Prudential Plc & Anor, R (on the application of) v Special Commissioner of Income Tax & Ors

At common law, legal advice privilege protects confidential communications made for legal advice only where the adviser is a qualified lawyer acting professionally: a solicitor, barrister or appropriately qualified foreign lawyer. It does not extend to legal advice given by accountants, even where they are competent and regulated. The near-absolute character of the privilege requires a clear and certain boundary. Any wider extension to accountants or other professionals requires legislation. The statutory protections for tax advisers under the Taxes Management Act 1970 did not create general privilege. Article 8 and article 14 of the European Convention on Human Rights did not require an extension. The appeal was dismissed.

Prudential sought judicial review of notices issued under section 20 of the Taxes Management Act 1970, requiring production of documents concerning tax advice obtained from counsel, foreign lawyers and accountants. Mr Justice Charles dismissed the application in [2009] EWHC 2494 (Admin). He accepted the force of the argument that the rationale for legal advice privilege might not depend on the adviser’s legal qualification, but considered himself bound by existing authority.

The appeal concerned whether privilege depended on the nature of the advice or the status of the adviser, whether the Court of Appeal was bound by Wilden Pump Engineering Co v Fusfeld, and whether legislation or the European Convention on Human Rights permitted an extension to accountants.

Lloyd LJ delivered the leading judgment. Stanley Burnton LJ and Mummery LJ agreed.

1. Disposition. The appeal was dismissed. The judicial review application remained dismissed, permission to appeal to the Supreme Court was refused, and the appellants were ordered to pay the second respondent’s costs, with no order as to the interveners’ costs.
2. Nature and scope of privilege. Legal professional privilege is a fundamental and, subject to limited exceptions, virtually absolute rule. It is not confined to litigation and is not subject to an ad hoc balancing exercise against the public interest in disclosure. Its scope must therefore be clear and certain. The reasoning in R v Derby Magistrates Court ex parte B [1996] 1 AC 487 and Three Rivers District Council v Governor and Company of the Bank of England (No. 6) [2004] UKHL 48, [2005] 1 AC 610 supported those conclusions.
3. Function and status. Legal advice privilege requires a relevant legal context. Legal advice may include advice about what should prudently and sensibly be done in that context. However, the adviser must be acting as a lawyer and providing legal advice in that professional capacity. The fact that an accountant may competently give legal advice does not make the accountant a lawyer for the purposes of common-law privilege. The approach in Balabel v Air India [1988] Ch 317 and the observation that lawyers must be consulted qua lawyers were consistent with that distinction.
4. Binding authority and legislation. Wilden Pump Engineering Co v Fusfeld [1985] FSR 159 was binding authority that common-law privilege applied to advice sought from or given by lawyers, not patent agents or other non-lawyer professionals. The limited statutory extensions for patent agents, trade mark agents and licensed conveyancers did not support a wider general extension. Defining the eligible class of accountants, the necessary qualifications and professional standards, and the legal fields covered would be a legislative task. The limited protection for tax advisers in the Taxes Management Act 1970, and its successor in Schedule 36 to the Finance Act 2008, showed that Parliament had addressed the issue without creating general privilege.
5. Human rights. Article 8 protected confidential correspondence with a lawyer, as illustrated by Campbell v United Kingdom (1992) 15 EHRR 137 and Foxley v United Kingdom (2001) 31 EHRR 25. It did not require equivalent protection for communications with accountants. The distinction concerned the adviser to whom the client turned, rather than an impermissible distinction in the enjoyment of the client’s rights. Limiting privilege to relevant legal professions was in accordance with law and capable of being necessary in a democratic society.

• Court of Appeal (Civil Division) dismissed the appeal and refused permission to appeal to the Supreme Court: [2010] EWCA Civ 1094.
• High Court of Justice, Queen’s Bench Division, Administrative Court dismissed Prudential’s judicial review application concerning notices issued under section 20 of the Taxes Management Act 1970: [2009] EWHC 2494 (Admin).