Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Legal professional privilege – where is your advice coming from?

Several high-profile cases last year made the law very clear on legal professional privilege, and clients should take note of where their advice is coming from.

One of the construction industry’s most talked-about cases of 2012 was that of Walter Lilly & Company Ltd v Mackay and another [2012] EWHC 649, which made clear the only parties that can claim legal professional privilege and rely on it are those who have engaged the services of a solicitor in a law firm.

Industry interest

This was the source of much contention within the industry, particularly among claims consultants, who suddenly found themselves in the unenviable position of being required to disclose what they had previously regarded as confidential advice.

There was therefore huge interest when it emerged that the concept of LPP was now going to be tested in the Supreme Court, following an application by Prudential in the case of R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another [2013] UKSC 1.

So why does it matter?

Taking a step back, LPP means, in simple terms, that when a company or individual is given advice by their solicitor about their prospects of success, the extent of potential liability or perhaps just as to what a contract may or may not mean to them and their business, that such advice does not have to be shown to the other side: it is private and confidential.

Prior to Walter Lilly, all sorts of ‘advisers’ were providing advice to clients and hiding behind this banner.

Bring in the accountants

So what does this have to do with accountants? One of the other big stories of 2012 was tax avoidance – as opposed to tax evasion – and the number of corporations that were employing accountants to devise new and ingenious ways to reduce their tax liabilities.

One of the big names in accountancy, PricewaterhouseCoopers, devised a clever tax-avoidance scheme that was specially adapted for the Prudential.

However, HM Revenue & Customs was concerned it was a little too clever and decided to investigate. When it requested disclosure of certain documents, the Prudential refused, citing the advice PwC had provided was protected by LPP. HMRC disagreed and off to court the parties went.

Supreme Court ruling

Having failed to convince the Court of Appeal of the merits of its case, the Prudential was granted leave to appeal to the Supreme Court in its attempt to extend LPP to accountants providing legal tax advice.

Unfortunately for the accountancy profession, the Supreme Court decided, on a five-to-two basis, that the appeal should not be allowed.

In handing down his judgment, Lord Neuberger clearly had the wider picture in mind, acknowledging that if accountants were granted LPP then it would be extremely unclear where the boundaries would lie when it came to offering ‘confidential’ advice.

He said: “The issue cannot simply be treated as limited to the question whether tax advice given by expert accountants is covered by legal advice privilege. While that is the specific question between the parties, it is just a subset, no doubt, of a much larger set.

“The decision may be viewed by some as anti-competitive, but the law, for once, is at least clear-cut”

“To concentrate on tax advice given by accountants would be wrong, because it would ineluctably follow from our accepting Prudential’s argument that legal advice given by some other professional people would also be covered.”

Whether Lord Neuberger specifically had in mind the same claims consultants who had shouted so loudly when the Walter Lilly judgment was handed down, we will never know.

What next for LPP?

The decision may be viewed by some as anti-competitive, providing lawyers with an unfair advantage when it comes to offering confidential advice, but the law, for once, is at least clear-cut.

The protection provided by LPP will only exist when clients are seeking advice from qualified lawyers. It does not extend to other professions.

The consequences of this decision will certainly continue to be debated but the courts have left us in no doubt as to the stance they are taking, and clients need to take stock of exactly who they are receiving their advice from.

Bill Barton is a partner at Barton Legal

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.