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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Prudential Plc & Anor, R (on the application of) v Special Commissioner of Income Tax & Ors  EWCA Civ 1094 (13 October 2010)
Cite as:  1 Costs LR 92,  STC 2802,  2 WLR 50,  Lloyd's Rep FC 1,  STI 2709,  ACD 19,  1 All ER 316,  EWCA Civ 1094,  NPC 99,  CP Rep 5,  BTC 773,  1 FCR 195,  QB 669
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MR JUSTICE CHARLES
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE STANLEY BURNTON
| THE QUEEN ON THE APPLICATION OF
(1) PRUDENTIAL PLC
(2) PRUDENTIAL (GIBRALTAR) LTD
|- and -
|(1) SPECIAL COMMISSIONER OF INCOME TAX
(2) PHILIP PANDOLFO (HM Inspector of Taxes)
(1) INSTITUTE OF CHARTERED ACCOUNTANTS IN ENGLAND AND WALES
(2) THE GENERAL COUNCIL OF THE BAR
(3) THE LAW SOCIETY
PricewaterhouseCoopers Legal LLP) for the Appellants
The First Respondent was not represented
Timothy Brennan Q.C. Diya Sen Gupta and Laura McNair-Wilson (instructed by
Solicitor to HMRC) for the Second Respondent
Charles Flint Q.C. (instructed by Simmons & Simmons) for the First Intervener
Bankim Thanki Q.C. and Ben Valentin (instructed by the Bar Council)
for the Second Intervener
Sir Sydney Kentridge Q.C. and Tom Adam Q.C. (instructed by Herbert Smith LLP)
for the Third Intervener
Hearing dates: 14 and 15 July 2010
Crown Copyright ©
Lord Justice Lloyd:
"I agree that by reference to the need for confidentiality in respect of the giving of legal advice and the logic, purpose and public interest underlying legal advice privilege there is real strength in the argument that the extent of the right to refuse disclosure should not relate to the nature of the legal qualification of the person giving the advice."
"LPP is a fundamental human right long established in the common law. It is a necessary corollary of the right of any person to obtain skilled advice about the law. Such advice cannot be effectively obtained unless the client is able to put all the facts before the adviser without fear that they may afterwards be disclosed and used to his prejudice."
"Legal professional privilege is thus much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests."
On the following page he said:
"Putting it another way, if a balancing exercise was ever required in the case of legal professional privilege, it was performed once and for all in the 16th century, and since then has applied across the board in every case, irrespective of the client's individual merits."
"that all relevant material should be available to courts when deciding cases. Courts should not have to reach decisions in ignorance of the contents of documents or other material which, if disclosed, might well affect the outcome."
He too rejected the idea that a balancing exercise could be conducted as regards LPP on the facts of the particular case.
How the point arises in the present case
Taxes Management Act 1970, section 20
"20(1) Subject to this section, an inspector may by notice in writing require a person
(a) to deliver to him such documents as are in the person's possession or power and as (in the inspector's reasonable opinion) contain, or may contain, information relevant to
(i) any tax liability to which the person is or may be subject, or
(ii) the amount of any such liability, or
(b) to furnish to him such particulars as the inspector may reasonably require as being relevant to, or to the amount of, any such liability.
(3) Subject to this section, an inspector may, for the purpose of enquiring into the tax liability of any person ("the taxpayer"), by notice in writing require any other person to deliver to the inspector or, if the person to whom the notice is given so elects, to make available for inspection by a named officer of the Board, such documents as are in his possession or power and as (in the inspector's reasonable opinion) contain, or may contain, information relevant to any tax liability to which the taxpayer is or may be, or may have been, subject, or to the amount of any such liability "
"(8) A notice under section 20(3) or (8A) or section 20A(1) does not oblige a barrister, advocate or a solicitor to deliver or make available, without his client's consent, any document with respect to which a claim to professional privilege could be maintained.
(9) Subject to subsections (11) and (12) below, a notice under section 20(3) or (8A) -
(a) does not oblige a person who has been appointed as an auditor for the purposes of any enactment to deliver or make available documents which are his property and were created by him or on his behalf for or in connection with the performance of his functions under that enactment, and
(b) does not oblige a tax adviser to deliver or make available documents which are his property and consist of relevant communications.
(10) In subsection (9) above "relevant communications" means communications between the tax adviser and
(a) a person in relation to whose tax affairs he has been appointed, or
(b) any other tax adviser of such a person,
the purpose of which is the giving or obtaining of advice about any of those tax affairs; and in subsection (9) above and this subsection "tax adviser" means a person appointed to give advice about the tax affairs of another person (whether appointed directly by that other person or by another tax adviser of his).
