No legal privilege for accountants, says Court of Appeal

LPP protection has to keep 'narrow approach'

The High Court looked at a 1985 decision of the Court of Appeal, Wilden Pump Engineering versus Fusfeld, in which one side of the dispute sought LPP protection for communication with a patent agent.

"It seems to me that the position is that it is impossible to uphold an utterly wide test of privilege extending to any communication by the litigant with any person from whom he has sought, or happens to have received, advice on any point of law relevant to the litigation in question," said the judge in that case.

"It is far too wide, and the courts have never adopted such a wide approach. The narrow approach of the common law is to recognise certain types of person as being legal advisers, communications with whom on matters of law are privileged. Besides barristers and solicitors, this, it seems from the old authorities, originally also included scriveners and doctors of the civil law practising in Doctors' Commons and Proctors in the Ecclesiastical Courts – whether or not they were solicitors. But those were regarded as varieties of lawyer," said that ruling.

The High Court considered this a binding precedent that limited the application of LPP to lawyers, Lord Justice Lloyd said. He said that the ruling must be binding on his court as well.

"I consider that this court is bound to hold that LPP does not apply, at common law, in relation to any professional other than a qualified lawyer: a solicitor or barrister, or an appropriately qualified foreign lawyer. That is the effect of [the] Wilden Pump [case]," he said.

"Even if we were not so bound, I would conclude that it is not open to the court to hold that LPP applies outside the legal profession, except as a result of relevant statutory provisions," said Lord Justice Lloyd. "In my judgment, only Parliament can provide the answers to such questions [raised during the case]. It is not a proper task for the courts to undertake. In other countries where LPP does apply in relation to accountants it is as the result of statutory intervention."

"Parliament has conferred limited protection in respect of accountants by TMA section 20, and its successor, the Finance Act 2008. The enactment of an extension of LPP to accountants, more general than that of TMA though not as general as that for which [Prudential] argues, was proposed by the majority of the [committee behind the 1982 report], but that recommendation has not been taken up," he said.

The European Court of Justice (ECJ) ruled recently on another proposed extension of LPP. It said that in EU competition law cases, communications from in-house lawyers to their employers should not be protected by LPP.

The Court said that employed lawyers suffered too great a conflict of interest because they were employed by the company they were advising and so their communications should not be protected by the secrecy rule.

In fact some advice by non-lawyers can be protected by LPP, but only in particular circumstances, said Julie Herriott of Pinsent Masons, the law firm behind OUT-LAW.COM.

"Communications between a lawyer or client and a third party are protected only if they are created for the dominant purpose of litigation which is pending, reasonably contemplated or existing," she said.

"If there is a challenge to privilege, then the party asserting privilege will have to submit evidence to the court that any reports and documentation produced by third parties have been prepared for the dominant purpose and in contemplation of litigation," said Herriott. “Companies might have to demonstrate that when they commissioned an investigation by a third party, they knew who they thought would sue them, the circumstances as to why this is thought to be the case, and why an investigation from the professional adviser is required."

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