In the English case of R (on the application of Prudential plc & Anor) v Special Commissioner of Income Tax & Anor, England’s Supreme Court, by a majority of 5 to 2, decided that legal advice privilege (“LAP”) may only be claimed by clients in respect of advice sought from legal professionals. The decision is of interest to the construction industry because it is very common for claims consultants, who are not legally qualified, to give opinions which may involve the application of legal principles to their client’s case.
Prudential had instructed PricewaterhouseCoopers (“PWC”) to provide tax advice and PWC had advised them to adopt a tax avoidance scheme, the objective being to enable a tax deduction from a foreign subsidiary to be set off against Prudential’s profits in the UK, thereby reducing its liability to corporation tax.
The Inspector of Taxes served statutory notices, requiring Prudential to disclose certain documentation for the purpose of its investigation of transactions carried out by Prudential to implement PWC’s advice. Prudential refused to disclose some of the documents requested on the ground that they included legal advice from PWC and were therefore protected by LAP. The appeal concerned the breadth of LAP, namely the types of advisors with whom communications can attract LAP. The particular issue in this appeal was whether LAP should attach to communications passing between chartered accountants and their client in connection with expert tax advice given by the accountants to their client, in circumstances where there is no doubt that LAP would attach to those communications if the same advice was being given to the same client by a member of the legal profession.
The Supreme Court, upholding the decisions of the Court of First Instance and Court of Appeal, held that LAP should not be extended to communications in connection with advice given by professional people other than lawyers, even where that advice is legal advice which that professional person is qualified to give, for the following reasons:
In their dissenting judgments, Lords Clarke and Sumption, were in favour of extending LAP to advice given by professionals other than lawyers. Lord Clarke queried why if two individuals, A and B, had the same problem, the solution to which depended upon an application of the legal principles of taxation law to the facts and A sought advice from lawyers, and B from say, PWC, why the advice given by the lawyers should attract LAP and the advice of PWC not. Lord Sumption, in his dissenting judgment, said that although there were perfectly rational reasons why one might wish to see the scope of LAP limited, there were no rational reasons for addressing the issue by discriminating between different categories of legal advisors performing precisely the same function.
Those in the construction industry should note that legal advice, commonly provided by claims and other consultants will not be protected by LAP. In our August 2012 Construction & Arbitration Legal Update, we reported on the case of Walter Lilly & Co v Giles Mackay & DMW Developments Ltd, where the court found that Mr Mackay could not claim LAP in relation to advice given to him by a claims consultant.
電話: +852 2825 9211
Click here to share this shortlist.
(It will expire after 30 days.)