Legal Privilege

In the case of Three Rivers District Council and Others v Governor and Company of the Bank of England [2004] the House of Lords clarified the position of Legal Privilege and the right to obtain advice in confidence. This has had an impact in the business world as companies are now assured that their communications with their legal advisors are now less likely to be disclosed to outside parties.

There are two types of privilege:

1. Legal advice privilege which protects disclosure of communications between a legal advisor and his client provided that they are confidential and in relation to seeking or giving legal advice. Legal advice privilege will apply whenever a legal advisor is advising in a legal context.
2. Litigation privilege which protects all communications produced for the sole or main purpose of the litigation where litigation proceedings are contemplated or are in progress, including communications between the legal advisor and his client and also the legal advisor or client with an independent third party.

However, uncertainty remains in respect of the identity of the client. In the previous Court of Appeal case Three Rivers (No.5) it was held that legal advice privilege only protected communications between the legal advisors and the Bank's Bingham Inquiry Unit. The Inquiry Unit in the Courts view was the client. Communications between other employees of the Bank and the Banks lawyers were not privileged. The House of Lords did not overturn the Court of Appeal's decision in relation to this issue. This now a cause of concern for companies as to how they are able to communicate with their lawyers through their employees.

When seeking legal advice for the purposes of litigation companies should consider whether the employee who communicates with legal advisors has the authority to seek advice directly with the legal advisors or to give instructions directly to the legal advisors. As a cautionary measure companies should identify a group of employees as the client who have authority to instruct legal advisors. However, a court may still consider whether or not such authority is legitimate.