Case: Balabel v Air India [1988] 1 Ch 317
Outcome: considered
In Balabel v Air India [1988] 1 Ch 317 (' Balabel' ), Taylor LJ (Parker LJ and Lord Donaldson MR agreeing) said that it goes too far to extend legal advice privilege without limit to all solicitor and client communications upon matters within the ordinary business of a solicitor and referable to that relationship. In his Lordship's view, the correct test is whether the communication or other document was made confidentially for the purposes of legal advice. Taylor LJ then continued at 330: '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 or 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.' 87 This analysis, especially the concluding words, must be understood in the context of the case. Balabel concerned documents which were brought into existence for the purposes of the solicitor's conduct of a commercial leasing transaction. The trial judge had held that privilege only attached to documents which actually seek or convey advice, and did not extend to two other categories of documents relating to the lease, namely communications between the client and its solicitors, and draft working papers, attendance notes and memoranda of the solicitors: at 323. 88 The approach explained by Taylor LJ in Balabel has been followed in subsequent cases. In Nederlandse Reassurantie Groep Holding NV v Bacon &amp; Woodrow [1995] 1 All ER 976 (' NRG' ), the action concerned a negligence claim brought by a Dutch corporation against various parties who had advised it in connection with a share purchase transaction. In the course of discovery, the plaintiff disclosed a bill of costs from its solicitors in respect of work carried out in relation to the share purchase transaction. One of the defendants claimed that the bill of costs showed that the solicitors were providing not only legal advice but advice of a more general nature going to the commercial advisability of the share purchase transaction. They sought specific discovery of communications passing between the plaintiff and its solicitors. Colman J rejected the claim. In doing so, Colman J said that Balabel had not disturbed well accepted principles concerning the scope of legal professional privilege (at 983): 'However, legal professional privilege only attaches to such communications as pass between the solicitor and client which are brought into existence or occur in the course of the performance of the solicitor's professional duty or function as solicitor retained to give professional advice, as distinct from some other capacity unrelated to the giving of legal professional advice (see Minter v Priest [1930] AC 558 esp at 581-586 per Lord Atkin). The substance of the scope of the privilege as identified by Taylor LJ in Balabel v Air India [1988] 2 All ER 246, [1988] Ch 317 does not, in my view, disturb or modify what has been clear law since Minter v Priest , namely that if a solicitor is instructed for the purpose of getting legal advice in relation to a particular transaction or series of transactions, then all the communications between the solicitor and the client relating to that transaction will be privileged notwithstanding they do not contain advice on matters of law or construction, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser of the client.' 91 The House of Lords overturned the decision of the Court of Appeal. It held that the documents at issue were the subject of legal advice privilege. All of their Lordships endorsed Taylor LJ's statement in Balabel that legal advice is not confined to telling the client the law but also includes advice as to what should prudently and sensibly be done in the relevant legal context. 92 It is sufficient for present purposes to refer to several passages in the speeches of Lord Scott of Foscote, Lord Rodger of Earlsferry, Lord Carswell and Lord Brown of Eaton-under-Heywood. 93 Lord Scott said at 652-653 [43] that: 'The preparation of the evidence to be submitted and the submissions to be made to the inquiry on behalf of the Bank were for the purpose of enhancing the Bank's prospects of persuading the inquiry that its discharge of its public law obligations under the Banking Acts in relation to BCCI was not deserving of criticism and had been reasonable in the circumstances. The presentational advice given by Freshfields and counsel for that purpose was advice "as to what should prudently and sensibly be done in the relevant legal context": Balabel v Air India [1988] Ch 317, 330. The "relevant legal context" was the Bingham Inquiry and the question whether the Bank had properly discharged its public law duties under the Banking Acts. The presentational advice falls, in my opinion, squarely within the policy reasons underlying legal advice privilege.' A little later Lord Scott said at 653 [44]: 'The skills of professional lawyers when advising a client what evidence to place before an inquiry and how to present the client and his story to the inquiry in the most favourable light are, in my opinion, unquestionably legal skills being applied in a relevant legal context.' 94 Lord Rodger distinguished the situation which would arise if the Bank consulted other professionals, including 'the modern equivalent of a rhetorician', on how to present the Bank's position and evidence to the inquiry: at 658 [59]. His Lordship then said at 658 [60]: 'When, however, the [Bank] consulted the lawyers in Freshfields, and through them counsel, about the presentation of their evidence to the inquiry, it was not seeking their comments and assistance as bankers, accountants, rhetoricians or anything else: it was seeking their comments and assistance as lawyers professing expertise in the field. Either expressly or impliedly, the [Bank] was asking them to put on legal spectacles when reading, considering and commenting on the drafts. In other words it was asking them to consider, as lawyers, how the Bank's evidence could be most effectively presented to Bingham LJ, given that he was inquiring into the Bank's discharge of their legal responsibilities under the Banking Acts. Such advice could come in many forms. ... What matters is that the [Bank] was instructing the lawyers in Freshfields to carry out a function which necessarily involved the use of their legal skills if it was to be performed properly. The communications between the [Bank] and Freshfields were therefore concerned with obtaining "legal advice" in the broader sense in which, as Taylor LJ rightly said in Balabel v Air India , that term should be understood for this purpose. It follows that legal advice privilege applies to those communications. The appeal must be allowed.' 