Law Society intervenes in Prudential appeal case

6 May 2010

The Court of Appeal has given the Law Society of England & Wales permission to intervene in a crucial court case in which Prudential is seeking to extend legal professional privilege (LPP) beyond the legal profession.

The Society has permission to intervene in the appeal of Prudential PLC and Prudential (Gibraltar) Limited v Special Commissioner of Income Tax and Philip Pandolfo (HM Inspector of Taxes) over concerns about the potential scope for any professional giving advice on an area of the law to claim LPP. This would be irrespective of whether they are regulated or members of any organised and disciplined association and irrespective of their role in the administration of justice.

LPP gives communications between a lawyer and his/her client for the purpose of obtaining legal advice privileged status so that such communications cannot be made available to the court or third parties.

Law Society President Robert Heslett says:

"The case has the potential consequence of giving anyone who describes his/her self as a tax accountant or other professional the ability to withhold vital information from bodies such as HMRC, when legal professional privilege is intended to have a very specific purpose. The boundaries of LPP must remain clear. Extending it risks creating uncertainty over what can and cannot fall under LPP.

"The concept of legal professional privilege has been and remains closely tied to the administration of justice. The first duty of a solicitor is to the Court and the second is to the client. In this respect a solicitor is unique among the professions. The duty to the Court seeks to ensure that the privilege is not abused.

"In consequence the courts have taken the approach that legal advice privilege does not attach solely because of the purpose and nature of the advice but also because the advice emanates from a member of the legal profession."

The Prudential case concerns the advice provided by accountants where litigation was not contemplated. In such scenarios the advice and any information in relation to it will not benefit from legal advice privilege and a taxpayer may have to disclose documents or information, including its communications with the accountant under Schedule 36 Finance Act 2008 and section 20 Taxes Management Act 1970.

The Society points out that in October last year the High Court held that legal advice privilege does not extend to advice from, and communications with, accountants even if it relates to advice about the law.

Law Society President, Robert Heslett, says: "The Society believes that the issues raised in this appeal are of considerable importance both to the solicitors’ profession and the public interest. Questions which bear upon the nature and extent of legal professional privilege are fundamental to the work of solicitors.

"An extension of legal professional privilege to non-lawyers is not a new suggestion. It is something which has been considered by law reformers before, but has never been taken up by Parliament. Such an extension should be the subject of consideration by Parliament and, if considered desirable, be the subject of primary legislation which would clearly define the limits and conditions of any extension to other professionals."

Julian Copeman and Heather Gething, partners in Herbert Smith LLP, are instructed by the Law Society in connection with the intervention. Hebert Smith commented that, "Privilege is the creation of the common law and as it stands the common law is clear: only communications with a lawyer are protected by privilege. Any extension would seem to us to require statutory intervention."

In-house lawyers

The Society has also been tackling the issue of legal professional privilege on behalf of its in-house members’ interests. While the Society was refused permission to intervene in the Akzo Nobel case in the European Court of Justice, it continues to lobby hard to ensure certain communications between in-house lawyers in their capacity as solicitors and their company executives remain subject to privilege.

Last week, the Advocate General's opinion on the case favoured not allowing privilege for general counsel.

Law Society chief executive Desmond Hudson says:

"We are disappointed with the opinion given by the Advocate General but we must wait for the European Court of Justice to give its ruling on this issue and we remain hopeful. For our part, a solicitor is a solicitor whether working in practice or as General Counsel for a company. Their obligations as an officer of the court and as a member of a fine profession remain unchanged."