England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (Commercial)
MR JUSTICE TOMLINSON

		Royal Courts of Justice Strand, London, WC2A 2LL
		3rd April 2003

Lord Justice Longmore:

1. This is the judgment of the court in an interlocutory appeal from Tomlinson J in relation to disclosure of documents in the current litigation in which the appellants, liquidators and creditors of BCCI, are suing The Bank of England ("the Bank") for misfeasance in public office. The Bank have claimed legal professional privilege for numerous documents which came into existence between the time when BCCI collapsed and the time when they made their final submissions to the Bingham Inquiry conducted by Lord Justice Bingham as he then was. The Bank does not claim that the documents were prepared in contemplation of litigation and are thus protected by that category of legal professional privilege which can be described as "litigation privilege"; rather the Bank claims that the documents are protected from disclosure by reason of that category of legal professional privilege known as "legal advice privilege", viz. privilege in relation to legal advice that is not founded on the existence or the contemplation of litigation. It is clear on the authorities that documents emanating from or prepared by third parties or employees of a party are covered by the principle of "litigation privilege" if prepared with the dominant purpose of use in existing or contemplated litigation. The scope of "legal advice privilege" is less clear. It is agreed that documents emanating from or prepared by independent third parties and then passed to the Bank's solicitors ("Freshfields") for the purpose of advice being given to the Bank are not privileged under the legal advice head but beyond this the scope of legal advice privilege is controversial.
2. The reason why the Bank accepts that it cannot rely on litigation privilege as opposed to legal advice privilege is that in Re L [1997] 1 AC 16 the House of Lords decided that litigation privilege is essentially a creature of adversarial proceedings and thus cannot exist in the context of non-adversarial proceedings. The Bank further accepts that the Bingham inquiry was not adversarial; the terms of reference were:-

"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".

The inquiry was set up on behalf of the Chancellor of the Exchequer and the Bank but was a private non-statutory inquiry. As the judge said:-

"It was an inquiry one outcome of which could be criticism of the conduct of the Bank from an informed and highly authoritative source, an outcome which would not only be of some importance in relation to the Bank's ongoing regulatory and supervisory role but would itself be likely either to lead to or to encourage the institution or attempted institution of proceedings against the Bank by depositors and others who had lost money in consequence of the collapse of BCCI."

Nevertheless the inquiry did not constitute adversarial litigation and litigation privilege cannot arise. To the extent that the Bank now wish to claim privilege in the current litigation, the Bank accept that they can only claim legal advice privilege.

3. The judge has set out the background to the dispute by referring to his earlier judgments and reciting at length from the evidence before him and reference can be made to his judgments for any matter of detail. For present purposes it is sufficient to record that, shortly after the Bingham inquiry was established, the Governor of the Bank of England appointed 3 Bank officials, Mr Paul Tucker, Mr John Trundle and Mr John Rippon to deal with all communications between the Bank and the inquiry. They became known as the Bingham Inquiry Unit ("BIU"). On the day on which they were appointed they met the Bank's solicitors, Freshfields. All the BIU's communications with the inquiry were therefore the subject of extensive legal advice from Freshfields and counsel instructed by them. This advice covered all aspects of the preparation and presentation of the Bank's evidence and submissions to the Bingham inquiry. The Bank and its solicitors prepared a substantial 258 page document which constituted its "Statement to the Inquiry"; they also prepared a paper entitled "Supervisory Issues". Lord Justice Bingham was not provided with witness statements but witnesses gave evidence to him and that evidence was transcribed. The Bank has disclosed both of its submissions in the form in which they were finally sent to Lord Justice Bingham and the transcripts of the evidence of its witnesses.
4. Mr Pollock QC, for the appellants, has made clear in his submissions that disclosure is not sought of documents passing between the BIU and Freshfields or vice versa, nor is disclosure sought of any of Freshfields' internal memoranda or drafts. He accepts that the BIU was, for the purpose of the inquiry, the client of Freshfields and that communications passing between them are covered by legal advice privilege. But he submits that documents prepared by the Bank's employees or ex-employees, whether prepared for submission to or at the direction of Freshfields or not, should be disclosed as being no more than raw material on which the BIU would, thereafter, seek advice. The evidence isolated and the judge dealt with 4 separate categories of such documents; he asked himself the following questions:-

(1) Does legal advice privilege extend to documents prepared by Bank employees, which were intended to be sent to and were in fact sent to Freshfields?

(2) Does it extend to documents prepared by Bank employees with the dominant purpose of the Bank's obtaining legal advice but not, in fact, sent to Freshfields (though, perhaps, their effect was incorporated into documents that were so sent)?

(3) Does it extend to documents prepared by Bank employees, without the dominant purpose of obtaining legal advice, but in fact sent to Freshfields?

(4) Are the answers to (1), (2) and (3) above any different if the documents were prepared by Bank employees who are now (viz. as at 11th March 2003) ex-employees of the Bank?

It is accepted that some, at any rate, of the material sought could be highly relevant to the litigation eg, the first memorandum or statement of an officer intimately concerned in the supervision of BCCI.

5. In the course of argument, a surprisingly wide divergence about the extent of legal advice privilege opened up. The judge observed that the law on this topic is not as clear as one might have expected. Mr Pollock submitted that it was only communications between solicitor and client, and evidence of the content of such communications, that were privileged. Preparatory materials obtained before such communications, even if prepared for the dominant purpose of being shown to a client's solicitor, even if prepared at the solicitor's request and even if subsequently sent to the solicitor, did not come within the privilege.
6. Mr Stadlen QC, for the respondent, submitted that, as a matter of general principle, any document prepared with the dominant purpose of obtaining the solicitor's advice upon it came within the ambit of the privilege, whether or not it was actually communicated to the solicitor; he said that the authorities confined the class of documents that attracted legal advice privilege no further than that; in particular, there was no authority to support the proposition that it was only communications between solicitor and client that were privileged. This general principle was subject to the exception that documents sent to or by an independent third party (even if created with the dominant purpose of obtaining a solicitor's advice) would not be covered by legal advice privilege. Both counsel maintained that the law was well-settled in favour of their submissions by the end of the nineteenth century and that we were bound by the law as so settled which had not changed in substance for over a hundred years.
7. The judge's conclusion in favour of the Bank was :-

"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".

It will be necessary to consider the nineteenth century authorities to see whether this is right.

8. The law

Lawyer and client privilege is of great antiquity. In the early nineteenth century there was controversy whether the privilege only existed in relation to existing litigation. This debate was regarded as authoritatively settled by Lord Brougham LC, sitting on appeal, in Greenough v Gaskell (1833) 1 My. & K. 98 in which the question arose whether the defendant solicitor, sued for fraudulently concealing that his client was insolvent and thereby inducing the plaintiff to issue a promissory note on the client's behalf, could claim privilege in respect of communications which he had received from his client. The Lord Chancellor held that the defendant could claim privilege, that it made no difference whether it was the client or the solicitor who was the defendant and that it did not matter that, at the time, there were no existing or contemplated proceedings. Since this is the first time that legal advice privilege, in the absence of pending or contemplated litigation, was unequivocally upheld, it is necessary to quote a fairly lengthy passage from the judgment (pages 101-103):-

"Here the question relates to the solicitor, who is called upon to produce the entries he had made in accounts, and letters received by him, and those written (chiefly to his town agent) by him, or by his direction, in his character or situation of confidential solicitor to the party; and I am of opinion that he cannot be compelled to disclose papers delivered, or communications made to him, or letters, or entries made by him in that capacity. To compel a party himself to answer upon oath, even as to his belief or his thoughts, is one thing; nay, to compel him to disclose what he has written or spoken to others, not being his professional advisers, is competent to the party seeking the discovery; for such communications are not necessary to the conduct of judicial business, and the defence or prosecution of men's rights by the aid of skilful persons. To force from the party himself the production of communications made by him to professional men seems inconsistent with the possibility of an ignorant man safely resorting to professional advice, and can only be justified if the authority of decided cases warrants it. But no authority sanctions the much wider violation of professional confidence, and in circumstances wholly different, which would be involved in compelling counsel or attorneys or solicitors to disclose matters committed to them in their professional capacity, and which, but for their employment as professional men, they would not have become possessed of.

As regards them, it does not appear that the protection is qualified by any reference to proceedings pending or in contemplation. If touching matters that come within the ordinary scope of professional employment, they receive a communication in their professional capacity, either from a client, or on his account, and for his benefit in the transaction of his business, or, which amounts to the same thing, if they commit to paper, in the course of their employment on his behalf, matters which they know only through their professional relations to the client, they are not only justified in withholding such matters, but bound to withhold them, and will not be compelled to disclose the information or produce the papers in any Court of law or equity, either as party or as witness. If this protection were confined to cases where proceedings had commenced, the rule would exclude the most confidential, and it may be the most important of all communications – those made with a view of being prepared either for instituting or defending a suit, up to the instant that the process of the Court issued.

If it were confined to proceedings begun or in contemplation, then every communication would be unprotected which a party makes with a view to his general defence against attacks which he apprehends, although at the time no one may have resolved to assail him. But were it allowed to extend over such communications, the protection would be insufficient, if it only included communications more or less connected with judicial proceedings; for a person oftentimes requires the aid of professional advice upon the subject of his rights and his liabilities, with no references to any particular litigation, and without any other reference to litigation generally than all human affairs have, in so far as every transaction may, by possibility, become the subject of judicial inquiry. "It would be most mischievous," said the learned Judges in the Common Pleas, "if it could be doubted whether or not an attorney, consulted upon a man's title to an estate, was at liberty to divulge a flaw" (2 Brod. & Bingh. 6).

The foundation of this rule is not difficult to discover. It is not (as has sometimes been said) on account of any particular importance which the law attributes to the business of legal professors, or any particular disposition to afford them protection, though certainly it may not be very easy to discover why a like privilege has been refused to others, and especially to medical advisers.

But it is out of regard to the interests of justice, which cannot be upholden, and to the administration of justice, which cannot go on, without the aid of men skilled in jurisprudence, in the practice of the Courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings. If the privilege did not exist at all, every one would be thrown upon his own legal resources; deprived of all professional assistance, a man would not venture to consult any skilful person, or would only dare to tell his counsellor half his case. If the privilege were confined to communications connected with suits begun, or intended, or expected, or apprehended, no one could safely adopt such precautions as might eventually render any proceedings successful, or all proceedings superfluous."

It is apparent from this lengthy extract that the privilege stemmed from the confidential relationship of client and solicitor and attached only to communications between the client and solicitor. It is also true to say that at this early stage in the law there was no distinction drawn between litigation privilege and legal advice privilege; the Lord Chancellor thought there was a single lawyer/client privilege which applied even if proceedings were not contemplated. However, the reference to the competence of the party seeking discovery to compel the other party

"to disclose what he has written or spoken to others, not being his professional advisers" (at the beginning of the quotation)

militates against the submission that the client's internal memoranda or materials preparatory to consulting his solicitor can be privileged.

