Judgment summary
This is a decision of the First-tier Tribunal (Tax Chamber) under the Resolution of Disputes as to Privileged Communications Regulations 2009, determining whether three documents, described as the PG Slides, the Corporate Member Executive Summary and the February Paper, were protected by legal advice privilege following an information notice issued under paragraphs 1 and 2 Schedule 36 Finance Act 2008 (1).
The dispute arose from HMRC's enquiries into HLI's partnership tax returns for 2014/15 to 2023/24, concerning deductibility of payments made by HLI to Hogan Lovells US LLP (HLUS) under a Cooperation Agreement (2). HMRC had since closed the enquiry by issuing closure notices, which were under separate appeal (TC/2026/07011) (2).
The Tribunal determined the matter on the papers under Rule 29, with the parties' consent, considering witness statements from Nicholas Mark Atkins, HLI's General Counsel, extensive contemporaneous documents, and submissions on relevant legal principles (see Decided by section; paras 1, 34-41).
The Tribunal held that the PG Slides should be disclosed in redacted form, while the Corporate Member Executive Summary and the February Paper were privileged and need not be disclosed (5, 101).
Background
HLI and HLUS operate as separate legal entities following their combination in 2009 under a Cooperation Agreement (3). An 'imbalance issue' arose concerning the financial consequences of partner remuneration and payment arrangements between the two firms, generating discussions from 2012 to 2014 about possible solutions, including a corporate member proposal and ultimately payments by HLI to HLUS (3).
HMRC opened an enquiry into HLI's 2014/15 partnership tax return on 12 May 2016 and issued Sch 36 information notices during the enquiry (7). HLI disclosed substantial material but withheld the Disputed Documents on privilege grounds (7). HMRC first challenged the PG Slides and February Paper in correspondence of 15 December 2021, and HLI asserted privilege over the Corporate Member Executive Summary on 23 May 2022 (8).
On 7 March 2025 HMRC issued a detailed challenge to HLI's privilege claims, contending the advice was commercial rather than legal, and that any privilege had been lost through sharing between HLI and HLUS as adverse parties, and alleging waiver as to the February Paper (9). HLI issued the Application on 6 February 2026 (10). In its Response, HMRC reformulated its position, primarily contending none of the documents attracted privilege at all, while maintaining alternative confidentiality and severability arguments, and dropping its collateral waiver argument (11).
Core dispute
The core dispute was whether the PG Slides, the Corporate Member Executive Summary and the February Paper attracted legal advice privilege, and if so, whether that privilege had been lost through circulation between HLI and HLUS, or whether any non-privileged content was severable (4, 11, 46-47).
The parties agreed on many underlying principles of legal advice privilege, including that legal advice is not confined to questions of law and may address commercial consequences within a relevant legal context, and that there is no absolute rule that confidentiality is lost merely because material is shared with a party whose interests are not fully aligned (18-22).
Disagreement centred on: the scope of the doctrine protecting secondary communications revealing the substance of legal advice (23-33); the weight to be given to Mr Atkins' witness evidence as to the character and purpose of the documents (34-41); whether the authors, PG and PF, were acting as lawyers when preparing the documents given their dual legal/managerial roles (49-53); and whether confidentiality had been preserved when the documents were circulated between HLI and HLUS personnel and governance bodies (87-89).
Court findings
On secondary communications, the Tribunal held that a document does not attract privilege merely because it was influenced by legal advice or produced against a background where legal advice had been obtained; privilege attaches where disclosure would provide a 'definite and reasonable basis' for inferring the substance of privileged advice, whether directly or by necessary and reasonable inference, following the approaches in A v B and Edwardian (32-33).
On witness evidence, the Tribunal found that Mr Atkins' evidence as to factual and organisational background carried weight, but his opinions on the proper characterisation of the Disputed Documents did not bind the Tribunal, which formed its own view from the documents and contemporaneous material (40-41).
The Tribunal declined to determine the scope of the 'direction and supervision' principle concerning joint lawyer/non-lawyer authorship, finding it unnecessary since both parties agreed it was not material to the Application (45).
The Tribunal found that the 'imbalance issue' provided a relevant legal context in which privileged legal advice could be sought and given, since contractual, tax, regulatory, governance and commercial aspects of the problem could not realistically be separated (84-86).
The Tribunal found that confidentiality in the Disputed Documents was preserved despite circulation within HLI and HLUS, because circulation was restricted to a small group occupying leadership, governance, advisory or implementation roles, for the limited purpose of addressing the imbalance issue (89-90).
Applying these principles document by document, the Tribunal found the PG Slides were prepared by PG acting as a lawyer for the dominant purpose of giving legal advice, but that limited factual parts could be severed and should be disclosed in redacted form (94). The Corporate Member Executive Summary was found to have been prepared by PF acting as a lawyer for the dominant purpose of giving legal advice, with commercial matters not severable (97). The February Paper was similarly found to have been prepared by PF acting as a lawyer, conveying and evaluating legal advice within the relevant legal context, with any commercial content not severable (100).
Outcome
The Tribunal determined that the PG Slides should be disclosed to HMRC, subject to redactions of the legal advice contained within them, with disclosure stayed pending any application for permission to appeal (94, 101(1)).
The Corporate Member Executive Summary and the February Paper, together with relevant drafts, were held to be privileged and were not required to be disclosed (101(2)-(3)).
The decision records the parties' right to apply for permission to appeal within 56 days under Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (102).
Major issues / areas of contention
- Whether the PG Slides, Corporate Member Executive Summary and February Paper attracted legal advice privilege under the Resolution of Disputes as to Privileged Communications Regulations 2009
- The correct test for determining whether a secondary document attracts privilege by revealing the substance of legal advice, as between the approaches in A v B and Edwardian Group Ltd v Singh
- The weight to be attached to witness evidence from Mr Atkins (HLI's General Counsel) supporting the privilege claims, given he lacked direct involvement in the underlying events
- Whether the 'imbalance issue' between HLI and HLUS constituted a relevant legal context capable of supporting legal advice privilege, despite its commercial dimensions
- Whether confidentiality in the Disputed Documents was lost through circulation between HLI and HLUS personnel and governance bodies during the period their interests had diverged
- Whether the authors of the Disputed Documents, PG and PF, were acting as lawyers (as opposed to in managerial or commercial capacities) when preparing them
- Whether non-privileged or commercial content within the Disputed Documents was capable of severance from privileged legal advice
- Whether a document jointly authored or presented by a lawyer and non-lawyer, without clear evidence of respective contributions or direction and supervision, could attract privilege
- Whether HMRC was entitled to serve its Further Response and whether certain documents disclosed by HLI had been inadvertently disclosed without waiving privilege