Three Rivers District Council & Ors v The Governor & Company of the Bank of England Rev 1

Factual and Procedural Background

This opinion concerns an interlocutory appeal from a judgment of a High Court judge regarding disclosure of documents in ongoing litigation. The appellants, who are liquidators and creditors of Company A, are suing The Bank of England ("the Bank") for misfeasance in public office. The Bank claimed legal professional privilege over numerous documents created between the collapse of Company A and the Bank's final submissions to a private, non-statutory inquiry conducted by a senior judge ("the Inquiry"). The Bank does not claim litigation privilege for these documents, acknowledging that the Inquiry was non-adversarial, but asserts legal advice privilege. The dispute focuses on whether legal advice privilege extends to internal documents prepared by Bank employees and ex-employees, some of which were sent to the Bank’s solicitors ("Solicitors A"). The procedural history includes the judge’s detailed analysis of legal principles on privilege and the scope of documents subject to disclosure, culminating in an appeal to the Court of Appeal.

Legal Issues Presented

1. Does legal advice privilege extend to documents prepared by Bank employees that were intended to be, and in fact were, sent to the Bank's solicitors?
2. Does legal advice privilege extend to documents prepared by Bank employees with the dominant purpose of obtaining legal advice but not actually sent to the Bank's solicitors?
3. Does legal advice privilege extend to documents prepared by Bank employees without the dominant purpose of obtaining legal advice but which were sent to the Bank's solicitors?
4. Do the answers to the above questions differ if the documents were prepared by ex-employees of the Bank?
5. What is the correct scope and application of legal advice privilege in relation to internal documents prepared in the context of a non-adversarial inquiry?
6. What is the appropriate test for determining the dominant purpose of document preparation in relation to legal advice privilege?

Arguments of the Parties

Appellant's Arguments

• Disclosure is not sought of communications between the Bank’s inquiry unit (the BIU) and Solicitors A or their internal memoranda or drafts, which are accepted as privileged.
• Documents prepared by Bank employees or ex-employees, whether or not prepared for submission to Solicitors A, should be disclosed as they constitute raw material rather than privileged communications.
• Legal advice privilege should be confined to communications directly between solicitor and client, excluding preparatory materials or internal memoranda not themselves communications.

Respondent's Arguments

• Any document prepared with the dominant purpose of obtaining legal advice falls within legal advice privilege, regardless of whether it was actually communicated to the solicitor.
• Documents emanating from or prepared by employees of the Bank should be privileged as the Bank acts through its employees, and such documents are effectively communications for the purpose of legal advice.
• Legal advice privilege extends beyond direct communications to include documents prepared confidentially for the purpose of seeking legal advice, even in non-litigious contexts.
• The dominant purpose test, as developed in case law and accepted in other jurisdictions, supports a broad scope of legal advice privilege.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Greenough v Gaskell (1833) 1 My. & K. 98	Established legal advice privilege applies even absent pending or contemplated litigation; privilege attaches to communications between client and solicitor.	Confirmed that privilege is rooted in solicitor-client confidentiality and does not extend to internal client communications not shared with solicitors.
Reece v Trye (1846) 9 Beav. 316	Privilege protects unrestricted communication between parties and their professional legal advisers.	Reaffirmed that privilege applies to communications with solicitors, emphasizing the importance of confidentiality in legal advice.
Anderson v Bank of British Columbia (1876) 2 Ch.D. 644	Distinguished communications made to agents from those made to solicitors; internal communications to agents not privileged unless for litigation.	Held that communications from employees or agents do not attract privilege absent litigation context.
Southwark and Vauxhall Water Company v Quick (1878) 3 Q.B.D. 315	Documents prepared with dominant purpose of obtaining solicitor’s advice are privileged even if not actually communicated to solicitor.	Clarified that documents created for legal advice purposes are privileged, but this relates to litigation privilege context.
Wheeler v Le Marchant (1881) 17 Ch.D. 675	Legal advice privilege does not extend to communications from third parties to solicitors unless in litigation context.	Confirmed that reports from third parties to solicitors for advice are not privileged absent litigation.
Balabel v Air India [1988] Ch 317	Legal advice privilege protects all communications between solicitor and client on matters within the solicitor's ordinary business.	Confirmed privilege applies to solicitor-client communications but not to internal client documents not communicated to solicitor.
Waugh v British Railways Board [1980] AC 521	Dominant purpose test applies to litigation privilege; documents must be prepared with dominant purpose of use in litigation or obtaining legal advice related to litigation.	Held that dominant purpose test governs privilege but in litigation context only; not extending to legal advice privilege generally.
Esso Australia v Federal Commissioner of Taxation (1999) HCA 67	Adopted dominant purpose test in Australian law for litigation privilege.	Supported the use of dominant purpose test but focused on litigation privilege, not extending legal advice privilege.
Grant v Downs (1976) 135 CLR 674	Debated whether sole purpose or dominant purpose test applies to litigation privilege.	Majority required sole purpose; dissent favored dominant purpose; later adopted by House of Lords for litigation privilege.
Price Waterhouse v BCCI Holdings (Luxembourg) SA (1992) BCLC 583	Rejected legal advice privilege for reports prepared by accountants, whether independent or committee members.	Supported narrower application of legal advice privilege excluding third party reports.
Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987] 1 WLR 1027	Accepted dominant purpose test for documents prepared to obtain legal advice in litigation context.	Used as authority for broader application of dominant purpose test in litigation privilege.