(11) Subject to subsection (13) below, subsection (9) above shall not have effect in relation to any document which contains information explaining any information, return, accounts or other document which the person to whom the notice is given has, as tax accountant, assisted any client of his in preparing for, or delivering to, the inspector or the Board."
"(2) For the purposes of sections 20 and 20A, a person stands in relation to another as tax accountant at any time when he assists the other in the preparation or delivery of any information, return, accounts or other document which he knows will be, or is, or are likely to be, used for any purpose of tax; and his clients are all those to whom he stands or has stood in that relationship."
"5(2) For this purpose "items subject to legal privilege" means-
(a) communications between a legal adviser and his client or any person representing his client made in connection with the giving of legal advice to the client;
(b) communications between a professional legal adviser and his client or any person representing his client or between such an adviser or his client or any such representative and any other person made in connection with or in contemplation of legal proceedings and for the purposes of such proceedings; and
(c) items enclosed with or referred to in such communications and made-
(i) in connection with the giving of legal advice; or
(ii) in connection with or in contemplation of legal proceedings and for the purposes of such proceedings,
when they are in the possession of a person who is entitled to possession of them."
"(1) An information notice does not require a person
(a) to provide privileged information, or
(b) to produce any part of a document that is privileged.
(2) For the purpose of this Schedule, information or a document is privileged if it is information or a document in respect of which a claim to legal professional privilege, or (in Scotland) to confidentiality of communications as between client and professional legal adviser, could be maintained in legal proceedings.
The scope of LPP: Three Rivers (No. 6)
"So I must now come to policy. Why is it that the law has afforded this special privilege to communications between lawyers and their clients that it has denied to all other confidential communications? In relation to all other confidential communications, whether between doctor and patient, accountant and client, husband and wife, parent and child, priest and penitent, the common law recognises the confidentiality of the communication, will protect the confidentiality up to a point, but declines to allow the communication the absolute protection allowed to communications between lawyer and client giving or seeking legal advice. In relation to all these other confidential communications the law requires the public interest in the preservation of confidences and the private interest of the parties in maintaining the confidentiality of their communications to be balanced against the administration of justice reasons for requiring disclosure of the confidential material. There is a strong public interest that in criminal cases the innocent should be acquitted and the guilty convicted, that in civil cases the claimant should succeed if he is entitled to do so and should fail if he is not, that every trial should be a fair trial and that to provide the best chance of these desiderata being achieved all relevant material should be available to be taken into account. These are the administration of justice reasons to be placed in the balance. They will usually prevail."
"None of these judicial dicta tie the justification for legal advice privilege to the conduct of litigation. They recognise that in the complex world in which we live there are a multitude of reasons why individuals, whether humble or powerful, or corporations, whether large or small, may need to seek the advice or assistance of lawyers in connection with their affairs; they recognise that the seeking and giving of this advice so that the clients may achieve an orderly arrangement of their affairs is strongly in the public interest; they recognise that in order for the advice to bring about that desirable result it is essential that the full and complete facts are placed before the lawyers who are to give it; and they recognise that unless the clients can be assured that what they tell their lawyers will not be disclosed by the lawyers without their (the clients') consent, there will be cases in which the requisite candour will be absent. It is obviously true that in very many cases clients would have no inhibitions in providing their lawyers with all the facts and information the lawyers might need whether or not there were the absolute assurance of non-disclosure that the present law of privilege provides. But the dicta to which I have referred all have in common the idea that it is necessary in our society, a society in which the restraining and controlling framework is built upon a belief in the rule of law, that communications between clients and lawyers, whereby the clients are hoping for the assistance of the lawyers' legal skills in the management of their (the clients') affairs, should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else (see also paras 15.8 to 15.10 of Zuckerman's Civil Procedure (2003) where the author refers to the rationale underlying legal advice privilege as "the rule of law rationale"). I, for my part, subscribe to this idea. It justifies, in my opinion, the retention of legal advice privilege in our law, notwithstanding that as a result cases may sometimes have to be decided in ignorance of relevant probative material."
"In Balabel v Air India  Ch 317, Taylor LJ said, at p 330, that for the purposes of attracting legal advice privilege
"legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context".
I would venture to draw attention to Taylor LJ's reference to "the relevant legal context". That there must be a "relevant legal context" in order for the advice to attract legal professional privilege should not be in doubt. Taylor LJ said, at p 331, that
"to extend privilege without limit to all solicitor and client communication upon matters within the ordinary business of a solicitor and referable to that relationship [would be] too wide".
