Appeal No.EA/2007/0043

IN THE INFORMATION TRIBUNAL

UNDER THE FREEDOM OF INFORMATION ACT, 2000

BETWEEN

JAMES KESSLER QC

Appellant

-and-

THE INFORMATION COMMISSIONER

Respondent

-and-

HER MAJESTY’S REVENUE AND CUSTOMS

Additional Party

APPELLANT’S WRITTEN SUBMISSION

References to page numbers refer to the Bundle of Documents compiled by the Respondent as directed by the Tribunal. References to tab numbers refer to the enclosed file of the Appellant’s authorities.

The Basic Facts

1. This case arises out of the abolition of the “professional trustee residence rule” on 6 April 2007. Under this rule, professional trustees of trusts created by foreign settlors were treated as not resident in the UK, with the consequence that disposals of the property of such trusts were not subject to UK capital gains tax¹.

2. The undisputed evidence before the Tribunal is that

   1. this rule was necessary to enable UK professional trustees to compete on a level playing field with professional trustees in other countries²; and

   2. its abolition puts UK professional trustees at a serious competitive disadvantage in the international market for the services of professional trustees and is driving investment business out of the UK³.

3. The Additional Party, HMRC, claimed that the rule had to be abolished because they had been advised by the Dti that it was contrary to EC Rules on State Aids⁴.

4. The Appellant sought disclosure of that advice under the Freedom of Information Act 2000⁵ (“the Act”). HMRC and the Respondent, the IC, refused disclosure on the ground that it was covered by legal professional privilege and therefore exempt from disclosure under s.42 of the Act.

5. HMRC also invoked the exemption of material relating to the formulation of government policy in s.35 of the Act, but the IC did not resolve this point⁶.

The Issues

6. The following issues arise:

   1. Whether a claim to legal professional privilege could be maintained for the Dti’s advice and the letter requesting it, in relevant legal proceedings⁷;

   2. Whether HMRC waived legal professional privilege by deploying the Dti’s advice as the sole reason for abolishing the professional trustee residence rule⁸;

   3. Whether the public interest in maintaining the exclusion of the duty of disclosure outweighs the public interest in disclosing the information⁹;

   4. Whether the advice is exempted from disclosure under s.35 of the Act¹⁰.

7. Issue (a) is raised by the Appellant’s Supplementary Ground of Appeal¹¹, for which leave has been sought¹² under Rule 11 of the Information Tribunal’s Rules¹³. The Appellant has provided the other parties with the full text of his submission on this issue¹⁴, enabling them to respond to it in their written submissions, and the other parties have confirmed that they do not object to its admission into the proceedings. In these circumstances, it is respectfully submitted that leave should be granted.

8. Disclosure cannot be resisted under s.42 of the Act if the Appellant succeeds on any of issues (a), (b) or (c). In this event, disclosure could still be resisted, at least in theory, under s.35 of the Act, which is addressed by issue (d). Although the IC did not resolve issue (d), it is respectfully submitted that the Tribunal can and should do so if it finds in favour of the Appellant on any of issues (a), (b) or (c).

9. Under s.58 of the Act, the Tribunal may make any notice which the IC could have made; this includes a notice resolving issue (d). The alternative course of remitting the case to the IC would be likely to result in significant delay as well as further expenditure of time and effort by all parties. Disclosure delayed is disclosure denied.

10. Furthermore, both the IC and HMRC have invited the Tribunal to consider the s.35 issue: see the IC’s Reply §31¹⁵ and HMRC’s Reply §2¹⁶.

The role of the Tribunal

11. Under s.58 of the Act, the Tribunal must decide the issues on their merits. In particular, the Tribunal is not restricted to reviewing whether the IC’s assessment of the public interest balance was irrational. As the Tribunal said in Bellamy¹⁷:

“If the Tribunal considers that the Commissioner was wrong in his judgment of the public interest balance in accordance with section 2(2)(b), it will overrule him. It merely needs to come to the conclusion that it takes a different view.”

