(back to preceding text)

    37. On the other hand, I respectfully think that the decision of Millett J on a similar point in Price Waterhouse v BCCI Holdings (Luxembourg) SA [1992] BCLC 583 was wrong. The question was whether LPP could be overridden by a notice given by the Bank of England under section 39 of the Banking Act 1987 requiring production of documents which it "may reasonably require for the performance of its functions under this Act" (section 39(3)). The Act contained no express language excluding LPP but section 39(13) provided that the section should not "compel the production by a barrister, advocate or solicitor of a document containing a privileged communication made by him or to him in that capacity." Millett J said, at p 593, that subsection (13) must be taken "not only as making an exception to documents which may be required to be produced but also as marking the limits of that exception". The judge remarked that it might seem strange that "the Bank of England should be unable to compel the production of documents from the lawyer when it can compel their production from his client". I agree. But I do not think that the judge's answer, namely that "Parliament was not concerned to protect the interests of the client but those of the lawyer" is at all adequate. What are the interests of the lawyer? He has no interest in whether LPP is maintained or not. If the client chooses to divulge the information, there is nothing the lawyer can do about it. LPP is entirely in the interests of the client. For the reasons I have already given in connection with section 20(1) of the 1970 Act, I do not think that the existence of subsection (13) was a sufficient ground for finding a necessary implication that LPP had been excluded.

    38. The revenue say that it is important for them to have access to the taxpayer's legal advice in those cases in which liability may turn upon the purpose with which he entered into a transaction or series of transactions. This is particularly true of some of the anti-avoidance provisions. But there are many situations in both civil and criminal law in which liability depends upon the state of mind with which something was done. Apart from the exceptional case in which it appears that the client obtained legal advice for the purpose of enabling himself better to commit a crime (R v Cox and Railton (1884) 14 QBD 153) this is not thought a sufficient reason for overriding LPP. The court must infer the purpose from the facts.

    39. It is of course open to Parliament, if it considers that the revenue require such powers, to enact them in unambiguous terms. But there is also the Human Rights Act 1998 to be borne in mind. The appellants put forward an alternative submission that, if your Lordships agreed with the construction given to section 20(1) by the Court of Appeal, you should make a declaration that it was incompatible with the right to privacy under article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms (1953) (Cmd 8969). In the circumstances it is unnecessary for your Lordships to pronounce upon the point. It is however the case, as I have mentioned, that the European Court of Human Rights has said that LPP is a fundamental human right which can be invaded only in exceptional circumstances: see Foxley v United Kingdom (2001) 31 EHRR 25 p 647, para 44. Mr Brennan said that the public interest in the collection of the revenue could provide the necessary justification but I very much doubt whether this is right. Nor is it sufficient to say simply that the power is not used very often. That is no consolation to the person against whom it is used. If new legislation is passed, it will have to be seen whether it is limited to cases in which the interference with LPP can be shown to have a legitimate aim which is necessary in a democratic society.

    40. I would allow the appeal and quash the notice.

LORD HOPE OF CRAIGHEAD

My Lords,

    41. I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Hoffmann and Lord Hobhouse of Woodborough. I agree with them and for the reasons which they have given I too would allow the appeal.

LORD HOBHOUSE OF WOODBOROUGH

My Lords,

    42. I agree that this appeal should be allowed. The question to be decided falls within a very narrow compass and since this House is differing from unanimous decisions of the courts below I will shortly state in my own words my reasons for agreeing with the Opinion of my noble and learned friend Lord Hoffmann.

    43. The question is one of statutory construction. It is now accepted for the purposes of this litigation that the documents in respect of which the right to demand production remains in dispute contain or may contain information relevant to a tax liability to which Morgan Grenfell may be liable or its amount and that they are documents which are subject to legal professional privilege (advice privilege) which has not been waived. It is likewise accepted that the character of the privilege is that described in the speech of Lord Taylor of Gosforth in your Lordships' House in Reg v Derby Magistrates' Court, ex parte 'B' [1996] AC 487: its character is absolute and -

        .... if a balancing exercise was ever required in the case of legal professional privilege, it was performed once and for all in the 16th century, and since then has applied across the board in every case, irrespective of the client's individual merits." (p.508)

At the least, some and, more probably, all of these premises would benefit from further examination but they have not been the subject of argument on the present appeal. The question of construction is therefore whether the statute empowers the Revenue to require the delivery up to them of documents notwithstanding that they are covered by legal professional privilege.

