The Court of Appeal has given its judgment1 in the appeal by Prudential Plc ("Prudential") seeking judicial review in respect of the application of legal professional privilege ("LPP") to advice on legal matters relating to tax which had been obtained from their accountants.
Prudential's application arose in the context of notices served by HMRC under section 20 of the Taxes Management Act 1970 requiring the production of documents. In an earlier briefing note last October, we reviewed the High Court judgment which rejected Prudential's application. The Law Society and the Institute of Chartered Accountants in England and Wales ("ICAEW") intervened in the proceedings.
Before the Court of Appeal, Prudential argued that it was really the function of the adviser that mattered, rather than its status. Giving the leading judgment in the Court of Appeal, Lloyd LJ rejected that argument and found that status as well as function was necessary to LPP. He agreed with Charles J in the court below that the courts are bound by precedent which has established that the legal advice covered by LPP is restricted to advice received from lawyers and does not extend to advice on legal matters that is received from others. Lloyd LJ noted that without the requirement that the advice is given by a qualified lawyer, there would be considerable uncertainty as to the scope of the rule at common law given that there were numerous other types of adviser that may give professional advice on matters of law (such as pensions advisers).
Prudential also argued that the protection provided by the Human Rights Act 1998 against interference with the privacy of a person's communications with his lawyer extends to communications with others who give legal advice. Lloyd LJ dismissed that argument, finding that the relevant article of the European Convention on Human Rights (article 8) confers a qualified right which need not be extended to other communications, and that a rule limiting the scope of LPP was not only in accordance with law but can properly be regarded as necessary in a democratic society, taking into account the rights and freedoms of persons other than the individual in question.
Significantly, Lloyd LJ made clear that, if there is to be any extension to LPP so that it would apply to advice given by non-lawyers, then this is "not a proper task for the courts to undertake" and could only be undertaken by Parliament. Lloyd LJ found nothing in the legislation so far enacted that would permit the courts to extend the privilege as Prudential wished.
In the High Court, Charles J had expressed sympathy with the idea that a "level playing field on the disclosure of legal advice to clients of lawyers and accountants .... should be created"2. Lloyd LJ stated that he did not share this view, reiterating that the issue was not a matter for the courts. Accordingly, the Court of Appeal left LPP intact and did not take up the possibility suggested by Charles J of a reduction in the scope of LPP in order to achieve parity between legal advice given by lawyers and accountants.
Our view
Lloyd LJ's ruling will disappoint non-lawyer advisers who may have hoped that the Court of Appeal would prepare the ground for the Supreme Court to provide the level playing field referred to by Charles J.
The implication of Lloyd LJ's ruling is that the accountancy sector will need to focus its attention on obtaining an extension to LPP by petitioning Parliament for legislative reform. The ICAEW has already indicated that it intends to pursue its cause at Parliament. It seems likely that this will necessarily be a long-term project. In the current economic climate, it will not be easy to persuade politicians to legislate for an extension of LPP which will protect a wider range of communications from production to HMRC and other government bodies.
There must therefore be a prospect that Prudential will appeal to the Supreme Court, in the hope of finding a more receptive hearing of issues which raise matters of public policy.
Footnotes
1 Prudential Plc v Special Commissioners of Income Tax and another [2010] EWCA Civ 1094
2 Paragraph 73 [2009] EWHC 2494
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