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Legal Advice Privilege Judgment – but Practical Problems for Companies

The House of Lords handed down its judgment in the Three Rivers appeal concerning privilege on 11 November 2004. This decision is welcome across all industry sectors, and construction and engineering is no exception. In July 2004, the Lords had allowed the Bank of England’s appeal from the Court of Appeal’s decision that “presentational” advice did not amount to legal advice for the purpose of privilege, but without giving reasons. Now we have the reasons, in which the Lords have unanimously rejected the Court of Appeal’s reasoning and re-emphasised the right to seek legal advice in confidence.

However, the Lords disappointingly declined to comment on the earlier Court of Appeal decision which cast doubt on whether communications between a lawyer and the client’s employees are covered by legal advice privilege. This has left uncertainty as to whether companies can effectively rely on legal advice privilege.

What Constitutes Legal Advice?

The appeal to the House of Lords concerned the question of whether communications between the Bank of England and its legal advisers for advice and assistance in relation to the Bingham Inquiry concerning the collapse of BCCI were protected by legal advice privilege. The Court of Appeal had held that legal advice privilege only protects advice as to legal rights and obligations, and that this did not include what it regarded as “presentational” assistance in putting relevant factual material before the Inquiry. In doing so, the Court of Appeal substantially narrowed the scope of legal advice privilege, opening up the need for difficult considerations as to whether a lawyer’s retainer was for the dominant or primary purpose of genuine legal advice or of mere “presentational” advice in order to determine what, if any, non-legal advice or communications would be protected as part of the “continuum” of giving and getting genuine legal advice. Furthermore, Lord Phillips MR went so far as to voice doubts as to the justification for legal advice (as opposed to litigation) privilege, querying why it should apply to matters such as conveyancing or the preparation of a will.

In unanimously rejecting the Court of Appeal’s narrow application of legal advice privilege, the House of Lords has now taken the opportunity to reaffirm the public policy reasons for it. Both Lord Scott and Lord Carswell (who gave the two main speeches) stressed that the rationale for legal privilege is the need for a client to be able to seek advice from a lawyer with absolute candour, which is only possible where the lawyer can give unqualified assurance that whatever the client tells him in confidence will never be disclosed without his consent. In drawing those conclusions, their Lordships rejected the Court of Appeal’s doubts as to its justification, emphasised the absolute nature of privilege, and concluded that the Court of Appeal had failed to accord legal advice privilege a wide enough scope.

In re-affirming the policy reasons behind privilege, their Lordships emphasised that, contrary to the Court of Appeal’s comments, legal advice privilege should, and will, continue to apply to matters such as the drafting of wills or giving of tax advice for which full and frank disclosure of information to the legal adviser on a confidential basis is necessary.

Employee Communications

In an earlier application in the same case, the Court of Appeal held that legal advice privilege only protected communications between the legal advisers and the three person Bingham Inquiry Unit (“BIU”) within the Bank of England, which was deemed to be the “client”. It did not protect documents generated by employees of the Bank for submission to, or which were in fact submitted to, the party’s legal advisers, because the employees were in the same position as third parties or agents rather than being the lawyer’s client.

It is worth noting that litigation privilege would have protected such “third party” communications, the only difference between the two forms of privilege being that litigation privilege also covers communications with third parties for obtaining advice or evidence for the litigation. The Bank had accepted from the outset that litigation privilege did not apply because the Bingham Inquiry was non-adversarial, and the House of Lords in Re L [1997] AC 16 restricted litigation privilege to adversarial proceedings. Lord Scott described the Inquiry as having taken place “under the shadow of potential judicial review”, and arguments could be envisaged that adversarial litigation is always reasonably in prospect in inquiries such as this, so that litigation privilege should apply.

Permission to appeal the earlier Court of Appeal decision had previously been refused, and it was not technically in issue on this appeal. However, given the concern expressed at the implications of that judgment, particularly for corporate clients who can only communicate with their lawyers through employees or officers, the House of Lords had been invited by the applicants, and by the Attorney General, the Law Society and Bar Council (who were permitted to intervene in this appeal), to clarify the approach that should be adopted to determine whether a communication between an employee and his employer’s lawyers should be treated for legal advice privilege purposes as a communication between the lawyer and the client.

Unfortunately, their Lordships have not done so. Lord Scott noted that in Three Rivers disclosure has already been given pursuant to the Court of Appeal judgment, so that the issue was moot. He also noted that it was a difficult issue with a dearth of domestic authority; that whatever views were expressed would not bind the lower courts; and that if the issue did come formally before the House of Lords, a different view might then be reached.

However welcome the re-affirmation of the importance and wide application of legal advice privilege, the law of privilege remains in an unsatisfactory state because companies and the courts are still faced with what Baroness Hale referred to as “particular difficulties in identifying ‘the client’ to whose communication privilege should attach”. Difficult issues will arise as to who can be regarded as the lawyer’s “client” whenever a company seeks advice from external legal advisers or inhouse lawyers. This will hamper the efficient and costeffective gathering of information for the purpose of obtaining legal advice, and will, if disputes later arise, encourage expensive satellite litigation concerning the appropriate disclosure. It is to be hoped that the point rapidly finds its way to the House of Lords on a proper footing and is adequately clarified. In the meantime, companies and their legal advisers will need to consider carefully who within the company can properly be viewed as “the client”, and to control communications between the lawyers and other employees.