News Archive for February, 2013

Legal professional privilege does not extend to accountants

In an important decision, an attempt by the Prudential to have advice its accountants gave to clients to be covered by what’s called Legal Professional Privilege has failed in the highest court in the land. Legal Professional Privilege is the term given to describe the principle that communications between a lawyer and their client are covered by a right of absolute confidentiality and cannot be divulged to the courts or third parties.  Anthony Davies a partner in local law firm DPA Law comments: “Prudential argued that as the advice was legal advice relating to a tax avoidance scheme it should be protected. The Court ultimately was having none of it. The implication is that the nature of the advice they gave may now be revealed in Court, or scrutinised by the taxman.”

The Supreme Court has reiterated the principle that it is communications between qualified lawyers and their clients that are covered, and not communications between professional people other than lawyers, even where that advice is legal advice which that professional person is qualified to give. Anthony comments: “The message is clear, if you want legal discussions between you and your adviser, say, relating to tax liability, to be absolutely privileged, make sure the adviser is a qualified lawyer.” If you feel you would like to know more, call Anthony Davies at DPA Law on 01554 749144 for further information.


PARTNER NOTES
The Supreme Court press report relating to the judgement is available at:

http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2010_0215_PressSummary.pdf

Posted by Peter Nicholas on Tuesday, February 12, 2013 at 04:39 PM

Interest rate Swap Mis-selling Scandal Rumbles On

Yet another bank mis-selling scandal has revealed just how much small and medium sized firms have been exploited by the banking sector, according to a hard hitting report just published by the Financial Services Authority.  Between 2006 and 2008 tens of thousands of small businesses (typically bed and breakfast establishments, corner shops, chip shops, and children’s nurseries, etc.)  were sold complicated derivative-based  products, on the back of conventional bank loans, with some owners alleging they were often sold as a condition of the loans. The FSA described the products as “absurdly complex”, and affected borrowers can expect substantial compensation, with the final bill running into billions of pounds.
Problems arose for two main reasons: first, clients lost small fortunes as interest rates fell amid claims they were not warned of the risk; and second, the banks imposed very large exit fees if clients wanted to terminate the service, these “break costs” often running into tens of thousands of pounds. The FSA has been considering what “redress” scheme to put in place. Says Anthony Davies a partner in local law firm DPA Law: “Everybody’s known the FSA was going to end up deciding these clients needed compensating. The question has been how and how much.”

Over the past few months the FSA has been running a pilot scheme to provide information to decide the correct form of redress for the estimated 40,000 businesses that were mis-sold. They have concluded that over 90% of the derivatives sold by banks to small businesses could have been mis-sold. Anthony Davies comments: “The report effectively means the FSA is giving the green light to these small businesses to go all out and seek substantial compensation from these banks.” If you feel you may be one of those affected businesses, call Anthony Davies at DPA Law on 01554 749144 for further information.


PARTNER NOTES

The FSA Press Release is available at:

http://www.fsa.gov.uk/library/communication/pr/2013/010.shtml


The FSA’s full report is available to view at:

http://www.fsa.gov.uk/pubs/other/interest-rate-swaps-2013.pdf

Posted by Peter Nicholas on Tuesday, February 12, 2013 at 04:23 PM