R (Prudential plc) v Special Commissioner of Income Tax – legal advice privilege and employment law

by Laurie Anstis on January 23, 2013

The Supreme Court has today given judgment in the case of R (Prudential plc) v Special Commissioner of Income Tax. This was a case on the scope of legal advice privilege.

In most cases, the English legal system requires full disclosure from a party of all the documents which they have which are relevant to the matters in issue. This obligation extends to documents which would usually be considered confidential, but there are some limited exceptions, one of which is for documents covered by legal advice privilege. Broadly speaking, communications between a party and their legal advisor, made for the purpose of obtaining or giving legal advice, are exempt from the disclosure requirements. The principle is that it is in the interests of justice for lawyers and their clients to be frank and open with each other, without fear that this openness may later be used against them in court.

The common law has limited the kinds of legal advisor who count for legal advice privilege to qualified solicitors, barristers and chartered legal executives, and their equivalents in other jurisdictions. Just calling someone a “legal advisor” does not bring them within the scope of legal advice privilege, as it has traditionally been understood.

In R (Prudential plc) v Special Commissioner of Income Tax, the question was whether this legal advice privilege should be extended to communications with accountants, who Prudential had consulted about a particular tax scheme.

What has all of this got to do with employment law?

Well, the rules on disclosure in the employment tribunal mirror the rules on disclosure in the ordinary courts, but the use of legal advisors or consultants without traditional legal qualifications has been much more prevalent in the employment tribunal than in the ordinary courts. There is nothing wrong with that, but it had left a question mark over whether communications between them and their clients could be covered by legal advice privilege. If not, then confidential advice passing between them and their clients might have to be disclosed as part of the litigation.

The position in employment tribunals prior to the Prudential decision is set out in Harvey on Industrial Relations and Employment Law as follows:

“With regard to the procedure before employment tribunals, the question has arisen whether the [legal advice privilege] rules are too restrictive, having regard to the informal nature of that procedure and the fact that many advisers are not legally qualified. In M & W Grazebrook Ltd v Wallens [1973] 2 All ER 868, [1973] IRLR 139, the NIRC (Sir John Donaldson presiding) took the view that they were too narrow, and concluded that professional privilege extended to non-legal advisers, such as personnel officers, but only ‘in relation to communications with an actual view to the litigation in hand and the mode of conduct of it’.

This approach has since been doubted by the EAT in New Victoria Hospital v Ryan [1993] IRLR 202, where Tucker J, giving judgment, considered that legal professional privilege ‘should be strictly confined to legal advisers such as solicitors and counsel, who are professionally qualified, who are members of professional bodies, who are subject to the rules and etiquette of their professions, and who owe a duty to the court’. To extend the privilege to unqualified advisers, such as personnel consultants, would, in his view, be ‘unnecessary and undesirable’. The documents in dispute in this case included legal advice (relating to the disciplining and dismissal of the claimant) that had been given to the employers by a firm of industrial relations personnel consultants, whom the employers were obliged to consult under the terms of their employment protection insurance contract, and who did not employ any legally qualified staff. Disclosure of the relevant documents was ordered, both on the ground that the consultants were not legally qualified, and on the basis that, even if they had been, the documents (which the EAT inspected) did not amount to ‘communications with an actual view to the litigation in hand and the mode of conduct of it’.

Whilst restricting the privilege to qualified lawyers is undoubtedly, as Tucker J stated, ‘a clearly defined and easily identifiable qualification for the attachment of privilege’, the criticism of this approach is that it puts a premium on legalism in the procedure of employment tribunals, and would put parties who are not legally represented (who still form the majority) at a material disadvantage in the conduct of their cases.”

In Prudential, the majority of the Supreme Court endorsed the traditional approach – in the interests of certainty, legal advice privilege should be limited to communications with solicitors, barristers, chartered legal executives and their equivalents in foreign jurisdictions. Although Lord Neuberger found “a strong case in logic” for extending the scope of legal advice privilege (para 46), if there were to be an extension of the principle it would be difficult to see how far it should go, and any extension beyond established priciples would be a matter for Parliament (para 52).

Lords Sumption and Clarke dissented. They would have been prepared to extend privilege irrespective of the professional qualifications of those giving the legal advice, although Lord Clarke would only have extended it to those who were members of a traditional professional body, such as accountants, and it isn’t clear whether Lord Sumption had in mind an extension to advisors who had no professional qualifications at all.

Of course, none of this was decided in the context of an employment tribunal claim, but the limitation of legal professional privilege to solicitors, barristers and legal executives leaves us in the uncomfortable position set out in Harvey as cited above.  Is there anything special about employment tribunal litigation or the employment tribunal rules which mean that the traditional common law rules on legal professional privilege do not apply in the same way they would in the courts?

[Note: this post was updated on 24 January 2013 to refer to “legal advice privilege” rather than “legal professional privilege”.]