House of Lords hand down Opinions in Three Rivers

After a four day hearing in July 2004 the House of Lords immediately allowed the appeal by the Bank of England on the scope of legal advice privilege with reasons to follow. The issue before the Lords was whether all communications between the Bank of England and its lawyers relating to the Bingham Inquiry (into the collapse of BCCI) were protected by legal advice privilege. The Court of Appeal had previously ruled that communications that did not relate to the Bank's legal rights and obligations were not privileged.

Yesterday, the Lords handed down their Opinions. In summary, they are in favour of the protection of the legal professional privilege, although there remain some areas of uncertainty; the vexed issue of "who is the client" raised by Three Rivers (No. 5) remains unresolved. Further, a party participating in an inquiry may draw some comfort that advice obtained from a lawyer using his or her legal skills and within a "relevant legal context" will be protected by legal advice privilege.

The following key points can be drawn from the Lords' unanimous decision:

1. The correct test for legal advice privilege is as set out in Balabel v. Air India [1988]: "…legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context"
2. When determining whether advice is "legal advice", the courts will look at whether or not a lawyer is providing advice in his or her capacity as a lawyer, in other words using his or her legal skills.
3. The "dominant purpose" test (which is applicable in determining litigation privilege) is not an intrinsic part of the relevant test for legal advice privilege.
4. In Three Rivers (No. 5), the Court of Appeal ruled that only communications between the Bank's lawyers and the Bingham Inquiry Unit (three bank officials appointed to deal with the Bank's lawyers in relation to the Bingham Inquiry) were protected by legal advice privilege and that other documents created by the Bank for the purpose of the Inquiry were not so protected. The Bank and, intervening in the House of Lords appeal, The Law Society, considered that the Court of Appeal had gone too far. Although the Lords did not comment upon the Court of Appeal decision, Lord Carswell, at least, made his views clear: "I do not propose to express any opinion on [Three Rivers (No. 5)]. Having said that, I am not to be taken to have approved of the decision… and I would reserve my position on its correctness."
5. The Lords have questioned whether the scope of litigation privilege is properly limited to "adversarial proceedings" as established in re L [1997]. However, as the issue went beyond the scope of the appeal, no conclusions were reached.
6. The need for legal advice privilege, for example in matters of conveyancing or the drawing up of a will, was seen as unquestionable by the Lords, in contrast to the doubts raised by the Court of Appeal.

Please click here for a more detailed analysis of the issues raised in the Judgment.

For further information contact Guy Pendell on +44(0)20 7367 2404 or at [email protected] or Amanda Wadey on +44(0)20 7367 2308 or at [email protected]