CASE UPDATE: Prudential plc v Special Commissioner of Income Tax (1)

Legal professional privilege is an important right and one coveted by other professions as they give advice: but does it apply to non-lawyers when they give legal advice?

Background

Legal professional privilege (LPP) is the rule which provides that whatever a lawyer and client discuss regarding the giving of legal advice cannot be seen by any court or tribunal. It is an old rule, dating back several years and exists as a curious exception to the rule that a court should be entitled to see everything which might bear on getting to the truth. Throughout the centuries the rule has survived and the courts have recognised that it does more good than harm: it is now recognised as a human right, and its benefit is that absolutely anyone can receive skilled advice on their legal position and what their options are without the fear that what is said has to be divulged later.

Facts

This case (2) concerned the request for various documents made by the tax authorities of Prudential in November 2007 pursuant to various powers contained in the Taxes Management Act 1970. Prudential said that these documents concerned the seeking of legal advice about tax affairs from various professionals, including PricewaterhouseCoopers, a firm of accountants. Prudential claimed that, as PricewaterhouseCoopers had given advice on legal matters, LPP should extend to them, even though they were accountants and not lawyers.

The judgment

The Court of Appeal noted that it was already established that documents requested in this way did not have to be disclosed if LPP attached to those documents. The Court also had regard to the judgment of the House of Lords in Three Rivers v Bank of England (No 6) (3) where it was confirmed that LPP went beyond just litigation, and extended to the giving of legal advice even absent any current or contemplated or feared litigation.

Legal advice is also not confined to just expounding the law - it extends to advice about what should prudently and sensibly be done in the relevant legal context (4). However, there has to be a legal context - LPP does not cover absolutely that everything a client and a lawyer discuss. So, if a lawyer discusses business matters in general with a client, then LPP would not apply to those communications.

However, the Court of Appeal was clear that LPP attached only to properly qualified lawyers - not other professions. It did not matter if other professions moved into areas previously occupied by lawyers and gave advice on matters which a lawyer could have been consulted on.

The Court of Appeal noted that LPP had been extended in various ways e.g.

• It applied to employed lawyers and their employers so that in-house lawyers' communications with their internal clients are protected by LPP (5)
• It can apply to communications with foreign lawyers
• There have been some limited statutory extensions of the principle e.g. to patent agents, trade mark agents and licensed conveyancers

The Court of Appeal also had regard to the human rights aspects of LPP. It has been established that an individual's communications with a lawyer cannot be interfered with (6) but the Court of Appeal felt that to extend LPP to some vague and undefined category of professional advisers would render the law uncertain, and of itself might run counter to human rights law.

The further problem in this case would be how to define “accountants”: LPP is restricted to solicitors and barristers, but there are various bodies representing accountants, and the court was not prepared to formulate some definition for the future as to who would and who would not benefit from LPP.

Analysis

LPP has featured in the cases several times in the last few years - ample testimony to the usefulness of the rule and to the desire of third parties to overturn it and obtain documents and information (witness the tax authorities in this case).

This decision creates no law but simply confirms what everyone thought to be the position. It has a couple of important points which need to be assimilated:

• If law firms or in-house legal departments have non-lawyers working for them, LPP could be lost if advice is not provided by qualified lawyers (solicitors or barristers)
• This goes further as business people may frequently give written advice about the meaning of a contract or the state of a troubled project - this would always be subject to disclosure in litigation, and so there is an opportunity for lawyers to be more involved in analysing and advising on problematic projects so that LPP is gained for the advice given

Finally, it should be noted that the trial judge (Charles J) suggested that it might be time to review the scope of LPP and restrict it to matters connected with litigation. The Court of Appeal rejected this view and so, at least for the foreseeable future, it seems that LPP survives with its broad scope but restricted to qualified lawyers.

Notes

(1) Copyright Richard Stephens 2010. The law is stated as at 18 October 2010.

This note is intended to provide general information about legal developments in England & Wales and you should not apply any of the advice or information contained in it to specific situations without seeking professional advice first.

(2) [2010] EWCA Civ 1094

(3) [2004] UKHL 48

(4) Balabel v Air India [1988] Ch 317

(5) Alfred Compton Amusement Machines v Commissioners of Custom & Excise (No 2) [1972] 2 QB 102: the odd position is now that the European Court of Justice has recently ruled that they will not recognise LPP as applying to communications with in-house counsel (see Akzo Nobel Chemicals v Commission Case C-550/07 P, 14 September 2010)

(6) Campbell v UK (1992) 15 EHRR 137; Foxley v UK (2001) 31 EHRR 25