Legal Professional Privilege - Update
Legal Professional Privilege: The Man from the Pru rebuffed by the Supreme Court
In a previous article " Legal Professional Privilege: Prudential Progress to the Supreme Court" we briefly discussed the principle of Legal Professional Privilege ("LPP") and Prudential PLC's challenge to the notion that Legal Advice Privilege, being a part of LPP, only covers advice provided by members of the legal profession. The Supreme Court, in its long awaited judgment, has confirmed that Legal Advice Privilege only applies to advice provided by lawyers and barristers.
Legal Professional Privilege
Privilege entitles a party to withhold evidence from a third party. Legal professional privilege is sub-divided into
- Legal Advice Privilege, which covers all communications between a lawyer and his client for the primary purpose of obtaining or providing legal advice;
- Litigation Privilege, which covers all communications between a lawyer and his client and also a lawyer or his client and a third party, the primary purpose of which is connected to actual or pending litigation.
The history to the Prudential case
The Prudential case concerned the breadth of Legal Advice Privilege, that is, the question of whether advice provided by a member of a profession other than the legal profession was protected by Legal Advice Privilege and thereby entitled the recipient of that advice to refuse to disclose documents containing that advice.
Prudential PLC and Prudential (Gibraltar) Limited ("Prudential"), entered into a marketed tax avoidance scheme. Notice was subsequently served upon Prudential by HMRC under section 20 the Taxes Management Act 1970 requiring the disclosure of documents relating to the Scheme.
Some of the documents that HMRC requested Prudential disclose included tax advice provided to Prudential by PricewaterhouseCoopers ("PWC"), a firm of accountants. The House of Lords in the 2002 case of R (Morgan Grenfell & Co) v Special Commissioner of Income Tax had previously held that a notice served under section 20 does not require a person to disclose documents to which LPP applies.
Prudential sought to rely upon this case, asserting that LPP attached to the advice provided by PWC, and as such, the documents were privileged from production. HMRC argued that advice received from accountants was not protected by LPP. The Special Commissioner upheld the view of HMRC and rejected Prudential's assertions as to the applicability of LPP. Prudential brought a judicial review application to challenge the validity of the Notices issued by HMRC .
At first instance, Charles J held that advice provided by professionals who were not members of the legal profession was not protected by Legal Advice Privilege and found in favour of HMRC. Prudential appealed to the Court of Appeal.
The Court of Appeal rejected Prudential's appeal and upheld the decision of Charles J. Whilst the Court of Appeal held that that it was bound by previous case law to find against Prudential, it also found against Prudential on a number of other grounds, one of which was that the extension of Legal Advice Privilege by the Courts would not provide enough definition and detail to produce a sufficiently clear rule as to what advice would be covered Legal Advice Privilege. The Court of Appeal stated that Parliament was better placed to extend Legal Advice Privilege; the Court noted that Parliament in the past had considered whether to extend Legal Advice Privilege to cover accountants but had decided not to. Giving the lead judgment, Lord Justice Lloyd stated that:
"It is of the essence of the rule that it should be clear and certain in its application, since it is not the subject of any ad hoc balancing exercise but is, to all intents and purposes, absolute. As applied to members of the legal professions, acting as such, it is sufficiently clear and certain. If it were to apply to members of other professions who give advice on points of law in the course of their professional activity, serious questions would arise as to its scope and application…In my judgment, only Parliament can provide the answers to such questions as these."
The Court of Appeal refused to give Prudential permission to appeal to the Supreme Court. Prudential therefore applied directly to the Supreme Court for leave to appeal. Following that application being successful, Prudential's appeal was heard over 3 days between 5 - 7 November 2012 by 7 Justices of the Supreme Court. The much awaited judgment was handed down on 23 January 2013.
The Supreme Court's Decision
The issue before the Supreme Court was whether Legal Advice Privilege only applied to advice provided by members of the legal profession or whether Legal Advice Privilege could be attached to advice provided by other professions. The Supreme Court decided, by a 5:2 majority, that Legal Advice Privilege should not be extended to advice given by professional people other than lawyers, even where that advice is legal advice which that professional person is qualified to give.
It was acknowledged by the Supreme Court that it certain situations it is often hard to distinguish between advice given by lawyers and advice given by non-lawyers, with the functions performed often being essentially the same. However, as Lord Hope highlighted, it is generally understood that Legal Advice Privilege applies only to advice provided by lawyers. Extending Legal Advice Privilege so that its application was determined not by the profession of the person providing the advice but by the nature of the advice would give rise to uncertainty.
Lord Neuberger, President of the Supreme Court, giving the lead judgment for the majority, dismissed Prudential's appeal for 3 connected reasons:-
"Firstly, the consequences of [extending Legal Advice Privilege]…would be likely to lead to what is currently a clear and well understood principle becoming an unclear principle, involving uncertainty. Secondly, the question whether Legal Advice Privilege should be extended to cases where legal advice is given from professional people who are not qualified lawyers raises questions of policy which should be left to Parliament. Thirdly, Parliament has enacted legislation relating to Legal Advice Privilege, which, at the very least, suggests that it would be inappropriate for the Court to extend the law on Legal Advice Privilege as proposed by Prudential"
In short, the Supreme Court affirmed the view expressed by the Court of Appeal that the extension of Legal Advice Privilege was a matter for Parliament and not the Judiciary.
Lord Clarke, who along with Lord Sumption dissented with the decision of the majority, expressed the hope that the issue of LPP will be considered by Parliament as soon as practically possible. For now, however, Legal Advice Privilege only applies to advice given by members of the legal profession.
Posted on: 28/01/2013
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.
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