12. It is necessary to emphasise this point because the IC’s Reply¹⁸ appears to be based on the premise that the Appellant has to show that the IC’s Decision was irrational. That premise is wrong in law.

Key features of this case

13. The following features of this case are, it is submitted, of particular importance:

    1. HMRC and the government have stated that the professional trustee residence rule was abolished solely because of the Dti’s advice that it infringed EC state aid rules, contrary to the policy which they would otherwise have preferred¹⁹.

    2. The abolition of the rule has caused and is causing significant damage to professional trustees in the UK and the removal of investment business to other countries²⁰.

    3. Without seeing the advice, it is not possible for persons concerned by this state of affairs to identify whether and how the advice is wrong, and to make effective representations to reconsider the abolition of the rule²¹.

    4. HMRC have represented that the Dti’s advice was unequivocal²². If this is true, the advice is difficult to reconcile with the view of Christopher Vajda QC²³ and the retention of the same rule by the Irish Republic²⁴; and there is a strong public interest in allowing interested parties to examine the advice to see if it is based on a fallacy or incorrect factual basis. If, on the other hand, these statements were not true (i.e. the advice was qualified), there is a strong public interest in disclosing it to restore candour and to enable interested parties to understand the significance and limits of the qualifications; and this may lead them to propose alternatives which may be compatible with the advice and with the legitimate business of professional trustees in the UK.

    5. It appears from the evidence in this appeal that the advice sought by HMRC and given by the Dti did not in fact relate to the existing form of the professional trustee residence rule but rather to a proposed alternative form²⁵. It is therefore possible that HMRC has made a fundamental error in supposing that this advice was applicable to the rule in its existing form. Improving the decision-making process by enabling the public to identify and correct errors such as these is one of the principal aims of the Act²⁶.

    6. Apart from one contention which is incorrect on the facts²⁷, it is not suggested that disclosure of the Dti’s advice will cause any specific detriment to the public interest relating to the subject-matter of this case. Instead, the IC and HMRC argue in essence that disclosure should be excluded in this case because it might discourage frank legal advice in other cases.

    7. That approach is contrary, it is submitted, not only to the basic policy of the Act but also to a key principle of government policy on tax simplification. As the announcement accompanying the Pre-Budget Report of 9 October 2007²⁸ states:

“The Government commits to three principles of tax simplification … the Government will share its findings on the viability of tax simplifications with business”

The Dti’s advice apparently found that it was not viable to simplify the taxation of trusts by maintaining the professional trustee residence rule and extending it to income tax. Yet HMRC is refusing to share it with those carrying on business as professional trustees.

Documents and evidence

14. The Tribunal is invited to read the documents listed below; page references relate to the bundle prepared by the IC. Since the bundle is not in the most convenient order, the Tribunal may find it helpful to follow the order set out below.

    1. HMRC Announcements and Papers

       1. HMRC Discussion Paper 17/12/2002, p161, §67

       2. HMRC Consultation Document 13/8/2004, p198, §4.24

       3. HMRC Feedback Paper 16/3/2005, p222, §30

       4. HMRC Announcement 16/3/2005, p287-8

       5. HMRC Draft Explanatory Note 16/3/2005, p266, §34

       6. HMRC Announcement 22/3/2006, p300, first bullet

       7. HMRC Regulatory Impact Assessment 22/3/2006, p292, §15.19

    2. Appellant’s requests to HMRC for disclosure and HMRC’s responses, pp14-23

    3. Proceedings before the IC

       1. Appellant’s application to the IC, pp0-5

       2. HMRC letter to the IC, p37

       3. IC’s Decision, pp47-52

    4. Pleadings on appeal

       1. Grounds of Appeal, pp60-61

       2. IC’s Response, pp94-109

       3. HMRC’s Response, pp142-3

       4. Supplementary Ground of Appeal

    5. Evidence

       1. Kessler (1), pp117-120

       2. Opinion of Christopher Vajda QC, pp125-9

       3. Ingham, pp131-4

       4. Chamberlain, pp135-141

       5. Fearn, pp301-316

       6. Hartnett, pp317-323

       7. Kessler (2), pp324-327

15. The IC and HMRC have not sought to cross-examine any of the Appellant’s witnesses. In these circumstances, the Tribunal is bound to accept their evidence unless it can be said to be incredible (which, it is submitted, it cannot): see Markem v Zipher²⁹ §§56-61.

