UK: Privilege: Three Rivers Runs Through It

Last Updated: 22 July 2003
Article by Robert Hogarth

First published June 2003

In Three Rivers the Court of Appeal has ruled that the scope of legal advice privilege for documents created in the absence of actual or threatened litigation is very limited. In house lawyers need to be very alert to this, particularly when faced with regulatory investigations

The case was part of the complex BCCI litigation and the brief facts are as follows:

In 1988 The Bank of England, ("the Bank ") granted a licence to BCCI to carry on business as a deposit taking institution. On BCCI's collapse in 1991,the government set up the Bingham Inquiry to investigate the Bank's supervision of BCCI and to consider whether the actions taken by the UK authorities were appropriate and timely.

The Bingham Inquiry Unit ("BIU "), an internal body consisting of three Bank officials, was set up to deal with all communications between the Bank and the inquiry. Solicitors were appointed to advise the Bank.

Creditors and liquidators of BCCI subsequently brought proceedings against the Bank for misfeasance in public office relating to events emerging from the collapse of BCCI. In these proceedings, the liquidators sought disclosure of certain documents, prepared by the Bank's employees and ex employees, that came into existence at the time of the Bingham Inquiry. The Bank refused to disclose these documents on the grounds that they were covered by legal advice privilege.

It was for the court to determine the scope of legal advice privilege and whether this was restricted to communications between solicitor and client, or if it included material brought into existence for the dominant purpose of obtaining legal advice, even though that material was not in itself a communication between the solicitor and client.

The claim for privilege was upheld at first instance. The Court of Appeal overturned the decision and ruled that these documents were not covered by legal advice privilege.

The Court of Appeal confirmed the established principle of law that documents passing directly between a solicitor acting in his professional capacity and his client are protected by legal advice privilege where the dominant purpose of those communications is to obtain legal advice. However, the court raised the issues of who constitutes the client and what constitutes legal advice. The decision appears to exclude from privilege documents obtained from employees prior to the communication between the solicitor and the client, even if the documents are prepared for the dominant purpose of being shown to solicitors and prepared at the solicitor's request.

For practical purposes, the position so far as in house lawyers are concerned can now be summarised as follows:

  • communications between lawyers and their clients, to the extent they are for the purpose of giving and obtaining legal advice, are always privileged at common law. Whether the legal adviser is directly employed by or external to the company is irrelevant.
  • the vital distinction is whether or not the advice is given in the context of actual or threatened litigation. Where it is, the cloak of privilege can be wide ranging. Where it is not, documents which are not part of the direct process between lawyer and client for obtaining and giving legal advice are not privileged from production.

Privilege in the context of actual or threatened litigation

Where an in house lawyer is asked to advise in the context of a claim by any client, employee or third party, privilege will attach to all documents generated by employees of the company or by third parties provided the dominant purpose of preparing those documents was for the purpose of actual or threatened litigation. It is important therefore that:

  • the litigation context is clearly communicated to whoever is generating a document and
  • as an additional safeguard, the document is clearly marked "privileged, prepared in contemplation of litigation".

"Pure" legal advice, otherwise than in the context of litigation

The debate in Three Rivers concerned the extent to which privilege can be extended to documents brought into existence to make up the legal advisors' "brief" but not prepared in the context of actual or threatened litigation.

Only those employees whose job it is to receive and act upon the legal advice will represent the client for the purposes of legal professional privilege. Normally it will be self evident from who asks for the advice and to whom it is given, but in case of any doubt, it is sensible expressly to establish which employees constitute the "client" when advice is being given.

In Three Rivers the court decided that the dominant purpose of the preparation of the documents was not litigious. The Bingham Inquiry, being an inquisitorial rather than adversarial process, was agreed by all parties not to constitute "litigation". For that reason only, documents prepared internally1, even though passed through external lawyers for approval/comment, did not attract privilege.

On the authority of Three Rivers, legal privilege would not attach to the following classes of documents, even where they are prepared for the purpose of obtaining "pure" legal advice:

  • documents prepared by employees outside the circle of those who constitute the "client" for the purpose of the company obtaining legal advice.
  • third parties asked to provide information or statements which will fall to be considered by the lawyer as part of the process of giving advice.
  • possibly documents prepared by employees who do constitute the "client", but only so far as they provide factual information intended to form the background to the advice sought.

Recommendations

If an in house lawyer identifies a situation in which he/she is called to give "pure" legal advice but is concerned about creating documents which would not be protected by privilege (particularly in the context of any regulatory/inquisitorial type inquiry such as that which took place in relation to the Bank following the BCCI collapse), he/she should consider the following:

  • privilege may attach where in house or external lawyers interview relevant employees and third parties and record what those employees (whether part of designated "client" or not)say in the context of providing letters of advice to the "client". The "client" would need to be clearly and expressly identified as such.
  • by the same reasoning, privilege may attach to documents created by the "client" for the purpose of briefing in house or external solicitors about what they or third parties might have to say in relation to the matters on which advice is sought.
  • no copies or drafts of any such document should be provided to employees (other than the "client")or third parties and certainly they should not be allowed to keep them or mark them. They might, however, be allowed to read and comment on them in the course of an interview with the "client" or, preferably, legal adviser.

The Three Rivers case did not consider whether documents privileged under the head of "pure " legal advice might be edited to render disclosable those parts which deal with the underlying factual information obtained from third parties and employees. For this reason our recommendations are cautious. The logic of the decision supports the possibility that even the precautions (and inconveniences)set out above might not be enough to preserve the entire content of otherwise privileged documents from production.

1. For the purpose of managing the Bank's response to the enquiry the Bank had set up the "Bingham Enquiry Unit", consisting of three designated employees. The court held that any employee of the Bank outside that Unit was not the "client" and therefore privilege did not attach to documents prepared by those outside employees, even though the documents were, or were intended to be, sent to the Bank's legal advisers for review. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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