9. This decision was not greeted everywhere with enthusiasm. Lord Langdale MR in particular seems to have put up a rearguard action but, by 1846, when counsel was still submitting that privilege only extended to client/lawyer communications which had taken place pending, or in contemplation of, litigation, he said:-

". . . I must refuse so much of the motion [for production] as relates to the documents alleged to be privileged; I have anxiously examined the subject, and arrived at a conclusion, which to me has seemed right; but it has not been approved, and I have no doubt, that, if I were to order the production of these documents, the order would be reversed elsewhere.

The unrestricted communication between parties and their professional advisers, has been considered to be of such importance as to make it advisable to protect it even by the concealment of matter without the discovery of which the truth of the case cannot be ascertained." Reece v Trye (1846) 9 Beav. 316, 318-9.

We note again the use of the phrase "communication between parties and their professional advisers".

10. There then follow three important cases in the Court of Appeal decided between 1876 and 1881 of which the first is Anderson v Bank of British Columbia (1876) 2 ChD 644. Litigation was threatened against an English bank concerning the conduct of an account kept at the branch of the bank in Oregon. The English bank's London manager thought it necessary to ascertain the full facts and cabled the branch manager in Oregon (Mr Russell) for full particulars of transactions on the account. Mr Russell replied with the particulars and in the ensuing litigation the bank claimed that the reply was privileged. As Bingham LJ pointed out in Ventouris v Mountain [1991] 1 WLR 607, 612H, a modern court would be likely to have held that privilege did attach since litigation was imminent and the letter was written for the purpose of obtaining advice in that litigation. But at this stage there was no clear-cut distinction between litigation and legal advice privilege and both Sir George Jessel MR at first instance and the Court of Appeal thought it plain that Mr Russell's letter was not privileged; this was mainly because they concluded that the bank's London manager was taking steps to inform himself of the position rather than to obtain material which would find its way, in due course, into counsel's brief. Once again, in the light of the arguments addressed to us, it is unfortunately necessary to set out substantial parts of the judgments. Mr Stadlen relied in particular on the first citation from the judgment of Sir George Jessel MR. Mr Pollock relied on the judgments in the Court of Appeal.
11. At page 647, Sir George Jessel MR refers to the affidavit of the London branch manager claiming privilege for Mr Russell's letter:-

"The affidavit goes on to state this, that when he first saw the letter of the Plaintiff he observed - whatever "observed" may mean - "that litigation was imminent, and I felt it was essential that the bank should have the benefit of legal advice, and that for that purpose there should be obtained from the other side" - that is, from Oregon - "the full particulars of all the facts and circumstances of the case likely to be required by the solicitor of the bank. I determined, therefore, at once to telegraph to Mr. Russell" - that is, the agent - "instructions for full particulars, and at the same time to request the attendance of the solicitor of the bank at the next meeting of the court of directors;" and, accordingly, he sent a telegram, and the solicitor attended the court of directors. Now, there is not a syllable there which shews that any communication, direct or indirect, expressed or implied, was made to the agent to the effect that his communication was to be a confidential one for the purpose of being submitted to the professional man - that is, the solicitor - for advice. If it had been so, I apprehend that it would have been protected upon principles well understood. If you ask your agent to draw out a case for the opinion of your solicitor, or for the opinion of your counsel, that is a confidential communication made for that purpose. Here there is nothing of the sort. Nor is it suggested or alleged that, without being requested, the agent did make the communication with the object of its being laid before the solicitor for advice. He therefore did not make it as a confidential communication in any other sense than that in which every communication from an agent to his principal, or from a sub-agent to the chief agent of the principal, is confidential. Every such communication, no doubt, is in a sense confidential, but not in the sense in which we call a communication to a professional man confidential. This communication, then, as regards the sender, was not made or sent for the purpose of being laid before a professional adviser, nor was there any intimation of such purpose sent by the person who required the communication. All that you have got is a statement of the person who sent the telegram as to the state of his feelings at a particular time, which is not sufficient for the purpose of the point I have to determine. I therefore feel no difficulty whatever in saying that this clearly was not a confidential communication made within the rule which protects confidential communications from discovery as regards the other side."

This, said Mr Stadlen, showed that any communication made or sent for the purpose of being laid before a solicitor was privileged. The Master of the Rolls then, after referring to authority, including Greenough v Gaskell, set out the object of the rule (page 649):-

"The object and meaning of the rule is this: that as, by reason of the complexity and difficulty of our law, litigation can only be properly conducted by professional men, it is absolutely necessary that a man, in order to prosecute his rights or to defend himself from an improper claim, should have recourse to the assistance of professional lawyers, and it being so absolutely necessary, it is equally necessary, to use a vulgar phrase, that he should be able to make a clean breast of it to the gentleman whom he consults with a view to the prosecution of his claim, or the substantiating his defence against the claim of others; that he should be able to place unrestricted and unbounded confidence in the professional agent, and that the communications he so makes to him should be kept secret, unless with his consent (for it is his privilege, and not the privilege of the confidential agent), that he should be enabled properly to conduct his litigation. That is the meaning of the rule."

Next, the Master of the Rolls set out the extent of the rule (pages 649-650):-

"Now, as to the extent of the rule. It goes not merely to a communication made to the professional agent himself by the client directly, it goes to all communications made by the client to the solicitor through intermediate agents, and he is not bound to write letters through the post, or to go himself personally to see the solicitor; he may employ a third person to write the letter, or he may send the letters through a messenger, or he may give a verbal message to a messenger, and ask him to deliver it to the solicitor, with a view to his prosecuting his claim, or of substantiating his defence.

Again, the solicitor's acts must be protected for the use of the client. The solicitor requires further information, and says, I will obtain it from a third person. That is confidential. It is obtained by him as solicitor for the purpose of the litigation, and it must be protected upon the same ground, otherwise it would be dangerous, if not impossible, to employ a solicitor. You cannot ask him what the information he obtained was. It may be information simply for the purpose of knowing whether he ought to defend or prosecute the action, but it may be also obtained in the shape of collecting evidence for the purpose of such prosecution or defence. All that, therefore, is privileged.

Then the rule goes a step further. The solicitor is not bound any more than the client to do this work himself. He is not bound either to collect information or to collect testimony. He may employ his clerks or other agents to do it for him, and upon the same principle as the information acquired by himself directly is protected, so the information acquired by a clerk or agent employed by him is equally protected. But then the cases go still a step further. Suppose the information required is in a foreign country, where neither the solicitor nor his clerk nor an ordinary agent can obtain it, he may request the client to obtain it himself, and then the information so obtained by the client at the request or under the advice of the solicitor is in a sense obtained by the agent of the solicitor, although it is a very odd way of expressing it. It is turning the client, so to say, into the agent of the solicitor for the purpose of obtaining information; but it is clearly within the rule of privilege. So far as I understand, the cases in equity go no further."

While the first passage that has been quoted, and on which Mr Stadlen relies, is in general terms, the sentences that we have emphasised in the later passages make it plain that the foundation of his approach was the existence or imminence of litigation.

12. The case then went to appeal and it is at this stage that we see the distinction between litigation privilege and legal advice privilege beginning to emerge. Mr Chitty QC for the bank, claiming that Mr Russell's letter was privileged, opened his argument by saying (page 654):-

"We contend that this letter is privileged as being a confidential communication to enable the directors to obtain legal advice."

Mellish LJ intervened:-

"I apprehend that a letter written by an agent who was getting up evidence to be used at the trial would be privileged; but this is not like that."

He intervened again at the end of the argument to say:-

"The object here was, not to obtain evidence, but to learn what the facts were, in order to know whether the claim should be resisted. It seems to be an extension of the rule as to privileged communications to apply it to such a case."

13. James LJ, in giving judgment, thought the case one of the plainest cases to have come before the court. He said, at pages 656-7:-

"Looking at the dicta and the judgments cited, they might require to be fully considered, but I think they may possibly all be based upon this, which is an intelligible principle, that as you have no right to see your adversary's brief, you have no right to see that which comes into existence merely as the materials for the brief. But that seems to me to have no application whatever to a communication between a principal and his agent in the matter of the agency, giving information of the facts and circumstances of the very transaction which is the subject-matter of the litigation. Such a communication is, above all others, the very thing which ought to be produced."

There are two relevant passages from the judgment of Mellish LJ; first, at page 658:-

"I am clearly of opinion that such a communication is not privileged. To be privileged it must come within one of two classes of privilege, namely, that a man is not bound to disclose confidential communications made between him and his solicitor, directly, or through an agent who is to communicate them to the solicitor; or, secondly, that he is not bound to communicate evidence which he has obtained for the purpose of litigation."

This appears to be the first occasion on which a clear distinction is drawn between legal advice privilege and litigation privilege; although many claims to privilege can be decided on either basis, it is a distinction which appears hereafter in the decided cases.

14. Later Mellish LJ says that potential evidence obtained in order to decide whether to bring or defend an action may be privileged (page 659):-

". . . but I cannot think that that ought to be held to apply to information which a principal asks his agent to give respecting the matters which the agent has done for and on account of the principal. That is information respecting matters which in point of law are the acts of the principal himself, and it is information respecting matters as to which the knowledge of the agent is the knowledge of the principal. In point of law, the principal is to be deemed to have known the facts before he has actually got personal information about them. I cannot but think that, as you are entitled to ask the principal what he knows respecting those facts, you must necessarily be entitled to the information which his agent has sent respecting them."

Baggallay JA was of the same opinion and said (pages 661-2):-

"Now if the Defendant in this case, instead of being a banking company, had been an individual banker, and his business either in London or Oregon had been carried on under his own immediate direction, it could not have been for one moment contended that he would not be bound to give the fullest particulars as to the circumstances under which this transfer from one account to the other took place. It would be no answer for him to say: "I did not attend to this matter personally. I sat upstairs, and the business was managed by my clerks here or by my clerks in Oregon." He would be bound, for the purpose of making the discovery, to ascertain from his clerks or manager all the particulars of the case."

These two citations show that information given by an employee to an employer or fellow-employee, or information given by an agent to a principal, stands in the same condition as matters known to the client and does not, of itself, attract privilege in the first of Mellish LJ's two categories. This is so even though, on the facts, it is intended that it be shown to a solicitor. If, however, it is intended that the information will be shown to a solicitor in the context of existing or contemplated litigation, it will fall into the second category, whether it was obtained for use as evidence or for the purpose of obtaining advice. The Anderson case thus does not support the wide ambit of privilege for which Mr Stadlen contends.

