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No extension of privilege for accountants
18 October 2010
The Court of Appeal last week handed down a judgment
confirming that Legal Professional Privilege (LPP) should only
extend to situations where legal advice is provided by a solicitor
or barrister, or where specifically provided for by statute.
The Court of Appeal ruled that LPP should not be extended to
legal advice given by other professionals (in this case an
accountant) with the Court concluding that this position can only
be altered by Parliamentary legislation. The Institute of Chartered
Accountants for England and Wales, the General Council of the Bar
and the Law Society were all granted permission to intervene and
make submissions in this case.
In this case, R v Special Commissioner of Income Tax &
Ors (ex parte Prudential Plc & Ors) [2010] EWCA Civ 1094,
a notice under section 20 of the Taxes Management Act 1970 (TMA)
was authorised by the first respondent requiring the production of
various documentation related to Prudential’s tax affairs. The TMA
gives power to HMRC to require production of documents that relate
to an individual’s tax liability.
Prudential assert that the notices require production of
documents by which they sought or received legal advice on tax
matters. This advice was obtained from a mixture of Counsel,
foreign lawyers and, significantly (for the purpose of the case),
PricewaterhouseCoopers.
Prudential argued that they did not need to provide these
documents as they were covered by LPP. Prudential therefore brought
the judicial review proceedings to challenge the TMA notices.
The Court of Appeal held that LPP does not apply to any
professional other than a solicitor or a barrister, or an
appropriately qualified foreign lawyer, even if it is legal advice
that the other professional is qualified or competent to give, such
as an accountant giving advice on tax law.
LPP has therefore been read narrowly to apply only in
circumstances where a solicitor or barrister is giving legal advice
to a client.
Lord Justice Lloyd, giving the leading judgment in the Court of
Appeal, did refer to previous case law that acknowledged that there
was little logic that advice given by a solicitor or barrister
should be covered by LPP, but the same advice given by another
professional would not be afforded the same treatment.
However, a number of other factors were taken into account by
the Court when reaching its conclusion, including the
following.
Case law – The primary issue is the case of
Wilden Pump Engineering Co v Fusfeld [1985] FSR 159, which
the Court believed it was bound by. In that case the Court of
Appeal held that LPP only applies in relation to advice by
solicitors and barristers, as well as foreign lawyers. In his
judgment, Lloyd LJ states that even if Wilden Pump was not binding
on the Court then Prudential’s arguments still would not have been
accepted.
Public interest – The role of LPP for lawyers
is essential to upholding the rule of law. It is essential that
clients can discuss their affairs in full with their lawyer in the
knowledge that the details will never be disclosed. However, to
expand this to encompass other professions would leave far too wide
a scope for applying LPP. There is no recognised profession of
‘accountant’, just several professional bodies to which an
accountant can belong, so anyone can set up as an accountant and
offer advice.
The rule of LPP needs to be clear in its scope and application,
which would not be possible if it was held that LPP could be
applied to any professional providing legal advice on a particular
matter.
Role of Parliament – The extent of LPP was
considered to be a question for Parliament to deal with and
legislate on, not for the Court to make law on this issue. The
Court noted that legislation had previously been passed to extend
some limited privilege to patent agents, trade mark agents and
licensed conveyancers when providing advice on their specific area
of law, but no such legislation had been passed for
accountants.
Moreover, it was noted by the Court that the question of
extending LPP to accountants had previously been considered by a
number of committees over the past 40 years, with mixed
conclusions, and Parliament has still not legislated in favour of
extending it to accountants.
It is notable that this case was heard at the same time that the
Quinn Direct Insurance Ltd v The Law Society [2010] EWCA
Civ 805 (regarding LPP and its interplay with solicitors’
professional indemnity insurers) judgment was handed down. These
cases, combined with the recent European Court of Justice’s
decision in the Akzo Nobel Chemicals Ltd case (regarding LPP and
in-house lawyers in EU competition investigations), suggest that
the Courts are very reluctant to extend the scope of LPP, but if
the Courts find that LPP is engaged, it should be rigorously
adhered to.
Until Parliament or the Supreme Court decides otherwise,
accountants and their clients should remain circumspect as to what
legal advice is communicated between them without engaging a
lawyer.
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