16. The same point does not apply in reverse, since the Appellant sought an oral hearing at which witnesses could be cross-examined but was refused. The Appellant is entitled to criticise HMRC’s evidence, in particular where it is contradicted by stated government policy.

Issue (a): Could a claim to legal professional privilege be maintained for the Dti’s advice and the letter requesting it in relevant legal proceedings?

17. s.42 of the Act provides that

“Information in respect of which a claim to legal professional privilege or, in Scotland, to confidentiality of communications could be maintained in legal proceedings is exempt information”.

18. The Act does not define the legal proceedings to which this provision refers. However, it must, it is submitted, refer to relevant legal proceedings. In particular, exemption from disclosure under the Act could not be justified on this ground if disclosure could be required in the very legal proceedings contemplated by the advice in issue.

19. s.42 is an exception to the basic principle of disclosure set out in s.1 of the Act. As such, it should be interpreted strictly and should not be extended beyond its specific object. Its object is identified in the White Paper³⁰ which preceded the Freedom of Information Bill in the following terms:

“Lastly, FOI should not disadvantage the government in litigation. For that reason, the Act will not cover legal advice obtained by the government from any source or any other advice within government which would normally be protected by legal professional privilege.”

20. The object of not disadvantaging the government in litigation does not apply where the advice is not protected in the very proceedings which it contemplates.

21. The proceedings contemplated by the Dti advice in this case are proceedings for enforcement by the European Commission of the rules on state aids in the Treaty of Rome. These rules are contained in section 2 of the “Rules on Competition”³¹. Section 1 of the “Rules on Competition” contains rules applying to undertakings.

22. The European Courts have consistently held, most recently in Akzo v Commission³² at §§165-183, that

“the protection accorded to LPP [legal professional privilege] under Community law, in the application of Regulation No 17, only applies to the extent that the lawyer is independent, that is to say, not bound to his client by a relationship of employment …. The requirement as to the position and status as an independent lawyer, which must be met by the legal adviser from whom the written communications which may be protected emanate, is based on a concept of the lawyer’s role as collaborating in the administration of justice by the courts and as being required to provide, in full independence, and in the overriding interests of the administration of justice, such legal assistance as the client needs ….

“It follows that the Court expressly excluded communications with in-house lawyers, that is, legal advisers bound to their clients by a relationship of employment, from protection under LPP.” (Akzo §§166-7)

23. Akzo and earlier authorities concerned proceedings against undertakings under section 1 of the “Rules on Competition” in the Treaty of Rome. However, it is submitted that the same rule applies in proceedings against states under section 2 of the “Rules on Competition”. These proceedings are governed by Regulation 659/1999³³ which provides a generally similar procedural regime to that provided by Regulation 17³⁴ for proceedings under section 1 of the “Rules on Competition”. In particular, art. 5 of Regulation 659/1999 contains a power to request information similar to art. 11 of Regulation and art. 24 of Regulation 659/1999 contains similar protection for “Professional Secrecy” as art. 20 of Regulation 17.

24. The advice in question was given by a lawyer employed by the Crown in the Dti³⁵. He would not be regarded as an “independent lawyer” for the purpose of the criterion re-affirmed in Akzo. It follows that a claim to legal professional privilege could not be maintained in the very proceedings contemplated by the Dti advice. In these circumstances, it is submitted that the exemption in s.42 of the Act does not apply.

Issue (b): Did HMRC waive legal professional privilege by deploying the Dti’s advice as the sole reason for abolishing the professional trustee residence rule?

The facts

25. On publishing the draft of the Finance Bill 2006 on 22 March 2006, HMRC stated:

“What has happened to the professional trustee measure in the residence test?

