Three Rivers District Council and Others v Governor and Company of the Bank of England (No 9)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLORD SCOTT OF FOSCOTE,LORD RODGER OF EARLSFERRY,BARONESS HALE OF RICHMOND,LORD CARSWELL,LORD BROWN OF EATON-UNDER-HEYWOOD
Judgment Date11 November 2004
Neutral Citation[2004] UKHL 48
Date11 November 2004

[2004] UKHL 48

HOUSE OF LORDS

The Appellate Committee comprised:

Lord Scott of Foscote

Lord Rodger of Earlsferry

Baroness Hale of Richmond

Lord Carswell

Lord Brown of Eaton-under-Heywood

Three Rivers District Council

and others

(Respondents)
and
Governor and Company of the Bank of England
(Appellants)

(2004)

LORD SCOTT OF FOSCOTE

My Lords,

1

On 29 July 2004, the Appellate Committee announced that this appeal should be allowed. I now give my reasons for reaching that decision.

Introduction

2

The actual issue for decision on this appeal is an apparently simple one that can be very shortly stated. Do the communications between the Bank of England, their solicitors, Freshfields, and counsel relating to the content and preparation of the so-called overarching statement submitted on behalf of the Bank to the Bingham Inquiry qualify for legal professional privilege? It is contended by the respondents, and was held by the Court of Appeal, that they do not. But the broader issues that have been debated on this appeal are not in the least simple. They have required your Lordships to consider the policy justifications for the existence of legal professional privilege in our law and, generally, the permissible scope of the privilege. In relation to what sort of communications can legal professional privilege be claimed? As to the scope of legal professional privilege, the focus has been, first, on the part, if any, that legal professional privilege should be allowed to play where the advice or assistance sought by the lawyers is not advice or assistance about the client's legal rights or obligations, and, second, on the criteria to be applied to determine whether communications between the lawyers and employees of the client can be treated for privilege purposes as communications between the lawyers and the client.

3

In order that the significance of the issues as I have broadly described them can be understood, it is necessary to provide a brief history of the events that have led up to this appeal.

The history

4

The starting point is the collapse of BCCI in July 1991 with a huge excess of liabilities over assets. BCCI's depositors stood to lose a substantial part of their deposits. Shareholders in BCCI stood to lose their investments. Under the Banking Acts of 1979 and 1987 the Bank of England ("the Bank") has a supervisory role in relation to banks and financial institutions carrying on business in the United Kingdom. So the Bank had had statutory responsibilities and duties regarding the supervision of BCCI.

5

Very shortly after the collapse of BCCI the Chancellor of the Exchequer announced in Parliament that there would be an independent inquiry into the Bank's supervision of BCCI. Bingham LJ (as he then was) was appointed to conduct the Inquiry. Bingham LJ's terms of reference required him

"To enquire into the supervision of BCCI under the Banking Acts; to consider whether the action taken by all the UK authorities was appropriate and timely; and to make recommendations."

In a letter to the Chancellor of the Exchequer written in July 1992, Bingham LJ described his terms of reference as calling for the consideration of five broad questions. These were -

"(1)What did the United Kingdom authorities know about BCCI at all relevant times?

(2) Should they have known more?

(3) What action did the United Kingdom authorities take in relation to BCCI at all relevant times?

(4) Should they have acted differently?

(5) What should be done to prevent or minimise the risk of such an event recurring in the future?"

6

It was clear to all that the Bank was the principal party to be investigated and shortly after the Inquiry had been established the Governor of the Bank appointed three Bank officials to deal with all communications between the Bank and the Inquiry. These officials, and other Bank personnel appointed to assist them from time to time, became known as the Bank's Bingham Inquiry Unit ("the BIU"). Freshfields were retained by the Bank to advise generally on all dealings of the Bank, its officials and employees with the Inquiry. Freshfields retained counsel to assist in that process. One of the main functions of the BIU was the preparation and communication of information and instructions to Freshfields to enable them to carry out their duties under their retainer. They (Freshfields) and counsel gave advice as to the preparation and presentation of the Bank's evidence to the Inquiry and as to the submissions to be made to the Inquiry on the Bank's behalf. Indeed, except for some routine administrative arrangements, all the Bank's communications with the Inquiry were the subject of extensive advice from Freshfields and counsel.

