The UK Supreme Court's first decision of 2013 may turn out to be the most talked about of the year. On 23 January, the Supreme Court handed down its judgment dismissing an appeal by Prudential Plc. Prudential argued that legal advice privilege should extend to legal advice it received from its accountants, PwC, in relation to its tax affairs, even though PwC are accountants, not lawyers. The Judgment was reached after arguments by a host of interested parties including not just Prudential and Her Majesty's Revenue & Customs, but also the Law Society, the General Counsel of the Bar of England and Wales, and the Institute of Chartered Accountants. The roll call of Judges and lawyers could not have been more eminent.

By a five to two majority verdict, the Supreme Court rejected calls to extend the scope of legal privilege beyond the legal profession. In the view of the majority of the Court, there were strong arguments in principle to extend privilege to cover the advice of accountants, but in practice such a move would lead to uncertainty and further litigation. The minority view was that privilege should depend on the character of the advice, not the advisers' status. However, if there is to be an extension of privilege under these circumstances, the Court considered that it was clearly the role of Parliament, not the judiciary, to determine the issue.

This judgement is far from an esoteric matter of legal procedure. Corporations of all shapes and sizes routinely rely on expert legal advice from their tax accountants, rather than their lawyers. However, until Parliament decides to legislate otherwise, legal advice privilege remains the exclusive preserve of clients of the legal profession.

For further details see:

On 23 January 2013 The Supreme Court handed down judgment on the appeal R (on the application of Prudential plc and another) (Appellants) v Special Commissioner of Income Tax and another (Respondents) [2013] UKSC

The appeal considered under what circumstances a client can claim legal advice privilege (LAP), specifically whether legal advice given by accountants is protected by LAP. The Court was asked to decide if advice that would be privileged if given by a lawyer, was also privileged if given by an accountant. By a five to two majority, the Court rejected the claim for LAP in respect of advice from accountants.

LAP applies to all communications passing between a client and its lawyers, acting in their professional capacity, in connection with the provision of legal advice. In this case, the specific issue was whether, following receipt of a statutory notice from an inspector of taxes to produce documents in connection with its tax affairs, a company was entitled to refuse to withhold certain documents on the ground that the documents were covered by LAP. The claim for LAP arose where legal advice was given by accountants in relation to a tax avoidance scheme. The more general question raised by the issue was whether LAP extended, or should be extended, so as to apply to legal advice given by someone other than a member of the legal profession.

Despite acknowledging the logic and force of the arguments in the dissenting judgment, the majority were not prepared to rule in favour of what they saw as an extension of the principle of the scope of LAP in circumstances which should rightly be decided and legislated on by Parliament. In their opinion, LAP was restricted to advice given by lawyers and the court should not extend it to accountants in connection with tax advice.

The Court felt that Parliament had had ample opportunity to consider whether to extend LAP before and had only done so in very particular circumstances. The Court was being asked to extend the current parameters of the LAP in manner that would turn a certain principle into an uncertain one. Which professions would be covered by the extension? What is a profession? How does one distinguish between legal and non-legal advice? These questions were beyond the scope of the Court. In the court's interpretation, any question of extension was a policy issue for Parliament to decide.

Newly appointed Lord Sumption gave the lead dissenting judgment. He asserted that it has long been established that a fundamental principle of LAP is that it is the client's privilege and it depends on the public interest in promoting access to legal advice and is not dependant on the status of the advisor. Once that is accepted, there is no principled reason for distinguishing between solicitors and barristers on the one hand, and accountants on the other. LAP is a creature of common law and is therefore within the court's domain to adjudicate on the issue. Although Parliament had legislated on privilege in the past, nothing it had done had established a comprehensive scheme of recognition which could make the omission of accountants' tax advice significant.

The view was also expressed that Parliament should consider the whole issue of legal professional privilege as soon as practicable. There is currently an uneasy distinction between the client who takes legal advice on tax from a firm of solicitors (so can claim LAP) and the other client who obtains the very same type of advice, but from a firm of accountants, who is denied the right to claim LAP. The Institute of Chartered Accounts in England and Wales describe the current position as ‘unprincipled and anti-competitive for individuals and businesses who we believe should be able to seek the best professional advice upon the same terms whether from lawyers, accountants or indeed other appropriately qualified professionals'. They said that parliament must, as a matter of urgency, find a way to resolve how issues such as legal professional privilege are addressed in multi-disciplinary practices.

Until such time as parliament finds space in an already over-stretched legislative agenda, the only way to ensure that legal advice is protected by privilege is to obtain that advice from a legally qualified professional.