This remark is, in my respectful opinion, plainly correct. If a solicitor becomes the client's "man of business", and some solicitors do, responsible for advising the client on all matters of business, including investment policy, finance policy and other business matters, the advice may lack a relevant legal context. There is, in my opinion, no way of avoiding difficulty in deciding in marginal cases whether the seeking of advice from or the giving of advice by lawyers does or does not take place in a relevant legal context so as to attract legal advice privilege. In cases of doubt the judge called upon to make the decision should ask whether the advice relates to the rights, liabilities, obligations or remedies of the client either under private law or under public law. If it does not, then, in my opinion, legal advice privilege would not apply. If it does so relate then, in my opinion, the judge should ask himself whether the communication falls within the policy underlying the justification for legal advice privilege in our law. Is the occasion on which the communication takes place and is the purpose for which it takes place such as to make it reasonable to expect the privilege to apply? The criterion must, in my opinion, be an objective one."
"In relation to legal advice privilege what matters today remains the same as what mattered in the past: whether the lawyers are being asked qua lawyers to provide legal advice."
"61. But the privilege is too well established in the common law for its existence to be doubted now. And there is a clear policy justification for singling out communications between lawyers and their clients from other professional communications. The privilege belongs to the client, but it attaches both to what the client tells his lawyer and to what the lawyer advises his client to do. It is in the interests of the whole community that lawyers give their clients sound advice, accurate as to the law and sensible as to their conduct. The client may not always act upon that advice (which will sometimes place the lawyer in professional difficulty, but that is a separate matter) but there is always a chance that he will. And there is little or no chance of the client taking the right or sensible course if the lawyer's advice is inaccurate or unsound because the lawyer has been given an incomplete or inaccurate picture of the client's position.
62. This rationale extends much more broadly than to advice about legal rights and obligations strictly so-called. I understand that we all endorse the approach of the Court of Appeal in Balabel v Air India , and in particular the observation of Taylor LJ, at p 330, that "legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context". There will always be borderline cases in which it is difficult to decide whether there is or is not a "legal" context. But much will depend upon whether it is one in which it is reasonable for the client to consult the special professional knowledge and skills of a lawyer, so that the lawyer will be able to give the client sound advice as to what he should do, and just as importantly what he should not do, and how to do it. We want people to obey the law, enter into valid and effective transactions, settle their affairs responsibly when they separate or divorce, make wills which will withstand the challenge of the disappointed, and present their best case before all kinds of court, tribunal and inquiry in an honest and responsible manner."
"The foundation of this rule is not difficult to discover. It is not (as has sometimes been said) on account of any particular importance which the law attributes to the business of legal professors, or any particular disposition to afford them protection, though certainly it may not be very easy to discover why a like privilege has been refused to others, and especially to medical advisers.
But it is out of regard to the interests of justice, which cannot be upholden, and to the administration of justice, which cannot go on, without the aid of men skilled in jurisprudence, in the practice of the Courts, and in those matters affecting rights and obligations which form the subject of all judicial proceedings. If the privilege did not exist at all, every one would be thrown upon his own legal resources; deprived of all professional assistance, a man would not venture to consult any skilful person, or would only dare to tell his counsellor half his case. If the privilege were confined to communications connected with suits begun, or intended, or expected, or apprehended, no one could safely adopt such precautions as might eventually render any proceedings successful, or all proceedings superfluous."
Status or function?
"The privilege is confined to the cases of Counsel, Solicitor and Attorney; but in order to raise the privilege, it must be proved that the information, which the adverse party wishes to learn, was communicated to the witness in one of those characters; for if he be employed merely as a steward, he may be examined."
"A hypothetical instance put in argument by Mr. Burton would be a case in which a client going on extended holiday instructed his solicitor to collect rents from his tenants. If an issue subsequently arose as to whether the landlord had waived any right to forfeiture, the communication of those instructions to his solicitor would be disclosable and admissible because there would be no question of their being related to the obtaining of legal advice."
"I would add that in the modern age it is not easy to see why the logic, purpose and public interest underlying the privilege when litigation is not contemplated supports the privilege in respect of communications with a lawyer but not, for example, communications with an accountant on the same subject matter;"
"in our opinion the privilege should be strictly confined to legal advisers such as solicitors and counsel, who are professionally qualified, who are members of professional bodies, who are subject to the rules and etiquette of their professions, and who owe a duty to the Court. This is a clearly defined and easily identifiable qualification for the attachment of privilege. To extend the privilege to unqualified advisers such as personnel consultants is in our opinion unnecessary and undesirable."
