Room 70 at the Royal Courts of Justice was standing room only last week, as some of England’s highest profile QCs argued and judges mused over extending legal professional privilege (LPP) beyond lawyers to tax advisers.
The court was hearing an appeal by the Prudential after it lost an earlier case to have information about a tax scheme provided by PwC kept out of the clutches of
HM Revenue & Customs. Prudential had cited it was protected by LPP, however the court previously decided that privilege only covered lawyers’ clients.
The two-day case was vigorously contested, with Prudential’s Lord Pannick QC putting forward a strong case for extension of the privilege to tax advisers, despite strong questioning from the judges over how an extension could be applied in real life situations.
Pannick made several key points, firstly that LPP was a “fundamental right” of the client. “Is there a proper justification for confining it to lawyers?” he said.
He also argued that the advice given by accountants and lawyers in a tax context was effectively the same, and by its nature was “legal advice”.
On the basis that tax advisers give legal advice, privilege should extend to them.
But the lord justices – Mummery, Burton and Lloyd – pushed Pannick and ICAEW representative Charles Flint QC to clear up whether extending LPP would effectively create huge complications.
They voiced concerns about when and where LPP would apply. What if an accountant was giving advice on producing a client’s year-end accounts?
That, Pannick said, was not tax advice and failed to be covered under the privilege he was arguing for.
However, the lord justices added, what if that advice leads to a problem with the client’s tax bill?
Then privilege would come into effect, he said.
Pannick said he was arguing purely on behalf of tax accountants, but appreciated that his argument seemed to suggest that LPP could potentially extend to any suitably qualified and regulated professional giving legal advice within their sphere of understanding.
“We’re having to think about this – the ramifications that could go beyond [requests for information from the taxman],” said Lord Mummery.
“If it’s advice on tax, it’s advice on law,” said Flint.
“So where’s the boundary?” responded Lord Lloyd.
An architect, for example, could potentially give legal advice based on his area of expertise, but not outside of it – a similar situation as accountants giving tax advice.
Timothy Brennan QC, representing the tax inspectors, said extending privilege “hasn’t been pressing” for legislators. But Lord Mummery said the lord justices “need an answer” as to whether it should be extended by principle, not whether Parliament had been quiet about the topic.
“The common law moves with the times,” said Lord Mummery.
Experienced QC Sir Sydney Kentridge, representing the Law Society, argued that LPP was a “unique status” for lawyers’ clients, formed over centuries in connection with the administration of justice”.
“The power to discipline the legal profession was a power of the judges. They’re officers of the court. That’s what makes it different,” said Sir Sydney.
He also attempted to shoot down claims that ICAEW-qualified advisers had the same duty of confidentiality to clients as lawyers. He cited the institute’s own rules,
that advisers may disclose information about clients to “interested bodies”.
Responding to the arguments, Pannick conceded that extending LPP to tax accountants could potentially open the door to other professions, but added: “[I’m] not submitting it’s easy – but not impossible. I’m saying accountants can meet the tough criteria.”
LPP, he contended, was a principle to enable clients to seek and obtain advice skilled in jurisprudence.
Lord Mummery applauded the QCs on their excellent arguments, before saying that the complexity and importance of the case would mean that a judgment would likely be brought after summer recess, in September.
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