Court Of Appeal Rejects Appeal For Extension Of Legal Privilege To Accountants

The Court of Appeal has given its judgment1 in the appeal by Prudential Plc ("Prudential") seeking judicial review in respect of the application of legal professional privilege ("LPP") to advice on legal matters relating to tax which had been obtained from their accountants.

Prudential's application arose in the context of notices served by HMRC under section 20 of the Taxes Management Act 1970 requiring the production of documents. In an earlier briefing note last October, we reviewed the High Court judgment which rejected Prudential's application. The Law Society and the Institute of Chartered Accountants in England and Wales ("ICAEW") intervened in the proceedings.

Before the Court of Appeal, Prudential argued that it was really the function of the adviser that mattered, rather than its status. Giving the leading judgment in the Court of Appeal, Lloyd LJ rejected that argument and found that status as well as function was necessary to LPP. He agreed with Charles J in the court below that the courts are bound by precedent which has established that the legal advice covered by LPP is restricted to advice received from lawyers and does not extend to advice on legal matters that is received from others. Lloyd LJ noted that without the requirement that the advice is given by a qualified lawyer, there would be considerable uncertainty as to the scope of the rule at common law given that there were numerous other types of adviser that may give professional advice on matters of law (such as pensions advisers).

Prudential also argued that the protection provided by the Human Rights Act 1998 against interference with the privacy of a person's communications with his lawyer extends to communications with others who give legal advice. Lloyd LJ dismissed that argument, finding that the relevant article of the European Convention on Human Rights (article 8) confers a qualified right which need not be extended to other communications, and that a rule limiting the scope of LPP was not only in accordance with law but can properly be regarded as necessary in a democratic society, taking into account the rights and freedoms of persons other than the individual in question.

Significantly, Lloyd LJ made clear that, if there is to be any extension to LPP so that it would apply to advice given by non-lawyers, then this is "not a proper task for the courts to undertake" and could only be undertaken by Parliament. Lloyd LJ found nothing in the legislation so far...