“As we explained when we published the draft legislation earlier in the year, there was a risk that the professional trustee measure would fall foul of the EU State aid rules. We have now consulted with the Department of Trade and Industry which has confirmed that it would indeed constitute a State aid. In view of this we have had to withdraw the measure.”³⁶

26. In the Parliamentary debate on the Bill, the Paymaster General (the Minister then responsible for the HMRC) stated:

“… the Department of Trade and Industry advised HMRC that the new test would constitute a state aid – it would have been unfair competition against professional trustees in other European states – and that there were no grounds on which the European Commission would have approved the measure as a state aid. Based on that advice the Department withdrew the proposals covering professional trustees and it would be inappropriate therefore to retain the existing capital gains tax rule …”³⁷

27. Having thus deployed the Dti’s advice to justify the abolition of the professional trustee residence rule, it is submitted that the government cannot now maintain any claim to legal professional privilege in the advice, even if (contrary to §§- above) it ever could.

The Law

28. There are two aspects to this issue:

    1. Whether legal professional privilege is waived by deploying the subject-matter in a public announcement to justify certain action;

    2. Whether legal professional privilege in the whole of the advice is waived by deploying the gist of it.

29. As to (a), confidentiality is a pre-condition for the existence of legal professional privilege: see Three Rivers v Bank of England³⁸ at §24. It must follow that publication to the world at large waives legal professional privilege. This proposition was applied in the New Zealand cases, Chandris Lines v Wilson & Horton³⁹, approved in Harbour Inn Seafoods v Switzerland General Insurance⁴⁰, and adopted by this Tribunal in Kirkaldie⁴¹ at §26, citing the Chandris Lines case.

30. As to (b), it is well-established that deploying the gist of legal advice to justify a particular position waives privilege in the whole of it. Those who have been thus addressed are entitled to know the full story. As Mustill J put it in Nea Karteria Maritime v Atlantic and Great Lakes Steamship⁴²:

"... where a party is deploying in court material which would otherwise be privileged, the opposite party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question. To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being misunderstood."

31. That case related to material deployed in litigation, but the principle is not confined to material so deployed. In AWB v Cole⁴³, the Federal Court of Australia considered whether AWB had waived privilege in legal advice relating to its dealings under the UN Oil-For-Food Programme for Iraq. AWB had summarised the advice in its discussions with the Australian Government, the Independent Inquiry Committee of the UN (“IIC”) and a Special Commission established by the Commonwealth of Australia (“the Commission”). The Court concluded at §178:

“Overall, I am satisfied that by means of these disclosures, AWB deployed the gist or substance of legal advice it had obtained. Moreover, I am satisfied that AWB made a conscious and voluntary decision to deploy this legal advice in its dealings with the Australian Government, the IIC and the Commission because it considered that it was in its commercial interests to do so. These actions are inconsistent with the maintenance of confidentiality in the legal advice. “

32. Similarly, in Chandris Lines v Wilson & Horton⁴⁴ publication of the conclusion of a report in a newspaper article (quoted at p603 l.22 – 604 l.11) waived privilege in the whole report: see p611, ll.9-13). The Court concluded:

“The defendant advised the world it had the report. It disclosed part of its contents. Yet it still refuses to disclose the whole document. I consider in all the circumstances, supported by the law as shown in the Marlborough Hotel and Great Atlantic cases, that there has been a waiver of privilege.”

As mentioned above, this case was cited with approval by the Tribunal in Kirkaldie⁴⁵.

33. In Dunlop Slazenger International v Joe Bloggs Sports⁴⁶, the English Court of Appeal held that a party had waived privilege in communications between itself and its expert witness by summarising in an affidavit certain findings communicated to it by the expert. The relevant passage in the affidavit is set out at §7 of the Judgment of Waller LJ. Waller LJ concluded at §§11-12:

“… the authorities provide for a distinction between a reference to the effect of the document and reliance on the content. Mr Croxford suggests that this is a reference case and not a deployment case.

“In my view, this is clearly a deployment case. This is a case in which, by the terms of those paragraphs, 13 and 14 in particular, of Miss Ahmed, Miss Ahmed was seeking to refer to the contents of the information that was being supplied by the expert to her in order to seek to persuade Gibbs J to make an order that the further evidence should be allowed to be put in.”

