Last month the Supreme Court gave permission for Prudential to appeal against the Court of Appeal decision last year not to extend Legal Professional Privilege to communications between Tax Accountants and their clients.
Legal Professional Privilege is a Common Law concept and therefore capable of being developed by the Courts. The reasons for its existence were explained by Lord Brougham in the case of Greenough v Gaskell as far back as 1833 and the Courts have been adapting and developing the concept ever since but extending Privilege to Accountants is likely to be one step too far, even for the Supreme Court.
The Decision of the Court of Appeal emphasised the importance of certainty in terms of the nature and content of Legal Professional Privilege and it was considered that to extend it to other professions “without statutory help or definition” would lead to the scope of the rule being “lamentably uncertain”.
In a modern context is it right that the existence or otherwise of Privilege should depend upon the qualifications of the person giving the advice rather than the nature of the advice itself? The view of the Court of Appeal was that the answer to that question is for Parliament to provide and not the Courts. It was reiterated that if the extent of Privilege is to be widened, that decision will have to be made by Parliament and Parliament has failed to do so despite having had numerous opportunities to do so over many years. Reference was made to Section 20 of the Taxes Management Act (now Finance Act 2008 Schedule 36) which sets out what a Tax Advisor or Accountant can and cannot be required to produce. This provision would not have been necessary had Parliament been of the view that Privilege should be extended beyond communications between Lawyers and their Clients.
The picture is complicated by the advent of Alternative Business Structures under the Legal Services Act. What will be the status of advice given by a multi disciplinary firm of Accountants and Solicitors. Is the client going to be expected to know whether or not he/she can claim Privilege for such advice if called upon to produce it by HMRC at some point in the future? Presumably such firms will have to ensure that such advice is communicated via a Lawyer within their organisation.
If the appeal fails the Accountancy Lobby is likely to press for reform but that will not be an easy matter for Parliament. Any such proposal is likely to be opposed by the Treasury and HMRC. Defining the nature and extent of the communications which would attract Privilege will not be an easy matter and nor will identifying the Professions with appropriate regulations and controls to whom the concept of Legal Professional Privilege can be extended.
In the meantime, businesses and individuals need to be aware that only communications with their lawyers for the purpose of obtaining legal advice are privileged from production. Communications with their accountants containing or seeking such advice are not. Accountants should also be aware that although their communications with their clients are confidential, this does not mean that they can avoid producing them if called upon to do so by a Court or Tribunal. In my view, if they are likely to give advice for which their client might need to claim Privilege at some point in the future, they should consider advising their client to instruct a firm of Solicitors so that the advice can be channelled through them.
For further information please contact Peter Moore on 0844 391 5848.