Are your affairs confidential? …..Not unless you use a lawyer

GS article (lit)

Many people assume that when they are given legal advice on their affairs – such advice increasingly being offered by their accountant, insurer or a specialist company (often through an insurance policy) – that advice is “privileged” or “confidential”, and that they cannot be forced to reveal that advice to anyone else. However, a recent decision of the Supreme Court has confirmed that is only the case where such advice has been provided by a member of the legal profession such as a solicitor.

The case of R.(on the application of Prudential plc and another) –v- Special Commissioner of Income Tax and another [2013] UKSC 1, involved legal advice being given by chartered accountants in relation to a tax avoidance scheme. HMRC issued a statutory notice under section 20 of the Taxes Management Act 1970 requiring Prudential to disclose all documents and advice relating to the scheme. Prudential argued that because the advice was of a legal nature, it should attract legal advice privilege and therefore, they were not obliged to disclose that advice to HMRC. Prudential argued that it was the nature of the advice, not the status of the adviser, which should determine whether it was protected by legal advice privilege.

The Supreme Court disagreed. It accepted HMRC’s arguments that legal advice privilege only applied to communications in connection with advice given by lawyers such as solicitors or barristers. To extend legal advice privilege to other professions – such as to advice of a legal nature given by accountants – would lead to too much uncertainty as to when the rule applied and when it did not. In order to retain that certainty, only advice given by lawyers should be (and is) capable of being protected in this way.

Gavin Evans, Associate in the Commercial Litigation team at The Wilkes Partnership, comments:

“The decision of the Supreme Court in this case is important both for non-legally qualified professional advisers, such as accountants, and for their clients, be they businesses or individuals. It emphasises that although there is an increasingly crowded market for legal services, and many other professional advisers routinely give legal advice, that advice does not attract the same protection from disclosure as it would do if given by those in the legal profession. That can lead to difficult and embarrassing situations if that advice is required to be disclosed as part of a Court process.

Therefore, where sensitive and confidential advice is to be given, there is a strong incentive for all concerned to make sure that a legal professional such as a solicitor is involved in the process.”

The Commercial Litigation team at The Wilkes Partnership regularly advises on contentious and sensitive commercial and financial disputes. If you wish to discuss any issues relating to legal advice privilege, please contact Gavin Evans.