34. Thorpe LJ makes it clear at §18 that “effect” is not being used in the sense of “tenor”, but in the sense of “consequence”:

“In preparing her witness statements dated 21st and 28th May 2003, Miss Usmat Ahmed might have confined herself to a bare reference to a report from Delta Clinics as a result of which she took steps to prepare statements from additional witnesses and supplemental statements from existing witnesses. But, as paragraphs 13 and 14 of her first statement and paragraph 3 of her second statement demonstrate, she elected to state what may prove to be either the whole contents or the significant contents of the report.”

35. Chandris Lines and Dunlop Slazenger were followed by this Tribunal in Kirkaldie⁴⁷. After reviewing these and other authorities, the Tribunal affirmed that

“The test for waiver is whether the contents of the document in question are being relied on. A mere reference to a privileged document is not enough, but if the contents are quoted or summarised, there is waiver.”

36. It was contended in Kirkaldie that legal professional privilege had been waived by the following statement by a Councillor at a public session of a Local Council:

“The Council has taken legal advice on this matter and whether or not the introduction of the 11 night time arrivals constitutes a change of use requiring planning permission. The advice is that it may as a matter of fact and degree”.

37. The Tribunal found that

“the basis on which the advice had been sought and the main opinion given in that advice, were mentioned by Councillor Kirby at the public meeting” (§41)

and concluded

“Applying the test set out in the Dunlop Slazenger International Ltd case referred to above, by providing a summary of the legal advice at a full Council meeting on 13 January 2005 followed by the recording of the disclosure in the minutes of the meeting, the Tribunal finds that the legal professional privilege exception had indeed been waived by TDC.” (§42)

The Tribunal accordingly ordered that the whole of the opinion must be disclosed.

38. In this case, HMRC and its Minister did not simply say that they had received advice from the Dti as a result of which they had decided to abolish the professional trustee residence rule - which would merely have been referring to the effect of the advice. Instead, they deployed at least part of the substance of the advice, publicly stating

“the Department of Trade and Industry advised HMRC that the new test would constitute a state aid – it would have been unfair competition against professional trustees in other European states – and that there were no grounds on which the European Commission would have approved the measure as a state aid”⁴⁸

39. In these circumstances, by the standards applied in the authorities cited above, privilege has clearly been waived in the whole of the advice and the letter requesting it.

The IC’s decision

40. In §14 of his Decision⁴⁹, the IC said:

“The reference to consultation with the DTI in the announcement [of 22 March 2006] does not mention that legal advice on the point has been obtained from the DTI and it was the legal advice that concluded that the measure would amount to state aid. The reference is very general and is not sufficiently specific to amount to a waiver of legal professional privilege in respect of the request for legal advice and the advice provided.”

41. With due respect to the IC, the first sentence quoted above is specious. HMRC had specifically stated in the announcement⁵⁰ that the Dti had confirmed that the measure would constitute a State aid. Although HMRC did not expressly characterise the confirmation which had been given by the Dti as “legal advice”, it was by its nature legal advice. Furthermore, HMRC themselves accept that it is public knowledge that they sought and were given legal advice: see §4 of their Reply⁵¹. In any case, waiver of legal professional privilege does not depend on the person waiving it characterising the material as legal advice. Indeed, it is does not even depend on the material being legal advice, as the cases Chandris Lines⁵² and Dunlop Slazenger⁵³ illustrate. What matters is whether part of the content of the material has been deployed by the person claiming privilege.

42. Nor is waiver avoided by the suggested generality of the reference, if (as here) what purports to be the primary conclusion of the advice has been deployed: see AWB v Cole⁵⁴, Dunlop Slazenger International v Joe Bloggs Sports⁵⁵ and Kirkaldie⁵⁶ cited above. In any case, the statement of the sponsoring Minister (quoted by HMRC in their Reply and reproduced at § above) was significantly more specific and constituted a clear deployment purportedly of the gist of the advice to support the Government’s position. The disclosure in this case is in fact considerably more specific than, for example, that in Kirkaldie which was held by this Tribunal to waive privilege in the full advice.

