The UK common law principle of legal advice privilege (LAP) is designed to enable a client to access legal advice openly from their lawyer.
LAP protects against compulsory disclosure of all types of communications made between a client and their lawyer in which advice is sought or given within a “relevant legal context”.
Additionally, LAP can also be invoked to prevent disclosure of relevant documents to various government bodies, including HMRC. This is an extraordinary power and the courts have to date been guarded in respect of any attempts to extend the application of the principle.
If a lawyer and an accountant were to provide precisely the same substantive legal advice to a client regarding, say, the setting up of a tax structure, why should the identity or status of the adviser, rather than the character of the substantive advice, determine whether that advice should be protected from disclosure?
This very question was raised before the Supreme Court in Prudential plc and another vs Special Commissioner of Income Tax and another, in which the court was asked to consider extending the application of LAP to accountants. Prudential had sought advice from PwC as to the tax and legal implications of setting up a tax management scheme, and had been served a notice by HMRC requiring them to disclose all documents relevant to the scheme.
The appellant claimed LAP in relation to these documents on the basis that they contained tax law advice from a professional adviser.
Prudential’s arguments had already been rejected by the High Court and the Court of Appeal. Both lower courts held that the power to withhold relevant documents must be treated with care and that opening up the right to non-lawyers could make the boundaries blurred and uncertain.
The Supreme Court held (by a majority of five to two) that it would not extend the scope of LAP to legal advice given by anyone other than a member of the legal profession. The status quo has been maintained.
While the Prudential case has not established the availability of LAP for legal advice given by non-lawyers, opinions as to the logical grounds for the opposition are changing. Indeed, in the leading judgment in the case, Lord Neuberger, the UK’s most senior judge, accepted that there was “a strong case in terms of logic for allowing the appeal”, stating that it was hard to see why, “as a matter of pure logic, privilege should be restricted to communications with legal advisers as opposed to with other professional people with a qualification or experience which enables them to give expert legal advice in a particular field”. The judges hoped that any extension to the ambit of privilege could be addressed by Parliament in due course.
Given the ever increasing complexity of asset and fund management strategy and structuring, and the growing association between expert asset strategy, financial management, accountancy and tax planning for clients, the boundaries between legal and non-legal advice, and who is best placed to provide it, are becoming ever more blurred.
While the Prudential battle was lost, it remains to be seen whether the war to extend LAP more widely is yet to be won.
David Lytton is a senior associate at Dundas & Wilson
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