    44. The next step in the legal analysis is also not disputed and was expressly adopted by the Court of Appeal. The principle of statutory construction is succinctly stated in a quotation from the speech of Lord Hoffmann in ex parte Simms [2000] 2 AC 115, at p.131:

"Parliamentary sovereignty means that Parliament can, if it chooses, legislate contrary to fundamental principles of human rights. ... The constraints upon its exercise by Parliament are ultimately political, not legal. But the principle of legality means that Parliament must squarely confront what it is doing and accept the political cost. Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual. In this way the courts of the United Kingdom, though acknowledging the sovereignty of Parliament, apply principles of constitutionality little different from those which exist in countries where the power of the legislature is expressly limited by a constitutional document."

The context in which Lord Hoffmann was speaking was human rights but the principle of statutory construction is not new and has long been applied in relation to the question whether a statute is to be read as having overridden some basic tenet of the common law. (Viscountess Rhondda's Claim [1922] 2 AC 339; B v DPP [2000] 2 AC 428) The protection given by the common law to those entitled to claim legal professional privilege is a basic tenet of the common law as has been reaffirmed by the case of 'B' (sup).

    45. It is accepted that the statute does not contain any express words that abrogate the taxpayer's common law right to rely upon legal professional privilege. The question therefore becomes whether there is a necessary implication to that effect. A necessary implication is not the same as a reasonable implication as was pointed out by Lord Hutton in B v DPP [2000] 2 AC at 481. A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context. It distinguishes between what it would have been sensible or reasonable for Parliament to have included or what Parliament would, if it had thought about it, probably have included and what it is clear that the express language of the statute shows that the statute must have included. A necessary implication is a matter of express language and logic not interpretation.

    46. In the present case the statutory language falls a long way short of meeting this criterion. The arguments advanced by the Revenue are fully discussed in the Opinion of my noble and learned friend. I agree with his conclusion. At best from the point of view of the Revenue the legislation is equivocal. Left to myself I would incline to the view that the implication, if any, is that the Legislature was intending to preserve the legal professional privilege of the taxpayer rather than abrogate it; otherwise, why preserve it in respect of documents in the hands of the adviser when the client has not consented to waive the privilege? Further, the argument that a general public interest in collecting revenue for the Executive suffices (in peace-time) implicitly to override the basic right and public interest represented by legal professional privilege is contrary to the authorities and the principles which the Revenue accept that those authorities lay down.

    47. The present appeal thus falls to be decided applying the well-established principles of statutory construction to be found in English law. The appellants do not need the assistance of the Human Rights Act or the Convention. The judgments of the European Court of Human Rights in Foxley v UK (33274/96), 31 EHRR 25, and the European Court of Justice in A M & S Europe v The Commission (Case 155/79), [1983] QB 878, show a general recognition of the importance of legal professional privilege.

    48. There were cited to your Lordships decisions of the courts of other common law jurisdictions which have also arrived at conclusions very similar to those of your Lordships in this case. I do not wish to add anything to what my noble and learned friend has said in this connection nor to what he has said about the English authorities which will now have to be read with the judgment of this House. Attention has rightly been drawn by my noble and learned friend to what was said by Glidewell LJ in R v Commissioners of Inland Revenue ex parte Taylor (No.2) 62 TC 578 at p.588 concerning the implicit restriction upon the use which may be made of documents which are obtained under a statutory power and its possible interaction with the question whether a client's privilege will be infringed by requiring the disclosure of documents by the professional adviser. It is a general principle that where a power is given for a particular purpose it is not permissible to use that power for a collateral purpose.

LORD SCOTT OF FOSCOTE

My Lords,

    49. I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hoffmann. I agree with it, and for the reasons which he has given I, too, would allow the appeal.

Appendix

20.(1)  Subject to this section, an inspector may by notice in writing require a person to deliver to him such documents as are in the person's possession or power and as (in the inspector's reasonable opinion) contain, or may contain, information relevant to any tax liability to which the person is or may be subject, or to the amount of any such liability.

(2)    Subject to this section, the Board may by notice in writing require a person to deliver, to a named officer of theirs, such documents as are in the person's possession or power and as (in the Board's reasonable opinion) contain, or may contain, information relevant to any tax liability to which he is or may be subject, or to the amount of any such liability.

(3)    Subject to this section, an inspector may, for the purpose of enquiring into the tax liability of any person ("the taxpayer"), by notice in writing require any of the persons who in relation to the taxpayer are subject to this subsection to deliver to the inspector or, if the person to whom the notice is given so elects, to make available for inspection by a named officer of the Board, such documents as are in his possession or power and as (in the inspector's reasonable opinion) contain, or may contain, information relevant to any tax liability to which the taxpayer is or may be, or may have been, subject, or to the amount of any such liability.

