The English Supreme Court recently rejected an appeal seeking to extend legal advice privilege (LAP) to communications between chartered accountants and their clients in connection with expert tax advice. The High Court and the Court of Appeal both considered that LAP did not extend to those communications even where there was no doubt that LAP would apply if the same advice was given by a member of the legal profession.

The majority of the Supreme Court agreed. Given that LAP is entirely for the benefit for the party receiving the legal advice, the Court acknowledged that there was a strong case for allowing the appeal. However, notwithstanding this concession, the majority agreed that they should not extend LAP to advice given by non-lawyers because:

  • The consequences were hard to assess and would likely lead to a clear and well understood principle becoming unclear and uncertain
  • The issue raises questions of policy which should be left to Parliament, to be considered within its legislative process, with its wide powers of inquiry and consultation and its democratic accountability
  • Parliament had previously enacted legislation relating to LAP which suggested that it would be inappropriate for the court to extend the law.

The dissenting judges considered that the focus should be on the rationale of the privilege, not the status of the advisor, and there can be no principled reason for distinguishing between the advice of solicitors and accountants. Legal advice on tax issues is increasingly given by accountants and as a creature of the common law LAP should be capable of re-definition to cater for changed conditions.

The position in New Zealand is significantly different. In 2005, sections 20B-20G were inserted into the Tax Administration Act 1994 (TAA), creating a statutory privilege in relation to any confidential "tax advice document" where the relevant "tax advisor" is a member of an "approved advisor group" approved by the CIR. Only the advice itself is protected, not any other information that may form part of the accountant's file or briefing.

In April 2009, in ANZ National Bank Limited v CIR [2009] 3 NZLR 123, the Court of Appeal confirmed that the protection afforded by section 20B was much more confined than LAP and it did not provide a basis for resisting discovery in Court proceedings. Rather, it applied solely to a request by the Commissioner for information pursuant to section 17. Section 20B of the TAA was swiftly amended in October 2009 to extend its application to the disclosure of information "under a discovery obligation".