The Court of Appeal today unanimously confirmed that legal professional privilege (LPP) only applies to qualified lawyers – solicitors and barristers. The decision was welcomed by the Law Society as giving certainty to solicitors and their clients.

The Law Society had intervened in the Court of Appeal case of Prudential PLC and Prudential (Gibraltar) Ltd v Special Commissioner of Income Tax and Philip Pandolfo (HM Inspector of Taxes). Prudential had sought to extend the existing rule of LPP – which gives certain communications between a lawyer and their client absolute confidentiality so that it cannot be disclosed to the court or third parties without the client’s consent – to advice on tax law given by accountants.

The Court of Appeal emphasised that extending LPP communications to other professionals, such as accountants, was a matter for parliament, not for the courts. The court noted that parliament had considered the matter several times over the past 40 years and ‘that failure to change the law in this respect is not an accident’.

In its judgment last October the High Court declined to extend such privilege to non-solicitors, but said that accountants and lawyers should operate on a ‘level playing field’ when it comes to disclosing legal advice on tax law issues. Chancery Lane was granted permission to intervene in the appeal in May.

Law Society president Linda Lee said today: ‘The decision gives clarity and confirmation to the issue of when LPP applies. The Court of Appeal has stressed the need for a clear and certain application of LPP and pointed out that the present rules, when applied to members of the legal profession acting in a professional capacity, achieve that.

‘To date, parliament has chosen not to extend LPP beyond the legal profession and it therefore remains a right that is exclusive to clients who consult the legal profession for advice. The courts have long taken the approach that legal advice privilege does not attach solely because of the purpose and nature of the advice but also because the advice emanates from a member of the legal profession. Today's judgement reaffirms that notion. Clients know that they can consult solicitors in the knowledge that the advice they receive will remain confidential.

‘The concept of LPP has been and remains closely tied to the administration of justice. The first duty of a solicitor, like other lawyers, is to the court and the second is to the client. In this respect lawyers are unique among the professions.

‘It is reassuring for clients and solicitors that the Court of Appeal has rejected the suggestion of a reduction in the scope of LPP as it applies in relation to lawyers who give advice on tax law.

‘The Law Society supports the court's view that it is a matter of public policy what the bounds of LPP should be. If LPP is to be extended beyond the advice of the legal professions it must be done via statute that clearly defines the limits and conditions of any extension both as to the areas of law or the professional adviser to ensure certainty as to the scope of its application.’

Prudential had argued that taxpayers often approach accountants rather than lawyers for advice on tax liabilities, which involves consideration of, and advice about, the relevant law. They had argued that a client’s communications should be protected from disclosure if the advice is given by an accountant in the same way as it would be if given by a solicitor. The court rejected that proposition.

The full judgment will be available at the Bailii website.

The Institute of Chartered Accountants in England and Wales, which also intervened in the appeal, said it was ‘disappointed’ by the decision and is reviewing its options.

Frank Haskew, head of the tax faculty, commented: ‘This was an opportunity for the court to decide that on public policy grounds there should be a level playing field for LPP. As it stands at the moment, the current position is anti-competitive for UK taxpayers and businesses. Whether they consult lawyers or chartered accountants, in our view clients who seek professional tax advice should be treated in the same way, irrespective of the qualification of the person.

‘We believe that the current situation is unsustainable and contrary to the public interest. However, the judges decided that they were bound by existing precedent and that only lawyers were entitled to LPP. As a professional body, we will be reviewing the options available to press the case for reforming the LPP rules so that there is a level playing field for taxpayers seeking tax advice.’