Bowman v Fels has been written about a good deal since the decision was published in early March. The case effectively overrules P v P [2003] EWHC 2260 (Fam), the case in which the President of the Family Division decided that legal professional privilege did not exempt lawyers from an obligation to report information or suspicion of ‘money laundering’ to a constable, in effect to the NCIS.

I will be brief in summarizing the case because most practitioners will already be aware of it. Indeed, the Bar Council’s guidance specifically advises barristers to read the judgment in Bowman v Fels.

The relevant legislation is Proceeds of Crime Act 2003, in particular s. 328, which reads
12. (1) A person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person. (2) But a person does not commit such an offence if— (a) he makes an authorised disclosure under section 338 and (if the disclosure is made before he does the act mentioned in subsection (1)) he has the appropriate consent; (b) he intended to make such a disclosure but had a reasonable excuse for not doing so; (c) the act he does is done in carrying out a function he has relating to the enforcement of any provision of this Act or of any other enactment relating to criminal conduct or benefit from criminal conduct."

I discussed this provision in a recent column about the way it can lead to a bank account being suspended, which is potentially a serious problem, where the bank wrongly suspects (as banks are all too ready to, presumably to protect themselves) that a client may have done some wrong. The Act as a whole is confusing, and no doubt will be subject to extensive clarification by the courts.

Briefly, P v P was an ancillary relief application. The wife’s lawyers suspected that the husband may have evaded tax. Therefore some of the money out of which the wife sought ancillary relief might have been proceeds of crime (tax evasion is of course a crime). Arranging a settlement out of that money for the wife was arguably an offence under s. 328. So, arguably, was getting a judgment from the court with respect to the suspect money. The wife’s lawyers had sought the advice of the NCIS who told them that not only must they disclose their suspicions, but under the anti-tipping-off provisions of the act they must not tell the other side about the fact they had made a disclosure. This requirement of secrecy would have been the same if the suspicion was about their own client. It happened to be about the client on the other side.

The consequence of the decision was not only to undermine legal privilege, but to interfere with the conduct of litigation. Once the disclosure has been made, the person making the disclosure cannot take any step until the relevant authority (in most cases the NCIS) has consented, (or, if the authority does not reply, for seven days). If the NCIS withholds consent, then nothing can be done for 31 days.

One danger, then, is that a case can come to a sudden halt, lawyers can refuse to take any step, and can find themselves unable to tell the other side, or their own client, why. If this happens on the eve of trial, that could be disastrous. That is just what happened in Bowman v Fels. It is a claim for beneficial ownership of a share of house where the parties formerly lived together. Two days before trial, the claimant’s lawyers applied without notice to vacate the trial, and the court did so, and ordered that the defendant should not be told why the trial had been vacated. Two days later that order was set aside (with permission to appeal), too late for the trial to go ahead.

The case settled, but the Court of Appeal decided to hear the appeal nevertheless. Having decided to hear the appeal after the case had been settled, because of its importance, the Court of Appeal fortunately was able to give a single judgment of the whole court. Put at its most basic, the court decided that acting in litigation, and arranging a settlement do not constitute ‘becoming concerned in an arrangement’ for the purposes of the Act; and that the Act does not override legal advice privilege or litigation privilege.

Since a great deal has already been written about the case, much of it amounting to a collective sigh of relief that the legal professions and its clients are ‘off the hook’ so to speak, I will confine my comments to some sidelights on the case. First, it is interesting that the Court of Appeal decided to hear a case which had been settled. Whether the costs of the further appeal and the delayed trial encouraged the parties to settle we do not know. The Bar Council, the Law Society, and the NCIS had intervened (as they did in P v P). Although the case settled, and although it was not a public law case, the Court of Appeal decided that since the appeal was on an important point of public law they had jurisdiction to hear the appeal, and they decided to exercise that jurisdiction. This point, which was argued, in itself makes the case important. In deciding to hear the appeal, the Court discussed the relevant case law, and referred to the overriding objective, ‘which illuminates all civil court practice today.’

Second the court noted that the point in issue in these civil proceedings before the Civil Division of the Court of Appeal was a point of criminal law. It is submitted that one consequence of the Proceeds of Crime Act may be the development of a body of case of law, and of professional specialization, in which criminal and commercial issues are engaged and overlap to an extent which has not yet been fully appreciated. With Bowman v Fels we may be at an early stage of this development, with a great deal more to come.

Third, it is interesting to observe the extensive discussion of the EU directives which lie behind the Act and its predecessor. Extensive examination of EU directives tend to be seen as little-used fall-back in the interpretation of UK statutes which depend on those directives. However, this use of the EU directives and legislative history might point the way for practitioners who in future are litigating this unduly complex, and potentially very controversial statute.

A fourth and related point is the way in which the Court uses this legislative history. The Court speaks about what the ‘EU legislator’ and the UK Parliament would have ‘had in mind’ when drafting the statute. This is not quite the same as purposive construction because the Court was not looking to the purpose of the statute so much as to the broader framework supplied by the recitals to the directive, and by EU and European Human Rights law. When it becomes necessary to read a statute in this way, it is arguable that the Courts are treating that statute as poorly drafted. There is of course nothing novel about this method of statutory interpretation, and it does not go so far as permitting courts to interpret a statute contrary to its ‘literal meaning.’ It may however be a sign of the way in which this particular piece of legislation will be handled.

All of these points must be read with the proviso that it is likely that Bowman v Fels will go to the Lords. The NCIS made it clear that they very much favour the huge number of disclosures from lawyers which they have apparently been receiving, and are keen for that to continue. For a while the professions’ sigh of relief is premature, and we would do well to hold our breath.

Dr John Birchall - Professional English, Legal English, and Common Law Training