Reported at [2004] UKHL 48

Lord Rodger said,

50. The Bank of England (“the Bank”) resist a claim for disclosure of communications between the BIU and Freshfields on the ground that the communications are covered by legal advice privilege. In the formulation of Millett J in Price Waterhouse v BCCI Holdings (Luxembourg) SA [1992] BCLC 583 , 588d-e legal advice privilege attaches to all communications made in confidence between solicitors and their clients for the purpose of giving or obtaining legal advice even at a stage when litigation is not in contemplation. It does not matter whether the communication is directly between the client and his legal adviser or is made through an intermediate agent of either.

51. It is common ground between the parties that legal advice privilege has to be distinguished from litigation privilege. As Lord Edmund-Davies noted in Waugh v British Railways Board [1980] AC 521 , 541-542, in the past the need to make that distinction was sometimes overlooked:
“It is for the party refusing disclosure to establish his right to refuse. It may well be that in some cases where that right has in the past been upheld the courts have failed to keep clear the distinction between
(a) communications between client and legal adviser, and
(b) communications between the client and third parties, made… (‘for the purpose of obtaining information to be submitted to the client’s professional legal advisers for the purpose of obtaining advice upon pending or contemplated litigation.’ “

52. Litigation privilege relates to communications at the stage when litigation is pending or in contemplation. It is based on the idea that legal proceedings take the form of a contest in which each of the opposing parties assembles his own body of evidence and uses it to try to defeat the other, with the judge or jury determining the winner. In such a system each party should be free to prepare his case as fully as possible without the risk that his opponent will be able to recover the material generated by his preparations.
In the words of Justice Jackson in Hickman v Taylor (1947) 329 US 495 , 516,
“Discovery was hardly intended to enable a learned profession to perform its functions either without wits or on wits borrowed from the adversary.”

54. The rationale of legal advice privilege has been identified in numerous cases, many of which are cited in the speeches of Lord Scott and Lord Carswell. I need not repeat them but venture to add a passage from Sir George Mackenzie’s Observations upon the 18th Act of the 23rd Parliament of King James the Sixth against Dispositions made in Defraud of Creditors etc (1675), in Sir George Mackenzie’s Works, vol 2 (1755), p 1.

He said, at p 44:
“An Advocate is by the Nature of his Imployment tied to the same Faithfulness that any Depositor is: For his Client has depositate in his Breast his greatest Secrets; and it is the Interest of the Common-wealth, to have that Freedom allowed and secured without which Men cannot manage their Affairs and private Business: And who would use that Freedom if they might be ensnared by it? This were to beget a Diffidence betwixt such who should, of all others, have the greatest mutual Confidence with one another; and this will make Men so jealous of their Advocates that they will lose their private Business, or succumb in their just Defence, rather than Hazard the opening of their Secrets to those who can give them no Advice when the case is Half concealed, or may be forced to discover them when revealed.”

As this passage shows, the public interest justification for the privilege is the same today as it was 350 years ago: it does not change, or need to change, because it is rooted in an aspect of human nature which does not change either.

If the advice given by lawyers is to be sound, their clients must make them aware of all the relevant circumstances of the problem. Clients will be reluctant to do so, however, unless they can be sure that what they say about any potentially damaging or embarrassing circumstances will not be revealed later.

So it is settled that, in the absence of a waiver by the client, communications between clients and their lawyers for the purpose of obtaining legal advice must be kept confidential and cannot be made the subject of evidence.

Of course, this means that, from time to time, a tribunal will be deprived of potentially useful evidence but the public interest in people being properly advised on matters of law is held to outweigh the competing public interest in making that evidence available. As Lord Reid succinctly remarked in Duke of Argyll v Duchess of Argyll 1962 SC (HL) 88 , 93:
“the effect, and indeed the purpose, of the law of confidentiality is to prevent the court from ascertaining the truth so far as regards those matters which the law holds to be confidential.”

Edited for ease of reading. See the other postings on this case under the same tag.