15. The next in this trio of cases was much relied on by Mr Stadlen, Southwark and Vauxhall Water Company v Quick (1878) 3 QBD 315. The water company sued its former engineer; before the action was brought but when it was contemplated, certain documents were prepared to be laid before the company's solicitor for his advice, although in the event one of them (a transcript, made by a shorthand writer of a conversation between a chimney sweep employed by the company and the company's current engineer) was not in fact put before the solicitor. Cockburn CJ presiding in the Queen's Bench Division said (pages 317-8):-

"The relation between the client and his professional legal adviser is a confidential relation of such a nature that to my mind the maintenance of the privilege with regard to it is essential to the interests of justice and the well-being of society. Though it might occasionally happen that the removal of the privilege would assist in the elucidation of matters in dispute, I do not think that this occasional benefit justifies us in incurring the attendant risk. The question here is whether the documents of which inspection is sought are within the privilege. I think they are. It is clear that they were documents containing information which had been obtained by the plaintiffs with a view to consulting their professional adviser. Two out of the three sorts of documents were actually submitted to him; as to the other it is not clear whether it was actually submitted to him or not. It is admitted upon the decisions that where information has been obtained on the advice of the party's solicitor it is privileged. I can see no distinction between information obtained upon the suggestion of a solicitor, with the view of its being submitted to him for the purpose of his advising upon it, and that procured spontaneously by the client for the same purpose. Again, I see no distinction between the information so voluntarily procured for that purpose and actually submitted to the solicitor, and that so procured but not yet submitted to him."

In the Court of Appeal Brett LJ, after referring to what had been said by James and Mellish LJJ in Anderson, said this:-

". . . it is clear that if a party seeks to inspect a document which comes into existence merely as the materials for the brief, or that which is equivalent to the brief, then the document cannot be seen, for it is privileged. It has been urged that the materials, or the information obtained for the brief, should have been obtained "at the instance" or "at the request" of the solicitor; but I think it is enough if they come into existence merely as the materials for the brief, and I think that phrase may be enlarged into "merely for the purpose of being laid before the solicitor for his advice or for his consideration." If this is the correct rule, the only question is whether the affidavits in the present case bring the documents under discussion within that rule. I think all the classes of documents mentioned are brought within the rule. The only document about which there can be any doubt is the transcript of the shorthand writer's note of the conversation between the chimneysweep and the company's engineer; but I think that the Queen's Bench Division construed the language of the affidavit to mean that the transcript was made in order that it might be furnished to the solicitor for his advice, although before passing on to him, it was to be laid before the board of directors, or reported to the board, in order than they also might see it. The object for which the notes were taken, and the transcript made, was that they might be furnished to the solicitor for his advice. If that is so, then it stands on the same footing as the others, except that it was not sent to the solicitor; that cannot make any difference. If at the time the document is brought into existence its purpose is that it should be laid before the solicitor, if that purpose is true and clearly appears upon the affidavit, it is not taken out of the privilege merely because afterwards it was not laid before the solicitor. It might not have been laid before the solicitor, because the person making the statement had died or went away and could not be found. I think, therefore, that this document having been made bonâ fide merely for the purpose of being laid before the solicitor for his advice or his consideration, it is precisely like the other documents, and that all the documents are privileged. "

Mr Stadlen submitted that these passages from the judgments of Cockburn CJ and Brett LJ showed that, if documents were prepared the contents of which were to be made known to a solicitor for the purpose of his giving advice, it did not matter that they were not submitted to him. It followed that, even the documents in category (2) set out in paragraph 4 above were privileged. However that does not address the question whether memoranda or documents, produced to the Bingham Inquiry Unit by Bank employees, are, in general, privileged at all. That question is not settled by these citations; it is fair to say that the judgment of Cockburn CJ is in general terms which might arguably encompass legal advice privilege as well as litigation privilege but it is quite clear that the "rule" identified and addressed by Brett LJ is the rule relating to litigation privilege and that he is not talking of legal advice privilege in any way.

16. Mr Stadlen also sought to rely on the judgment of Cotton LJ, particularly the following passages (pages 321-2):-

"Privilege only extends to communications with legal advisers, or in some way connected with legal advisers; communications with a most confidential agent are not protected if that confidential agent happens not to be a solicitor. And this proceeds on the principle that laymen (by which I mean persons not learned in the law) cannot be expected to conduct their defence or litigation without the assistance of professional advisers; and, for the purpose of having the litigation conducted properly, the law has said that communications between the client and the solicitor shall be privileged, and that no one shall be entitled to call for the production of a document which has been submitted to the solicitor for the purpose of obtaining his advice, or for the purpose of enabling him to institute or to defend proceedings. There must be the freest possible communication between solicitor and client, and it is on this ground that professional communications are entitled to privilege, which excepts them from the general rule. The most obvious form of claiming privilege is when any litigant sends either directly or indirectly to his solicitor a document for the purpose of obtaining his advice, or for the purpose of enabling him to institute or defend an action. That is not quite the question here . . ."

and (pages 322-3):-

"That, I think, is the true principle, that if a document comes into existence for the purpose of being communicated to the solicitor with the object of obtaining his advice, or of enabling him either to prosecute or defend an action, then it is privileged, because it is something done for the purpose of serving as a communication between the client and the solicitor."

He pointed to the disjunctive preposition "or" in both citations and submitted that Cotton LJ had the two quite separate categories of privilege in mind and that, for the purpose of each of them, it was sufficient that the document be prepared with the dominant purpose that it or its contents should be put before the solicitor for advice. This, however, reads too much into the word "or" when the context was solely that of litigation privilege. The "obtaining of the advice" is in contrast to "the purpose of the solicitor being enabled to institute or defend an action" and the advice contemplated by Cotton LJ is advice in relation to the intended action. That is made clear by the passage towards the end of his judgment (at page 323):-

"All these documents must be looked upon as having been prepared for the purpose of being laid before the solicitor, either for the purpose of enabling him to prosecute the action contemplated, or for the purpose of obtaining his advice on the question at issue in the action, and in my opinion are privileged"

It is clear from this final citation that Cotton LJ was only talking in terms of litigation privilege.

17. The last of the three cases is Wheeler v Le Marchant (1881) 17 ChD 675 which was a case of legal advice privilege not litigation privilege. In that context it was held that documents obtained from a third party to be shown to a solicitor for his advice did not fall within the privilege. Advice was given to the defendant trustee of the will of a Mr Brett in the course of its administration in the Chancery Division; for the purpose of that advice information was sought from both the former and the current estate-agent and surveyor. Part of the estate consisted of land in respect of which the defendant made an agreement with Mr Wheeler that he (Mr Wheeler) was to erect certain buildings and then be granted a lease of that land. The parties fell out. Mr Wheeler brought an action for specific performance and the defendant trustee claimed privilege for the reports of the estate-agent/surveyor made to the solicitors in the course of the administration of the estate. It was held that while the communications between the defendant and the estate's solicitors were privileged, the reports of the estate-agent/surveyor were not. Cotton LJ is reported to have intervened in argument at page 680 to say:-

"Your proposition is that all communications by a solicitor with third parties, for the purpose of enabling him to give advice, are privileged. Has any case protected them except when made post litem motam?"

Counsel responded, after a little prevarication:-

"The question is whether the rule, though not distinctly carried to such a length by any of the cases, ought not to be extended to meet this case . . ."

18. Once again it is necessary to cite a little extensively from the judgments in order to get their flavour. Sir George Jessel MR, now presiding in the Court of Appeal, recognised the two categories of privilege saying this (pages 680-1):-

"As regards the main question in dispute, this appears to be an attempt on the part of the present Respondents to extend the rule as to protection from discovery. It was fairly admitted by their counsel that no decided case carries the rule to the extent to which they wish it carried, but they urged that as a matter of principle it ought to be so extended. What they contended for was that documents communicated to the solicitors of the Defendants by third parties, though not communicated by such third parties as agents of the clients seeking advice, should be protected, because those documents contained information required or asked for by the solicitors, for the purpose of enabling them the better to advise the clients. The cases, no doubt, establish that such documents are protected where they have come into existence after litigation commenced or in contemplation, and when they have been made with a view to such litigation, either for the purpose of obtaining advice as to such litigation, or of obtaining evidence to be used in such litigation, or of obtaining information which might lead to the obtaining of such evidence, but it has never hitherto been decided that documents are protected merely because they are produced by a third person in answer to an inquiry made by the solicitor. It does not appear to me to be necessary, either as a result of the principle which regulates this privilege or for the convenience of mankind, so to extend the rule."

And (pages 681-2):-

". . . it must not be supposed that there is any principle which says that every confidential communication which it is necessary to make in order to carry on the ordinary business of life is protected. The protection is of a very limited character, and in this country is restricted to the obtaining the assistance of lawyers, as regards the conduct of litigation or the rights to property. It has never gone beyond the obtaining legal advice and assistance, and all things reasonably necessary in the shape of communication to the legal advisers are protected from production or discovery in order that that legal advice may be obtained safely and sufficiently."

And (pages 682-3):-

"But what we are asked to protect here is this. The solicitor, being consulted in a matter as to which no dispute has arisen, thinks he would like to know some further facts before giving his advice, and applies to a surveyor to tell him what the state of a given property is, and it is said that the information given ought to be protected because it is desired or required by the solicitor in order to enable him the better to give legal advice. It appears to me that to give such protection would not only extend the rule beyond what has been previously laid down, but beyond what necessity warrants. The idea that documents like these require protection has been started, if I may say so, for the first time to-day, and I think the best proof that the necessities of mankind have not been supposed to require this protection is that it has never heretofore been asked. It seems to me we ought not to carry the rule any further than it has been carried. It is a rule established and maintained solely for the purpose of enabling a man to obtain legal advice with safety. That rule does not, in my opinion, require to be carried further, and there fore I think this appeal ought to be allowed . . ."

Brett LJ said (page 683):-

"The proposition laid before us for approval is, that where one of the parties to an action has in his possession or control documents which passed between his solicitor and third parties, they are protected in his hands from inspection, on the ground that they were documents which passed between the solicitor and the third party for the purpose of enabling the solicitor to give legal advice to his client, although such information was obtained by the solicitor for that purpose at a time when there was no litigation pending between the parties, nor any litigation contemplated. It seems to me that that proposition cannot be acceded to. It is beyond any rule which has ever been laid down by the Court, and it seems to me that it is beyond the principles of the rules which have been laid down. The rule as to the non-production of communications between solicitor and client is a rule which has been established upon grounds of general or public policy. It is confined entirely to communications which take place for the purpose of obtaining legal advice from professional persons. It is so confined in terms, it seems to me it is so confined in principle, and it does not extend to the suggested case."

Cotton LJ said (pages 684-5):-

"It is said that as communications between a client and his legal advisers for the purpose of obtaining legal advice are privileged, therefore any communication between the representatives of the client and the solicitor must be also privileged. That is a fallacious use of the word "representatives." If the representative is a person employed as an agent on the part of the client to obtain the legal advice of the solicitor, of course he stands in exactly the same position as the client as regards protection, and his communications with the solicitor stand in the same position as the communications of his principal with the solicitor. But these persons were not representatives in that sense. They were representatives in this sense, that they were employed on behalf of the clients, the Defendants, to do certain work, but that work was not the communicating with the solicitor to obtain legal advice. So their communications cannot be protected on the ground that they are communications between the client by his representatives and the solicitor. In fact, the contention of the Respondents comes to this, that all communications between a solicitor and a third person in the course of his advising his client are to be protected. It was conceded there was no case that went that length, and the question is whether, in order fully to develop the principle with all its reasonable consequences, we ought to protect such documents. Hitherto such communications have only been protected when they have been in contemplation of some litigation, or for the purpose of giving advice or obtaining evidence with reference to it. And that is reasonable, because then the solicitor is preparing for the defence or for bringing the action, and all communications he makes for that purpose, and the communications made to him for the purpose of giving him the information, are, in fact, the brief in the action, and ought to be protected. But here we are asked to extend the principle to a very different class of cases, and it is not necessary, in order to enable persons freely to communicate with their solicitors and obtain their legal advice, that any privilege should be extended to communications such as these."

