Summary
Today in R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and others the Court of Appeal has upheld the judgment of Charles J in the High Court, confirming that legal advice privilege does not extend to cover advice about law (e.g. tax law) given by accountants. To access the Law Now on the High Court judgment, please click here.
Facts
The Appellants (Prudential) were served with notices under section 20 of the Taxes Management Act 1970 in exercise of HMRC's investigatory powers. The notices required Prudential to disclose documents in relation to their tax liability. Prudential argued they were not obliged to disclose the documents as they related to advice about tax law, albeit from accountants, and were covered by legal professional privilege (LPP).
Decision
The appeal by Prudential was dismissed. The Court was bound by the decision in Wilden Pump Engineering Co v Fusfeld [1985] FSR 159 to hold that LPP does not apply, at common law, to any professional other than a qualified lawyer.
Even if the Court was not so bound, the same decision would have been reached for the following reasons:
(i) If LPP were extended to apply to members of other professions who give advice on law, the scope and application of this rule would be uncertain and therefore may be in breach of human rights law; and
(ii) If the law is to be extended, it must be done by Parliament. Parliament did provide limited protection to accountants under the Taxes Management Act 1970 and would have extended this protection further if that had been their intention.
Commentary
The Court of Appeal judgment only disagreed with Charles J's
High Court judgment on two points:
(i) that there is an argument the application of LPP to lawyers
should be restricted; and
(ii) that the court might be able to prescribe conditions under
which accountants would be covered by LPP.
Prudential's argument that only allowing LPP to apply to
members of the legal profession breaches articles and 8 and 14 of
the European Convention on Human Rights was rejected by the Court
of Appeal. Instead, they held that extending the rule would make
the application and scope of LPP so uncertain that there would be a
breach of the human rights test that the rule should be "in
accordance with the law".
The case generated a lot of interest within the legal and accountancy communities. The Institute of Chartered Accountants in England and Wales, the General Council of the Bar and the Law Society all intervened. However, the Court of Appeal's decision is no surprise; and was likely seen as a necessary step for Prudential to try to take the case to the Supreme Court. Until then, advice in relation to tax and other matters sought from and given by accountants will not benefit from legal advice privilege. As such, clients may have to disclose documents in this regard.For a full copy of the judgment click here.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 13/10/2010.
