In the recent decision of The Financial Reporting Council Limited v Frasers Group Plc1, the English High Court held that documents detailing advice received from accountants in respect of a company's tax structure were not protected from disclosure by litigation privilege because they were not prepared for the sole or dominant purpose of litigation, notwithstanding that litigation over the company's tax affairs was reasonably anticipated at the time of the documents came into existence.
The judgment serves as a helpful reaffirmation of the requirements (and limitations) of litigation privilege under English law in circumstances where legal advice privilege is unavailable because the (purportedly privileged) communications are made with, and advice sought from, third parties such as accountants, who fall outside the lawyer-client relationship. Under English law, legal advice privilege is only available to protect advice given by members of the legal profession, and not advice received from other professionals such as accountants.2
Following receipt of an emailed enquiry from the French tax authorities asking whether the relevant entity within the company's corporate group paid English or French VAT, the company sought expert accountancy advice in respect of its tax arrangements. The three documents at issue, all PowerPoint slide presentations, recorded advice provided by the accountants in respect of the design and implementation of an enhanced or new corporate tax structure for the company. The company submitted in evidence that the changes to its tax structure were made for "the exclusive purpose of responding to the real and present threat of litigation that was anticipated from the French tax authority and other tax authorities."3
The three documents were found not to be protected from disclosure by litigation privilege. In his judgment, Lord Justice Nugee referred to Lord Carswell's summary (in Three Rivers (No 6)) of the conditions that must be satisfied under English law for a claim to litigation privilege to be successful (emphasis added): "(a) litigation must be in progress or in contemplation; (b) the communications must have been made for the sole or dominant purpose of conducting that litigation; (c) the litigation must be adversarial, not investigative or inquisitorial"4 and the Court of Appeal's ruling in WH Holding Ltd v E20 Stadium LLP, which held that the dominant purpose of conducting litigation is properly considered to be (emphasis added) "obtaining information or advice in connection with the conduct of the litigation ."5
Applying these settled legal principles, Nugee J rejected the company's claims to litigation privilege, finding that "A taxpayer who takes advice as to how to structure his affairs does not do so for litigation purposes. He does so because he wants to achieve a particular result for tax purposes"6 and that "They [the taxpayer] are not putting it [the tax structure] in place to assist them with the litigation, they are putting the structure in place because they want the structure."7
None of the three documents recording advice received from the company's accountants were therefore held to have been created for the sole or dominant purpose of 'obtaining information or advice in connection with the conduct of litigation' and consequently did not attract litigation privilege. Nugee J's finding that the documents failed the dominant purpose limb of the test for litigation privilege meant that it was unnecessary for him to decide if litigation was in reasonable contemplation at the time of their creation.
Whilst a straightforward application of well-established principles of English litigation privilege, the judgment nonetheless provides a timely refresher of the limitations of seeking to protect from disclosure advice sought from non-lawyers, even in circumstances where litigation is reasonably contemplated by the party seeking the advice.
1  EWHC 2607 (Ch).
2 R (Prudential PLC) v Special Commissioner of Income Tax  UKSC 1.
3 The Financial Reporting Council Limited v Frasers Group Plc, at para. 21.
4 Three Rivers DC v Bank of England (No 6)  UKHL 48, at para. 104.
5 WH Holding Ltd v E20 Stadium LLP  EWCA Civ 2652, at para. 27.
6 The Financial Reporting Council Limited v Frasers Group Plc, at para. 36.
7 Ibid., at para. 37.
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