers (No 6).

    70.  In Three Rivers (No 5) the claimants, the present respondents, applied pursuant to CPR r 31.19 for disclosure by the Bank of a large number of documents for which the Bank had claimed legal privilege. In his judgment given on 13 December 2002, to which I have referred, Tomlinson J upheld the Bank's claim and refused the declaratory relief sought by the claimants. His reasons for so holding, which appear to me to have considerable force, are set out in paragraph 30 of his judgment, in which he expressed his conclusion:

    "In my judgment an internal confidential document, not being a communication with a third party, which was produced or brought into existence with the dominant purpose that it or its contents be used to obtain legal advice is privileged from production."

    The judge stated that the necessary control is supplied by the dominant purpose test, which is applied at the time of creation of the documents. He summarised his conclusion on the dominant purpose test at para 32 of his judgment, where he held that

    " … the Bank has properly identified as the dominant purpose for which much of the material was brought into existence by the BIU the obtaining or recording of legal advice. More broadly, the Bank has established that the material was prepared or commissioned pursuant to the retainer between the Bank and the legal advisers as part of the necessary exchange of information of which the object was the giving of legal advice."

    71.  The Court of Appeal (Lord Phillips of Worth Matravers MR, Sedley and Longmore LJJ) reversed the judge's decision, accepting the contention advanced by counsel for the claimants that documents prepared by the Bank's employees or ex-employees, whether prepared for submission to or at the direction of Freshfields or not, should be disclosed as being no more than raw material on which the BIU, as the client of Freshfields, would thereafter seek advice. It accordingly held that the Bank was not entitled to privilege in respect of any of the following four categories of documents in issue:

    a.  documents prepared by Bank employees, the dominant purpose of preparing which was that they should be sent to Freshfields and which were in fact so sent;

    b.  documents of the same class which were not in fact so sent to Freshfields;

    c.  documents prepared by Bank employees, without the dominant purpose of obtaining legal advice, which were in fact sent to Freshfields;

    d.  documents in categories a to c which had been prepared by Bank employees who were no longer employed by the Bank.

    72.  The court accepted that Freshfields' client was the BIU, not the Bank itself or any individual officer, but its conclusions did not turn so much on the identity of the authors of the documents in question as on the more general point that in the court's view legal advice privilege, as distinct from litigation privilege, was restricted to communications between a client and his legal advisers, to documents evidencing such communications, and to documents that were intended to be such communications even if they were not in fact communicated. None of the four categories of documents concerned in the appeal came within that description and accordingly they were not covered by privilege. It rejected the Bank's argument that communications from an employee were so covered, even though it recognised that a corporation can only act through its employees.

    73.  The court reached a subsidiary but distinct conclusion on a second issue, the dominant purpose of the preparation of the documents, which was set out in paragraph 35 of the judgment of the court, given by Longmore LJ:

    "In the former case of original documentary material supplied to assist in the compilation of the November 1991 statement or April 1992 paper, we think it impossible to say that the dominant purpose of its preparation was the obtaining of legal advice. It is raw material for presentation to the inquiry and the dominant purpose for which it was prepared was so that the Bank could comply with its primary duty of putting all relevant factual material before Bingham LJ."

    74.  The Bank presented a petition for leave to appeal to your Lordships' House, but on 14 May 2003 the Appeal Committee dismissed the petition. The Bank has disclosed documents to the respondents in accordance with the ruling of the Court of Appeal. The respondents, as they state in their printed case, found that those documents proved to be a "veritable gold-mine of factual information as to what had happened during the years of BCCI's supervision and as to what various Bank officials had really thought."

    75.  In Three Rivers (No 5) Mr Pollock QC, leading counsel for the respondents, made it clear that he did not seek disclosure of any documents passing between Freshfields and the BIU, regarding them on thitherto accepted principle as being covered by legal advice privilege. In the light of the content of the judgment of the Court of Appeal on the second issue in Three Rivers (No 5) the respondents mounted a further application - Three Rivers (No 6) - seeking disclosure of communications between the BIU and Freshfields in so far as those were seeking or obtaining assistance or advice as to the manner in which the Bank should most appropriately present evidence and material to the inquiry. The essence of the case made by the respondents was that although the Court of Appeal had declared that the Bank was entitled to claim privilege for communications passing between the Bank and its legal advisers for the purpose of obtaining legal advice, the term "legal advice" was limited to advice on the legal rights and obligations of the Bank and, specifically, did not extend to advice and assistance directed towards the better presentation of the Bank's case to the inquiry. Tomlinson J permitted Mr Pollock to withdraw the concession which he had made in Three Rivers (No 5) and to present this new argument. He expressed the view that it was implicit in the decision of the Court of Appeal in Three Rivers (No 5) that it did not regard Freshfields' assistance and advice on presentational matters as attracting legal advice privilege. He held accordingly and made a declaration that

    "the only documents or parts of documents in the Bank's control and coming into existence between the closure of BCCI SA on 5 July 1991 and the issue of the present proceedings in May 1993 which the Bank is entitled to withhold from inspection on the ground of legal advice privilege are:

    (1)  communications passing between the Bank and its legal advisers (including any solicitor seconded to the Bank) for the purpose of seeking or obtaining legal advice (which means, for the avoidance of doubt, advice concerning the Bank's rights and obligations); and

    (2)  any part of a document which evidences the substance of such a communication."

 
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