Here Cotton LJ, unlike in his judgment in Southwark v Quick, considers each of the two categories of legal professional privilege and decides in terms that the documents in question do not fall within the first category because they are not communications between solicitor and client and not within the second category because litigation is not contemplated. This case thus makes clear that legal advice privilege does not extend to documents obtained from third parties to be shown to a solicitor for advice. Mr Stadlen, of course, accepts this but says that communications from an employee are different. The reason he gives is that a corporation can only act through its employees; while that is true, it is not a consideration that can carry Mr Stadlen home. Indeed the passage cited from Anderson shows that information from an employee stands in the same position as information from an independent agent. It may, moreover, be a mere matter of chance whether a solicitor, in a legal advice privilege case, gets his information from an employee or an agent or other third party. It may also be problematical, in some cases, to decide whether any given individual is an employee or an agent and undesirable that the presence or absence of privilege should depend upon the answer.

19. By the end of the nineteenth century it was, therefore, clear that legal advice privilege did not apply to documents communicated to a client or his solicitor for advice to be taken upon them but only to communications passing between that client and his solicitor (whether or not through any intermediary) and documents evidencing such communications. When Mr Edward Bray came to publish his book, The Law of Discovery (1885), he set out the object, meaning and scope of the doctrine of legal professional privilege in Part I of the relevant chapter, by citing (inter alia) selections from the judgments of the following judges:-

(1) Sir George Jessel MR in Anderson v Bank of British Columbia as set out in the second citation of paragraph 11 above;

(2) Lord Langdale MR in Reece v Trye as set out in paragraph 9;

(3) Cockburn CJ in Southwark and Vauxhall Water Co v Quick as set out in paragraph 15;

(4) Sir George Jessel MR in Wheeler v Le Marchant as set out in paragraph 18;

(5) Turner VC in Russell v Jackson 9 Hare 391, itself citing from Greenough v Gaskell.

He then made his detailed exposition of the law by reference first to communication between client and adviser in sections I to IX of Part II of the relevant chapter and then, secondly, by reference to documents and oral communications having reference to (or connection with) existing or anticipated litigation in section X of the chapter

"not being communications directly between the client and the professional legal adviser, or communication or documents standing on the same footing."

20. This exposition is remarkably similar in form to that adopted by the distinguished signatories of the 16th (1967) Report of the Law Reform Committee (Privilege in Civil Proceedings) which, under the head of "Privileges in aid of litigation", dealt first with "Communications between the client or his agents and the client's professional advisers" and, thereafter, with communications with third parties if made for the purpose of pending or contemplated litigation. It is noteworthy that the Committee, in dealing with the first heading, entitles it "Communications between . . .", and defines its true rationale as a privilege in aid of litigation. The Committee does not suggest that the category of privilege with which it is dealing attaches, in the absence of pending or contemplated litigation, to any documents other than communications between client and legal adviser. To similar effect is Buttes Oil and Gas Co v Hammer [1981] 1 QB 223, 243F-244A per Lord Denning MR and Halsbury, Laws, 4th ed. Vol 37 (2001) para 579:-

"Reports made by agents or employees to employer. Reports made by employees to their employers or by agents to their principals are not privileged unless they satisfy, and are privileged if they do satisfy, the conditions already set out, that is to say they must be reports made for the purpose of being laid before the party's legal adviser for the purpose of obtaining his advice in connection with the anticipated or pending litigation."

21. We, therefore, conclude that the nineteenth century authorities established that legal advice privilege was a well-established category of legal professional privilege, but that such privilege could not be claimed for documents other than those passing between the client and his legal advisers and evidence of the contents of such communications. Mr Stadlen made much play of the concession in the court below that it was not necessary for the communication to have actually been received before privilege could attach; if, for example, the sender of the communication had died before the communication had been sent to his legal adviser or the document concerned had been lost the privilege would still exist; but that concession is not inconsistent with the law as thus stated. If such a situation arose there would be no difficulty in saying that a document which was intended to be a communication between client and solicitor was still privileged even if not in fact communicated. That might be a modest extension of the principle but cannot be a foundation for the width of legal advice privilege which Mr Stadlen sought to maintain.
22. Later Development

Mr Stadlen submitted that, even if the law was as stated in the nineteenth century, it had been elaborated by developments in the law of discovery which occurred in the twentieth century. Thus there was a lengthy debate in the context of litigation privilege in relation to the right test to apply to a document intended to be submitted to a solicitor for his consideration. Was it sufficient that one of the purposes for which it had been prepared was to obtain legal advice or did it have to be the dominant purpose or even the sole purpose of the document coming into existence? In Grant v Downs (1976) 135 CLR 674 the majority of the High Court of Australia said it had to be the sole purpose; Barwick CJ's dissenting judgment in favour of the dominant purpose was ultimately preferred by the House of Lords in Waugh v British Railways Board [1980] AC 521 and in Esso Australia v Federal Commissioner of Taxation (1999) HCA 67 the English test has now been adopted by the High Court of Australia in preference to its original view. Mr Stadlen placed particular reliance on the statements of principle in the judgment of Barwick CJ at page 677 which was ultimately adopted by the House of Lords in Waugh. It is in the following terms:-

"Having considered the decisions, the writings and the various aspects of the public interest which claim attention, I have come to the conclusion that the Court should state the relevant principle as follows: a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection."

23. As to this passage the judge said this in paragraph 24 of his judgment:-

"On its natural reading this passage would seem to be concerned both with the obtaining of legal advice and with the conduct of litigation reasonably in prospect. It is possible that Sir Garfield had in mind only the obtaining of advice in relation to litigation in reasonable prospect, as opposed to the obtaining of legal advice which was not similarly focussed, but I can see no rational basis on which the principles which protect the confidentiality of the process of obtaining legal advice should differ as between these two distinct situations, although the exigencies of litigation, actual or contemplated, require the net to be cast wider than it is in relation to the obtaining of legal advice simpliciter, so as to enable a party to carry out confidential preparations for trial."

The judge further pointed out in paragraph 26 of his judgment that the passage in the judgment of Barwick CJ was expressly approved by Lords Wilberforce, Simon and Edmund-Davies in Waugh at pages 532-3, 534 and 537 and 543-4 respectively. It was this approval that, together with two authorities in relation to litigation privilege and Balabel v Air India [1988] Ch 317 which undoubtedly concerned legal advice privilege, persuaded the judge to accord the disputed documents the privilege claimed by the Bank.

24. We cannot read the principle set out by Barwick CJ and later approved by the House of Lords as being a statement in relation to legal advice privilege. The context was only litigation privilege and when the Chief Justice refers to a document brought into existence with the dominant purpose of

"using it or its contents in order to obtain legal advice or to conduct or aid the conduct of litigation"

it is more natural to read the words "in order to obtain legal advice" not as referring to the obtaining of legal advice in a free-standing situation but as a contrast with the concept "in order to conduct, or aid in the conduct of, litigation". In other words, the use of the document envisaged by the Chief Justice is potentially a two-fold use viz. for obtaining advice in the pending litigation or for conducting (or helping to conduct) the pending litigation. So understood it is a complete statement of the relevant law. If it is to be more widely understood, the statement of the law is incomplete, unless it was intended to depart from Wheeler v Le Marchant and the law as understood at the end of the nineteenth century. There is no indication of that.

25. Waugh itself was undoubtedly concerned only with litigation privilege. Mr Peter Weitzman QC, opening the appeal for the ultimately successful plaintiff identified the issue before the House in this way [1980] AC at page 523:-

"Where a report is brought into existence for several reasons or purposes only one of which is to obtain professional legal advice in litigation that is pending or anticipated, is it protected by legal professional privilege from discovery?"

This is echoed at both the beginning and conclusion of Lord Wilberforce's speech at pages 531E and 533B respectively:-

". . . . the affidavit [of the defendant] makes it clear that the report was prepared for a dual purpose: for what may be called railway operation and safety purposes and for the purpose of obtaining legal advice in anticipation of litigation . . . . So the question arises whether this is enough to support a claim of privilege . . ."

and

"It appears to me that unless the purpose of submission to the legal adviser in view of litigation is at least the dominant purpose for which the relevant document was prepared, the reasons which require privilege to be extended to it cannot apply."

Lord Simon of Glaisdale's speech is to similar effect at pages 536A-B (where he cites Cotton LJ's judgment in Southwark v Quick as being a case of pending or anticipated litigation) and 538A. Lord Edmund-Davies at pages 541G-542C expressly draws attention to the distinction between the two categories of legal professional privilege and makes it clear that the case with which the House was dealing was privilege in aid of existing or contemplated litigation. He then cites Anderson v Bank of British Columbia, sets out the possible candidates for the appropriate test in relation to a document prepared for use in such litigation and states that the House of Lords was free to choose and declare the proper test. He continues (page 543C):-

". . . . in my judgment we should start from the basis that the public interest is, on balance, best served by rigidly confining within narrow limits the cases where material relevant to litigation may be lawfully withheld. Justice is better served by candour than by suppression. For, as it was put in the Grant v. Downs majority judgment, at p. 686: '... the privilege ... detracts from the fairness of the trial by denying a party access to relevant documents. . . .'"

He then comes down in favour of Barwick CJ's "dominant purpose" and quotes in full the passage set out in paragraph 22 above. But the context is all litigation privilege and it is clear that he was not considering legal advice privilege. If he had been considering legal advice privilege, it is unlikely, in the light of the considerations advanced in the above passage, that Lord Edmund-Davies would have wished to extend legal advice privilege in any way.

26. The judge said that he could see no rational basis on which the principles which protect the confidentiality of the process of obtaining legal advice should differ as between the two distinct situations of contemplated litigation and the absence of contemplated litigation. It is perhaps possible to separate two such bases that appealed to the nineteenth century judges in the cases by which this Court remains bound to-day:-

(1) the need for a client

"to be able to make a clean breast of it to the gentleman whom he consults with a view to the prosecution of his claim, or the substantiating of his defence against the claim of others"

(to use the words of Sir George Jessel MR in Anderson) is paramount when litigation either exists or is contemplated. It is in the interests of the state which provides the court system and its judges at taxpayers' expense that legal advisers should be able to encourage strong cases and discourage weak cases, see Ventouris v Mountain [1991] 1 WLR 607, 611C per Bingham LJ. It is by no means so clear that, in the absence of contemplated litigation, there is any temptation for the client not to offer a clean breast to his legal adviser. He wants advice and the prospect of winning or losing a particular case will normally do nothing to cloud his judgment as to what facts he places before his legal adviser.