7

The Bingham Inquiry Report was published on 22 October 1992. In 1993 some 6,231 persons, each of whom claimed to be a depositor with United Kingdom branches of BCCI, and BCCI itself (by its liquidators) commenced an action against the Bank for the loss they had respectively been caused by the BCCI collapse. Section 1(4) of the Banking Act 1987 relieves the Bank of any liability "for anything done or omitted in the discharge or purported discharge of the functions of the Bank under this Act unless it is shown that the act or omission was in bad faith". It was, therefore, not possible for the action to be based merely on an alleged negligent performance by the Bank of its supervisory duties vis-à-vis BCCI. The various acts or omissions on the part of the Bank to which the collapse of BCCI was alleged to be attributable had to be "in bad faith". This requirement plainly placed before the claimants in the action (the respondents before your Lordships) a very high hurdle and it is not in the least surprising that they have been, and still are, seeking the widest possible discovery from the Bank in order to assist their efforts to jump it.

8

By an application notice dated 25 October 2002 the claimants sought disclosure by the Bank of a large number of documents which the Bank claimed it had the right to withhold on the ground of legal professional privilege. These were documents which had been brought into existence by employees of the Bank for the purpose of being passed to Freshfields. The parties were agreed that documents emanating from or prepared by independent third parties and then passed to Freshfields were not privileged. It was the status of documents prepared by Bank employees that was in question.

9

Tomlinson J in his judgment of 13 December 2002 ( Three Rivers District Council v Governor and Company of the Bank of England (No.5) [2002] EWHC 2730) held that all these documents were privileged. In paragraph 10 of his judgment, he described the documents as "generated for the purpose of providing information to the Bank's legal advisers to enable them to prepare submissions and/or to advise on the nature, presentation, timing and/or content of the Bank's submissions to, evidence for and responses to requests from the Inquiry". And he proceeded to consider the privilege issue "upon the assumption that the material which the Bank seeks to protect from disclosure is both relevant to and probative as to the issues in the trial".

10

The modern case law on legal professional privilege has divided the privilege into two categories, legal advice privilege and litigation privilege. Litigation privilege covers all documents brought into being for the purposes of litigation. Legal advice privilege covers communications between lawyers and their clients whereby legal advice is sought or given. In in re L [1997] AC 16 Lord Jauncey of Tullichettle described litigation privilege as "essentially a creature of adversarial proceedings" and held that the privilege could not be claimed in order to protect from disclosure a report prepared for use in non-adversarial proceedings (see p.26). Lord Lloyd of Berwick and Lord Steyn expressed their agreement. The Bingham Inquiry could not have been described as adversarial. It was, as inquiries invariably are, an inquisitorial proceeding. It was no doubt with in re L in mind that the Bank did not claim that the documents of which disclosure was being sought were entitled to litigation privilege. The Bank took its stand on legal advice privilege. As to that, the Bank claimed privilege for all documents prepared for at least the dominant purpose of obtaining or recording legal advice from Freshfields or counsel. In paragraph 30 of his judgment Tomlinson J accepted this claim. He said -

"In my judgment an internal confidential document, not being a communication with a third party, which was produced or brought into existence with the dominant purpose that it or its contents be used to obtain legal advice is privileged from production."

He therefore dismissed the 25 October 2002 discovery application.

11

In an addendum to his judgment given on 6 February 2003 after a further hearing Tomlinson J dealt with the question whether documents prepared by ex-employees or ex-officers of BCCI stood on the same footing for legal advice privilege purposes as documents prepared by current employees or current officers. He held that provided the dominant purpose test that he had formulated in his main judgment were satisfied, no distinction for privilege purposes was to be drawn. He said, in paragraph 6 -

"In my judgment the former officers of the Bank who were concerned with the supervision of BCCI and who in that capacity acquired relevant knowledge which was confidential to the Bank are not for this purpose to be regarded as third parties".

12

The BCCI claimants appealed and on 3 April 2003 the Court of Appeal allowed the appeal. It is important to notice that Mr Gordon Pollock QC, counsel for the claimants, did not argue for disclosure of documents passing between the BIU and Freshfields nor...

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