R.

(on the application of Prudential Plc) v Special Commissioner of

Income Tax
Supreme Court | January 23, 2013 | 2013 WL 128056

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Jurisdiction: United Kingdom

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R. (on the application of Prudential Plc) v Special..., 2013 WL 128056 (2013)

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R. (on the application of Prudential Plc) v Special
Commissioner of Income Tax

Positive/Neutral Judicial Consideration

Court
Supreme Court

Judgment Date
23 January 2013

Where Reported
[2013] UKSC 1
[2013] 2 A.C. 185
[2013] 2 W.L.R. 325
[2013] 2 All E.R. 247
[2013] S.T.C. 376
[2013] 1 WLUK 431
[2013] 2 Costs L.R. 275
[2013] 1 F.C.R. 545
82 T.C. 64
[2013] B.T.C. 45
[2013] C.I.L.L. 3309
[2013] S.T.I. 264
[2013] 5 E.G. 96 (C.S.)
(2013) 163 N.L.J. 109
Times, February 5, 2013
[2013] C.L.Y. 2390
Judgment

Subject
Professions

Other related subjects

Accountancy; Legal profession; Tax

Keywords
Accountants; Legal advice privilege; Professionals; Tax avoidance

Judge
Lord Neuberger JSC;
Lord Hope DPSC;
Lord Walker JSC;
Lord Mance JSC;
Lord Clarke JSC;
Lord Sumption JSC;
Lord Reed JSC

Counsel
For the appellants: Lord Pannick QC, Conrad McDonnell.
For the respondent: James Eadie QC, Patrick Goodall.
For the first intervener: Sydney Kentridge QC, Tom Adam QC, Tim Johnston.
For the second intervener: Patricia Robertson QC.
For the third intervener: Philip Havers QC.
For the fourth intervener: Bankim Thanki QC, Ben Valentin, Henry King, Rebecca Loveridge.
For the fifth intervener: Michael Edenborough QC, James Tumbridge.

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R. (on the application of Prudential Plc) v Special..., 2013 WL 128056 (2013)

Solicitor
For the appellants: PricewaterhouseCoopers Legal LLP.
For the first intervener: Herbert Smith Freehills LLP.
For the second intervener: Simmons & Simmons.
For the third intervener: In-house solicitor.
For the fourth intervener: Field Fisher Waterhouse LLP.
For the fifth intervener: Gowlings (UK) LLP.
For the respondents: In-house solicitor.
Case Digest
Summary
Legal advice privilege did not apply to legal advice given by someone other than a member of the legal profession,
and therefore did not cover legal advice given by accountants in relation to a tax avoidance scheme.

Abstract
The appellant companies (P) appealed against a decision ([2010] EWCA Civ 1094, [2011] Q.B. 669) that legal
advice given by accountants in respect of tax matters was not covered by legal advice privilege.

The Revenue had issued a notice under the Taxes Management Act 1970 s.20 requiring disclosure of documents
relating to a tax avoidance scheme. P refused to disclose documents containing legal advice from their accountants
on the ground that they were covered by legal advice privilege.

Held
Appeal dismissed.

(Lords Sumption and Clarke JJ.S.C. dissenting) (1) Allowing the appeal would extend legal advice privilege
considerably beyond what had for a long time been understood to be its limits. There was a strong argument in
principle for allowing the appeal: the privilege was based on the need to ensure that a person could seek legal
advice with candour, and it was conferred for the client's benefit, not for the legal profession. It was therefore
hard to see why the privilege should be restricted to legal advisers who happened to be lawyers. The principled
arguments for restricting the privilege to professional lawyers were weak, although not wholly devoid of force
(see paras 37-42 of judgment). (2) However, legal advice privilege would not be extended to communications in
connection with advice given by professional people other than lawyers, even where that advice was legal advice
which that person was qualified to give. The consequences of allowing the appeal were hard to assess and were
likely to lead to a clear and well-understood principle becoming unclear and uncertain. The accepted state of the
law was clear to advisers and relatively easy to explain to clients. The implications had been generally understood
and allowed for by the rules and practice of the courts and in legislation. Extending the privilege to advice given
by a member of a profession which ordinarily included giving legal advice, as had been proposed, carried an
unacceptable risk of uncertainty. It was unclear whether certain occupations would be regarded as professions,
and unclear how a court was to decide whether a profession was one which ordinarily included giving legal advice
(paras 51-57). The question of whether the privilege should be extended raised questions of policy which should
be left to Parliament. Many pieces of legislation gave the executive power to call for documents, which could
be resisted by invoking the privilege. It would require exceptional circumstances before the courts could create
or extend such a right. Further, the passing of the Legal Services Act 2007 indicated that Parliament was ready
to change common law practices involving special rules for lawyers when it wished to do so. The extension of
the privilege to other professions might only be appropriate on a conditional or limited basis; that could properly
be considered by Parliament, not by the courts. The matter had been discussed in Parliament and proposed to
the executive, and Parliament had apparently chosen not to extend the privilege to accountants giving tax advice.
Such points could be overcome if there was a pressing need for the common law to move; there was no evidence
that got near establishing such a need (para 61-67). Parliament had enacted legislation relating to the privilege,
which suggested that it would be inappropriate for the court to extend the law on the privilege. It had on occasions
extended the privilege on the basis that it had been limited to members of the legal profession; such provisions
would have been unnecessary had the privilege already been broader (paras 68-69). (3) (Obiter, per Lord Hope

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J.S.C.) There was likely to be interest in the instant case in Scotland as well as England. Although the law had
developed separately there, it had developed in the same direction. It was not apparent that the courts had yet been
required to decide whether the privilege should be confined to lawyers; the authorities therefore did not foreclose
the possible application of the privilege to accountants' advice. Nevertheless, the general understanding was that
the privilege applied only to legal professionals. If the question of whether to extend the privilege were to arise,
the courts would have to make a policy decision (paras 102-113). (4) (Per Lord Sumption J.S.C.) Legal advice
privilege was the client's privilege, depended on the public interest in promoting access to legal advice on the
basis of absolute confidence, and was not dependent on the status of the adviser. Accordingly, there could be no
principled reason for distinguishing between the advice of lawyers and accountants. Recognising that would not
extend the scope of the privilege at common law, but would only recognise that much legal advice was given by
advisers who were not lawyers. It was not necessary to leave the matter to Parliament (paras 122-130).

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