Earlier this week, Lords Neuberger, Mance, Clarke, Sumption and Reed heard Prudential’s appeal against the Court of Appeal’s unanimous decision in 2010 to uphold the first instance decision that, at common law, legal professional privilege (LPP) does not extend to non-lawyers.

That there are several interveners, being the Law Society, the Bar Council, the ICAEW, the Legal Services Board and the International Association for the Protection of Intellectual Property UK, underlines the significance of this appeal, which, if allowed, could protect from disclosure tax law advice given by accountants and therefore further blur the line between tax lawyers and accountants.  From a broader perspective, if the appeal is allowed it may question the very nature and basis of legal professional privilege and, specifically, legal advice privilege.


The appellants, being Prudential plc and Prudential (Gibraltar) Limited (referred to collectively as “Prudential”), entered into a marketed tax avoidance scheme that was notified to HMRC.  Prudential received two notices under the Taxes Management Act 1970, s 20(1), (3) requiring them to disclose documents in connection with this scheme to HMRC.  It was previously established by the House of Lords in R (Morgan Grenfell & Co) v Special Commissioner of Income Tax [2002] UKHL 21 that a notice under section 20 does not require a person to disclose documents to which LPP applies. Prudential sought to argue that they were not obliged to disclose any documents relating to legal advice they obtained on tax matters, irrespective of whether such advice was obtained from lawyers or accountants, on the basis that all such documents were protected by LPP.  HMRC argued that advice from accountants was not covered by LPP, a decision that was upheld by the First Respondent.  Prudential brought a judicial review application to challenge that decision.  The First Respondent has not taken part in proceedings, which have been defended by Philip Pandolfo (HM Inspector of Taxes).

First Instance

At first instance before Charles J in the Administrative Court, Prudential challenged the decision on the basis that the documents were protected by LPP or further or alternatively, that they were irrelevant.

Charles J considered that the case law established legal advice and litigation privilege to be two sub-sets of LPP and, although he accepted obiter that the latter applies to accountants, held that the established case law does not provide authority that clients of accountants and other professions other than lawyers (for example, patent attorneys) have a right to claim LPP on the basis of legal advice privilege.

Court of Appeal

The central contention of the Appellants before the Court of Appeal was that the rationale which lies behind the LPP rule requires that a client’s communications with his advisers should be just as much protected from disclosure if the advice, being legal advice, is sought from and given by an accountant as it is if sought from and given by a solicitor or barrister. Whether LPP applied should be determined by the type of advice given rather than the status of the advice-giver.  Counsel for the Appellants, Lord Pannick QC, relied on a number of cases in order to support this proposition, including Calley v Richards (1854) 19 Beav 401 where the client had written to a Mr Mullings who had been a solicitor but, unknown to the client, had since ceased to practise as such, though he was held out by the firm as being still in the firm and therefore in practice. The Master of the Rolls held that LPP applied, provided that the client did not know that the adviser was no longer a solicitor. Lord Pannick also referred to Greenough v Gaskell (1833) 1 My & K 98, which referred to LPP as being relevant to ‘men skilled in jurisprudence’, a phrase which Lord Pannick argued, in relation to fiscal law, includes some accountants. In particular the Appellants sought to distinguish the current case from the decision in Wilden Pump Engineering Co v Fusfeld [1985] FSR 159, which held that LPP was limited to lawyers, and did not extend to patent agents.

The Court rejected the appellant’s argument. It accepted that LPP was a  ‘fundamental condition on which the administration of justice as a whole rests’ but for this very reason the rule should be clearly defined and subject to only limited exceptions, in part because of the absolute nature of the rule which entitles the client to refuse to disclose documents or answer questions, and to require the adviser and others so to refuse as well. It therefore creates a real conflict with the general public policy that cases should be decided by reference to all available relevant evidence.

The Court also rejected the argument that LPP for persons other than lawyers is protected by Article 8. The Court accepted that Article 8 guarantees protection for correspondence with a lawyer, but it cannot be taken to require the extension of that privilege to communications with any other person who may be asked to give legal advice. The Court justified its conclusion on the grounds that LPP represents a significant restriction on the powerful public interest in all relevant evidence being capable of being made available for the determination of legal proceedings. Article 8 is a qualified right and so its scope should be balanced against the public interest in open litigation.

Finally, the court held that it was bound by Wilden Pump despite Lord Pannick’s attempts to distinguish the case.  Lord Justice Loyd, giving the lead judgment, also stated that:

Even if we were not so bound, I would conclude that it is not open to the court to hold that LPP applies outside the legal profession, except as a result of relevant statutory provisions. 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. It is not a proper task for the courts to undertake.” [83]


Issues before the Supreme Court

The Supreme Court will be deciding the issue of whether, at common law LPP applies to communications between a client and an accountant seeking and giving legal advice on tax law.


Opening the case on Monday, Lord Pannick said that there was no question that accountants gave as much, if not more, tax advice as lawyers. It was also accepted that accountants had as much expertise in the area as lawyers. He emphasised the importance of LPP in the administration of justice and Lord Hoffman’s comments in Morgan Grenfell [2002] UKHL 21 stating that LPP was a fundamental human right and that the client needs to be able to put all the facts to his adviser in the confidence that what he says is confidential. LPP is driven by the interests of the client, not the status of the adviser. Lord Pannick argued that in this modern age there was no clear reason why the law supports advice from lawyers being confidential but not that of accountants, especially since accountants were skilled in jurisprudence and have both competence and expertise in performing the role of tax advisor.  It remains to be seen whether the Court is persuaded by Lord Pannick’s reasoning. If they are then the decision will have considerable ramifications for the legal profession.