25 October, 2010
In recent years, many large companies have sought to reduce their overheads by employing in-house legal advisers rather than consulting independent law firms. Social housing providers and their insurers are no exception to this trend.
However, it is of vital importance that such organisations are aware of the limitations of such strategies, especially when Legal Professional Privilege is concerned.
Legal Professional Privilege is the rule of law that a client cannot be required by a Court to disclose the contents of any discussions or correspondence with their Solicitors or Barristers. Similarly, their Solicitor or Barrister cannot be required to disclose these matters either.
The rule is split into two limbs - "Legal Advice Privilege" and "Litigation Privilege". Legal Advice Privilege applies when advice is sought on general issues, and Litigation Privilege applies when Court proceedings are "contemplated".
In the recent case of Prudential Plc and others v Special Commissioner of Income Tax and others  EWCA Civ 1094 the Court of Appeal reiterated the established rule that Legal Advice Privilege can only be claimed when legal advice is sought from a qualified and practising lawyer such as a Solicitor or Barrister. In the instant case, it could not be claimed with respect to legal advice sought from a tax accountant. By extension, Legal Advice Privilege cannot be claimed by in-house legal advisers unless they are qualified and entitled to practise. Although the situation arose in the context of tax advice, the principle is equally applicable to social housing providers and their insurers.
In contrast, Litigation Privilege applies to all correspondence, communications and documents which are "prepared for the purposes of litigation", regardless of whether a qualified lawyer was involved. Unlike Legal Advice Privilege, a company can claim Litigation Privilege for internal memoranda and communications with witnesses. However, the position can be factually less certain because it turns on whether each individual document or communication was prepared with the prospect of litigation in mind. When a record or communication is prepared before proceedings are begun, in cases where Legal Advice Privilege does not apply, the company will need to show the extent to which Court proceedings were being "contemplated".
The recent case of Prudential v Special Commissioner serves as a valuable reminder of the complexities of seeking internal legal advice, and the advantages of instructing specialist Solicitors at an early stage.