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CCCA_V7No2_Col-McCarthys-FIN_CCCA 13-05-16 5:12 PM Page 48 Legal Update – McCarthy Tétrault LLP Is legal advice given by accountants privileged? The UK Supreme Court weighs in. By Brendan Brammall n a much-anticipated ruling, R (on the ing the scope of the privilege to legal advice Supreme Court) indicated that there are Iapplication of Prudential plc) v. Special given by lawyers. He noted that the privi- strong, principled reasons to distinguish Commissioner of Income Tax, [2013] UKSC lege is conferred for the benefit of the client between the legal advice given by lawyers, 1, a majority of the UK Supreme Court and that the modern reality is that legal on the one hand, and the legal advice given confirmed that legal advice privilege advice is often given by non-lawyers, espe- by accountants, on the other.The FCA stat- (known as “solicitor-client” privilege in cially on tax-related issues. Nonetheless, ed that lawyers are legally and ethically Canada) does not apply to legal advice Lord Neuberger echoed Oliver Wendell bound to protect the public interest in the given by accountants, even if the same Holmes Jr.’s famous phrase that the life of the administration of justice, but that account- advice given by a lawyer would be privi- common law has been experience,not logic. ants are not so bound. Moreover, the leged. The majority’s decision is consistent In this vein, Lord Neuberger concluded accountant-client relationship is, according with the result reached in the leading that judicially extending the privilege to to the FCA,“in no way” as fundamental to Canadian case and should serve as a helpful legal advice given by non-lawyers would society and to the administration of justice as reminder that communications with create too much uncertainty and would is the solicitor-client relationship. The FCA accountants, even on legal issues, may have involve policy considerations that are best thus saw no need to recognize a new privi- to be disclosed. left to Parliament.Whereas Lord Sumption lege with respect to accountants. The case arose in relation to a tax avoid- (in his strong dissent) proposed that the Even though the UK Supreme Court ance scheme developed by Pricewaterhouse- privilege should apply to legal advice given and the FCA adopted different analytical Coopers (PwC) and implemented by a sub- by a person who is a member of a profes- approaches, Prudential will likely be influ- sidiary of Prudential plc.After the inspector sion that “ordinarily includes the giving of ential in Canada. Indeed,it may have broad of taxes served notices on Prudential requir- legal advice,” Lord Neuberger was con- implications for the development of the ing the disclosure of documents relating to cerned that this formulation may give rise law of privilege, in light of the majority’s PwC’s tax advice, Prudential commenced a to many difficulties in practice. It may be strong preference for judicial restraint. The judicial review application challenging the difficult to determine, for example, main message in Lord Neuberger’s reasons validity of those notices on the basis that they whether town planners or pension advisers is that certainty in this area of the law is of were protected by legal advice privilege. are professionals in this sense. Lord great importance and should be preserved Prudential’s application was dismissed at the Neuberger therefore preferred not to by the judiciary, and that Parliament is bet- first instance,and this decision was upheld by make a judicial extension of the privilege ter positioned to make significant reforms. the Court ofAppeal and again by the major- to accountants or, for that matter, to any Whatever the full implications of Prudential ity of the UK Supreme Court. non-legal professionals. prove to be,it seems likely that the decision Lord Neuberger, who delivered the main Ten years ago, the Federal Court of will, at a minimum, serve to reinforce the reasons on behalf of the majority, began his Appeal (“FCA”) reached the same result, result inTower. Canadian businesses should analysis by observing that legal advice privi- albeit by a different analytical process, in therefore continue to be aware that legal lege is “universally believed” to cover only Tower v. Canada (Minister of National advice given by an accountant will not give legal advice given by members of the legal Revenue),2003 FCA 307,which remains the rise to a viable claim of accountant-client profession. The question was thus whether leading Canadian authority on this issue. In privilege. legal advice privilege should be judicially its decision, the FCA held that there is no extended to cover legal advice given by non- class or case-by-case privilege that shields Brendan Brammall is an associate in lawyers and, in particular, by accountants. professional tax advice given by accountants McCarthy Tétrault’s Litigation Group in As a matter of “pure logic,” Lord from disclosure to the revenue authorities. Toronto. He maintains a general litigation prac- Neuberger found it difficult to justify limit- Notably, the FCA (unlike the UK tice. (bbrammall@mccarthy.ca) 48 CCCA Canadian Corporate Counsel Association SUMMER 2013