Legal Advice Privilege Does Not Extend to Non-Lawyers: R (On the Application of Prudential Plc and Another) v Special Commissioner of Income Tax and Another

The Supreme Court has held that legal advice privilege does not extend to advice given by accountants, tax advisors or other professionals.

Legal advice privilege (LAP) protects against compulsory disclosure of confidential legal advice given by a lawyer to a client.

In this case, Prudential argued that tax advice given by accountants in relation to a tax avoidance scheme should not be disclosed to HMRC, as accountants provide essentially the same services as qualified lawyers. Prudential considered that the function of the advisor (ie giving legal advice) is more relevant to determining whether LAP applies than whether the advisor is legally qualified or not.

The Supreme Court noted that the current scope of LAP does not protect the common practice of clients seeking legal advice (such as tax advice) from professionals other than qualified lawyers. However, it refused to extend LAP because: (1) extending LAP to communications with professionals other than qualified lawyers would lead to uncertainty as the court would need to consider issues such as what constitutes a profession and in which areas of law the profession was competent and regulated to advise; (2) the question of whether LAP should be extended raised policy issues that should be addressed by Parliament and not the courts; (3) Parliament had previously considered the issue and declined to enact a limited tax advisor privilege statute.

Interestingly, evidence submitted to the court showed that 90% of all tax advice in the UK was provided by professionals other than lawyers, such as chartered accountants.

Had the matter been contentious, the documents may have been protected by litigation privilege, which protects advice given by a lawyer or a non-lawyer third party for the dominant purpose of litigation.

Although the appeal was dismissed, the Supreme Court recognised that there were persuasive arguments for LAP to be extended, and Lord Clarke commented in his dissenting judgment that he hoped the issue would be reviewed by Parliament.

Companies should also bear in mind the Three Rivers District Council & Ors v Bank of England case, which confirmed that not all employees of a company are considered part of the “client” for the purpose of LAP – only those who deal with external lawyers on a day to day basis are considered to be part of the client.

Practical tips

  1. Consider carefully where you seek advice from. If the advice relates to a highly confidential matter, check whether the advisor is legally qualified.
  2. Consider who will need to communicate frequently with lawyers – only those who deal with external lawyers on a frequent basis should liaise with lawyers.
  3. Make sure that privileged documents and communications are only circulated to recipients who need to see them and do not forward them to anyone else either inside or outside your company.
  4. If the matter involves a cross-border element, check whether the communication is protected by legal advice privilege in that jurisdiction before it is sent.

Bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.