(2) one ought not to lose sight of the public interest that the courts, if possible, should come to correct judgments on the basis of all relevant material. Of course legal advice privilege must prevail over this consideration to the appropriate extent. It is a fundamental human right which can be overridden only by the express words of a statute or by necessary implication, see R (Morgan Grenfell & Co Ltd) v Special Commissioners for Income Tax [2002] 2 WLR 1299. But it is a privilege possessed by the client in relation to no other adviser. Lord Brougham was exercised by the difficulty of discovering why the privilege has been refused in respect of other advisers, especially medical advisers. But the law is clear that it is so refused in respect of every profession other than that of the law. In these circumstances it is important that it be confined to its proper limits. The judges of the nineteenth century thought that it should only apply to communications between client and adviser. That is the proper compass of the privilege. It is not, in our judgment, open to this court to extend the privilege, even if we thought we should.

27. The remaining twentieth century cases do not take the matter much further. It is certainly true that in Re Highgrade Traders Ltd (1984) BCLC 151 the court rejected a claim for legal advice privilege in relation to reports commissioned by an insurance company after a suspected arson. The documents were reports prepared by third parties rather than employees of the company but, as far as it goes, it supports Mr Pollock's argument. So does the decision of Millet J in Price Waterhouse v BCCI Holdings (Luxembourg) SA (1992) BCLC 583 where a claim for legal advice privilege was rejected for reports written by accountants both when the accountants were independent and when they reconstituted themselves as a committee of the client.
28. On the other side of the fence, the courts in both Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027 and The Sagheera [1997] 1 Lloyds Rep 160 (both cases of litigation privilege) were prepared to proceed on the basis that any document prepared with the dominant purpose of using it or its contents to obtain legal advice was privileged. In defining the extent of the privilege in the latter case, Rix J said that the dominant purpose test applies in relation to legal advice privilege in a different way from the way it applies in relation to litigation privilege and added:-

"In legal advice privilege, I would suggest, the practical emphasis is upon the purpose of the retainer. If the dominant purpose of the retainer is the obtaining and giving of legal advice, then, although it is in theory possible that individual documents may fall outside that purpose, in practice it is unlikely."

This observation was not critical to his judgment and we would respectfully doubt whether the shift of focus from the dominant purpose for which a document or documents were prepared to the "dominant purpose of the retainer" can be justified by reference to authority or principle in relation to documents which are not communications between client and legal adviser.

29. Balabel v Air India [1988] Ch 317 is potentially more relevant since it is a case which relates to legal advice privilege. The issue was whether, once a solicitor had been instructed, legal advice privilege extended to all communications between solicitor and client on matters within the ordinary business of the solicitor and referable to the relationship or whether, although communications seeking or conveying advice were privileged, documents passing between the client and his solicitor recording information or transactions or meetings were not privileged. This court decided that the former was the law; the appellants' position in this case is, in no way, inconsistent with the decision since they accept that all documents passing between the BIU and Freshfields are privileged as, indeed, are Freshfields' own drafts and memoranda. The issue in Balabel arose in an action brought by Mr and Mrs Balabel for specific performance of an agreement for an underlease, supposedly made between them and Air India as underlessors; unfortunately for Mr and Mrs Balabel there was no note or memorandum in writing passing between the parties for the purpose of section 40 of the Law of Property Act 1925 and they made a discovery application in the hope that such a memorandum would be found in

(1) communications between Air India and their solicitors other than those seeking or giving legal advice;

(2) drafts, working papers and memoranda of the solicitors;

(3) internal communications of Air India other than those seeking legal advice.

Significantly Mr Lightman QC for the appellants, against whom an order for discovery had been made, abandoned any claim to privilege for category (3) which was the category equivalent to the category for which privilege is claimed in the present case, see page 319C of the report.

30. Nevertheless Tomlinson J cited two passages from the judgment of Taylor LJ in favour of the appellants first at page 330:-

"Although originally confined to advice regarding litigation, the privilege was extended to non-litigious business. Nevertheless, despite that extension, the purpose and scope of the privilege is still to enable legal advice to be sought and given in confidence. In my judgment, therefore, the test is whether the communication or other document was made confidentially for the purposes of legal advice. Those purposes have to be construed broadly."

The judge drew attention to the words "or other document" but the context of that phrase was that privilege was being sought for (2) "draft, working papers and memoranda" which were not, of course, communications. No argument was addressed on class (3) which would be the only relevant class for the purpose of the argument in this case. Then the judge cited the passage at page 332:-

"As indicated, whether such documents are privileged or not must depend on whether they are part of that necessary exchange of information of which the object is the giving of legal advice as and when appropriate."

That is a perfectly appropriate test to apply to communications between the client and his solicitor but authority does not support its wider application to memoranda supplied by employees for the purpose of being sent to the client's solicitor and it is most unlikely that Taylor LJ intended to deal with that question. Indeed, shortly before the passage quoted, Taylor LJ pointed out that the range of assistance given by solicitors to their clients and of activities carried out on their behalf has been greatly broadened in recent times and is still developing. He added:-

"Hence the need to re-examine the scope of legal professional privilege and keep it within justifiable bounds."

Balabel is thus no authority for extending the privilege.

31. We therefore conclude that the Bank is not entitled to privilege in any of the four categories itemised at the beginning of this judgment. Mr Stadlen asked what the position would be if the Governor himself had noted down what he remembered in relation to the supervision of BCCI with the intention of giving it to the BIU for transmission to Freshfields. No privilege has been claimed for any such specific document but, as it seems to us, Mr Pollock was right to say that on the evidence before the court, the BIU, which was established to deal with inquiries and to seek and receive Freshfields' advice, is for the purpose of this application, the client rather than any single officer however eminent he or she may be. It follows that no separate consideration need be given to the position of ex-employees who are, obviously, in no better position for the purpose of any claim to privilege.
32. "Dominant Purpose"?

In the light of the conclusions so far, it is unnecessary to express a view on the question whether the internal documentation of the Bank, which came into existence after the setting up of the Bingham inquiry, was indeed prepared with the dominant purpose of obtaining advice. It would, no doubt, be right to say that the obtaining and giving of advice was an important purpose; but we would not say on the facts of the present case that it was the dominant purpose. On any natural view of the matter the dominant purpose of obtaining the information which employees and ex-employees could give to the Bingham inquiry was merely to present that evidence to the inquiry. No doubt the Bank would naturally have been anxious to present that evidence in the way least likely to attract criticism. One of Freshfields' many skills is, of course, to present their clients' cases in the most favourable light. That, after all, is in large part the art of the advocate. Is this assistance "legal advice" in the sense in which the phrase is used when one refers to privilege being claimed for legal advice?

33. At this stage it is sensible to remind ourselves of the salient evidence. The Bank compiled the 258 page Statement to the inquiry in November 1991 and the paper entitled "Supervisory Lessons" in April 1992. Witnesses needed to be prepared, although no formal statements were taken from the witnesses. It is not surprising to read that the BIU communications with the inquiry were the subject of extensive legal advice from Freshfields. Mr Croall of Freshfields put the matter in this way in paragraph 17 of his second witness statement:-

"So as to ensure that the Bank's legal advisers were properly instructed and fully informed to advise and assist the Bank in preparing its evidence and more generally in relation to all its dealings with the Bingham Inquiry, there was a constant flow of factual information from the Bank to its legal advisers, usually channelled through the BIU. The BIU and the Bank's legal advisers effectively operated as a single team, with members of the BIU undertaking, or delegating to others within the Bank, tasks of research or fact-gathering for the purpose of review and/or advice by the Bank's legal advisers. Specific requests for factual matters to be investigated and reported (typically in the form of notes) to the legal team were sometimes made by the legal team itself to the BIU which then initiated work within the Bank. Sometimes such work was carried out by the BIU itself and sometimes by others elsewhere in the Bank commissioned to do so by the BIU. Fact finding and research based exercises were sometimes commissioned by the BIU itself of its own initiative in order to furnish information to the legal advisers. The purpose of carrying out all of this work was to provide information to the Bank's legal advisers to enable them to prepare submissions and/or advise on the nature, presentation and/or content of the Bank's submissions to, evidence for and responses to requests from, the Inquiry."

He later asserts that the documents passed to Freshfields were prepared with the dominant purpose of obtaining legal advice and that he has consulted with the writers of documents not passed to Freshfields to ascertain whether they were prepared with the same dominant purpose.

34. Mr Stadlen for the Bank, in these circumstances, relies on the following paragraph in the judgment of Taylor LJ in Balabel v Air India at page 330 D-G:-

"Although originally confined to advice regarding litigation, the privilege was extended to non-litigious business. Nevertheless, despite that extension, the purpose and scope of the privilege is still to enable legal advice to be sought and given in confidence. In my judgment, therefore, the test is whether the communication or other document was made confidentially for the purposes of legal advice. Those purposes have to be construed broadly. Privilege obviously attaches to a document conveying legal advice from solicitor to client and to a specific request from the client for such advice. But it does not follow that all other communications between them lack privilege. In most solicitor and client relationships, especially where a transaction involves protracted dealings, advice may be required [as] appropriate on matters great or small at various stages. There will be a continuum of communication and meetings between the solicitor and client. The negotiations for a lease such as occurred in the present case are only one example. Where information is passed by the solicitor or client to the other as part of the continuum aimed at keeping both informed so that advice may be sought and given as required, privilege will attach. A letter from the client containing information may end with such words as "please advise me what I should do". But, even if it does not, there will usually be implied in the relationship an overall expectation that the solicitor will at each stage, whether asked specifically or not, tender appropriate advice. Moreover, 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."

In applying this passage it seems to us that, on the facts of the present case, there may be a temporal distinction to be drawn between (1) original documentary material supplied by Bank employees to the BIU (or directly to Freshfields), whether obtained in response to a Freshfields inquiry or not, for the purpose of either the November 1991 submission or the April 1992 paper and (2) material supplied in "responses to requests from the Inquiry" to use Mr Croall's words at the end of his paragraph 17.

35. In the former case of original documentary material supplied to assist in the compilation of the November 1991 statement or April 1992 paper, we think it impossible to say that the dominant purpose of its preparation was the obtaining of legal advice. It is raw material for presentation to the inquiry and the dominant purpose for which it was prepared was so that the Bank could comply with its primary duty of putting all relevant factual material before Lord Justice Bingham. Mr Stadlen submitted that Mr Croall's assertion to the contrary must conclude the matter in the Bank's favour unless Mr Croall's honesty was to be impugned. We do not agree. The question of dominant purpose is a matter for a court to determine after consideration of the relevant evidence. If it can be seen upon analysis that the dominant purpose is not that of obtaining advice, as will seldom be the case where a national institution is gathering evidence to put before an inquiry set up by Government, then it is the court's duty to say so. The "continuum of communication . . . . as to what should prudently and sensibly be done in the relevant legal context" has not yet begun.
36. We have considered whether material generated in specific response to requests from the inquiry is different. It can be said that the "relevant legal context" has emerged and "what should prudently and sensibly be done" is something about which advice is sufficiently desirable for the obtaining of that advice now to be the dominant purpose for which documents are prepared.
37. We recognise that no specific argument was addressed to us on this matter. Having reflected upon it, we have come to the conclusion that there can be no relevant legal distinction between material generated at the early stage of preparing the submission to Lord Justice Bingham and material generated in response to requests from him. All such material is, in our judgment, prepared for the dominant purpose of putting relevant factual material before the inquiry in an orderly and attractive fashion, not for the dominant purpose of taking legal advice upon such material.
38. Conclusion

As stated, however, we do not, in any event, consider that privilege extends to any of the documentation or internal memoranda of the Bank's employees and, subject to any argument on the detailed wording, would be minded to grant the declaration for which the appellants asked in their application of 25th October 2002, on the assumption it is in the same form as recorded in paragraph 3.2 of Mr Grierson's 8th witness statement of 28th October 2002, and to order that the Bank serve a further and better list of documents in accordance with the terms of such declaration.

