Investigations & Legal Professional Privilege
The House of Lords has reversed the controversial Court of Appeal
decision in R (on the application of Morgan Grenfell & Co Ltd) v
Special Commissioner [2002] UKHL 21 in relation to legal professional
privilege, ìa fundamental human rightî, and affirmed its importance as a
corollary to the right to legal advice.
Morgan Grenfell operated a tax-related scheme in which it obtained a
long leasehold interest in a property owned by a client and leased it back
to the client under a sub-lease with a substantial tax saving. However,
the Inland Revenue believed that the purchase fell outside the scope of
its trading activities and as such was a capital asset. Morgan Grenfell
refused to hand over to the inspector documents relating to advice
obtained from counsel and solicitors, arguing that they were subject to
legal privilege, and the inspector successfully applied for permission to
issue a notice under s.20(1) of Taxes Management Act 1970 requiring
disclosure of the documents.
Section 20(1) states that ìan inspector may by notice in writing
require a person (a) to deliver to him such documents as are in the
person's possession or power and as (in the inspector's reasonable
opinion) contain, or may contain, information relevant toÖ (i) any tax
liability to which the person is or may be subject, or (ii) the amount of
any such liability.î In addition, s.20(3) makes provision for a power to
require the production of documents from a third party. However s.20B(8)
provides that the Inland Revenue cannot obtain privileged material which
is in the hands of a lawyer without his or her clients consent.
Morgan Grenfell then issued judicial review proceedings to quash the
notice on the grounds of ultra vires. Both the Divisional Court and the
Court of Appeal rejected the argument that the 1970 Act did not entitle
the inspector to require the delivery of documents subject to legal
professional privilege and held that the general terms of section 20
ìcould not be qualified to exclude documents subject to
legal
professional privilegeî.
The Court of Appeal
The Court of Appeal agreed with the Revenue's argument that if
Parliament intended to preserve legal professional privilege in general,
why did it specifically provide for its preservation in respect of
documents in the possession or power of a lawyer? It found that there was
an ìinescapable implicationî that legal professional privilege was
excluded except where it was expressly preserved, and that this one
...
To continue reading
Request your trial