Accountants lose bid for extension of legal privilege

Accountants lost their bid to have the same professional privilege status as lawyers in the UK, when the country's top court rejected a claim from a leading insurance company today.
Bad day for bean counters

Bad day for bean counters

British commentators are already hailing the early morning ruling as a boost for the legal profession, which had feared that if the judgment had gone the other way, swathes of sensitive tax advice would be lost to lawyers.

Avoidance scheme

As The Lawyer newspaper reports, the issue at stake was the refusal by insurance company Prudential to deliver documents to the UK taxman. The papers involved what is described as a ‘marketed tax avoidance scheme’, with Prudential executives claiming they were protected by professional privilege with their accountants.   
Officials at Britain’s Customs and Excise office challenged the position. The Prudential won the battle at England’s Appeal Court, but the Supreme Court justices overturned that ruling by a 5:2 majority.
The case was viewed with such trepidation by England’s legal profession that the Law Society, the solicitors’ trade union, intervened, with Heather Gething and Julian Cope, partners at London-based firm Herbert Smith Freehills, advising the professional body. They greeted the ruling by saying that extending privilege would have created costly delays in tax advice for clients.

Crying in their soup

Extending privilege, said Herbert Smith, ‘would have made the process of reviewing documents for privilege much more intricate, as parties would be required to adopt a view, in each case, as to whether or not the professional was a member of a profession that is recognised as competent to give legal advice ... and regulated when doing so.  That would in turn increase the time spent and costs incurred in the process of disclosure, with an increased risk of satellite litigation’.
Other lawyers were even more robust in their celebrations. ‘Tax accountants will be crying into their soup tonight, and tax lawyers will be dancing in the streets,’ commented Peter Clough, head of disputes at international law firm Osborne Clarke. ‘The case presents a clear cut choice for clients: if you want confidential tax advice, you’re better off going to a law firm. Accountants will no doubt think it is unfair, as it will drive clients concerned about maintaining confidentiality in advice provided to them into the welcoming arms of law firms.’


But not all advisers greeted the ruling with unbridled support. The UK branch of the International Association for the Protection of Intellectual Property, which also intervened in the Supreme Court hearing, described the British position on professional privilege as being outmoded.
Commented Michael Edenborough QC, who acted for the organisation: ‘The current position of legal advice privilege at common law in the UK is a result of ad-hoc historical developments and so is anomalous and unprincipled and does not reflect the fact that specialist legal advice is given by a wide range of professionals in the modern age, such as patent and trade mark attorneys advising on IP matters.’
AIPPI called on the British parliament to legislate on the issue of privilege, ‘rather than leaving the matter to the court, which could only deal with the particular issue raised by the parties’

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