In a long awaited judgment, the Supreme Court ruled last week that legal advice privilege (LAP) could not be extended to non-legally qualified professionals, a move with implications for businesses of all sizes.
LAP applies to all communications passing between a client and its lawyers, in connection with the provision of legal advice. It exists to ensure individuals have the confidence to seek advice in the knowledge it cannot be disclosed or passed on to a third party.
The ruling came about in a case between the insurer Prudential and HMRC. Prudential sought to extend LAP to tax advice it had received from its accountant, PricewaterhouseCoopers (PwC). In this case, HMRC had sought disclosure of that advice as part of its investigation into Prudential’s tax arrangements.
Prudential argued it was entitled to withhold certain documents from HMRC, because they contained legal advice on its tax position and were therefore covered by LAP, even though they had been produced by accountants not lawyers.
The Supreme Court dismissed Prudential’s claim and, in a majority verdict, refused to extend LAP to advice given by not-legally qualified professionals, even where that professional is authorised to provide the advice in question.
The irony is that if the same advice had been obtained from a qualified lawyer, it would automatically have attracted LAP.
The reasoning behind this was that by extending LAP to non-lawyers, this may lead to the distortion of a clear and well understood principle, creating confusion and uncertainty over what advice would be covered, by whom and in what circumstances.
The Supreme Court concluded that this was an issue which therefore ought to be left to Parliament to decide.
What is clear from this is that despite recent attempts to expand the legal market through the creation of multi-disciplinary practices, clients need to tread extremely carefully when taking advice from non-lawyers.
Until parliament enacts new legislation to extend the application of LAP, the only way that businesses can be confident they will not be compelled to disclose professional advice they receive on their affairs, whether it be tax advice from accountants or employment advice from HR advisers, is to ensure such advice is provided by a member of the legal profession.
If you wish to know more about this, or have any further questions, please contact Colin Fenny at Harrison Drury on Colin.Fenny@harrison-drury.com.