Case Law Details

Case Name : R (on the application of Prudential plc and another) Vs Special Commissioner of Income Tax and another (Supreme Court of India)
Appeal Number : Appeal- [2010] EWCA Civ 109
Date of Judgement/Order : 23/01/2013
Related Assessment Year :
Courts : Supreme Court of India (1007)

The long-awaited decision in the Prudential case was handed down by the UK Supreme Court on the morning of Wednesday 23 January.

R (on the application of Prudential plc and another) (Appellants) v Special Commissioner of Income Tax and another (Respondents) was heard by a full panel of seven law lords.  By a majority of five to two (Lords Clarke and Sumption dissenting), the UK Supreme Court dismissed the taxpayer’s appeal and confirmed the long-established principle that legal advice privilege (LAP) attaches only to advice provided by members of the legal profession.


The case concerned a “tax avoidance scheme” that had been marketed by an accountancy firm in 2004 to Prudential plc.  In the course of their enquiries into the effect of the planning in 2007, HM Revenue and Customs (HMRC) sought disclosure of certain transaction documentation.  The taxpayer refused to disclose the documents, asserting that they were covered by LAP, notwithstanding that the advice in respect of the planning had been provided by members of the accountancy profession rather than the legal profession.

The matter came before the UK courts when the taxpayer sought judicial review of a direction from the Special Commissioners to disclose the transaction documentation to HMRC.

The UK Supreme Court’s Decision

The fundamental question before the UK Supreme Court in this appeal was whether or not LAP attaches to advice provided by persons who are not members of the legal profession.  The UK Supreme Court has emphatically answered this in the negative.  Lord Neuberger, who gave the lead judgment for the majority based this decision on several key factors.

Firstly, it is clear that in its capacity as a creature of the common (i.e. judge-made) law, LAP could have been afforded to advice provided by persons other than legal professionals but it was not.  In the 500 years since the principle was established, no decision of the English courts has disturbed this basic proposition; on the contrary, it has instead been affirmed repeatedly by learned judges of great distinction.  It is clear therefore that the UK Supreme Court felt that an extension of LAP to persons other than members of the legal profession could only be effected by way of statutory intervention by Parliament.

Secondly, the UK Supreme Court recognised that Parliament has legislated on several occasions on the assumption that LAP is restricted to advice given by members of the legal profession and that, moreover, Parliament has specifically rejected proposals (most recently in 2001) to extend LAP to the accountancy profession.

Finally, Lord Neuberger expressed concern about the practical implications of extending LAP.  In particular, his Lordship was concerned that disturbing a principle that is so well-established and understood as LAP would lead to uncertainty in the minds of the very people LAP is intended to benefit (i.e. persons seeking legal advice) as to what professional advice they could definitively expect to be accorded LAP.  His Lordship also noted that, if LAP were to be extended, it was hard to see exactly where the line should be drawn and what criteria should be chosen for including or excluding a given profession from its ambit.  His Lordship asked for example whether or not town planners or engineers (both of whom have specialist legal expertise) should benefit from an enlarged LAP.

Two of the judges involved in the cases gave dissenting decisions and would have extended LAP to the advice provided to the taxpayer.  Lord Sumption gave the lead dissenting judgment.  His judgment is impressively lengthy, but in essence boils down to an argument that extending LAP is within the discretion of the courts (as LAP was originally created by the courts) and that the UK Supreme Court should exercise that discretion because the advice provided to the taxpayer had a legal content.  It is unsurprising that this line of thinking did not find favour with the majority of the UK Supreme Court; it ignores the long history of the concept of LAP as currently understood today and failed to engage with the practical implications of extending LAP as identified by the majority.

India follows the conventional rule of client-attorney privilege

The Indian law on privileged professional communication, codified under the Indian Evidence Act of 1872, has developed on the same lines as UK common law. The benefit of privileged communication under sections 126 and 129 of the Evidence Act is available only in relation to communications and correspondences between client and attorney or advocate. The attorney is not permitted, at any point of time, to disclose details of any communication or document pertaining to the client without the client’s express consent. The client can also not be compelled to disclose to the Court any confidential communication with his attorney unless he offers himself as a witness.

In a country like India where litigation is the order of the day (especially in matters of taxation and property), the issue of client-attorney confidentiality privilege has assumed unprecedented importance. Clients have a right to receive sound legal advice and the privilege of sharing confidential information with attorneys without fear of disclosure.

Whether disclosure by CA would be disclosure of privileged information u/s. 127 of the Evidence Act of India?

One may note that as per Code of Ethics, if a CA discloses privileged information of client, then same amounts to professional misconduct. However, one may further note that Code of Ethics itself states that in tax evasion cases, same would not amount to professional misconduct. Same was so held in a recent case U.K. Mahapatra & Co. 221 CTR 328 (Orrisa). However, interestingly in this case, there was no information in the case of client so as to extend the survey to CA’s office. Thus it was held

“Precondition for conducting survey in the premises of CA, lawyer etc. in connection with survey of the business place of their client is that the client in course of survey must state that his books of accounts/documents and records are kept in the officer of his CA/ lawyer etc. There being no material on record to show that survey of premises of firm of CA was undertaken consequent upon any statement of its client that its books of accounts were kept in premises of CA, survey conducted at the premises of CA firm was without authority of law.”


LAP has, for around five centuries, been understood as attaching only to advice provided by members of the legal profession.  The decision of the UK Supreme Court not to extend the ambit of LAP is therefore as welcome as it is right.  It is clear that the UK Supreme Court was conscious that any penumbra of uncertainty around the precise extent of LAP could effectively neuter its value to members of the public seeking legal advice and the decision means LAP will continue to be a valuable and unique aspect of the client-solicitor relationship.

As this is the highest domestic court of appeal, the point has now been put beyond any doubt in the absence of statutory intervention by Parliament.  This seems highly unlikely in view of the robust judgments given by the majority of the UK Supreme Court around the venerable nature of LAP and Parliament’s refusal even in recent history to extend its scope by way of statute.

Download Judgment/Order

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0 responses to “Client confidentiality privilege – Only for lawyers & not for accountants – UK SC”

  1. vswami says:

    On the subject matter, those interested may usefully read also the related following:

    @Indiacorpblog, the articles titled, –

    1.Legal advice privilege for tax advice given by non-lawyers

    2.SEBI Investment Advisers Regulations – an overkill?

    Article titled
    A Warning to Wall St. About Misleading Clients by




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