Vol 10 (2013) - Issue 3

Article preview

The Privilege of Legal Advice Privilege is to Stay with the Lawyers

In the landmark decision involving the great and the good of the legal world, the UK Supreme Court in the Prudential case1 has confirmed that legal advice privilege (LAP) only applies to qualified lawyers and does not extend to non-legal professionals providing legal advice.
The Supreme Court has reiterated the views of the High Court and Court of Appeal ruling that:
– Any extension to LAP would necessarily be a policy decision falling squarely within the remit of Parliament. Such a decision would require due assessment properly achieved through the legislative process; and
– Should the courts wade in and extend the limits of LAP without the benefit of such assessment, it could generate the undesirable consequence of undermining the principle of LAP by detracting from the much relied upon elements of certainty and clarity.
The specific issue in the Prudential case was whether, following receipt of a statutory notice from an inspector of taxes to produce documents in connection with its tax affairs, a company is entitled to refuse to comply on the ground that the documents are covered by LAP, in a case where the legal advice was given by accountants in relation to a tax avoidance scheme. The more general question raised by this issue is whether LAP extends, or should be extended, so as to apply to legal advice given by someone other than a member of the legal profession, and, if so, how far LAP thereby extends, or should be extended.

The facts
PricewaterhouseCoopers LLP (PwC) devised a marketed tax avoidance scheme in 2004. They adopted the scheme for the benefit of the Prudential group of companies, who implemented the scheme through a series of transactions. HMRC sought to investigate the transactions and served notices under the former section 20 of the Taxes Management Act 1970 (the ‘Notices’) for the disclosure of a series of documents relating to the scheme and transactions.
Prudential refused to disclose certain documents, on the ground that Prudential was entitled to claim LAP 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 advice sought was in relation to a non-contentious matter (setting up the tax structure) so there was no question of litigation privilege applying to the accountant’s advice.
Special Commissioners gave authorisation to HMRC to require Prudential to disclose the disputed documents.

October 2009 – High Court judgment
Prudential issued an application for judicial review challenging the validity of the Notices. The application was rejected on the ground that no privilege extended to advice provided by a professional person who was not a qualified lawyer.
Prudential submitted that:
– The Notices sought material covered by LAP; and
– The material sought was irrelevant to the determination of the proper tax treatment of the actual transactions carried out.
The challenge by Prudential was based on the proposition that LAP applied when a person obtains skilled legal advice about tax law from an accountant as opposed to a lawyer (para. 7).