Legal professional privilege not available for communications with accountants
15 October 2010
Notices under the Taxes Management Act 1970 (“Section 20 notices”) were served on the appellant company by the Revenue with a view to investigating a commercially marketed tax avoidance scheme. The appellant asserted that the notices required production of documents by which they sought or received legal advice on tax matters, in some cases from counsel and foreign lawyers, and in others from accountants.
A notice under s.20 did not require a person to disclose documents to which legal professional privilege applied. The appellant therefore claimed that they were not obliged to disclose documents relating to obtaining advice from their accountants. On most occasions, it was contended, on which a person seeks advice about fiscal liabilities, which often involves a consideration of, and advice about, the relevant law, that person does so by approaching accountants rather than lawyers. They submitted that the rationale which lies behind the legal professional privilege (LPP rule) requires that a client’s communications with his advisers should be just as much protected from disclosure if the advice, being legal advice, is sought from and given by an accountant as it is if sought from and given by a solicitor or barrister.
Charles J, who heard and dismissed Prudential’s application for judicial review, accepted much of what underlies Prudential’s argument. In his judgment below, he said this:
I … agree that by reference to the need for confidentiality in respect of the giving of legal advice and the logic, purpose and public interest underlying legal advice privilege there is real strength in the argument that the extent of the right to refuse disclosure should not relate to the nature of the legal qualification of the person giving the advice. (para 71)
Nevertheless he felt constrained by the present state of the law to decide against Prudential. In this appeal the Prudential submitted that the determining factor was not the status of the adviser but the nature of the advice, and thus the function of the adviser, so that it should not matter whether the adviser was a lawyer as such or was another appropriately qualified professional person approached for, or giving, legal advice.
The provisions under the TMA have since been repealed and replaced by Schedule 36 to the Finance Act 2008. In passing this equivalent law, Parliament had deliberately not created any statutory extension of legal professional privilege to legal advice sought from and given by accountants on tax matters. The justification for legal advice privilege was not limited to the conduct of litigation. The LPP rule recognises that
in the complex world in which we live there are a multitude of reasons why individuals, whether humble or powerful, or corporations, whether large or small, may need to seek the advice or assistance of lawyers in connection with their affairs; they recognise that the seeking and giving of this advice so that the clients may achieve an orderly arrangement of their affairs is strongly in the public interest (Lord Scott in Three Rivers District Council v Governor and Company of the Bank of England (No. 6))
The court also noted that an extension has been made by statute of LPP to patent agents, trade mark agents and licensed conveyancers. But this was of no assistance to the appellant:
not only has Parliament not created any statutory extension of LPP to legal advice sought from and given by accountants on tax matters, but this position has been reached after consideration of the position by several responsible bodies, making diverging recommendations on the point, including two committees, some of whose recommendations did lead to legislation.Parliament’s failure to change the law in this respect is not an accident.
Moreover, in s.20 TMA (and since then the Finance Act 2008, Schedule 36), general reference is made to documents which are the subject of LPP, and specific provision is made as regards what a tax accountant or a tax adviser could and could not be required to produce.
In any event the Court of Appeal was itself was bound by authority (Wilden Pump Engineering Co v Fusfeld (1985) FSR 159 CA (Civ Div))to hold that legal professional privilege applied, at common law, only as regards advice by members of the legal professions of England and Wales, and by extension foreign legal professions, and could not be extended to someone who was not a lawyer, even if the advice they were giving was legal advice which they were competent to give . Although function entered into the test, because the lawyer must be consulted in his professional capacity and must give or be asked to give advice as such, nevertheless status was also central to the test. Wilden Pump required the court to hold that legal professional privilege only applied, apart from statute and an exceptional case, to communications with a member of a relevant legal profession.
As for the argument under Article 8, while that provision guaranteed protection for correspondence with a lawyer, it could not be taken to require the extension of that privilege to communications with any other person who might be asked to give legal advice:
It does not seem to me to follow from the clear acceptance that the exercise of the right of privileged and confidential communication with a lawyer is protected by article 8, that the same article protects communications for obtaining legal advice from someone other than a member of the legal profession.
Given that the privilege represented a significant restriction on the powerful public interest in all relevant evidence being made available for the determination of legal proceedings, it was manifestly a matter of public policy what the bounds of the privilege should be. Article 8 conferred a qualified right. It seemed plain that a rule which limited legal professional privilege to communications with a member of a relevant legal profession complied with the requirements of that article. If the LPP rule were to be regarded as extending, without statutory help or definition, to the seeking and giving of advice from and by professionals other than lawyers, subject to some criterion as to the status and qualification of the adviser, then the scope of the rule would be lamentably uncertain, and that this in itself might fail to satisfy the human rights test of being “in accordance with law”. The rule as currently interpreted had the important benefit of certainty . It was for Parliament and not the courts to formulate an appropriate extension of the scope of the privilege to accountants.
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