Supreme Court decision on legal advice privilege

Supreme Court decision on legal advice privilege


Author: Elisabeth Peene

The Supreme Court today handed down its decision in the case of R (on the application of Prudential plc and another) (Appellants) v Special Commissioner of Income Tax and another (Respondents) [2013] UKSC 1.

The appeal concerned the scope of legal advice privilege.

Legal advice privilege applies to all communications passing between a client and its lawyers, acting in their professional capacity, in connection with the provision of legal advice.

The appeal dealt with the issue of whether having received a statutory notice from an Inspector of Taxes to produce documents, a company is entitled to refuse to produce them on the basis that the documents are covered by legal advice privilege.

However, the decision deals with the more general question of whether legal advice privilege extends, or should extend, to others outside the legal profession and if so, how far it should extend.

In this case, PricewaterhouseCoopers (PwC) devised a marketed tax avoidance scheme and adapted it for the benefit of the Prudential group of companies. The scheme was implemented through a series of transactions which the Inspector of Taxes subsequently decided to look into.

Accordingly, notices under the Taxes Management Act 1970 were served on Prudential asking for specified classes of documents. Prudential refused to disclose some of the documents claiming that they were entitled to claim legal advice privilege as the documents in question related to the seeking by Prudential and giving of legal advice by PwC in connection with the transactions.

The Inspector obtained authorisation from the Special Commissioners to require disclosure of those documents, and Prudential made an application for judicial review challenging the validity of the notices.

Prudential's application was refused on the grounds that no such privilege extended to legal advice given by a professional person who was not a qualified lawyer, even if though had such advice been sought from and obtained from a qualified lawyer and was identical in nature, it would have attracted legal advice privilege.

The Court of Appeal subsequently upheld the decision.

Prudential appealed to the Supreme Court.

By a majority of five to two, Prudential's appeal was dismissed. Lord Neuberger gave the lead judgment for the majority, who held that legal advice privilege could not be extended to professional people other than lawyers, even where that advice was legal advice which the professional person was qualified to give.

Concerns were raised that any extension to professional persons other than lawyers would create uncertainty and inconsistency if the court had to decide whether a group constituted a profession for the purposes of legal advice privilege. There was also the issue of how to deal with documents containing legal advice and non-legal advice.

The majority were of the view that any extension of legal advice privilege should therefore be left to Parliament, to be considered through the usual legislative process. As such it would be inappropriate for the Supreme Court to extend the law.

Accordingly, legal advice privilege will only apply to communications in connection with advice given by qualified lawyers.