Court's Reasoning and Analysis

The court undertook a detailed historical and doctrinal analysis of legal professional privilege, distinguishing between litigation privilege and legal advice privilege. It reaffirmed that litigation privilege applies only in adversarial or contemplated litigation contexts, which was not present in the non-adversarial Inquiry setting here. The Bank’s claim rested solely on legal advice privilege.

Reviewing nineteenth-century authorities, the court found that legal advice privilege has consistently been confined to communications between client and solicitor (or their agents) and does not extend to internal client documents or communications with third parties, even if prepared for legal advice. The court rejected the Bank’s broader interpretation that internal documents prepared by employees or ex-employees for seeking legal advice, but not constituting direct communications with solicitors, are privileged.

The court also considered twentieth-century developments, including the dominant purpose test as applied in litigation privilege cases. It held that these developments do not extend legal advice privilege beyond its traditional scope. The dominant purpose test does not justify extending privilege to internal memoranda or preparatory materials that are not communications between client and solicitor.

Applying these principles to the facts, the court concluded that the dominant purpose of the internal documents prepared for the Inquiry was to present factual material to the Inquiry, not to obtain legal advice. Extensive factual materials prepared by Bank employees and ex-employees were therefore not privileged. The court emphasized that the Bank’s inquiry unit (BIU) constituted the client for privilege purposes, not individual officers, and that ex-employees are in no better position to claim privilege.

Finally, the court addressed the practicalities of document control and disclosure, clarifying that the order would apply only to documents in the Bank’s possession and not to documents solely in Solicitors A’s files, as this was not argued or evidenced.

Holding and Implications

The Court allowed the appeal.

The court declared that legal advice privilege does not extend to internal documents or memoranda prepared by the Bank’s employees or ex-employees for the purpose of submission to solicitors or the Inquiry, absent their being direct communications between client and solicitor. Only communications directly between the Bank’s inquiry unit and its solicitors, and the solicitors’ internal drafts and memoranda, are privileged.

The immediate effect is that the Bank must disclose internal documents prepared by its employees and ex-employees relevant to the litigation, subject to any detailed wording arguments. The court ordered the Bank to serve a further and better list of documents accordingly.

The court refused permission to appeal to the highest court, citing the importance of proceeding with the trial without delay. However, it acknowledged the wider legal significance of the issues raised, particularly the scope of legal advice privilege in non-litigious contexts and the dominant purpose test. The court noted that the final determination of these principles might be left to a higher court in future cases.