A recent UK Supreme Court case in the area of privilege has considered whether legal advice privilege can be extended to cover advice from professional advisers other than lawyers, such as accountants. The judgment in Prudential R (Prudential plc & anor) v. Special Commissioner for Income Tax & anor (Institute of Chartered Accountants of England and Wales & ors intervening) [2013] UKSC 1 has held that it cannot. This will have far-reaching implications for the ever-changing legal market. It is also a timely reminder of the boundaries of legal advice privilege.

Three Rivers

The most significant UK case on legal advice privilege in recent years was the Three Rivers case, and one of the issues considered in this long-running litigation was how to define who the client was for the purposes of legal advice privilege. Legal advice privilege relates to communications between lawyers and clients for the purpose of giving or receiving legal advice (as opposed to litigation privilege, which only applies when litigation is in contemplation). The Three Rivers case came about as a result of the collapse of the Bank of Credit and Commerce International (BCCI) in 1991. In the wake of the collapse, the UK government appointed Lord Justice Bingham to investigate serious allegations into BCCI’s lack of supervision. As part of the investigation, the Bingham Investigation Unit (BIU), which consisted of three Bank of England officials, was set up to present the Bank of England’s case to the inquiry. The BIU appointed external lawyers to advise it.

After the inquiry had ended, litigation was brought against the Bank of England by the liquidators of BCCI who then sought disclosure of internal documents created by employees of the Bank of England for the BIU and used in the context of receiving advice from the external lawyers. The Bank of England claimed that the advice that it had received from the external lawyers was the subject of legal advice privilege and, therefore, not disclosable.

The Court of Appeal controversially held that the documents passed from employees of the Bank of England to the BIU and that the external lawyers were not covered by legal advice privilege because the client was the BIU and not the employees outside of the BIU. The employees outside the BIU were simply third parties and, therefore, did not benefit from the protection of legal advice privilege. This case was factually unusual, but it clearly shows that companies have to be careful about who, within the organization, communicates with legal advisers if they want to retain privilege around that advice, as simply being an employee of the organization that has sought legal advice is, in itself, not sufficient to guarantee that protection. Ideally, there should be a clear policy set out as to who, within the organization, can seek and obtain legal advice on behalf of the organization.

The Three Rivers case also dealt with the question of what constituted legal advice (privileged) as opposed to commercial advice (not privileged). One area where difficulties can arise in this regard in the employment law arena is where lawyers are engaged to assist with internal investigations into matters such as whistleblowing allegations. Naturally, in such a case, any final report to the company amounting to legal advice will be protected, but it is important that all the parties are aware from the start of the investigation that the transcripts of investigatory meetings with employees would be unlikely to attract legal advice privilege in the same way as the report. There may also be a question of whether the company would want not to disclose the report (for example, to rebut any allegation that it had not properly investigated any whistleblowing complaint and/or that the investigation findings had

supported the complaint). In which case, care would need to be taken to ensure that the report was not crafted in a way that would constitute legal advice.


The Prudential case looked at the slightly different question of not who the client is but who the lawyer is. Not a difficult question in most cases in the UK: The advice of solicitors, barristers, trainee solicitors and pupil barristers, provided they are all acting in their legal capacity and giving legal advice, attract legal advice privilege. The status of in-house counsel is slightly trickier: Whilst any internal legal advice will be privileged, it can sometimes be difficult to distinguish this from commercial advice (which will not be privileged) given by in-house counsel under the strict UK interpretation further to Three Rivers.

In the Prudential case, however, the Supreme Court was asked to expand the remit of legal advice privilege to include other professionals providing legal advice. The case involved the highly emotive and newsworthy subject of tax avoidance. The relevant tax authorities required Prudential and Prudential (Gibraltar) to disclose documents that contained information in relation to a tax avoidance scheme that had been put in place by Prudential (Gibraltar). Clearly, documents that were privileged were not disclosable under this request.  

Some of the documents related to tax advice from accountants PricewaterhouseCoopers in relation to the tax avoidance scheme. The case in the Supreme Court, therefore, looked at whether legal advice privilege could apply to legal advice given by accountants to Prudential, their client. The answer was NO. The court would not extend legal advice privilege beyond the current boundaries, as it was of the view that doing so would create unacceptable ambiguity and uncertainty in the doctrine, and any radical changes like this would have to be legislated for by Parliament. The judgment was a majority decision, and the dissenting minority held that drawing a distinction between two different types of professional advisers essentially giving the same advice was arbitrary and irrational.

The current political climate regarding tax avoidance in the UK may well have influenced this decision; but, nevertheless, the position remains that the traditional view that advice from non-lawyers (such as HR professionals, accountants and other professional advisers) is not covered by legal advice privilege. It is especially important to be mindful of this in UK-based employment claims in these days of global line management and centralized support services, particularly bearing in mind the valuable UK pre-litigation tactic of a disclosure search via a data protection “subject access request” from an employee searching for a “smoking gun.” Whilst an internal e-mail discussion thread involving HR or in-house Legal may be privileged from disclosure under local (e.g., U.S.) rules, it will generally not be so under UK interpretation. The Prudential case would suggest that’s not set to change any time soon.