The issue of legal privilege for advice given by accountants to their clients was the subject of a recent Court of Appeal decision.

As part of the litigation process, parties are required to disclose certain documents and information to one another. The parties must set out the documents they have in their control and detail those they do and do not object to the other side inspecting. The most common reason for objection is that a party claims privilege from inspection in relation to specified documents.

Privilege from inspection is available for communications passing between a party and his legal advisers. This is called ‘legal advice privilege’.

In the case of R (on the application of Prudential plc and another) v. Special Commissioner of Income Tax and others the Court of appeal upheld a High Court judgement that such legal advice privilege does not extend to advice about law (e.g. tax law) given by accountants.

The Appellants, Prudential were served notices requiring them to disclose documents relating to their tax liability. Prudential argued that they were not obliged to disclose the documents as they related to advice about tax law given to them by accountants and so were covered by legal professional privilege.

The Court was bound by an older judgement which said that legal professional privilege does not apply, at common law, to any professional other than a qualified lawyer. The Court was keen to explain that, had this previous ruling not existed, they would nonetheless have drawn the same conclusions. They explained this by saying that if legal professional privilege was to be extended to apply to members of other professions, the scope and application of this law would be uncertain. The Court pointed out that if the law is to be extended on this point it must be done so through Parliament. Parliament did provide limited protection to accountants under the Taxes Management Act 1970 and would have extended this protection further if that had been their intention.

Prudential argued that only allowing legal professional privilege to apply to lawyers was a breach of the European Convention on Human Rights; however, this argument was rejected by the Court of Appeal.

It is likely that Prudential will now try to take the case to the Supreme Court. For the moment it is important to remember that any advice you give to your clients in relation to tax and other matters will not benefit from legal advice privilege. Your clients may find that they will be required to disclose such documents in any relevant litigation.