R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another [2013] UKSC 1 23 January 2013 On appeal from [2010] EWCA Civ 1094


The Supreme Court has now given its judgment on the eagerly awaited appeal by Prudential regarding whether or not legal advice privilege should be extended to communications in connection with advice given by professional people who are not qualified lawyers. By a majority of 5:2 (Lord Clarke and Lord Sumption dissenting), the Supreme Court has declined to extend the long and well established principle.

Privilege, as a matter of Jersey (and English) law, typically falls into two sub categories: (1) legal advice privilege; and (2) litigation privilege. Communications subject to litigation privilege are outside the scope of this judgment summary, save to note that such communications are privileged only if litigation is in progress or contemplation (see Café de Lecq Limited v R A Rossborough (Insurance Brokers) Limited [2011] JLR 182). Communications subject to legal advice privilege ("LAP") on the other hand are broadly speaking privileged in all circumstances regardless of whether or not litigation is in progress or contemplation. The Prudential case concerned LAP.


By way of background, the Prudential case specifically concerned the question of legal advice given by accountants in relation to a tax avoidance scheme which HMRC was investigating. More generally, the case raised the question of whether the principle of LAP should be extended to legal advice given by someone other than a member of the legal profession.

Prudential had originally declined to provide certain documents to the HMRC on the grounds that they were subject to LAP since they related to legal advice given by accountants. The HMRC served notices on Prudential requesting disclosure of the documents, the validity of which Prudential sought to challenge by way of judicial review. That application was rejected, a decision that was upheld by the English Court of Appeal and appealed to the Supreme Court.

The appeal

It was common ground on the appeal that 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. Giving the lead judgment for the majority, Lord Neuberger identified three key points that had emerged from past jurisprudence:

  • LAP exists to ensure as full and frank communication between lawyers and their clients. "That communications between clients and lawyers whereby clients are hoping for the assistance of lawyers' legal skills…should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busy bodies or anyone else" is founded upon "the rule of law".
  • LAP exists solely for the benefit of the client.
  • LAP is a common law principle, developed by judges in cases going back to at least the 16th Century.

Prudential contended that the fact the majority of legal advice on tax matters is now given by accountants rather than lawyers supported the proposition that LAP should be extended. HMRC on the other hand contended that LAP should not be extended since to do so would involve a potentially nuanced policy decision, with unpredictable and potentially wide ranging public and forensic consequences which it said was best left to Parliament in the UK to deal with.

Lord Neuberger considered the implications of allowing the appeal acknowledging that were the Court to do so, they would have been extending LAP beyond what have for so long been understood to be its limits albeit that there had been strong argument from Prudential for allowing the appeal. Lord

Neuberger even said that it was hard to see as a matter of pure logic why privilege should be restricted to communications with lawyers as opposed to communications with other professionals who have a qualification or experience which enables them to give expert legal advice. Perhaps remarkably, given the outcome, Lord Neuberger said the arguments for restricting LAP to communications with lawyers were weak. He did say however that they were not "wholly devoid of force".

Oliver Wendell Holmes in The Common Law (1881) said "the life of the common law has not been logic". It "has been experience….in order to know what it is, we must know what it has been….". Lord Neuberger said that it was inevitable that the common law would include some rules only explicable by reference to historical practices or beliefs. LAP he said was one such rule which although illogical in the modern world was nevertheless explicable by reference to history.

Ultimately, the majority reached the conclusion that extending LAP would give way to uncertainty, expense and inconsistency. The scope of LAP was found to be a matter for Parliament rather than the judiciary not least the Court said because the extension of LAP may only be appropriate on a conditional or limited basis. Lord Neuberger said that was an aspect that can only properly be assessed and implemented by Parliament and not the courts as has been the case in New Zealand where the New Zealand Parliament has created a separate tax advice privilege, a model supported by the Australia Law Reform Commission specifically because it allows greater control over the scope and operation of tax advice privilege.

If there was evidence of a pressing need to change the limits of LAP because of some injustice or practicality caused by the rule as it stands, the Court could have done so but the Court said it had no evidence that was anywhere near establishing such concerns

The fact that Parliament in the UK has previously legislated on the scope of privilege, limiting LAP to advice given by members of the legal profession and extending it to communications with a limited category of agents only such as patent and trade mark agents, was seemingly a strong persuasive factor for the Supreme Court in concluding as it did.

The minority did not accept that allowing accountants to claim LAP necessarily extended the scope of LAP, rather it would allow recognition of the fact that legal advice is so often given in modern times by legal advisors who are not barristers or solicitors. Lord Sumption said it was the function of the Court "to ensure that changes in legal, commercial or social practice are properly reflected in the way that the law is applied".

Effect in Jersey

So what will the effect of the judgment be in Jersey? The law of privilege in Jersey has developed separately but in the same direction as the UK. In the recent case of Café de Lecq Limited v R A Rossborough (Insurance Brokers) Limited [2011] JLR 182, the Royal Court confirmed that the Jersey law of privilege mirrors English principles and so the general principle and its fundamental importance are broadly the same.

Since the intervention of Parliament in the UK was seemingly highly persuasive in the Supreme Court's thinking, it is worth considering whether similar such provisions have been given effect in Jersey. Although legal advice privilege has not been extended to communications with patent agents here in Jersey as it has in the UK, Article 20 of the Trade Marks (Jersey) Law 2000 does extend privilege to trade mark agents whose name is entered in the register of trade mark agents or who are on the list of professional representatives maintained in pursuance of the Community Trade Mark Regulations in relation to the protection of any trade mark or any matter involving passing off and provides that those communications are privileged from disclosure in the same way as a communication between a person and the person’s advocate or solicitor would be.

Given the broad similarities between the law of privilege in Jersey and the UK, it seems more likely than not that the latest decision of the Supreme Court will be persuasive in Jersey but there is always the potential for the judiciary here to adopt a different stance to the English judiciary in a jurisdiction where policy considerations can at times differ to those of the UK. As the Jersey Courts have so clearly demonstrated in relation to the law on mistake, even where English principle has been adopted and become part of Jersey law, subsequent interpretations or developments of it under English law may or may not be followed in Jersey.

In considering the question of whether or not LAP should be extended, Lord Clarke (dissenting) in the latest judgment provided the following example if the common law of privilege is to be treated as one of principle:

Two individuals, A and B, have the same problem, the solution to which depends upon an application of the legal principles of taxation law to the same, or substantially the same, facts. A seeks advice from a law firm and B seeks advice from a firm of accountants. Each asks the same question and gives an account of what are substantially the same facts to the person from whom they are seeking advice. Both A and B are receiving legal advice. Are both entitled to claim LAP? Lord Clarke said the only principled answer to that question is yes on the basis that privilege belongs to the client, not the advisor and if the common law treats the advice given to A as privileged, principle requires that it must do the same for B since the advice is the same legal advice in both cases.

There may be some force in Lord Clarke's argument and no doubt the time will come when the Jersey Court is faced with having to address the same issues as those recently addressed by the Supreme Court.