Legal professional privilege: Lawyers vs accountants
Published:Friday | June 24, 2011 | 12:00 AM
Janet E. Morrison, Legal Writer
The general public policy that cases should be decided by reference to all available relevant evidence has, since the sixteenth century, been subject to the important exception created by the doctrine of legal professional privilege (LPP).
There are two types of LPP recognised by the law:
Legal advice privilege arising out of confidence between lawyer and client which protects from disclosure advice, documents, opinions, emails - that is, all communications - between you and your lawyer; and
Litigation privilege, which protects from disclosure all communications between you and your lawyer, you and a third party, and your lawyer and a third party for the dominant purpose of seeking or obtaining legal advice in contemplated litigation.
LPP therefore creates a conflict with the general public policy mentioned above.
It is interesting to note that in the 2010 case of R v Special Commissioner of Income Tax - on the application of Prudential plc and another - the UK Court of Appeal confirmed that LPP applies only to lawyers and not to accountants.
This important decision is not only a highly persuasive precedent for our own courts but the facts of the case could readily arise in our own jurisdiction, where it is not unusual for some kinds of advice, notably tax advice, to be given by accountants rather than lawyers.
Prudential, the taxpayer in the case, sought the protection of LPP from Her Majesty's taxing authority which demanded the production of certain legal advice on a widely publicised tax avoidance scheme that Prudential had taken from well-known accountants.
Prudential claimed legal advice privilege in refusing to produce the legal advice it had obtained from its accountants.
Therefore, the crucial question the court was asked was whether LPP should justifiably or rationally only attach to the person, that is the lawyer, rather than to the advice.
The court unanimously held that LPP attached to the provider of the advice not the advice; that LPP is limited only to advice tendered by a lawyer, and, that the principle of LPP is based on long-established and robust principles of law set out in a wealth of case law that recognise:
That clients seek the advice or assistance of lawyers for ordering their affairs and that this is in the public interest;
That in order that clients can get the best advice to achieve a desirable result, it is essential that full and complete facts are placed before their lawyers; and
That unless clients can be assured that what they tell their lawyers will not be disclosed by the lawyers without their consent, full disclosure will not be forthcoming.
Accordingly, in an earlier case a law lord said, in affirmation of the principle, that communications between clients and lawyers within the framework of the rule of law "should be secure against the possibility of any scrutiny from others, whether the police, the executive, business competitors, inquisitive busybodies or anyone else."
But, why not extend LPP to accountants?
In this complex world there are a multitude of reasons why individuals and companies, small and large, may consider accountants more competent to give legal advice on knotty tax issues.
What makes a lawyer more qualified or competent than an accountant to address fiscal issues related to one's business?
Surely, it must be in a person's best interest to decide, or, it must be good public policy for the client to choose which professional it wishes to consult for legal advice?
Should not advice given by an accountant be afforded the same protection as advice given by a lawyer?
In the last 40 years, this very issue was studied by two Parliamentary committees in the UK, yet their Parliament did not create a statutory extension of LPP to accountants. On the other hand, the courts have taken the position, most recently demonstrated in the Prudential case, that it is for Parliament to extend LPP to other professions, and, that it is not for the courts so to do.
The case also decided that an extension of LPP to accountants could create uncertainty in the application of the principle, because, unlike in the case of all lawyers, there is no restriction on any person setting up business as an "accountant" providing advice on a range of matters.
The court further ruled that accountants who are not as lawyers are, accountable to the court, and some of whom are not registered or chartered accountants, would if the privilege were extended, be entitled to LPP.
The Prudential decision therefore demonstrates a balancing on the one hand of the general public policy that cases should be decided, subject to LPP, by reference to all available relevant evidence against, on the other hand, the desirability of extending LPP to accountants which could introduce uncertainty in the application of the principle, as well as extend the restriction placed on the courts by LPP to access available relevant evidence.
The decision is on its way to the Supreme Court, now the final Court of Appeal in the UK, for reappraisal. More anon.
Janet E. Morrison is attorney-at-law with DunnCox.