Order: Appeal allowed as per counsel's agreed order. Leave to appeal to the House of Lords refused. Order suspended pending result of Petition to appeal to their Lordships' House.

POST JUDGMENT DISCUSSION

Thursday, 3rd April 2003

(10.15 am)

39. THE MASTER OF THE ROLLS: For the reasons in the judgment of the court, which has been handed down, this appeal is allowed.
40. MR STADLEN: My Lord, there are two matters which I think arise.
41. THE MASTER OF THE ROLLS: Yes.
42. MR STADLEN: The first is the ambit of the order that should be made and, secondly, permission to appeal.
43. THE MASTER OF THE ROLLS: Yes.
44. MR STADLEN: My Lord, can I say, we submitted a skeleton argument yesterday and our understanding was that my learned friends were not intending to submit a skeleton argument but about half an hour ago we were sent a skeleton argument from my learned friends --
45. THE MASTER OF THE ROLLS: Yes.
46. MR STADLEN: -- which we have not had the position to take detailed instructions on. But can I say this in relation to the order first, that what has emerged from my learned friend's skeleton argument is what we would respectfully submit is really an opportunistic attempt to widen, after the debate, the ambit of the fruits of victory.
47. THE MASTER OF THE ROLLS: Yes. Just before we go any further, your skeleton argument in paragraph 2 referred, for instance, to:

" ... the liquidator's belated attempt to substitute the word 'control' for the word 'possession' in the order."

48. MR STADLEN: Yes.
49. THE MASTER OF THE ROLLS: That is the only document that we have that gives any hint of that attempt. The document rather suggests that there was some draft prepared on behalf of the liquidator which inserted the word 'control'. If there was, we have not seen it.
50. MR STADLEN: No, my Lord. Well, there was debate, I think, going back backwards and forwards between junior counsel --
51. THE MASTER OF THE ROLLS: I see.
52. MR STADLEN: -- in which it was suggested at one stage on behalf of the claimants that the word 'control' rather than 'possession' should come in. My Lord, the word in the Grierson affidavit -- the witness statement -- and in the applications and draft order was 'possession'.
53. THE MASTER OF THE ROLLS: Yes.
54. MR STADLEN: And these are really two sides of the same coin, putting in the word "Bank", which is what we suggest for clarity, and their attempt to substitute the word "control" for the word "possession" because what is at its heart is that in our submission it is abundantly plain, when one looks at the material, that the application concerned, and concerned only, documents within the Bank's files and not documents within Freshfields' files.
55. THE MASTER OF THE ROLLS: Yes.
56. MR STADLEN: There is no doubt about that and I can show your Lordship the references in the judgment, the skeleton arguments and the transcript.
57. THE MASTER OF THE ROLLS: Yes. I understood in the course of argument that there was no issue in relation to documents that had passed directly from the Bank to Freshfields. And vice versa, was not actually discussed but I would have thought it was implicit equally that, if Freshfields had sent a document directly to the Bank, that would have equally been in a category about which battle was not being fought. What was being fought was the documents that had been prepared on the Bank's side.
58. MR STADLEN: My Lord, that is absolutely right and it goes further. There was no battle joined in relation to documents created by Freshfields, or, for example, created by counsel and sent to Freshfields and remaining in Freshfields' files, which were not communicated to the Bank. The debate did not in any way fasten on the status of documents that are in Freshfields' files rather than the Bank's files, and I can show your Lordships the references to that in the material.
59. The effect of that is that the Bank has not put in evidence, and did not before the judge below, put in evidence in relation to the status or ambit of documents in its own files because there was no issue in relation to that and there simply has been no evidence and no argument relating to that issue.
60. Now, that being so, the substitution that is sought to be made by inserting the word 'control', which on one view might cover some documents in Freshfields' files, if it could be shown that they were in the control of the Bank, would, by a side wind and without argument and without evidence, be ordering by this court that certain documents about which there has been not even identification, let alone argument, are not privileged.
61. Now, that is, in our respectful submission, not an acceptable approach at this late stage. If the claimants have a point on documents in Freshfields' files, it is entirely open to them to make an application to the judge below and he can deal with it, and if there is evidence that can be considered and if it is resisted, evidence can be put in in the normal way. But for this substitution to be made would have the effect to which I have referred.
62. I do not know whether your Lordship wants me to take you to the material to make good the submission that I have made --
63. THE MASTER OF THE ROLLS: Well, I think we will see if it is challenged first.
64. LORD JUSTICE SEDLEY: Is Mr Grierson the only source of the order being debated below or is it somewhere in the documents in pristine form?
65. MR STADLEN: Well, it is in the same form in the draft order attached to the application.
66. LORD JUSTICE SEDLEY: Mr Grierson has it verbatim?
67. MR STADLEN: Yes.
68. LORD JUSTICE LONGMORE: I just could not find it when I was preparing the last paragraph of the judgment.
69. MR STADLEN: Yes.
70. LORD JUSTICE LONGMORE: No doubt because no one thought it necessary to give any reference and the only place I could find it usefully was in paragraph 3.2 of Mr Grierson, but that is a completely accurate transcription, is it, of what was sought?
71. MR STADLEN: My Lord, I think it is because it appears as well in the application for relief in the court below and it is there mirrored. So I do not think there is anything on the language.
72. My Lord, your Lordship indicated that you wanted to know whether it was challenged before I take your Lordship to material if it is challenged.
73. MR POLLOCK: My Lord, the position is as follows. We should have put "control" in originally because control is the word that appears in 31.8. Possession is a hark back to the pre-modern system and I am afraid by error we put it in. Now, if we have to live with that error, so be it, but we are not trying to pull too fast a one here. We are simply seeking to (inaudible).
74. If your Lordship looks at part 31.8 of the Civil Procedure Volume 1 -- and this, I am afraid, has tripped us up before in this case because people forget that there is a new terminology -- the relevant test for discovery is control.
75. LORD JUSTICE SEDLEY: Is that because possession, power and control was going from the lesser to the greater --
76. MR POLLOCK: Yes.
77. LORD JUSTICE SEDLEY: -- and all you really needed was the greater?
78. MR POLLOCK: Well, now you do not talk about possession, power and control, which was old RSC.
79. LORD JUSTICE SEDLEY: Control does it all.
80. MR POLLOCK: 31.8 says:

"Control ... "

81. And control is then defined as including -- well, as encompassing physical possession, right to possession or right to inspect and take copies. So that is what we are doing.
82. Now, if documents are privileged under your Lordships' judgment, whether they are in Freshfields or my clients' -- sorry, Freshfields' clients, the Bank's, actual possession, they remain privileged. If they are not privileged, then it appears absurd that we should have to go back and ask Tomlinson J for a further order that they list documents which are in their control, in that they are physically in Freshfields' possession, but the Bank are entitled to have them and they are not privileged.
83. That is all. We are not seeking to widen the scope of non-privilege; we are just seeking to save time in having an order now which does not involve us having to ask for a further order in order to put this right. That is all.
84. Now, one can see that there may well, as my learned friend says, hereafter, in the light of your Lordships' judgment, be arguments as to what documents are or are not privileged because one has to apply the test which your Lordships have laid down and that is a test which has to be applied to different categories of document. That is all we say.
85. Now, my learned friend indicates one of the problems is also this, in the way the case has been argued, that prior to this matter being brought, we had understood or believed that the way in which matters went was that witnesses would prepare material, supply it to the BIU, who would then on-supply it to Freshfields, Freshfields would come back to the BIU, and it would go back to the witness, and therefore all documents which appeared to be relevant would be in the possession of the Bank and the BIU would have them, and the only question was whether they are privileged or not.
86. In the light of my learned friend's argument, particularly in his answer to myself in this court, it appears that there are three possible scenarios, and they are as follows: firstly, the witness writes to the BIU, who writes to Freshfields and vice versa, in which case there will be documents in the Bank's possession; secondly, the witness writes directly to Freshfields -- and this was a point made by my learned friend in argument -- and copies are sent to the BIU or copies are not sent to the BIU.
87. Now, in the state of your Lordship's judgment, if a witness communicates directly in writing with Freshfields and the BIU does not have copies, but the Bank are entitled in the sense under 31.8 to control -- they are entitled to copies or entitled to possession -- then that is non-privileged material which ought to be listed and disclosed because it does not fall within the privileged range of your Lordships' judgment. This is the witness providing information to Freshfields not for the dominant purpose of legal advice and not a communication between client and solicitor.
88. The third possibility which it would appear now exists is that a witness communicated orally with Freshfields and orally Freshfields communicated back, asking questions. Freshfields then prepare a note or a statement as a result of that and that may -- one would presume that would be disseminated to the Bank at some stage and the Bank would have copies, but at some stage some of that may not have been. That explains why, in part, my learned friend's desire to insert 'created by the Bank' is wrong in this case because that has never been part of what has been argued. Now, if you have a case where Freshfields create a statement and then provide a copy to the BIU, my friend is seeking to exclude that, but on your Lordships' judgment that is not privileged and there is no reason why that should be excluded.
89. So your Lordship sees that what we are seeking to do is to leave the door open so that, with the least further need for argument -- well, the least further need for separate applications hereafter, Tomlinson J can work out, in the light of your Lordships' judgment, exactly what documents do or do not have to be listed. We would say that the starting point is simply to take the draft declaration which we submitted in the first place, and one does not insert into that "created by the Bank" for the reasons I have just given, but we would say that it is sensible to substitute "control" for "possession" because that is simply going to avoid the need for us to make a separate and additional application to Tomlinson J to apply your Lordships' judgment hereafter
90. LORD JUSTICE SEDLEY: So, if you are right, it would follow as a course that you would be entitled to a further order, verbatim except for substituting the word "control", because that is what the order plus our judgment gives you a right to?
91. LORD JUSTICE LONGMORE: The slight difficulty about that for my part I feel is that, when you opened the appeal -- and I quite see that things develop as the argument progresses -- you did say very firmly -- and it made it much easier for us, of course, in grasping the points -- that you did not seek anything passing between the Bank and Freshfields and I think actually you said the vice versa, if my Lord --
92. MR POLLOCK: Communications between the two seeking or giving legal advice, yes, my Lord, but at that stage one --
93. LORD JUSTICE LONGMORE: I thought it was any communications --
94. MR POLLOCK: Yes, well --
95. LORD JUSTICE LONGMORE: (Inaudible).
96. LORD JUSTICE SEDLEY: You sacrificed that pawn in order to get your check.
97. MR POLLOCK: Well, my Lord, certainly --
98. THE MASTER OF THE ROLLS: Otherwise, there opens up scope for an immense amount of further argument as to whether individual documents are or are not privileged.
99. MR POLLOCK: Well, the one thing we know in your Lordships' judgment, because we are in the market vis a vis the sheet anchor, that direct communications between a witness and a solicitor are not privileged. They are not privileged. Now, in order to get hold of those, of course, you have to ask yourself in whose possession or control are they for the purpose of seeking an order.
100. Now, if it were simply in the possession of the witness, for example, Mr Cooke, ex employee, had gone to be interviewed by Freshfields, Freshfields had drafted his statement for him and then sent it back and said, "Here it is," now, in Mr Cooke's possession, that is not privileged and, if necessary, we could then bring an application under part 31.17, I think it is, in order to get it from Mr Cooke.
101. Alternatively, there is a copy in the possession of Freshfields and if that is within the control of the Bank because it was created at their behest and it is not privileged, then we can ask for discovery of it. Alternatively, Freshfields passed a copy to their client, which one would think would be sensible, in which case we would say we are entitled to a copy of that document from the Bank because it was never privileged. Now, it is not actually a communication from Freshfields. This is the problem. That is not a communication from Freshfields to the Bank; it is simply Freshfields passing on a copy of Mr Cooke's statement. So that is where the difficulty arises.
102. Now, if your Lordships want to leave it on the basis that you just leave it as possession and not created by the Bank, then Tomlinson J will have to work it out afterwards. What I am particularly concerned about is that you do not put in "created by the Bank" because that introduces a limitation which was not there before and which has not been the subject of argument and which, for the reasons I have explained to your Lordship, would be designed to exclude from discovery that which in fact in many cases ought to be given.
103. LORD JUSTICE LONGMORE: So your fallback position is that we should just leave the order as it is, as it was asked for, without any amendment?
104. MR POLLOCK: That is my fallback position. I say that substituting for "control", "possession" does no harm, but if your Lordships think that needs further debate, that can take place before Tomlinson J in due course.
105. MR STADLEN: My Lord, what emerges from this exchange is that there is a matter of debate between the parties, potentially. My learned friend says in one breath that this is simply designed to save time and avoid the need for further applications, but in the same breath he identifies, for example, documents created by Freshfields in relation to oral conversations and notes made by Freshfields, solicitor-created documents, which may never have been communicated to the Bank and which would not form part of any argument that was addressed to your Lordship's court, and it is a matter of great importance that, whatever else your Lordships do, you do not make an order which has the effect of declaring what the law is in respect of material where there has been no argument addressed. And it looks as though I should draw your Lordships' attention to some of the references, because there is absolutely no doubt, whatever assumptions my learned friend may have made, that the argument, both below and in front of your Lordships' court, did not extend to documents created by Freshfields, and, my Lord, the starting --
106. THE MASTER OF THE ROLLS: Just before we start there, just looking at the draft order, if one takes out the words that have been inserted by the Bank, one has:

