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Supreme Court considers whether to extend scope of legal advice privilege to accountants

05 March 2013

Legal professional privilege has always been reserved for communications between a lawyer and client. The case of R (on the application of Prudential plc & anr) v Special Commissioner of Income Tax & anr [2013] UKSC 1, 23 January 2013, had the potential to turn 500 years of legal history on its head by extending privilege to accountants giving legal advice. The Supreme Court opted to preserve the status quo, but compelling dissenting judgments raise the question of whether Parliament will now consider the issue.


In 2004, PricewaterhouseCoopers (PwC) advised the Prudential group of companies in relation to transactions implementing a marketed tax avoidance scheme. HMRC served notices on Prudential requiring it to disclose documents in relation to the transactions. Prudential refused to disclose certain documents which related to the seeking (by Prudential) and the giving (by PwC) of legal advice.

There was no dispute that the documents would have attracted legal advice privilege (LAP), and thereby been excluded from Prudential's disclosure obligations had they been created between Prudential and a member of the legal profession. The judge at first instance, however, held that no such privilege extended to PwC's advice. The Court of Appeal upheld the decision for substantially the same reasons.

The issues

The specific issue before the Supreme Court was whether Prudential was entitled to claim LAP in relation to the disputed documents, being legal advice given by accountants in relation to a tax avoidance scheme.

The general issue – and the one which gave this case the ability to change the legal landscape so profoundly – was whether LAP extends, or should be extended (and if so, how far), to legal advice given by someone other than a member of the legal profession.

The Supreme Court's decision

By a majority of five to two (Lord Clarke and Lord Sumption dissenting) the Court dismissed Prudential's appeal.

Delivering the leading judgment, Lord Neuberger's fundamental concern was that to extend LAP would be to undermine the universally held belief that LAP only applies to communications in connection with advice given by members of the legal profession (ie barristers, solicitors, members of the Chartered Institute of Legal Executives, and foreign lawyers).

His Lordship cited numerous sources confirming this to be the case – among others, clear judicial statements of high authority, textbooks, official reports, and legislation passed by Parliament which plainly assumes that LAP is limited to advice given by lawyers.

Lord Neuberger and the rest of the majority did acknowledge that the case for allowing the appeal was strong, at least in principle. If LAP exists to allow a person to seek and obtain legal advice with candour and full disclosure by ensuring the utmost confidence, and if it is a benefit of the client and not the lawyer, Lord Neuberger found it hard, as a matter of pure logic, to see why it should be restricted to communications with legal advisers who happen to be qualified lawyers.

However "the life of the common law had not been logic", Lord Neuberger observed, but "has been experience", quoting Oliver Wendell Jones, Jr in The Common Law [1881]. He gave three connected reasons why LAP should not be extended beyond its current parameters.

First, there is an unacceptable risk of uncertainty and loss of clarity in a sensitive area of the law. Lord Sumption suggested in his dissenting judgment that LAP should be extended to legal advice given by a person who is a member of a "profession [which] ordinarily includes the giving of legal advice". How would one decide, Lord Neuberger asks, which occupations are "professions", and which professions include the giving of legal advice? The court would have to delve into the qualifications or standing of particular groups of people, leaving room for uncertainty, expenditure and inconsistency of approach.

Second, given the wide questions of public policy and significant consequences of extending LAP, this is a question which should be considered through the legislative process, with its wide powers of inquiry and consultation and its democratic accountability. An extension of LAP to other professions may only be appropriate on a conditional or limited basis, which cannot appropriately be assessed, let alone imposed, by the courts.

And third, Parliament has legislated in this area in recent years on the assumption that LAP only applies to advice given by lawyers. If LAP of the type argued by Prudential existed, the statutory extensions to patent attorneys, trade mark agents and licensed conveyancers would clearly not have been necessary.

Lord Sumption, who delivered a fascinating history lesson in the development of the modern law of privilege, disagreed with the majority and held that privilege attaches to any communication between a client and his legal adviser which is made: (i) for the purpose of enabling the adviser to give or the client to receive legal advice; (ii) in the course of a professional relationship; and (iii) in the exercise by the adviser of a profession which has as an ordinary part of its function the giving of skilled legal advice on the subject in question.

He took the view that the historical restriction of privilege to the advice of lawyers simply reflected the assumption that lawyers were the only source of skilled legal advice, an assumption which until modern times was correct. To recognise privilege attaching to the legal advice of accountants would not involve any change to the principles governing the availability of LAP, but would merely reflect changes in how and by whom legal services are provided. His Lordship held that it is up to the courts, in particular the Supreme Court, to ensure that changes in legal, commercial or social practice are properly reflected in the way that the law is applied.


The Supreme Court's time is reserved for appeals involving points of law of "general public importance". There can have been no doubt about the importance of the point of law argued in Prudential's judicial review.

The case had the potential to redefine the boundaries of legal professional privilege, a principle which, as explained by Lord Sumption, had its origins in the practice of the Court of Chancery in the years after the statute of 1562, although it was another couple of hundred years before it evolved into something resembling the modern law of privilege.

For the moment at least, the door has been closed on any extension of legal advice privilege to communications with professionals other than members of the legal profession. This is welcome news in many respects since, as was highlighted by Lord Neuberger, the myriad uncertainties which would arise in an area of the law which is currently very well understood would almost certainly result in an explosion of satellite litigation. Lord Sumption acknowledged that an extension of the principle to apply to accountants would result in the number of claims to privilege increasing, but he said this could be explained by the growing complexity of tax law and the increase in the number of people seeking legal advice. Why should one draw an arbitrary distinction between professions performing exactly the same function?

Lord Sumption's argument is attractive in principle, but as the majority noted, while it is true many other professions possess specialist legal knowledge and are often involved in the giving of skilled legal advice – town planners, pension consultants and surveyors were mentioned – it is less common that the legal element represents the totality of their advice. A practical consequence of extending privilege to communications with such professionals would be an exponential increase in the time and cost spent on disclosure in litigation, as parties and courts grappled with the nature of the role or function being performed by a professional, and whether certain documents, or parts of documents, should properly be regarded as privileged.

There is no doubt, however, that the arguments put forward by Lord Sumption and Lord Clarke have force, so while the status quo has been preserved for now, practitioners will await to see what, if any, response Parliament has to Lord Clarke's entreaty to consider the matter "as soon as reasonably practicable". Legal services in the UK are undergoing perhaps the most profound period of change in decades, with the Legal Services Act 2007 specifically omitting the giving of legal advice from the list of "reserved legal activities". In this context, perhaps it is inevitable that this fundamental principle, with its peculiar 500-year history, will be subject to profound change too. Whether and how will depend on Parliament's will and ability to navigate the many potential pitfalls highlighted by this judgment.

Further information

This case summary is part of the Allen & Overy Litigation Review, a monthly update on interesting new cases and legislation in commercial dispute resolution. For more information please contact Sarah Garvey, or tel +44 (0)20 3088 3710.