In brow-mopping mode

What I want to share with you is sacred to client and lawyer. It is a client’s right to refuse to disclose confidential information passing between itself and its lawyers to third parties. A right, as James Bessey reported (22 October 2004, page 62), that has been under threat. Since then the House of Lords’ judgment in Three Rivers Council and Others vs The Governor of the Bank of England has been handed down.

You will recall the BCCI bank failed calamitously in July 1991. BCCI’s depositors and shareholders stood to lose all. Under the banking acts, the Bank of England had a supervisory role in relation to banks and those transacting business in the UK. Soon the finger of blame was pointing at the bank. To quell those concerns, Lord Justice Bingham was appointed to head an independent inquiry into the bank’s supervision of BCCI.

The bank engaged lawyers and set up its own internal unit, the Bingham Enquiry Unit, to respond to the inquiry. Bingham’s report was duly published. Within a short time, thousands of depositors of BCCI had started proceedings against the bank for the losses they had incurred.

In order to succeed against the bank, they had to show not merely that the bank had negligently performed its supervisory duties towards BCCI, but was guilty of bad faith in office. So the claimants sought the widest disclosure of documents from the bank, including documents exchanged between bank employees, the enquiry unit and their lawyers. The bank maintained that any documents created for the purpose of dealing with the inquiry should be confidential.

At this point I should just say that in proceedings, a party is entitled to refuse to produce “privileged” documents. The main category of privilege is legal professional privilege. There are two types of legal professional privilege: legal advice privilege and litigation privilege. Legal advice privilege protects communications between a lawyer in his professional capacity and client, provided they are confidential and are for the purposes of seeking or giving legal advice. Documents sent to or from an independent third party (even if created with the dominant purpose of obtaining legal advice) are not covered by this privilege.

Litigation privilege arises after litigation is commenced or contemplated. It is wider than legal advice privilege and protects all documents produced for the sole or dominant purpose of the proceedings.

The bank could not claim litigation privilege.

It claimed, however, that legal advice privilege should apply to all confidential communications with the inquiry.

In June 2003, the Court of Appeal gave judgment concerning the nature of documents to which the bank could claim legal advice privilege. It caused an outcry. It was found that the advice of the bank’s lawyers to the bank on how best to present its evidence to the Bingham inquiry, was advice that was not privileged.

Such was the outcry, and the importance of this decision, that the Law Society, the Bar Council and attorney general were all granted leave to intervene in the appeal. Then sanity prevailed ...

Such was the importance of this decision that the Law Society, the Bar Council and attorney general were all granted leave to intervene in the appeal. Then sanity prevailed. On 11 November 2004, the House of Lords overruled the Court of Appeal. It declared that where the bank’s lawyers were providing “presentational advice” on how to submit evidence, such advice continued to be privileged. It was noted, “legal advice is not confined to telling the client the law. It must include advice as to what should prudently and sensibly be done”.

So advice given by a lawyer will be protected by advice privilege if it is provided in a “relevant legal context”. One should ask oneself whether the lawyer was wearing his “legal spectacles” or was acting as a “man of business”? If a solicitor advises his client on matters of business, such as the state of the property market, the advice will lack the relevant legal context.

Sadly, a key point made by the Court of Appeal was not addressed; it had decided that in applying the test for legal advice privilege to a large organisations the “client” includes only a specified collection of individuals responsible for day-to-day communication with the lawyers. This was considered unsatisfactory and the House of Lords was invited to express an opinion on this issue.

Despite acknowledging that it was of particular importance for corporate clients that only communicate through employees or officers, the House of Lords declined to do so.

Particular care must now be exercised in communicating with employees where it is not clear which constitutes “the client”. Until the courts have provided further guidance, the following steps may increase the chances of a successful claim for legal advice privilege:

• External solicitors should limit their communications to those corporate individuals responsible for obtaining the advice.
• Structure the chain of communications so that an in-house lawyer gives advice within the company and seeks advice from the external lawyer.
• Consider formally identifying a unit within the client company whose members comprise everyone with the material facts. The unit will then be responsible for the conduct of the transaction.
• If there are employees outside the unit who have material information or who need to be kept informed, arrange their attendance at meetings between the client unit and lawyers in order to avoid separate communications.

Simon Tolson is senior partner in Fenwick Elliott