Prudential gets rough judgment

In R (on the application of Prudential plc & Anor) v Special Commissioner of Income Tax & Anor the Supreme Court declined, by a majority of five to two, to extend the ambit of legal advice privilege to advice given by accountants on tax law.

Some may see this as an overly cautious, indeed a conservative, decision, particularly in circumstances where all the Justices seem to have agreed that there was no principled basis for restricting legal advice privilege to advice received from lawyers.

Prudential may feel it won the argument, but lost the case.

The arguments of principle in favour of extending the privilege were compelling. As Lord Clarke noted, if two parties respectively instruct a firm of solicitors and a firm of accountants to give them advice on the same point of tax law, providing the same information and receiving precisely the same advice, one would benefit from legal advice privilege while the other would not.

Lord Sumption, in a dissent so powerful it cast a long shadow, identified legal advice privilege as a fundamental right, long-established in common law, to obtain legal advice in confidence. Why should it matter whether that advice comes from a solicitor or an accountant?

For the majority, the extension of the privilege felt too much like judicial legislation. It has long been assumed that legal advice privilege extends only to lawyers. On this basis the courts have refused to extend it to trademark agents, patent agents and personnel consultants.

More significantly, Parliament has repeatedly legislated on the assumption that legal advice privilege extends only to advice given by lawyers, for example by creating statutory extensions to patent attorneys, trademark agents and licensed conveyancers that otherwise would have been unnecessary.

The minority responded that there is nothing to stop the common law developing in a manner contrary to Parliament’s assumptions, as long as it does not do so contrary to Parliament’s intentions. The fact that Parliament has proceeded on the (incorrect) basis that legal advice privilege is confined to advice from lawyers should not preclude the re-casting of this common law privilege by the courts so as to remove a historic anomaly.

Perhaps the most persuasive of the arguments of the majority was one of legal certainty. Lord Sumption sought to reformulate the privilege as extending to legal advice provided by any profession that has, as an ordinary part of its function, the giving of skilled legal advice on the subject in question. But how is a ‘profession’ to be identified, to which professions would the privilege extend and in the context of what types of advice? It would be necessary for the courts to delve into the qualifications, standing and practices of auditors, architects and actuaries, never mind town planners and employment consultants.

The majority concluded that this would be best left to Parliament.

It is disappointing that our highest court felt unable to develop the law in a direction that all appeared to agree would accord with sound principle. It has become common for the judiciary to be accused of interfering in matters best left to elected politicians. The Supreme Court certainly declined to do that.