The effect of legislation
i) By the Civil Evidence Act 1968, section 15, any communication between, on the one hand, the patent agent of a party to proceedings pending or contemplated before the Comptroller of Patents or the Patents Appeal Tribunal, and that party or any other person, on the other, was to be privileged from disclosure "in like manner as if" the proceedings had been in the High Court and the patent agent had been the party's solicitor. To much the same effect (substituting the Patents Court for the Patents Appeal Tribunal) was section 104 of the Patents Act 1977, which replaced it. Section 280 of the Copyright, Designs and Patents Act 1988 confers a more general equivalent of privilege as regards patent agents, in relation to any matter relating to the protection of any invention, design, technical information or trade mark or as to any matter involving passing off.
ii) Section 87 of the Trade Marks Act 1994 confers an equivalent privilege in relation to communications with trade mark agents as to any matter relating to the protection of any design or trade mark or as to any matter involving passing off.
iii) The Administration of Justice Act 1985, section 33, gave privilege as regards communications with a licensed conveyancer acting as such for a client.
i) The Law Reform Committee in its 6th report, on Privilege in Civil Proceedings, in 1967 (Cmnd 3472), made recommendations, some of which were implemented by the Civil Evidence Act 1968. One of these was the extension, already mentioned, to patent agents in relation to specific proceedings only (see paragraphs 24 to 26). The Committee considered the relationship between accountants and their clients, and concluded that there was no need for this relationship to be covered by any statutory privilege (paragraph 54). It is fair to say that no particular attention was given in the Committee's report to the proposition that legal advice on tax matters was sought from and given by accountants.
ii) The Committee on Enforcement Powers of the Revenue Departments (the Keith Committee) in its report in March 1983 (Cmnd 8822) considered confidentiality and LPP at chapter 26. At paragraph 26.6.13, by a majority, the Committee recommended that LPP should be extended to duly appointed tax agents who have been admitted members of an incorporated society of accountants or of the Institute of Taxation, and should apply only to advice given by the agent. This recommendation by the Committee has not been implemented.
iii) The Director-General of Fair Trading, in a report on Competition in Professions in March 2001, expressed the view that the rule by which LPP applies only where the advice is sought from and given by a lawyer restricted and distorted competition. In July 2002 the Department of Constitutional Affairs undertook a consultation on the issues raised by that report. In July 2003, having carried out that consultation process, the DCA stated that it would not propose any change to the law as regards LPP.
Wilden Pump Engineering Co v Fusfeld
"in that the person whose advice was in question seems to have been both patent agent and solicitor, and the essence of the decision was that the advice which he gave was privileged as advice of a solicitor only insofar as it was advice given by him in his capacity as a solicitor, but not insofar as he was merely acting as patent agent."
"In the judgment of Falconer J the test for which Mr Prescott was arguing is formulated in two propositions: the first, which is not disputed:
"where legal advice is sought in confidence from a qualified legal adviser in his professional capacity, privilege may be claimed for the communications made for that purpose".
The second, which is disputed:
"A qualified legal adviser is one who is officially recognised by the competent authorities in this country, or a foreign state, as being a member of a profession of persons fit to advise on the branch of law in respect of which the said advice is sought.""
"Leaving aside, however, whether Mr Prescott fails by his own test, it seems to me that the position is that it is impossible to uphold an utterly wide test of privilege extending to any communication by the litigant with any person from whom he has sought, or happens to have received, advice on any point of law relevant to the litigation in question. It is far too wide, and the courts have never adopted such a wide approach. The narrow approach of the common law is to recognise certain types of person as being legal advisers, communications with whom on matters of law are privileged. Besides barristers and solicitors, this, it seems from the old authorities, originally also included scriveners and doctors of the civil law practising in Doctors' Commons and Proctors in the Ecclesiastical Courts - whether or not they were solicitors. But those were regarded as varieties of lawyer.
I do not regard the patent agent as a variety of lawyer, and I take the view that the patent agent is not within the common law privilege."
"But it seems to me that it would be quite impossible for this court, in the face of that limited grant of privilege by Parliament, to hold that there exists a much wider, general privilege covering the advice of patent agents to their clients on matters of law - not even limited to matters arising under the Patents Act.
Moreover, if the court is to declare that a privilege is to be established by analogy, there must be a clear indication that the public interest so requires. I can see no such indication in the present case; in particular, no such indication which would warrant extending the general privilege to patent agents, but denying it to members of other professions, not being barristers or solicitors, who happen to give advice to their clients on matters of law."
"46. It is clearly in the general interest that any person who wishes to consult a lawyer should be free to do so under conditions which favour full and uninhibited discussion. It is for this reason that the lawyer-client relationship is privileged.
48. the Court sees no reason to distinguish between the different categories of correspondence with lawyers which, whatever their purpose, concern matters of a private and confidential character. In principle such letters are privileged under article 8."
Who is an accountant?
"an accountant, auditor or tax adviser who is a member of a professional body which is established for accountants, auditors or tax advisers (as the case may be) and which makes provision for (a) testing the competence of those seeking admission to membership of such a body as a condition for such admission; and (b) imposing and maintaining professional and ethical standards for its members, as well as imposing sanctions for non-compliance with those standards."
Comparisons with other jurisdictions
Lord Justice Stanley Burnton
Lord Justice Mummery
IT IS ORDERED THAT