The ripple effect of Three Rivers - a change in approach to legal privilege

United Kingdom

Over the last year we have covered the case of Three Rivers District Council & Others v Bank of England in a number of articles (29.04.2004, 3.03.2004, 29.12.2003, 14.04.2003, 12.03.2003). In this article we follow up recent developments in that case and comment on other cases on the subject of disclosure of lawyer/client communications which have followed in its wake.

The Three Rivers case was about "legal advice privilege". This is the confidentiality which attaches to lawyer/client communications which come into existence at a time when litigation is neither pending nor contemplated. This "privilege" enables the client to decline to disclose those communications in any subsequent litigation. In Three Rivers, the claimants had asked the Bank of England to disclose communications between the Bank and its lawyers which sought or gave advice on the best way of presenting the Bank's evidence to the Bingham Inquiry into the collapse of BCCI. The Bank refused to disclose, relying on legal advice privilege. But the Judge did not agree. He held that legal advice privilege only applied to communications seeking or giving advice concerning legal rights and obligations. Advice on presentation of evidence to an inquiry of the kind of the Bingham Inquiry was not legal advice in this sense. The communications had to be disclosed.

As anticipated in the December 2003 issue of our Bulletin, the Bank appealed against the Judge's decision. On 1 March 2004, the Court of Appeal gave its judgment, dismissing the appeal. The Court decided that "where a solicitor – client relationship is formed for the purpose of obtaining advice and assistance in relation to rights and liabilities, broad protection will be given to communications passing between the solicitor and the clients in the course of that relationship". However, the same principle does not apply "when the dominant purpose is not the obtaining of advice and assistance in relation to legal rights and obligations". Communications between the Bank and its solicitors the purpose of which was advice on presentation of evidence to the Bingham Inquiry did not attract privilege.

The Bank has obtained permission to appeal against this decision to the House of Lords. Meanwhile, however, the impact of the Three Rivers case is already making itself felt.

United States of America v Philip Morris Inc and others arose out of proceedings in the United States brought by the US Government against a number of tobacco companies including two companies in the British American Tobacco group. For the purposes of making evidence available in the US proceedings, the US Government sought an order from the English Court under the Evidence (Proceedings in Other Jurisdictions) Act 1975 for the examination of the partner in the firm of solicitors who had advised the BAT group between 1985 and 1994 as to the defendants' document management policies or procedures. He and BAT resisted the application on the grounds, among others, that the entirety of the evidence sought was protected by legal advice privilege.

The case came before the Judge prior to the Court of Appeal's latest judgment in Three Rivers. However, he commented that the earlier Three Rivers decisions on disclosure of documents had made it clear that the Court is not bound to accept the lawyer's own assessment of whether privilege applied and that it was necessary to approach the question in a rather more critical manner than had perhaps been the case in the past. He therefore found himself obliged to refer to a little more of the evidence of the circumstances in which the solicitors concerned came to act for the BAT group and the nature of the advice and assistance they were asked to give. He noted that it was possible that the solicitors gave advice and assistance on such matters as the organisation and implementation of a review of documents, which less clearly fell within the scope of legal advice. He added that, without more information, it was not possible to say whether the person with whom the solicitors communicated in any given case was to be regarded as "the client". Similarly, without further information, it was not possible to determine whether a particular communication was made for the dominant purpose of giving or receiving legal advice. For these and other reasons the Judge took the view that the right course was for objections to be raised and for privilege to be invoked by the solicitors as specific questions were asked of them. He therefore gave directions requiring the US Government to give a better indication of the types of question which it intended to ask, and for a further hearing to be held at which he would deal with any objections by the solicitors and BAT.

BAT and the solicitors appealed. On 23 March 2004 the Court of Appeal dismissed the appeal. The Court, which now had the benefit of the Court of Appeal's Judgment in Three Rivers, said that if part of the solicitor's duties embrace the giving of legal advice on his client's rights, liabilities and obligations, and a further significant part of his duties relate to activities which cannot be so characterised, then the Three Rivers cases show that it is too simplistic to refer simply to the dominant purpose of the original retainer, or to try to identify the dominant purpose of a role assumed over a number of years involving the solicitor in many different activities. The Court commented that there was obvious force in the general thrust of the argument that advice or assistance in collecting and collating, listing, spring-cleaning, storing, transporting and warehousing documents does not amount to legal advice concerning legal rights and obligations. If in the course of many communications passing between the solicitors and their clients there are some letters which were written for the dominant purpose of seeking legal advice, this does not itself confer privilege on the entire correspondence. The Judge's approach had been correct.

The judgments in USA v Philip Morris suggested that advice and assistance on document control and management, if given in circumstances where there is only a "mere possibility" of litigation, may not be protected by privilege. Three Rivers held that advice and assistance on presentation of evidence to public enquiries is not protected. As we observed in our article in the December 2003 issue of our Bulletin, there are many communications between solicitor and client which are not made for the purpose of obtaining or giving legal advice strictly so called. We can expect further attacks on legal advice privilege on this ground.

But the impact of Three Rivers goes further than this. Three Rivers marks a change in approach by the courts to claims for legal advice privilege. We can expect parties to be more ready to challenge such claims than they have been hitherto, to test the limits at which claims for legal advice privilege are to be drawn.

In USP Strategies plc v London General Holdings Ltd, for example, decided on 8 March 2004, the defendant had received legal advice from a firm of solicitors in the Isle of Man. It passed paraphrases, summaries and extracts from that legal advice to a third party. The claimant, relying in part on one of the earlier decisions in the Three Rivers case, sought disclosure of those paraphrases, summaries and extracts, on the grounds that they were communications passing between the client and a third party, not between the solicitor and the client, and were therefore not subject to legal advice privilege. The Judge rejected this analysis. Where legal advice privilege attaches to communications between solicitor and client it also attaches to documents evidencing such communications. "A record of a privileged communication has the same sort of quality as the communication itself for the purposes of privilege". The question therefore was whether, in disclosing the advice to the third party, the defendant had waived privilege in the documents not only as between itself and the third party, but also as between itself and the rest of the world. The Judge held that, in the circumstances of this particular case, there had been no general waiver of privilege.

Whatever the House of Lords decides in Three Rivers, it is likely to be some time before the ramifications of that case have been thoroughly worked through.

The ripples of Three Rivers look set to spread.

For more information please contact Peter Long at peter.long@cms-cmck.com