New UK Court Case On Legal Privilege: Three Rivers District Council & Others -V-Governor & Company Of The Bank Of England (Hl) (11/11/2004)

Background to the Judgment

In 1991, the Bank of Credit and Commerce International ("BCCI") collapsed with a huge excess of liabilities over assets. One of the biggest scandals in UK banking, many questions needed to be answered. People turned to the Bank of England ("The Bank"), which under the Banking Acts of 1979 and 1987, has a statutory supervisory role with responsibilities and duties concerning the supervision of banks, including BCCI.

A government inquiry was set up into the BCCI collapse, headed by Lord Justice Bingham, to investigate the Bank's conduct and role in the collapse. Given the Inquiry, the Bank set up an internal Unit ("BIU") made up of a number of bank officials, to co-ordinate the Bank's response. The BIU instructed lawyers to act on its behalf and extensive advice was given by the lawyers to the BIU as to the Bank's legal position and how best to present its evidence to the inquiry.

After the conclusion of the inquiry in October 1992, a number of depositors of BCCI ("the Claimants") commenced an action against the Bank, claiming damages for misfeasance in public office.

The appeal to the House of Lords concerned certain documents which the Bank was refusing to disclose on grounds of privilege. The House of Lords judgment is important as it clarifies the English common law position on what communications are covered by legal professional privilege.

Legal Professional Privilege

Legal professional privilege has been described in one case as "a fundamental condition on which the administration of justice as a whole rests"; it is a key element to any lawyer-client relationship.

The modern law on legal professional privilege has developed in two strands: litigation privilege and, the more general, legal advice privilege; it was the latter which concerned their Lordships, although comments on the former were made by way of reference and clarification.

Litigation Privilege

Litigation privilege covers documents created in respect of the seeking or giving of legal advice for the purposes of actual or contemplated legal proceedings - the rational being that in order to achieve the administration of justice, lawyers should have access to all relevant material from their client without fear that confidential communications will be available to the other side.

Litigation privilege extends beyond simply communications between the lawyer and his client. It covers communications between a lawyer or a lawyer's client and a third...