Professional Privilege and the Tax Man

Extract

R. (on the application of Morgan Grenfell & Co. Ltd.) v. Special Commissioner of Income Tax [2002] UKHL 21, [2002] 3 All E.R. 1 is an exercise in statutory interpretation in which different courts came to diametrically opposite views. The Revenue were trying to decide how MG, the taxpayer, should be assessed in relation to certain transactions and so asked MG to supply certain documents. MG declined, in part because these documents consisted of advice which MG had obtained from leading counsel and solicitors about whether the scheme behind the transactions would work; so the issue was the scope and nature of legal professional privilege (“LPP”). The Revenue asked for—and obtained—the consent of the Presiding Special Commissioner (His Honour Stephen Oliver Q.C.) for the issue of a notice by them to MG under Taxes Management Act 1970, s. 20(1), which allows an inspector by notice in writing “to require a person to deliver to him such documents as are in the person’s possession or power and which … contains information relevant to any tax liability of that person”. MG applied for judicial review to quash the notice, failing before the Divisional Court ([2000] S.T.C. 965, Buxton L.J. and Penry-Davey J.) and the Court of Appeal ([2001] EWCA 329, [2001] S.T.C. 497, Schiemann, Sedley L.JJ. and Blackburne J.), so that all six judges were for the Revenue; MG must therefore have been both delighted and perhaps surprised when a unanimous House of Lords, led by Lord Hoffmann, decided in its favour.