(4)  The persons so subject are—

(a) the taxpayer's spouse, and any son or daughter of his;

(b) in so far as the inspector's enquiries relate to liability of the taxpayer in respect of income, profits or gains that were, or may have been, derived from—

(i) any business (past or present) carried on by the taxpayer or his spouse, or

(ii) any business (past or present) with whose management either of them was concerned at a material time,

any person who is carrying on a business, or was doing so at a material time, and any company whether carrying on a business or not.

(7)   Notices under this section are not to be given by an inspector unless he is authorised by the Board for its purposes; and—

(a) a notice is not to be given by him except with the consent of a General or Special Commissioner; and

(b) the Commissioner is to give his consent only on being satisfied that in all the circumstances the inspector is justified in proceeding under this section.

(9) To the extent specified in section 20B below, the above provisions are subject to the restrictions of that section.

20A. (1)  Where after the passing of the Finance Act 1976 a person—

(a) is convicted of an offence in relation to tax (whenever committed) by or before any court in the United Kingdom; or

(b) has awarded against him a penalty incurred by him (whether before or after the passing of that Act) under section 99 of this Act,

and he has stood in relation to others as tax accountant, an inspector authorised by the Board for the purpose of this section may by notice in writing require the person to deliver to him such documents as are in his possession or power and as (in the inspector's reasonable opinion) contain information relevant to any tax liability to which any client of his is or has been, or may be or have been, subject, or to the amount of any such liability.

For this purpose section 20(8) above applies, substituting "the client" for "the taxpayer."

(3)  A notice is not to be given to any person under this section unless with the consent of the appropriate judicial authority; and that authority is to give his consent only on being satisfied that in all the circumstances the inspector is justified in so proceeding.

(5) To the extent specified in section 20B below, the above provisions are subject to the restrictions of that section.

20B(1)  Before a notice is given to a person by an inspector under section 20(1) or (3), or under section 20A, the person must have been given a reasonable opportunity to deliver (or, in the case of section 20(3), to deliver or make available) the documents in question; and the inspector must not apply for consent under section 20(7) or, as the case may be, section 20A(3), until the person has been given that opportunity.

(2)  A notice under section 20(1) does not oblige a person to deliver documents relating to the conduct of any pending appeal by him; a notice under section 20(3) does not oblige a person to deliver or make available documents relating to the conduct of a pending appeal by the taxpayer; and a notice under section 20A does not oblige a person to deliver documents relating to the conduct of a pending appeal by the client.

"Appeal" means appeal relating to tax.

(3)   An inspector cannot under section 20(1) or (3), or under section 20A(1), give notice to a barrister, advocate or solicitor, but the notice must in any such case be given (if at all) by the Board; and accordingly in relation to a barrister, advocate or solicitor for references in section 20(3) and (4) and section 20A to the inspector there are substituted references to the Board.

(8) A notice under section 20(3) or section 20A(1) does not oblige a barrister, advocate or a solicitor to deliver or make available, without his client's consent, any document with respect to which a claim to professional privilege could be maintained.

(9) A notice under section 20(3) does not, in the case of a person who (in the course of a business carried on by him) has stood in relation to another as tax accountant, oblige that person to deliver or make available documents which are his (the accountant's) property and originate as working papers of that relationship.

20C(1)  If the appropriate judicial authority is satisfied on information on oath given by an officer of the Board that—

(a) there is reasonable ground for suspecting that an offence involving any form of fraud in connection with, or in relation to, tax has been committed and that evidence of it is to be found on premises specified in the information; and

(b) in applying under this section, the officer acts with the approval of the Board given in relation to the particular case,

the authority may issue a warrant in writing authorising an officer of the Board to enter the premises, if necessary by force, at any time within 14 days from the time of issue of the warrant, and search them.

(3) On entering the premises with a warrant under this section, the officer may seize and remove any things whatsoever found there which he has reasonable cause to believe may be required as evidence for the purposes of proceedings in respect of such an offence as is mentioned in subsection (1) above.

But this does not authorise the seizure and removal of documents in the possession of a barrister, advocate or solicitor with respect to which a claim to professional privilege could be maintained.

20D(1)  For the purposes of section 20A and section 20C above, "the appropriate judicial authority" is -

(a) in England and Wales, a Circuit judge;

(b) in Scotland, a sheriff; and

(c) in Northern Ireland, a county court judge.

(2)   For the purposes of sections 20 and 20A, a person stands in relation to another as tax accountant at any time when he assists the other in the preparation of returns or accounts to be made or delivered by the other for any purpose of tax; and his clients are all those to whom he stands or has stood in that relationship.