"It is declared that the only documents or parts of documents created or coming into the Bank's possession ..."

107. Is that right? Did it not say "created by anybody" before?
108. MR STADLEN: No, it did not. We only wanted to put the words "by the Bank" in in response to an indication from the other side that they were asking for something that went wider than communication of documents in the Bank's files because it has never occurred to us, or indeed to Tomlinson J, or indeed to your Lordships -- because it is clear in paragraph 4 of the judgment, where you record my learned friend's concession that the application does not concern:

"Disclosure is not sought of any of Freshfields' internal memoranda or drafts."

109. Paragraph 4 of the judgment. And it is repeated in paragraph 29 of the judgment. And it goes further, because in paragraph 29 of the judgment your Lordships refer to the categories 2 and 3 in Balabel. Your Lordships may recall that category 2 was internal working papers, drafts and memoranda of the solicitors and category 3 was internal documents of the Bank, and that category, it was said, was no longer live in the Court of Appeal and your Lordships said that it was only category 3 that was relevant to the application in your Lordships' court. Perhaps I should just refer your Lordships to paragraph 29 of the judgment. It is at page 35. The first reference is at page 34, six lines down:

"This court decided that –"

110. THE MASTER OF THE ROLLS: Sorry, page or paragraph?
111. MR STADLEN: Oh, I am sorry, my Lord.
112. LORD JUSTICE LONGMORE: Can you do it by paragraph because we do not have pages?
113. MR STADLEN: I see. I was looking at the unapproved judgment. In the unapproved it is paragraph 29, about six lines down:

"This court decided that the former was the law. The appellant's position in this case is in no way inconsistent with the decision, since they accept that all documents passing between the BIU and Freshfields are privileged, as indeed are Freshfields' own drafts and memoranda."

114. That is the second reference to that. Then, if your Lordships go to --
115. LORD JUSTICE LONGMORE: But we are not talking here about drafts and memoranda which Freshfields keep. I do not think Mr Pollock is asserting that he is entitled to that and, if he was, it would be contrary to what he was accepting, or what I would, for my part, presently accept. What I thought we were talking about was something that is prepared by Freshfields, in the sense of a potential witness coming along and someone from Freshfields in a sort of clerical way, making a note of what that witness says and then, if it remains in Freshfields' drafts and in their offices and is never circulated to anybody, that would be purely internal. If, on the other hand, it is circulated to the Bank or to the witness -- the witness for approval -- then, although prepared by Freshfields, it is no longer internal.
116. MR STADLEN: Well, my Lord, that may or may not be so, but at the moment the language that my learned friend is seeking to substitute by resisting the words "by the Bank" or including the words "control" rather than "possession" would cover internal memoranda.
117. MR POLLOCK: No.
118. MR STADLEN: My learned friend says, "No," but if it --
119. THE MASTER OF THE ROLLS: I thought a moment ago he was telling us that, if Freshfields had prepared a witness statement which was in the control of the Bank, it would be disclosable, even if Freshfields had not sent it to anybody.
120. MR STADLEN: Precisely, and that is a matter that --
121. THE MASTER OF THE ROLLS: I thought that was what Mr Pollock was saying.
122. MR STADLEN: Yes, and to the extent, therefore, that my learned friend is saying that, that is going back on what was being said to your Lordships' court and the court below, and in any event, whether right or wrong, has not yet been the subject of argument. We are not seeking today to debate the merits of any of these different categories, the three categories that my learned friend has identified; we are simply seeking to preserve the status quo and the only way in which the status quo can be preserved, is to make it plain that this order is limited to the matters that were debated before your Lordship's court and that does not include documents created by Freshfields.
123. THE MASTER OF THE ROLLS: Well, it seems to me -- and I may be wrong -- that the amendment that is needed to reflect the basis upon which the argument is put would be simply to cut out "created" and "or" altogether because I do not see what they add. That would restrict the ambit of our declaration to documents in the Bank's possession and leave no declaration at all in relation to documents that may be somewhere else, because there has not been argument about documents that are somewhere else.
124. Now, if we did that, it might still leave open the argument in relation to documents in the Bank's possession that were sent to the Bank by Freshfields, but I do not see that we can make a declaration of law that is inconsistent with our judgment so far as those documents are concerned simply because there has not been any argument about them. Do you see what I mean?
125. MR STADLEN: My Lord, would your Lordship just repeat --
126. THE MASTER OF THE ROLLS: If the declaration was this:

"It is declared that the only documents or parts of documents coming into the Bank's possession between the ... "

127. Et cetera, et cetera:

" ... which the Bank is entitled to withhold from inspection are ... "

that means that the declaration of law we are making focuses only on documents in your client's possession. It leaves open the question what about documents that Freshfields --

