R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another

Legal advice privilege protects confidential communications between a client and a professional lawyer acting as such for the purpose of giving legal advice. At common law it does not extend to legal advice given by a person outside the legal profession, even where that person is professionally qualified to advise on the relevant law.

Extending the privilege by adopting a functional test would create uncertainty about qualifying professions, mixed legal and non-legal advice, and the conditions governing the privilege. It would also require policy choices better made through legislation. This conclusion is reinforced where Parliament has repeatedly legislated on the assumption that the privilege is confined to lawyers and has created specific statutory extensions for selected professions.

Chartered accountants devised a tax avoidance scheme and advised the appellants on its implementation. An inspector of taxes served notices under sections 20(1) and 20(3) of the Taxes Management Act 1970 requiring documents relating to the transactions. The appellants withheld communications with the accountants, contending that they attracted legal advice privilege because equivalent advice from a lawyer would have been privileged.

Charles J dismissed the judicial review claim in [2009] EWHC 2494 (Admin). The Court of Appeal upheld that decision in [2010] EWCA Civ 1094. The central issue before the Supreme Court was whether legal advice privilege extended to legal advice given by chartered accountants or other professional advisers who were not members of the legal profession.

1. Disposition. By a majority of five to two, the appeal was dismissed. Lord Neuberger, with whom Lord Walker agreed, gave the leading judgment. Lord Hope, Lord Mance and Lord Reed agreed in separate judgments. Lord Sumption and Lord Clarke dissented.
2. Legal advice privilege, as generally understood and established by authority, applies to communications between a client and a professional lawyer acting as such in connection with legal advice. Advice on tax law from accountants therefore falls outside the privilege, although equivalent advice from a lawyer would attract it. The privilege belongs to the client and serves the rule of law by encouraging full and candid communications, but those underlying principles did not justify judicial alteration of its settled professional boundary: paras 17–24, 29–37 and 46–52.
3. The proposed functional test, under which privilege would depend on whether the adviser's profession ordinarily involved skilled legal advice, would create substantial uncertainty. Courts would have to decide what constitutes a profession, whether legal advice is an ordinary professional function, and how to separate legal from technical or commercial advice in mixed communications. Clarity and predictability are especially important because clients must know in advance whether their communications are protected: paras 53–60, 80 and 95–101.
4. Extending the privilege also involved broad policy choices about its beneficiaries, limits and possible qualifications. Those choices required consultation and democratic assessment and were properly left to Parliament. Parliament had repeatedly legislated on the assumption that common law privilege was confined to lawyers, had granted specific extensions to selected professions, and had maintained a distinction between lawyers and tax advisers in the Taxes Management Act 1970 and Schedule 36 to the Finance Act 2008: paras 61–72 and 82–92.
5. Dissent. Lord Sumption, with whom Lord Clarke agreed, would have adopted a functional rule. In their view privilege depended on the character and professional context of the advice, not the adviser's status. They would have allowed the appeal and remitted the case to determine whether the documents would have been privileged had the same functions been performed by a barrister or solicitor: paras 114, 122, 128–138 and 139–149.

1. United Kingdom Supreme Court: The appeal was dismissed by a majority of five to two in [2013] UKSC 1.
2. Court of Appeal: The court upheld the dismissal of the judicial review claim in [2010] EWCA Civ 1094.
3. High Court, Administrative Court: Charles J dismissed the claim in [2009] EWHC 2494 (Admin), holding that privilege did not extend to legal advice given by a professional person who was not a qualified lawyer.