Legal Advice Privilege - Has the House of Lords Calmed Troubled Waters?

Originally published August 2004

The House of Lords recently confirmed that it had overruled the Court of Appeal's controversial decision on legal advice privilege in the Three Rivers litigation. Full reasons for the decision are expected in October and so it remains to be seen whether the boundaries of legal advice privilege have again been redefined or whether the House of Lords has simply rejected the Court of Appeal's restrictive interpretation and confirmed the previous position.
Please click on Previous Page' link at bottom of article to review an recent update on the Law Lords' decision regarding the content of this article.

Facts of the case

The facts of the case are by now well known. In summary, the Claimants, liquidators and creditors of BCCI brought an action against the Bank of England for misfeasance in public office in respect of its supervision of BCCI before its collapse. In the course of the litigation, the Claimants sought disclosure of a number of communications between the Bank and its legal advisers which had been created during the course of an earlier inquiry into the collapse of BCCI, the Bingham Inquiry. This inquiry was a private, non-statutory inquiry which had been set up to consider whether the action taken by all the UK authorities in relation to BCCI had been appropriate and timely. The inquiry therefore needed the assistance of the Bank. The Bank had taken steps to co-ordinate its response to the inquiry and appointed three bank officials to deal with all communications between itself and the inquiry. The officials became known as the Bank's Bingham Inquiry Unit ("BIU"). Save for some early administrative communications with the inquiry, the Bank's communications with the inquiry were from the outset all the subject of extensive legal advice from its solicitors. The Bank accepted that the inquiry was non-adversarial in nature and so litigation privilege would not apply. However, the Bank asserted that legal advice privilege would apply.

In the course of two appeals, the Court of Appeal held the following:

• Legal advice privilege would only attach to communications between the BIU and its solicitors. The Court of Appeal defined "client" narrowly and decided that the BIU was the client for the purpose of seeking and receiving its solicitors' advice, as opposed to the employees or ex-employees of the Bank.

• "Legal advice" in terms of legal advice privilege did not extend beyond advice in respect of rights and liabilities which are capable of being the subject matter of proceedings in a Court of Law.

• The dominant role of the Bank's solicitors was to advise on the preparation and presentation of evidence for the Bingham inquiry. It was possible that the solicitors may have given some advice as to the Bank's legal rights and obligations, however, this possibility alone was not enough to clothe the entirety of the advice given by the solicitors with privilege on the ground that it was all "in the context of" a professional relationship that involved advising on legal rights and obligations.

The Bank was therefore ordered to disclose communications between itself and its solicitors during the course of the Bingham inquiry into BCCI. Unsurprisingly the Bank appealed to the House of Lords.

The decision of the Court of Appeal has caused concern amongst practitioners who remain worried that the scope of legal advice privilege has been so significantly reduced that it may prevent clients from seeking advice from their lawyers in confidence.

It remains to be seen what approach the House of Lords has taken, however given the comments of the Court of Appeal that a further review is long overdue, practitioners will no doubt hope that the House of Lords has taken this opportunity to provide some well needed guidance in this area of law.

A detailed commentary and analysis of the House of Lords' Judgment will follow in the autumn.