128. MR POLLOCK: That is fine.
129. MR STADLEN: My Lord, everybody seems to be happy. This makes me feel very uneasy.
130. THE MASTER OF THE ROLLS: Well, let us take out the words "created or".
131. MR STADLEN: My Lord, the trouble with "control", if you include "control", is that ...
132. THE MASTER OF THE ROLLS: I myself, unless persuaded by either of my friends, would simply take out "created or" which does not seem to me to add anything to what was argued before us, and leave "possession" because that was the basis upon which it was argued before us, and at least you will then have a very clear task in listing the documents.
133. Are you happy?
134. MR STADLEN: Well, time will tell but ...
135. THE MASTER OF THE ROLLS: I sympathise with your suspicion of anything that Mr Pollock is prepared to agree to as maybe having a sting in the tail, but -- it is not always the case.
136. MR POLLOCK: My Lord.
137. MR STADLEN: Well, my Lord, that leads us to permission to appeal.
138. THE MASTER OF THE ROLLS: Yes.
139. MR STADLEN: Your Lordship has seen our skeleton argument, brief as it is, on this. What it perhaps in its brevity does not do justice to, is the really very significant nature of your Lordships' decision. In the light of your Lordships' ruling on the interpretation of Waugh it would be the first time that legal advice privilege has been before their Lordships' house, because your Lordships have ruled that Waugh was confined to litigation privilege.
140. There are a number of respects in which the matters raised are of very wide ambit. First of all, your Lordships know, and indeed indicate in the judgment itself, that on the very question of the interpretation of Waugh there is a line of authority that is to contrary effect. There is the decision, unanimous decision, of the Court of Appeal in Guinness Peat, in which, as your Lordships say in the judgment, the court was prepared to proceed on the basis that any document prepared with the dominant purpose of using it or its contents to obtain legal advice was privileged, and, as made clear in that decision, the court itself interpreted the Waugh decision as applying the dominant purpose test to legal advice as well as litigation privilege. That was what Rix J held. It is also the interpretation of -- Barwick CJ's dictum which was approved in the House of Lords, which has been made clear by the High Court itself in the Esso case.
141. My learned friend says, when we go on to say as a matter of policy that a different test is applied to legal advice privilege in Australia than it is in this country in the light of your Lordships' judgment, that that is limited in Australia to statute. With respect, that is not right because, as your Lordships recall the Esso case, it is quite clear from that that the courts in Australia have understood the Barwick decision, or the Grant v Downs decision, as applying not just to litigation privilege but to legal advice privilege. So there is no doubt that in Australia, not just in statute, but in common law, the Bank's view, Tomlinson J' view, is the view that has prevailed and was the interpretation of the Barwick test. One --
142. LORD JUSTICE LONGMORE: This case has to be tried, has it not? What is the present date of trial?
143. MR STADLEN: Well, if your Lordships are raising the question of whether an appeal to their Lordships' house would interfere with the trial, can I deal with that? My learned friend says that it would cause delay or uncertainty. The position is this: the trial is due to start in January, and Tomlinson J has indicated that he is going to entertain an old-style opening from both parties which will last, respectively, six and four weeks, so that evidence will not start until the middle of March.
144. The ambit of the material that would be disclosed or would be liable to be disclosed, I am told, insofar as estimates have been able to be made in the time since your Lordships' judgment, is something in the order of 20 files. Now, that is in the context of some 3,000 files which have already been disclosed in this case to date. It is a very, very small amount of material. And of course, if your Lordships gave permission to appeal, it would be on terms that we would undertake to prepare the material so that, if the appeal failed, it would be immediately available to be disclosed.
145. It would, of course, enormously assist if, this being an interlocutory appeal, any appeal could be expedited, but there is no reason to suppose that, if there is expedition, an appeal to the House of Lords should interfere with the smooth operation of this trial. It is just a small sideshow in what is otherwise a huge canvas. The trial is currently estimated to go on for a year and the amendments to the pleadings are still going on, because disclosure is going on on a rolling basis and, as it comes in, amendments are made.
146. So the practical argument is one which we invite your Lordships to discount. Given --
147. THE MASTER OF THE ROLLS: Well, you invite us to discount it on the premise that their Lordships would be prepared to expedite this appeal. I am bound to say at the moment my reaction is that that is a matter we should leave to their Lordships and, if their Lordships think that the matter is of such importance that it justifies expediting and dealing with it so that it will not interfere with the trial date, or alternatively they think it is of such importance that they should deal with it even if it is going to interfere with the trial date, I am inclined to think that is a decision that should be left to them.
148. MR STADLEN: Well, my Lord, I am not even in a position to say to your Lordships that expedition would be necessary. I do not know when this matter would come on before their Lordships' house in the absence of an order for expedition.
149. LORD JUSTICE SEDLEY: There are quite substantial delays.
150. MR STADLEN: Well then, my Lord, so be it. If your Lordships were to indicate -- in the light of your Lordships' view, if your Lordships were to give permission conditional upon it being expedited by their Lordship's house -- there are two quite separate questions here. One is, absent the possibility of it causing a delay in this case, is this a matter that ought to go to their Lordship's house and if your Lordships take the view that it is, then in our submission it would be right that your Lordships should give that indication even if your Lordships are concerned about the delay point, and it would be unfortunate, if your Lordships are of the view that this case does have sufficiently wide implications to justify a journey to the Lords, that you do not say so.
151. My Lord, can I deal with the policy issues? There are really two respects in which this has potentially very wide ramifications. The second is in the context of inquiries, but the first has nothing to do with inquiries and really goes much, much wider, and it is important that one does not lose sight of that because, although in this case it is, of course, true that the dominant purpose test falls to be considered in the context of an inquiry, the main legal part of your Lordships' judgment, which is that you need an actual communication between client and solicitor in order for legal advice privilege to attach, and that documents created for the purpose of being laid before a solicitor but not actually so laid, do not attract privilege, that is something that has effect across all legal advice, not just in the context of litigation privilege, but all commercial, matrimonial, criminal legal advice.
152. Tomlinson J drew attention to the remark by Cotton LJ in the Southwark case that the essence of the privilege is that there should be no fettering of the ability of a client to communicate with his solicitor, and he in his judgment set out the reason why he considered that to do anything other than protect the confidentiality of the process of communication, including documents that do not end up in front of a solicitor, would fetter the ability of corporate clients to communicate with their lawyers. If my learned friend says this case is only to do with an inquiry, that does not meet --
153. THE MASTER OF THE ROLLS: We do not have to accept that as law. For myself, I have some difficulty with this concept and difficulty with why there should be such a privilege or such an apprehension. It is one thing if you are expecting litigation. If you are not, I do not find it all that easy to envisage the situation where we cannot possibly put all the facts before our solicitors to find out if our lease is going to expire in 2010 or not because we might have to disclose that. Why should there be that illusion, any more, or even less, than if you are going to your doctor to get advice on your state of health and you may be a little apprehensive that you might have an insurance policy invalidated for non-disclosure.
154. MR STADLEN: Well, my Lord, the question your Lordship raises is really raising this question: namely, does the baring of the breast rationale apply to legal advice privilege as well as to litigation privilege? Your Lordships, in the judgment, indicated that it may apply with less force in legal advice than in litigation privilege, but in our submission there is authority to suggest that it does apply to both. There are grounds of practicality why one can see that it should apply to both because there may be all sorts of situations in which somebody with a guilty secret will not reveal it to his solicitor if he knows that in due course it is liable to surface in litigation. Whether the fact that litigation is not in contemplation, which may be the case in legal advice privilege, is sufficient, as a matter of policy, to enable the law to say it does not matter that clients cannot make a clean breast of their affairs to their lawyers is a matter of policy which in our submission is a matter that is one that should be decided by their Lordships.
155. It is ultimately a matter of policy and your Lordships indicated in the judgment that it was not for your Lordships' court to extend the law, as you in the light of your judgment considered such a conclusion to require, on a ground of policy, but plainly it would be open to their Lordships' court to decide where to draw the line.
156. Your Lordships drew attention to the Morgan Grenfell case and Lord Hoffmann's reference to legal advice privilege as a fundamental human right that can only be overridden by express words of a statute or by necessary implication, and there is a question of the balance that is to be drawn between legal advice and privilege and the need to protect it, and the desire that there should be as much material as possible before the court in disposing of litigation.
157. Now, my learned friend indicated in argument that that pendulum has swung in favour of a restricted view of legal advice privilege, and privilege generally. We see in the Esso case that the pendulum actually in Australia is swinging back in the opposite direction, albeit in the context of litigation privilege, where they have now changed from the Solehurst test, which was the majority in Grant v Down, and adopted the dominant purpose test.
158. So, these matters are matters that are liable to change and it is noticeable that, both in Esso and in Grant v Down and in Waugh, all of the judges in the highest courts in both jurisdictions really decided this question on a matter of policy: where should the line be drawn? And there is a balance in our respectful submission. The balance is between ensuring that there is no fetter on the ability of a client to obtain legal advice, even where litigation is not in contemplation, and the desirability of putting as much before the court as possible, and in our submission that is a line that should appropriately be drawn by their Lordship's house.
159. Now, your Lordships will see that my learned friend says:

"Well, this is all very well but it is academic in our case because of what your Lordships have held about the predominant purpose test in this case."

160. What we say in relation to that is that that also raises a point of very wide ramification because in effect what your Lordships have said is that in any case where a corporate client, or indeed an individual client -- but more relevant to the corporate client -- is informed that it is going to be subject to some kind of inquiry -- a DTI inquiry, a stock exchange inquiry, FSA inquiry -- this happens all day long throughout the City -- and rings up its solicitors and says:

"We have been told that we may be subject to inquiry. We want you to hold our hand. We want advice every step of the way. We are not currently contemplating litigation but we want you to give us advice."

161. The first thing that the solicitor says is:

"Well, you had better tell us what the facts are."

162. The effect of your Lordships' decision is that when facts in that context are put before the solicitors, they will be liable to be held not to be privileged -- not privileged because they will not have been put forward to the solicitor for the predominant purpose of getting legal advice, and your Lordships draw distinction between assisting the preparation of a case in front of an inquiry, which you say is not really legal advice, and legal advice. Now, my Lord, this is liable to have very wide ramifications.
163. THE MASTER OF THE ROLLS: It is going to be a very rare situation in the scenario that you postulate that there is not going to be contemplation of litigation, is it not? The case we are dealing with is a rather special one because of the ambit of the Bank's protection against litigation.
164. LORD JUSTICE LONGMORE: Well, it is all because of Re: L really, is it not? What you are saying is Re L is wrong in a commercial context.
165. MR STADLEN: Well, my Lord, that may --
166. LORD JUSTICE LONGMORE: I see the point.
167. MR STADLEN: Yes. That may be so. It may be that litigation is contemplated, as, for example, in our case, but the question is: what is the predominant purpose? So, even if litigation is contemplated -- and your Lordship postulates that example. Supposing the chairman rings up and says, "there is going to be a DTI inquiry, there may well be litigation at the end of the road and so we want advice," but, as between the litigation and short-term matters, it may be that its predominant purpose is not the litigation, so the question still remains in that example, is it right to say that the predominant purpose is not giving -- or putting the facts before the solicitor is not to enable legal advice to be given because the correct analysis of what is going on is that it is not for advice to be given, but it is for forensic assistance to be given, which could as easily be given by a management consultant.
168. Now, that is a matter that is liable to have very wide ramifications because it happens all the time, and the evidence before the court was described by the judge below as very cogent. Your Lordships indicate in the judgment that it was based on an assertion by Mr Croall. In our respectful submission it goes further than that because there is evidence, based on the banking officials who created or commissioned the documents, saying that the purpose for which they created those documents was to enable the Bank to get advice as well as assistance in the preparation of its case, and what your Lordships have held in effect, taking a broad view, is that, when one analyses it, the predominant purpose is not to get legal advice.
169. THE MASTER OF THE ROLLS: I think there is a limit to how much more assistance you can give us in relation to that.
170. This appeal has raised important issues of principle, but the importance of the issues of principle insofar as permission to go to the House of Lords is concerned is in tension with the high desirability that this trial date should now be held, having regard to the time that has already gone past. If we were to give permission to appeal, there would be a risk that the date could not be held and in those circumstances we are going to refuse permission to appeal. If a petition is made to their Lordship's house, it would be open, of course, to their Lordships to give permission to appeal, either on the basis that the hearing will be expedited and there will be no delay of the subsequent trial, or, alternatively, on the basis that their Lordships consider that the interests of resolving these issues by their Lordships outweighs the need to keep to the date. For those reasons we refuse permission.
171. MR POLLOCK: My Lord, I think my learned friend wants a stay.
172. MR STADLEN: My Lord, yes. Charitable as ever, my learned friend --
173. LORD JUSTICE SEDLEY: It is another Greek gift.
174. MR STADLEN: I was going to say dona parentis but in this case I am grateful, rather than fear my learned friend.
175. MR POLLOCK: My Lord, I can cut it short by saying we would not oppose a stay, subject only to this proviso. Obviously, the stay will only continue until the House of Lords say no. If they say yes, it will continue thereafter. But in order to save time, and my friend no doubt is going to expedite it, we would ask this proviso be imposed: that the Bank be instructed, be required, to prepare their list without waiting, so that, if the Lords say no, it can be served within 24 hours of that happening, because they have indicated that they need four weeks to prepare the list of documents. We would not want that four weeks to be added on to whatever delay is going to occur while an application to their Lordships is made. So, as long as it is done that way, we are perfectly happy.
176. MR STADLEN: Well, my Lord, I think the agreed order is that we will serve the list by 4 o'clock on 2nd May. We are content that that should remain as part of the order and, if the order is suspended until the petition is either dismissed, or the appeal is dismissed, then, if either of those two things happens, it follows that the documents might be disclosed immediately.
177. THE MASTER OF THE ROLLS: That seems perfectly reasonable. So we suspend the order pending the result of a petition for permission to their Lordships.

(11.07 am)

(The court adjourned)