95 Lord Carswell said at 681 [114]: 'The work of advising a client on the most suitable approach to adopt, assembling material for presentation of his case and taking statements which set out the relevant material in an orderly fashion and omit the irrelevant is to my mind the classic exercise of one of the lawyer's skills. I can see no valid reason why that should cease to be so because the forum is an inquiry or other tribunal which is not a court of law, provided that the advice is given in a legal context: see Lord Scott's opinion at para 42.' 96 Lord Brown said at 683 [120]: 'I think it clear that legal advice privilege attaches to the communications between the Bank and its lawyers concerning the preparation of the Bank's overarching statement (the statement of its case to the Bingham Inquiry). I would go so far as to state as a general principle that the process by which a client seeks and obtains his lawyer's assistance in the presentation of his case for the purposes of any formal inquiry whether concerned with public law or private law issues, whether adversarial or inquisitorial in form, whether held in public or in private, whether or not directly affecting his rights or liabilities attracts legal advice privilege. Such assistance to my mind clearly has the character of legal business. It is precisely the sort of professional service for which lawyers are ordinarily employed by virtue of their expertise and experience.' 97 In Australia, in Dalleagles Pty Ltd v Australian Securities Commission (1991) 4 WAR 325 (' Dalleagles' ), Anderson J rejected the argument that legal advice privilege only extended to what is literally either legal advice or a request for legal advice, and arrived at much the same position as Taylor LJ enunciated in Balabel . At 332-333, Anderson J said: 'I do not think the authorities provide justification for concluding that the doctrine of legal professional privilege as applying to non-curial communications between solicitor and client has been refined to the extent submitted by counsel for the defendants, which would require professional communications to be excluded from the protection of privilege unless expressed as advice simpliciter or as a request for such advice or unless forming part of a communication expressed in that way. But anyway, I think it is the case that whenever a lay client gives instructions to a legal practitioner to perform specialist legal services involving the exercise of professional skill, there is imposed on the solicitor a duty to give any advice reasonably necessary to protect the client's interests in the transaction whether expressly requested or not. Two cases in this Court illustrating that rule are Watts v Public Trustee (WA) [1980] WAR 97 and Stone James &amp; Co v Investment Holdings Pty Ltd [1987] WAR 363: see also Macpherson v Kevin J Prunty &amp; Associates [1983] 1 VR 573. It is not a large step from that position to say that whenever a client gives instructions to his solicitor there is assumed to be a request for advice. In my opinion, discourse between solicitor and client with reference to the transactions covered by those instructions, that is, professional discourse in a professional capacity, should be regarded as prima facie for the purpose of giving and receiving advice. This would apply to any communication that is on its face a communication of a professional nature from the solicitor to the client or his agent touching the subject matter of the solicitor's engagement and any communication from the client to the solicitor in connection with that engagement. Only if the rule is applied in that way can the policy of it be carried out and its object practically fulfilled.' Anderson J went on to say that there are limits to the application of this principle, including the fact that the material in question must have been created for the purpose of fulfilling the solicitor's professional engagement: at 334. 98 In DSE (Holdings) Pty Ltd v Intertan Inc [2003] FCA 1191 ; (2003) 135 FCR 151 (' DSE' ), Allsop J followed Dalleagles and Balabel , and said that he saw no difference of substance between them: at 173 [71]. But Allsop J made it clear that he did not consider that these cases extended legal professional privilege beyond legal advice (at 165 [45]): 'I do not read the reasons of Taylor LJ as extending the privilege beyond legal advice. The reasoning of Taylor LJ was clearly directed to the privilege being so limited. What legal advice is, however, goes beyond formal advice as to the law. This recognition does not see the privilege extend to pure commercial advice. In any given circumstance, however, it may be impossible to disentangle the lawyer's views of the legal framework from other reasons that all go to make up the "advice as to what should prudently and sensibly be done in the relevant legal framework" (Taylor LJ in Balabel at 330). That is how I read this last cited paragraph of Colman J: not extending the privilege beyond legal advice to commercial advice, but as recognising the form and nature of advice in a practical day to day context.' The last sentence in this passage refers to the statement by Colman J in NRG at 983 that a solicitor's professional duty or function not infrequently relates to the commercial wisdom of entering into a given transaction in relation to which legal advice is also sought. 99 Allsop J's judgment contains an extensive review of the cases which have referred to, and applied, the reasoning of Taylor J in Balabel . They include Saunders , in which French J said that the principle applied by Anderson J in Dalleagles extends to materials brought into existence by the client in order to communicate with the solicitor for purposes which would attract privilege: at 472. In Wenkart v Australian Federal Police (unreported, Branson J, 11 November 1986) (' Wenkart' ), Branson J cited Dalleagles for the proposition that 'professional discourse in a professional capacity, with reference to transactions covered by a retainer to provide legal advice, will be regarded as prima facie for the purpose of giving and receiving advice'. 101 There are, however, two additional points to be made. First, to qualify as privileged, the lawyer's advice must satisfy the description of professional advice given by a lawyer in his or her capacity as such: see NRG at 982 [g]-[j]; Three Rivers at 651 [38] and 658 [59]-[60]. The same requirement exists in the United States: see JH Wigmore, Evidence in Trials at Common Law , vol 8, rev J McNaughton, Little Brown &amp; Company, 1961 (1981) at s 2292; and Evans v City of Chicago 231 FRD 302 (ND Ill 2005). Secondly, communications for the purpose of obtaining and giving legal advice in the sense discussed in Balabel and the other cases mentioned above must satisfy the dominant purpose test if they are to attract legal professional privilege.