Legal advice privilege – Accountants – Respondents serving statutory notices requiring appellant companies to disclose documents relating to their tax affairs – Whether documents protected by legal advice privilege where relating to legal advice given by accountants on transactions under tax avoidance scheme – Whether legal advice privilege confined to members of legal profession or extending to other persons giving legal advice – Appeal dismissed
The appellants were two companies in the same group. Each received a statutory notice from an inspector of taxes, under section 20 of the Taxes Management Act 1970, requiring them to produce certain documents in relation to their tax affairs, specifically the use of a tax avoidance scheme marketed by an international firm of chartered accountants. The appellants challenged the validity of the notices in judicial review proceedings, contending that the notices sought disclosure of documents that were covered by legal advice privilege (LAP), in that they related to legal advice that the accountants had given to the appellants in relation to transactions under the scheme. It was settled law, in light of the decision in R (on the application of Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21; [2003] 1 AC 563, that section 20 could not be invoked to force anyone to produce documents to which LAP attached.
The appellants’ claim was dismissed, both at first instance and in the Court of Appeal, on the ground that LAP did not extend to legal advice given by someone other than a member of the legal profession: see [2009] EWHC 2492 (Admin) and [2010] EWCA Civ 1094. The appellants appealed to the Supreme Court.
Held (Lord Sumption and Lord Clarke dissenting): The appeal was dismissed.
Legal advice privilege was universally understood to apply only to communications in connection with advice given by members of the legal profession, including members of the Bar, the Law Society and the Chartered Institute of Legal Executives, and, by extension, foreign lawyers: Slade v Tucker (1880) 14 Ch D 824, Minter v Priest [1930] AC 558, Attorney-General v Mulholland [1963] 2 QB 477 and D v National Society for the Prevention of Cruelty to Children [1978] AC 171 applied. The government had rejected a 2001 proposal by the director general of fair trading that legal advice by accountants should be subject to the same privilege as that conferred on advice given by professional lawyers. Moreover, by providing statutory exceptions for patent attorneys, trade mark agents and licensed conveyancers, parliament had legislated in a way that plainly implied an assumption that LAP was limited to advice given by lawyers: see section 280 of the Copyright, Designs and Patents Act 1988, section 87 of the Trade Mark Act 1994 and section 33 of the Administration of Justice Act 1985. The provisions of the 1970 Act itself showed that parliament believed there to be a difference in the tax advice given by a “barrister, an advocate or a solicitor” as opposed to the more generic “tax adviser: see section 20B. That difference had been maintained when the relevant provisions of the 1970 Act were substantially re-enacted in Part 4 of Schedule 36 to the Finance Act 2008, despite discussions by the House of Commons public bill committee about the possibility of extending LAP to tax advice given by accountants. There was no suggestion of any parliamentary intention to depart from the 1970 Act in that respect.
Bearing those matters in mind, it was not appropriate for the court to extend the scope of LAP to communications in connection with advice given by professional people other than lawyers, notwithstanding that there was a strong case in logic for doing so. LAP was a creation of the common law, which would inevitably include some rules that, while entirely valid today, had limitations or other aspects that could only be explained by reference to historical practices or beliefs. The justification for LAP remained as valid in the modern world as it had been when it was first developed by the courts and its restriction to advice from members of the legal profession, while it could fairly be said to be illogical in the modern world, was explicable by reference to history. Where a common law rule was valid in the modern world, but had an aspect that appeared to be outmoded, it was not always proper for the court to modify or remove the limitation; it had to consider whether the implications of the proposed modification or removal were such that the matter was more appropriately be left to parliament. If parliament had unequivocally endorsed the aspect or limitation, then the courts should not alter it. Any extension of the scope of LAP was a matter for parliament, since: (i) the consequences of allowing the appellants’ appeal were hard to assess and would be likely to lead to a currently clear and well understood principle becoming unclear; (ii) questions of policy were involved, which should be left to parliament; and (iii) where parliament had enacted relevant legislation relating to LAP, on the assumption that LAP was confined to advice given by lawyers, it would be inappropriate for the court to extend it in the manner for which the appellants contended.
Lord Pannick QC and Conrad McDonnell (instructed by PriceWaterhouseCoopers Legal LLP) appeared for the appellants; James Eadie QC and Patrick Goodall (instructed by the legal department of HM Revenue and Customs) appeared for the respondents; Sir Sydney Kentridge QC, Tom Adam QC and Tim Johnston (instructed by Herbert Smith Freehills LLP) appeared for the Law Society of England and Wales, as intervener; Bankim Thanki QC, Ben Valentin and Henry King (instructed by Field Fisher Waterhouse LLP) appeared for the General Council of the Bar of England and Wales, as intervener; Patricia Robertson QC (instructed by Simmons & Simmons LLP) appeared for the Institute of Chartered Accountants in England and Wales, as intervener; Michael Edenborough QC and James Tumbridge (instructed by Gowlings (UK) LLP) appeared for AIPPI UK Group, as intervener; Philip Havers QC (instructed by the Legal Services Board) appeared for the Legal Services Board, as intervener.
