Legal Advice Privilege: Prudential case

February 27, 2014

Supreme Court confirms that client’s right to claim Legal Advice Privilege only applies to advice given by professionally qualified lawyers

In its recent judgment in R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another [2013] UKSC 1, a Supreme Court consisting of seven judges upheld by a majority of 5:2 the previously accepted proposition that Legal Advice Privilege (“LAP”) only applies to legal advice given by professionally qualified lawyers. In the absence of further statutory extensions (such as to patent attorneys, trade mark agents and licensed conveyancers under the Copyright, Designs and Patents Act 1988, section 87 of the Trade Mark Act 1994 and section 33 of the Administration of Justice Act 1985) legal advice given by non-lawyers does not confer the benefit of the privilege on its clients. The extension of this privilege to accountants had been proposed by the Office of Fair Trading in 2001 but had been rejected administratively in 2003.

The case advanced by Prudential to the Supreme Court required the Judges to examine in the context of the modern world the common law principle that LAP is attracted only where the advice is that of a solicitor or barrister. The Court was asked by Prudential to find that the true legal principle was that the privilege attached when legal advice was given by a member of a profession which ordinarily gives legal advice. It was submitted that there was no justification for limiting the protection merely to advice given by lawyers. In the case before the Supreme Court, the question concerned the disclosability of tax advice given by a leading firm of accountants.

The Supreme Court concluded that the conventional wisdom, as declared in previous cases, correctly expresses the scope of the privilege: the justification for LAP is one of candour. It enables clients to provide their lawyers with all the facts and matters that the lawyers (and their clerks and legal executives) need to give accurate advice. One of the justifications for imposing trust in lawyers is their special relationship with the Courts. The right to confidential legal advice is also a human right.

Although interesting arguments to the contrary are set out by Lords Sumption and Clarke, the majority found the objections to Prudential’s proposed reformulation predominant. The reasons included: (1) that it would be difficult to identify “a professional” for the purpose of the reformulation. It would be troublesome to say that it should not, for example, include a town planner, pension advisor, actuary or architect who gave legal advice. Determining on a case by case basis whether the advisor in question fell within the reformulation or not would give rise to uncertainty, wasted expenditure and inconsistency; (2) it would be difficult to decide whether legal advice is ordinarily given within a wide range of professions and the basis on which that decision could be made would itself be uncertain; (3) Parliament has both legislated and declined to legislate to extend the scope of LAP (see the legislation referred to above), which, along with the view of the courts, textbook writers and the writers of relevant official reports, suggests that Parliament did not need to use express words to limit LAP if it was not to apply to accountants – rather express words are needed to extend the privilege; (4) the extension of LAP to  in- house lawyers (see Alfred Crompton Amusement Machines Ltd v Customs & Excise (No 2) [1972] 2 QB 102) and foreign lawyers (see Lawrence v Campbell (1859) 4 Drew 485 and subsequent cases)  was based on fairness, comity and convenience and was not a basis for extending LAP further.

The right to receive and retain privileged legal advice is an important protection for businesses. Such advice should be kept in a manner which will not cause it to fall inadvertently into the hands of investigating officers exercising powers such as those under regulation 21(1) of the Consumer Protection from Unfair Trading Regulations 2008. These provide, among other matters that:

“(b) if [an enforcement officer] has reasonable cause to suspect that a breach of these Regulations has been committed, he may, for the purpose of ascertaining whether it has been committed, require any trader to produce any documents relating to his business and may take copies of, or of any entry in, any such document;

……

(d) he may seize and detain goods or documents which he has reason to believe may be required as evidence in proceedings for a breach of these Regulations.”

The right of a business to refuse disclosure of LAP is expressly retained by regulation 21(9) and a warrant under regulation 22 could not be issued to an enforcement officer for the purpose of obtaining access to this type of material. In contrast, legal advice from testing houses, primary authorities and scientific advisers is disclosable on a request by enforcement officers.

Sometimes, of course, businesses wish to disclose their legal advice: this may be a basis for reliance on a due diligence defence. See, for example, Popely v Scott (2001) 165 J.P. 742.  For further consideration of the disclosability of books and documents see Walkers Snack Foods Ltd v Coventry City Council [1998] 3 All E.R. 163.