Under Scots law, communications between a lawyer and a client, made in connection with the giving of legal advice and whether in contemplation of litigation or not, are privileged. This is well understood. Yet consider the position when a professional person who is not a lawyer gives legal advice. This is very common in the modern professional and business world.
For example, an accountant may give legal advice to a client on a tax issue. That accountant will hold a degree, will have experience of professional practice, will be overseen by a professional body, and will thus be qualified to give the advice. Yet, in Scots law, that advice will not be privileged. Can this position be justified? What are the barriers that prevent legal advice given by all professional persons from attaining privileged status? These questions raise issues that are fundamental to the basis of the privilege, and the identity of the party that the privilege is intended to benefit.
The subject was discussed recently by the Supreme Court in the case of R (on the application of Prudential plc) v Special Commissioner of Income Tax  UKSC 1; affirming  EWCA Civ 1094. By a majority of five to two, the court decided that “legal advice privilege” should not be extended so as to cover advice given by professional people other than lawyers, even where that professional person is qualified to give the advice.
The decision is not binding on Scots law, but the similarities to English common law are such that a Scottish court will see it as highly persuasive. This was largely implied in the speech of Lord Reed, one of the two Scottish justices who sat on the court. However, parties who wish to litigate on this matter in Scotland should look to the dissenting speech of Lord Sumption, where some of the difficulties in the majority position are laid bare.
Logic of the law
Pricewaterhouse Coopers (“PwC”), chartered accountants, devised a tax avoidance scheme for the benefit of clients. Prudential sought advice from PwC in connection with overseas holdings, and PwC advised Prudential that the scheme could be adapted for their benefit. Prudential implemented the scheme through a series of transactions. An inspector of taxes served a notice on Prudential in terms of the Taxes Management Act 1970, seeking disclosure of documents connected to the transactions.
Prudential challenged the validity of the notice by way of judicial review. They lost both at first instance and in the Court of Appeal. In front of the Supreme Court, Prudential argued that there was no principled basis upon which the privilege could be restricted to cases where the adviser happens to be a lawyer, as opposed to a qualified accountant.
The President of the court, Lord Neuberger, gave the leading speech for the majority. It was universally believed that the privilege applied only to communications made in connection with advice given by members of the legal profession. While the extent of the privilege may be “illogical in the modern world” (per Lord Neuberger, at para 48), it did not follow that the court should instinctively modify or remove the limitation.
Three reasons were given. First, alteration of the rule would create uncertainty. Secondly, any modification of the rule should be left to Parliament, which was best placed to assess any public policy implications that might arise from a change. Finally, although Parliament has, on occasion, extended the privilege by statute (to, among others, licensed conveyancers), it has always used as its starting point the proposition that the privilege extends only to advice given by lawyers.
One point on which all the justices were agreed was that the privilege existed not for the benefit of the lawyer, but rather for the benefit of the client. Thus, while the lawyer must refuse (unless the client consents) to disclose advice given, the client may disclose the advice at will. However, the majority found that the existence of the privilege depended upon the status of the person giving the advice.
In his dissenting speech, Lord Sumption took a different view. Having reviewed the case law, he found that the privilege did not depend on the status of the person giving the advice, but rather on the nature of the advice itself. Once this was appreciated, “there can be no principled reason for distinguishing between the advice of solicitors and barristers on the one hand and accountants on the other” (per Lord Sumption, at para 122).
This is a compelling argument. If indeed the privilege is a “substantive right of the client” (per Lord Sumption, at para 114), and the advice is his to disclose at will, why should it matter that it was given to him by a lawyer, and not by another equally well qualified professional? In principle, should the privilege not also cover advice given by, for example, an actuary, an auditor or a town planner, each of whom will have the necessary training, practical experience and consequent legal expertise?
In addressing the arguments of the majority, Lord Sumption made the following points. Although an extension of the privilege may increase the number of claims, and perhaps produce some uncertainty, it is the function of courts to ensure that modern professional practice is reflected in the way that the law is applied. Put another way, just because a proposed step will not be straightforward, does not of itself seem a persuasive reason for not taking that step. Further, he said, although Parliament is on occasion well placed to assess the impact from proposed changes in the law, that consideration did not apply in this case. The privilege was a creation of the common law. Therefore, “it is for the courts of common law to define the extent of the privilege” (at para 131).
Reading between the lines, it is apparent that there may have been a fear that if the privilege could be claimed by non-lawyers, matters may “get out of hand” (per Lord Sumption, at para 136). But there are many examples of situations, particularly in the field of delict, where modification or extension of a legal principle by the courts has prompted a rash of claims and subsequent litigation. The approach adopted by the courts on those occasions has been to scrutinise the claims, and thereby set precise legal parameters. This is the way that our law develops.
It has to be appreciated that the speeches of the majority are also persuasive. The court was plainly in an unenviable position. As Lord Reed put it, the court had a choice whether or not to extend the privilege, and had to make “a judgment...as to the most appropriate course of action” (at para 98).
It remains to be seen what judgment will follow should the issue form the subject of litigation in Scotland. In Lord Reed’s view, a Scottish court would require to make a policy decision, and there were factors that might weigh heavily in the balance against extension of the privilege. Chief among those would be the ability of the legislature and the executive to consult widely, and to consider the issue prior to enacting legislation. For example, the privilege has recently been extended under the Legal Services (Scotland) Act 2010 to “licensed providers” of legal services. A “licensed provider” is carefully defined. Thus, the argument would run, a Scottish court should be wary of extending the privilege to all professionals, when the Scottish Parliament has chosen to extend that privilege “on a conditional and limited basis” (at para 113).
In this issue
- Remember, remember?
- Equal justice for all?
- Compatibility: devolution issues reborn
- Profiting from the past
- RTI for PAYE - are you ready?
- Reading for pleasure
- A modest proposal – civil marriage ceremonies for all
- Opinion column: Alistair Dean
- Book reviews
- President's column
- Fee review: as you were
- Time to draw a line?
- The pay gap: seeking a cure
- Wealth management: Personal injury trusts - how to best invest
- Wealth management: Discretion - the model of choice
- Wealth management: Inheritance tax - discounts up front
- Wealth management: Pensions - time to look ahead
- Whose privilege is it, anyway?
- FLAGS unfurled
- Percentage game
- Rent, rent and rent again
- Sport, rights, and the internet
- An innocent mistake?
- Scottish Solicitors' Discipline Tribunal
- The trouble with in-house lawyers
- Lease of life for the High Street?
- PSG update
- Vacant and ready
- ABS in waiting
- Better ways: where to start?
- Keeping errors in check
- Ask Ash
- How not to win business: a guide for professionals
- What does a speculative fee allow?
- Law reform roundup