The Supreme Court has refused to extend the concept of legal privilege to other professionals giving legal advice.
By a 5-2 majority, the Law Lords rejected an appeal by Prudential in a case in which it argued that privilege covered legal advice given by accountants in relation to a tax avoidance scheme. However, had the appeal been allowed, Lord Neuberger said that it would “ineluctably follow” that it would apply to other professions, arguably including surveyors, architects and possibly even town planners.
In a dissenting judgment, Lord Clarke called on Parliament to consider extending legal privilege in such a way, while Lord Sumption said that, in his opinion privilege should apply “in any case where legal advice is given by a person who is a member of a profession which ordinarily includes the giving of legal advice”
However, giving the main ruling dismissing the appeal, Lord Neuberger said that the present state state of the law is “clear to any professional advisers who need to understand it, and relatively easy to explain to their clients who are meant to benefit from it”.
He said that to extend the concept, in the way put forward by Lord Sumption, would be an “inappropriate formulation” for the Court to adopt.
He added: “It would carry with it an unacceptable risk of uncertainty and loss of clarity in a sensitive area of law.
He said that, under such a formulation, it would be unclear whether occupations such as town planners, engineers, or pension advisers, who often have considerable specialist legal expertise, would be members of a “profession” for this purpose.
The question whether privilege should be extended raised questions of policy which should be left to Parliament, he said.
Lord Reed said that a “particularly significant” factor was that privilege must be capable of being relied upon if it is to serve its purpose of enabling clients and their legal advisers to communicate with each other with complete candour.
He said: “It is therefore highly desirable that the privilege should, as far as possible, be based upon a principle which is clear, certain and readily understood. The existing common law principle meets those requirements.
“The variety of possible formulations of an extended common law principle, and the consequent scope for debate as to whether particular professional persons, in particular situations, would or would
not fall within its scope, would detract from the certainty and clarity which presently exist.”
In his dissenting judgment, Lord Sumption said that, in his opinion, legal professional privilege “attaches to any communication between a client and his legal adviser which is made (i) for the
purpose of enabling the adviser to give or the client to receive legal advice, (ii) in the course of a professional relationship, and (iii) in the exercise by the adviser of a profession which has as an ordinary part of its function the giving of skilled legal advice on the subject in question”.
Lord Clarke also gave a dissenting judgment, and expressed the hope that the issue will be considered by Parliament “as soon as reasonably practicable”.
The case involved a tax avoidance scheme devised by PricewaterhouseCoopers and adapted for the benefit of the Prudential group of companies, who implemented the scheme through a series of transactions.
The inspector of taxes sought to look into the transactions and served notices under the Taxes Management Act 1970 on Prudential giving them the opportunity to make available specified classes of documents. H
However, Prudential refused to disclose certain documents on the ground that it was entitled to claim legal advice privilege in respect of them, because they related to the seeking, by Prudential, and the giving, by PwC, of legal advice in connection with the transactions.
The inspector obtained authorisation from the Special Commissioners requiring Prudential to disclose the disputed documents, and Prudential sought judicial review of the notices. Its case was rejected by Charles J and the Court of Appeal.
Mathew Ditchburn, partner in Hogan Lovells’ real estate disputes team, said that the ruling might come as a surprise to clients of surveyors.
He said: “Surveyors these days advise on lots of highly technical subjects such as rent reviews, rights of light and dilapidations, often brought in on day one long before lawyers get involved.
“They may give a view of the law or the strengths and weaknesses of the client’s case, although no litigation is yet in prospect.
“If the client ends up in court later on then they may be horrified to learn that such confidential ‘quasi-legal’ advice is disclosable to their opponent, even if it harms their case.
“That might seem unfair but any hope that things would change has now gone. The Supreme Court has decided that it would just be too difficult to have it any other way. So if you want legal advice, the safest option is to get it through a lawyer.”
R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another Supreme Court (Lord Neuberger, Lord Hope, Lord Walker, Lord Mance, Lord Clarke,Lord Sumption, Lord Reed) 23 January 2013
Lord Pannick QC and Conrad McDonnell (Instructed by PricewaterhouseCoopers Legal LLP) for the Appellants
James Eadie QC and Patrick Goodall (Instructed by Solicitor to Her Majesty’s Revenue and Customs ) for the Respondents
Sir Sydney Kentridge QC, Tom Adam QC and Tim Johnston (Instructed by Herbert Smith Freehills LLP ) for the First Intervener (The Law Society of England and Wales)
Bankim Thanki QC, Ben Valentin, Henry King, and Rebecca Loveridge (Instructed by Field Fisher Waterhouse LLP ) for the Second Intervener (The General Council of the Bar of England and Wales)
Patricia Robertson QC (Instructed by Simmons & Simmons LLP ) for the Third Intervener (The Institute of Chartered Accountants in England and Wales)
Michael Edenborough QC and James Tumbridge (Instructed by Gowlings (UK) LLP ) for the Fourth Intervener (AIPPI UK Group)
Philip Havers QC (Instructed by Legal Services Board) for the Sixth Intervener (Legal Services Board)
