Background: The case involved a dispute between Prudential PLC and the UK’s Special Commissioner of Income Tax (HMRC) which arose after the HMRC issued notices requiring Prudential to provide certain documents in relation to a marketed tax avoidance scheme, which Prudential claimed were covered by legal professional privilege (LPP) even though the documents were prepared by accountants. The rule of LPP gives communications between lawyers and clients absolute confidentiality, so that the advice cannot be disclosed in court or to third parties without the consent of the client.
Court’s decision: England’s highest court rejected Prudential’s claim and held that advice given by accountants in respect of tax matters was not covered by LPP and LPP should not extend to advice given by professional people other than lawyers, even where the professional person is effectively giving legal advice. The court emphasised that the issue of LPP extension to other professionals was a matter for parliament, not for the courts. It also ruled that:
|i.||to allow Prudential’s claim would lead to a clear and well-understood principle becoming unclear and uncertain (for example, whether a certain occupation should be regarded as a profession and whether it was one which ordinarily gives legal advice);|
|ii.||it is a question of policy to be left to parliament; and|
|iii.||it is inappropriate for the court to extend the law on LPP where parliament had enacted legislation relating to LPP.|
What it means for compliance officers and in-house counsel: Even though compliance officers may be giving legal advice at times, such advice to clients is not protected by LPP. Compliance departments should be aware of the nature of the advice they are giving to clients, and whether it is compliance or legal advice, which may sometimes overlap. Advice given by in-house counsel in Hong Kong enjoys the same privilege protection as advice given by solicitors in private practice. However, in-house counsel should check whether advice given to colleagues in other jurisdictions, particularly within the the European Union (EU), is to be privileged, given the EU’s decision in the Akzo case in 2010. For more details of this case, please refer to our October 2010 Financial Services Newsletter.
Although the judgment is not binding on Hong Kong courts, it is worth noting the view taken by the English courts on LPP as it may influence developments elsewhere.
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