Sally Dobson, barrister
R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another
Legal advice privilege – Accountants – Respondents serving statutory notices requiring appellant companies to disclose documents relating to their tax affairs – Whether documents protected by legal advice privilege where relating to legal advice given by accountants on transactions under tax avoidance scheme – Whether legal advice privilege confined to members of legal profession or extending to other persons giving legal advice – Appeal dismissedThe appellants were two companies in the same group. Each received a statutory notice from an inspector of taxes, under section 20 of the Taxes Management Act 1970, requiring them to produce certain documents in relation to their tax affairs, specifically the use of a tax avoidance scheme marketed by an international firm of chartered accountants. The appellants challenged the validity of the notices in judicial review proceedings, contending that the notices sought disclosure of documents that were covered by legal advice privilege (LAP), in that they related to legal advice that the accountants had given to the appellants in relation to transactions under the scheme. It was settled law, in light of the decision in R (on the application of Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21; [2003] 1 AC 563, that section 20 could not be invoked to force anyone to produce documents to which LAP attached.The appellants’ claim was dismissed, both at first instance and in the Court of Appeal, on the ground that LAP did not extend to legal advice given by someone other than a member of the legal profession: see [2009] EWHC 2492 (Admin) and [2010] EWCA Civ 1094. The appellants appealed to the Supreme Court.Held (Lord Sumption and Lord Clarke dissenting): The appeal was dismissed.Legal advice privilege was universally understood to apply only to communications in connection with advice given by members of the legal profession, including members of the Bar, the Law Society and the Chartered Institute of Legal Executives, and, by extension, foreign lawyers: Slade v Tucker (1880) 14 Ch D 824, Minter v Priest [1930] AC 558, Attorney-General v Mulholland [1963] 2 QB 477 and D v National Society for the Prevention of Cruelty to Children [1978] AC 171 applied. The government had rejected a 2001 proposal by the director general of fair trading that legal advice by accountants should be subject to the same privilege as that conferred on advice given by professional lawyers. Moreover, by providing statutory exceptions for patent attorneys, trade mark agents and licensed conveyancers, parliament had legislated in a way that plainly implied an assumption that LAP was limited to advice given by lawyers: see section 280 of the Copyright, Designs and Patents Act 1988, section 87 of the Trade Mark Act 1994 and section 33 of the Administration of Justice Act 1985. The provisions of the 1970 Act itself showed that parliament believed there to be a difference in the tax advice given by a “barrister, an advocate or a solicitor” as opposed to the more generic “tax adviser: see section 20B. That difference had been maintained when the relevant provisions of the 1970 Act were substantially re-enacted in Part 4 of Schedule 36 to the Finance Act 2008, despite discussions by the House of Commons public bill committee about the possibility of extending LAP to tax advice given by accountants. There was no suggestion of any parliamentary intention to depart from the 1970 Act in that respect.Bearing those matters in mind, it was not appropriate for the court to extend the scope of LAP to communications in connection with advice given by professional people other than lawyers, notwithstanding that there was a strong case in logic for doing so. LAP was a creation of the common law, which would inevitably include some rules that, while entirely valid today, had limitations or other aspects that could only be explained by reference to historical practices or beliefs. The justification for LAP remained as valid in the modern world as it had been when it was first developed by the courts and its restriction to advice from members of the legal profession, while it could fairly be said to be illogical in the modern world, was explicable by reference to history. Where a common law rule was valid in the modern world, but had an aspect that appeared to be outmoded, it was not always proper for the court to modify or remove the limitation; it had to consider whether the implications of the proposed modification or removal were such that the matter was more appropriately be left to parliament. If parliament had unequivocally endorsed the aspect or limitation, then the courts should not alter it. Any extension of the scope of LAP was a matter for parliament, since: (i) the consequences of allowing the appellants’ appeal were hard to assess and would be likely to lead to a currently clear and well understood principle becoming unclear; (ii) questions of policy were involved, which should be left to parliament; and (iii) where parliament had enacted relevant legislation relating to LAP, on the assumption that LAP was confined to advice given by lawyers, it would be inappropriate for the court to extend it in the manner for which the appellants contended.Lord Pannick QC and Conrad McDonnell (instructed by PriceWaterhouseCoopers Legal LLP) appeared for the appellants; James Eadie QC and Patrick Goodall (instructed by the legal department of HM Revenue and Customs) appeared for the respondents; Sir Sydney Kentridge QC, Tom Adam QC and Tim Johnston (instructed by Herbert Smith Freehills LLP) appeared for the Law Society of England and Wales, as intervener; Bankim Thanki QC, Ben Valentin and Henry King (instructed by Field Fisher Waterhouse LLP) appeared for the General Council of the Bar of England and Wales, as intervener; Patricia Robertson QC (instructed by Simmons & Simmons LLP) appeared for the Institute of Chartered Accountants in England and Wales, as intervener; Michael Edenborough QC and James Tumbridge (instructed by Gowlings (UK) LLP) appeared for AIPPI UK Group, as intervener; Philip Havers QC (instructed by the Legal Services Board) appeared for the Legal Services Board, as intervener.Sally Dobson, barrister
