U.K. Supreme Court confirms privilege is only for the clients of lawyers

by Sarah Chiu

Case Comment: R (Prudential plc and another) v. Special Commissioner of Income Tax and another (Institute of Chartered Accountants of England and Wales and others intervening), [2013] UKSC 1.

Earlier this year, the United Kingdom Supreme Court (formerly the House of Lords) confirmed that legal advice privilege, which is understood to attach to legal advice provided by a solicitor to a client, does not extend to tax advice provided by accountants or to legal advice provided by other professional to their clients.

The facts before the United Kingdom Supreme Court were as follows: PricewaterhouseCoopers provided advice regarding a tax plan that was intended to allow Prudential (Gibraltar) Ltd. (“GibraltarCo”), a subsidiary of Prudential plc (“Prudential”), to obtain a substantial tax deduction. Both Prudential and GibraltarCo were served with statutory notices requiring disclosure of certain documents which contained the advice provided by PricewaterhouseCoopers and Prudential and GibraltarCo refused to disclose such documents on the grounds that they were entitled to claim legal advice privilege in respect of them. The relevant statute provided that “items subject to legal privilege” did not need to be disclosed. Both parties accepted that if the same advice had been provided by a lawyer the advice (and, hence, the documents) would be protected by legal advice privilege.

President of the Supreme Court Lord Neuberger, in a decision concurred with by the majority, commented upon the historical and continued importance of legal advice privilege. He recognized that legal advice privilege is “a fundamental human right” which could only be removed by statute expressly or by necessary implication through express language and logic. He further noted that legal advice privilege is “founded upon ‘the rule of law’” and exists to ensure full and frank communication between lawyers and their clients which promotes broader public interests in the observance of law and administration of justice. He also acknowledged that legal advice privilege is a common law principle which has been in existence from at least the 16th century.

Neuberger declined to extend the important common law principle of legal advice privilege to legal advice given to clients by chartered accountants and other non-legal professionals for three main reasons. Firstly, there was a significant risk of turning the clear and well-understood principle of legal advice privilege into an unclear principle. So long as legal advice privilege was limited to advice from members of the legal profession, there would continue to be a strong and justified presumption that legal advice privilege applies in connection with any communications in that context because lawyers normally only give legal advice. If legal advice privilege was extended to legal advice from other professionals, such a presumption would be difficult to apply as these other professionals would also provide other (non-legal) advice and it would be difficult to determine which advice, and which corresponding documents, would be subject to privilege. Secondly, Parliament, not the courts, was better suited to extend legal advice privilege to other qualified professionals as it would be able to do so on a conditional or limited basis. Thirdly, Parliament had considered and extended privilege or confidentiality to certain other advice given by other professionals in limited circumstances, so, absent a pressing need, it was not necessary for the courts to extend the scope of legal advice privilege more broadly.

Lord Sumption and Lord Clarke dissented and would have extended legal advice privilege to legal advice given by any professional so long as (i) the advice was given in the course of a professional relationship and (ii) an ordinary part of the professional’s profession involved giving skilled legal advice on the subject matter of the legal advice given.

Although clearly not binding on Canadian courts, this decision of the majority is consistent with recent Canadian decisions (e.g., Tower v. M.N.R., 2003 D.T.C. 5540 (F.C.A.)) where the courts have declined to extend solicitor-client privilege to advice given by an accountant to a client. The United Kingdom Supreme Court’s decision serves as a reminder that privilege has not been extended to legal advice provided by non-legal professionals. Moreover, in Canada, non-legal professionals generally are legally precluded from providing legal advice by legislation governing the legal profession in the provinces and therefore the position taken by the parties in Prudential, that legal advice was being provided by the accountants, should not be sustainable in Canada. Tax practitioners should remind their clients that advice from accountants is likely producible and subject to scrutiny by the Canada Revenue Agency and clients should govern themselves accordingly when dealing with any sensitive tax advice.

Previously published in National Tax Insights