Disclosure and inspection of documents - Legal professional privilege

R (on the application of Prudential plc and another) v Special Commissioner of income tax and another: Court of Appeal, Civil Division (Lords Justice Mummery, Lloyd and Burnton): 13 October 2010

The claimant companies had communicated with accountants seeking advice on fiscal liability. That advice had included consideration of legal matters. Notices under section 20 of the Taxes Management Act 1970 were served on the claimants, which required it to produce documents. It was established law that a notice under section 20 did not require a party to disclose documents to which legal professional privilege (LPP) applied. The claimants issued proceedings, seeking to limit the scope of the section 20 notices on the ground that some of the documents were those in which it had sought legal advice on tax matters.

Some of the advice had been from lawyers, and other advice had been from accountants. The judge dismissed the claim, on the ground that communications between a lay client and an accountant could not be covered by LPP, regardless of the content of the communications. The claimants appealed.

The claimants argued that: (i) the Court of Appeal was not bound by authority to find that LPP could not cover legal advice given by an accountant, the test established by authorities on LPP being one of the substance of the communication, rather than the status of the advisor; (ii) the application of LPP to those communications made sense as when a person sought advice about fiscal liabilities, which often involved consideration of and advice about the relevant law, that person frequently did so by approaching accountants rather than lawyers; and (iii) the rule could be made manageable by restricting its application to accountants belonging to accredited professional organisations. Consideration was given to Wilden Pump and Engineering Co v Fusfield [1985] FSR 159

The court ruled: Where legal advice was sought in confidence from a qualified legal adviser in his professional capacity, privilege could be claimed for the communications made for that purpose. A qualified legal adviser was one who was officially recognised by the competent authorities in this country as being a member of a profession of persons fit to advise on the branch of law in respect of which the advice was being sought. In England and Wales, that included barristers and solicitors at common law, and certain other professions as enacted by statute (see [46]-[47], [56] and [82] of the judgment).

In the instant case, the court was bound by, which confirmed the rule that LPP did not apply, at common law, in relation to any professional other than a qualified lawyer. Had the court not been bound the rule would not have been extended in application beyond lawyers without express statutory provisions. The rule had to be clear and certain in its application, since it was not subject to any ad hoc balancing exercise, but was an absolute rule.

As applied to members of the legal professions, acting as such, it was clear and certain. If it were to apply to members of other profession who gave advice on points of law, serious question would arise as to its scope and application. Those were the sort of questions which only parliament could answer (see [82]-[83] of the judgment).

Wilden Pump and Engineering Co v Fusfield [1985] FSR 159 applied; Wilson v Rastall [1775-1802] All ER Rep 597 considered; Smith v Daniell LR 18 Eq 649 considered; Calley v Richards 19 Beav 401 considered; Balabel v Air India [1988] 2 All ER 246 considered; R v Derby Magistrates' Court, ex p B [1995] 4 All ER 526 considered; R (on the application of Morgan Grenfell & Co Ltd) v Special Comr of Income Tax [2002] 3 All ER 1 considered; Three Rivers District Council v Governor and Company of the Bank of England [2005] 4 All ER 948 considered; Crompton (Alfred) Amusement Machines Ltd v Customs and Excise Comrs (No 2) [1972] 2 All ER 353 considered. Charles J [2009] All ER (D) 142 (Oct); affirmed.

Lord Pannick QC and Conrad McDonnell (instructed by PricewaterhouseCoopers Legal LLP) for the claimants; The first defendant was not represented; Timothy Brennan QC, Diya Sen Gupta and Laura McNair-Wilson (instructed by the Solicitor to HMRC) for the second defendant; Charles Flint QC (instructed by Simmons and Simmons) for the first intervener; Bankim Thanki QC and Ben Valentin (instructed by the Bar Council) for the second intervener; Sir Sydney Kentridge QC and Tom Adam QC (instructed by Herbert Smith LLP) for the third intervener.