Legal advice privilege – a ‘Prudential’ approach

The Prudential case gives cause for all lawyers and their clients to reflect on the nature of lawyer client privilege and the parameters of what is a fundamental human right; namely, the right to obtain confidential legal advice from a qualified lawyer.

The dispute
In short, the UK revenue authority served “information notices” on the appellant companies, seeking documents in their possession with respect to a purported tax avoidance scheme, including documents prepared by the appellants’ accountants. The appellants challenged the information notices in court arguing that they were not required to disclose confidential communications evidencing “legal advice” from their accountants with respect to tax law. That challenge failed at first instance and on appeal.

The judgment
Two main points were decided on the appeal to the UK Supreme Court. In short, they are as follows; one specific and one general. Specifically, the Prudential case decides that, at common law, lawyer client privilege does not extend to a tax accountant giving legal advice to a client with respect to tax law. More generally, the Prudential case decides that, at common law, lawyer client privilege is restricted to confidential communications between a client (as properly understood) and a qualified lawyer for the purpose of giving or receiving legal advice; it does not apply to any other professional advisers who purport to give legal advice.
The majority of the Supreme Court judges considered that any such extension of the privilege to other professional advisers was a matter for legislation, not the courts. The judges in the majority were concerned to preserve the traditional boundaries of lawyer client privilege; the concern being that extending it to tax accountants or other professional advisers would lead to uncertainty and undermine the privilege.

Persuasive force
The Prudential case is persuasive in other common law jurisdictions; for example, Singapore, Hong Kong and Malaysia. Indeed, given the traditionally conservative approach of the courts in those jurisdictions to issues of privilege generally, it would be surprising if the Prudential case was not followed there; the policy considerations are likely to be similar.

In-house lawyers
• Generally speaking, communications with in-house lawyers within a company attract lawyer client privilege provided the communication: (i) can properly be regarded as the giving or receiving of legal advice and (ii) is with the corporate client as properly understood.
• With corporates, the difficult issue of exactly who is “the client” is not impacted by the Prudential case and in-house lawyers in common law jurisdictions still need to prepare for this issue, following the unsatisfactory outcome of the series of cases culminating in Three Rivers District Council (No.6).
• It will be the case with in-house lawyers, more often than lawyers in private practice, that the nature of the advice they give is more business and/or managerial in nature and not properly “legal advice”. In-house lawyers also need to be alive to this concern and how to deal with it.
• In-house lawyers that maintain their practising certificates and membership of their professional body (and all
that comes with it, such as continuing education requirements) will help to promote their legal role within a corporate organisation, with an emphasis on the giving of independent legal advice.
• In the context of common law legal advice privilege, the issue of communications between professional advisers (such as accountants) acting under the supervision of in-house lawyers is one that requires consideration on a case by case basis.

Qualified lawyers
• Private practitioners in common law jurisdictions will take heart from the following quote of the leading judgment in the Prudential case:
“So long as LAP (legal advice privilege) is limited to advice from members of the legal profession, the strong, and justified, presumption will be that LAP does apply in connection with any communications in that context, because lawyers normally only give legal advice.” (emphasis added)

Postscript: post-Prudential
In light of the appellants’ court challenge having failed, according to some press reports, the Institute of Chartered Accountants in England & Wales will consider lobbying the UK Parliament for a limited form of statutory protection for communications with accountants giving legal advice on tax law. While many taxpayers may wish them ‘good luck’ with that, it will be interesting to watch developments against a background of regulators and revenue authorities seeking to clamp down on certain tax avoidance schemes.

david.smyth@rpc.com.hk
warren.ganesh@rpc.com.hk
www.smythco.com.hk

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