UK: Legal Advice Privilege Clarified by the Commercial Court - but Appeal is Pending

Last Updated: 10 February 2003

A recent Commercial Court decision has confirmed that legal advice privilege is not restricted to communications between a solicitor and client. The privilege extends to protect material brought into existence with the dominant purpose of obtaining legal advice, even if it is not an actual communication between a solicitor and client. For example, working papers and draft documents created with the dominant purpose that their contents be used to obtain legal advice will be protected, provided they are internal confidential material.

Background

This decision of Tomlinson J in Three Rivers District Council and Ors v The Governor and Company of the Bank of England [2002] EWHC 2730 (COMM) was made in the course of ongoing litigation which has followed the collapse of the Bank of Credit and Commerce SA (BCCI) in 1991. After the collapse of BCCI a wide-ranging inquiry was undertaken by Lord Justice Bingham in part to consider whether the action taken by the UK authorities in relation to BCCI had been appropriate and timely. The Bank of England (the "Bank") appointed three Bank officials to deal with all communications between the Bank and the inquiry. They became known as the Bingham Inquiry Unit (BIU).

The claimants, former depositors in BCCI, subsequently issued these proceedings against the Bank. The primary claim is misfeasance in public office by officials of the Bank in their handling of the BCCI crisis. During the course of these proceedings, the Bank asserted legal advice privilege over a large number of documents generated by the BIU. The claimants applied for a declaration that legal advice privilege did not apply to the material generated by the BIU which were not actual communications between a solicitor and client.

Decision

Tomlinson J found in favour of the Bank and held that the material was protected by legal advice privilege. In coming to this conclusion, Tomlinson J considered in some detail the particular facts of this case and then examined the relevant authorities.

Facts

The BIU’s communications with the inquiry were all the subject of extensive legal advice from solicitors and counsel. According to the Bank, this advice covered every aspect of preparation and presentation of the Bank’s submissions to, evidence for and responses to requests from the inquiry.

The BIU’s role was to obtain, at the request of the legal advisers, all necessary information to enable the legal advisers to advise on the way in which the Bank’s case could be presented to the inquiry. However the location of all relevant information within the Bank and the form of its presentation to the legal advisers was often the subject of considerable internal BIU drafting and communication before its submission to the legal advisers.

Tomlinson J held the BIU was not an agent of the Bank but was the organ of the Bank through which it dealt with the inquiry, including the seeking of advice for the inquiry. Therefore material generated by the BIU was internal material to the Bank and not material generated by a third party.

Relevant law

Legal advice privilege and litigation privilege are the two limbs of legal professional privilege. The rationale behind legal professional privilege is the protection of confidential communications between client and legal adviser in order that the client may "make a clean breast of it" to his adviser (Sir George Jessel MR in Anderson v Bank of British Columbia [1876] 2 Ch D 644 at 649). Litigation privilege extends to protect communications between the legal adviser or client and third parties. However it only arises when litigation is in prospect or pending where the dominant purpose is use in the conduct of, or in aid of the conduct of the litigation. As the Bingham inquiry had no adversarial features of litigation, the Bank accepted that it was not entitled to assert litigation privilege over the material in question. The Bank however asserted that legal advice privilege applied to the material.

Tomlinson J considered the classic and modern authorities in some detail in his judgment. He found that legal advice privilege protected from production "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".

The claimants contended that in order to attract legal advice privilege, the material in question must be actually communicated to the legal adviser. They relied upon two cases in which they asserted that attempts to claim legal advice privilege over documents which were not communications between a lawyer and client had failed. Tomlinson J disagreed with their characterisation of what was being attempted in those cases. He found that the documents in question were actually communications with third parties and therefore not material which could attract legal advice privilege in any event.

Tomlinson J’s view, which he believed to be borne out by the modern authorities, is that the "touchstone" of whether legal advice privilege applies is whether or not the dominant purpose of the material at its creation is the obtaining of legal advice, and not whether or not the material is actually communicated to the legal adviser. He stated that the principle underlying legal advice privilege is to preserve the confidentiality of the process by which legal advice is sought and obtained, rather than the confidentiality of distinct communications within that process.

Dominant purpose

According to Tomlinson J, "the real question" which arose in this case was whether the Bank was correct to characterise the dominant purpose of the BIU as being, broadly, the obtaining of legal advice. He examined the authorities regarding when the "dominant purpose" test applies. While there has been some confusion, he referred to authorities which now assume that it does apply to legal advice privilege, as it does to litigation privilege. In legal advice privilege, the practical emphasis has been said by some judges to be upon the purpose of the retainer of the legal advisers (see Rix J in The Sagheera (1997) 1 Lloyds Rep 160 at p.168). Tomlinson J stated that the relevant test is therefore to enquire whether a document prepared by either solicitor or client fell within the scope of the retainer.

Tomlinson J found that the Bank had established, on somewhat unusual facts, that the material in question was prepared or commissioned pursuant to the retainer between the Bank and the legal advisers, and the object of that retainer was the giving of legal advice.

Comment

As Tomlinson J commented, it is surprising that it is still possible to have a sustained argument on so apparently basic a point, but on closer examination, the law in this area was not as clear as might have been expected to be the case. We understand that the claimants are appealing the decision and the appeal is to be heard in March. In the meantime, this decision will be of comfort to those looking to rely on legal advice privilege to protect internal documents prepared in the course of seeking legal advice, but never actually communicated to a legal adviser.

If the Court of Appeal reaches a different conclusion, it will not only be overturning Tomlinson J but it will also conflict with the current interpretation placed on the law by the main commentators in the area (see Passmore, Privilege, 1998 and Hollander and Adam, Documentary Evidence, 2000). We will update you on the Court of Appeal decision in a future article.

© Herbert Smith 2003

The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.

For more information on this or other Herbert Smith publications, please email us.

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