The Replies

43. The IC’s Reply claims at §28(2)⁵⁷ that

“The announcement [of 22 March 2006] did not even arguably examine or confirm the nature of any legal advice which had been given by the DTI’s solicitors directly to HMRC”

44. With due respect to the pleader, the announcement clearly did purport to confirm the nature of advice given by the Dti to HMRC. That it did not examine the advice is the very mischief addressed by the rule that a partial disclosure is treated as a waiver of the whole - so that the real weight or meaning of the document is not misunderstood, as Mustill J put it in Nea Karteria⁵⁸. That the announcement did not explicitly characterise the advice as legal is specious and irrelevant, as explained in § above. That it did not specify that the advice had been given by the Dti’s solicitors directly to HMRC is also irrelevant: what matters is that the gist was deployed to support HMRC’s position.

45. The IC’s Reply states at §28(3):

“There is plainly a distinction between: (a) a Government department publicly confirming that it has withdrawn a particular measure based on the views adopted by another Government Department about the legality of that measure and (b) a Government department praying in aid legal advice which it has received from another department’s solicitors in the course of its public pronouncements”

The pleader then claims that this case falls within (a) and not (b).

46. In fact this case falls within category (b). HMRC and its Minister went beyond saying that the measure had been withdrawn based on the views of the Dti. If that had been all, they might possibly have avoided waiver on the basis that they did not deploy the content of the advice but merely stated its effect on HMRC (see the Dunlop case discussed in §§- above). However, HMRC and its Minister went further, by stating and deploying in support of their position what purported to be the conclusion of the advice, namely that the measure

“would constitute a state aid – it would have been unfair competition against professional trustees in other European states – and that there were no grounds on which the European Commission would have approved the measure as a state aid”.

47. HMRC likewise contend in their Reply⁵⁹:

“… there is no basis for the contention that HMRC has ceased to be able to maintain a claim to legal professional privilege in respect of the information, by reason of the fact that it is public knowledge that HMRC sought legal advice and then acted in reliance on that advice. Neither of these matters affects the confidential nature of the disputed information.”

48. Again, if HMRC had merely said that they had sought legal advice and acted in reliance on it, they might have avoided waiving privilege. But in fact, they went beyond this, by deploying the purported conclusion of the advice in support of their position. They thereby destroyed the confidentiality of the conclusion and waived privilege in the remainder of the advice in accordance with the principle applied in the cases cited above.

49. In these circumstances, privilege in the whole advice has been waived and the exemption in s.42 of the Act cannot now apply even if it ever could.

Issue (c): Does the public interest in maintaining the exclusion of the duty of disclosure outweigh the public interest in disclosing the information?

The law

50. s.1(1) of the Act⁶⁰ lays down the basic principle:

“Any person making a request for information to a public authority is entitled … (b) … to have that information communicated to him.”

51. s.2(2) of the Act provides that

“In respect of any information which is exempt information …. section 1(1)(b) does not apply if or to the extent that … (b) in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.”

52. The Act thus establishes a general duty of disclosure subject to exceptions in relation to certain types of information if in all the circumstances the public interest in maintaining the exemption outweighs the public interest in disclosing the information. It is apparent, it is submitted, from the scheme of the Act and the wording of these provisions that:

    1. The burden rests on the authority resisting disclosure to show that the public interest in maintaining the exemption outweighs the public interest in disclosure.

    2. This burden can only be discharged by reference to the circumstances of the particular case. The mere fact that the information falls within a particular class is not sufficient. Information must be disclosed except where there is an overriding need to keep the specific information in issue confidential.

53. If these propositions are not clear from the legislation, it is submitted that the ambiguity can and should be resolved by reference to the statements of the promoters of the Bill and relevant amendments of it in Parliament in accordance with the guidance in Pepper v Hart⁶¹.

54. ss.2(1) and 2(2) in their present form were introduced into the Act by amendments 2 and 4 moved by Lord Lester⁶². Speaking to these amendments, Lord Lester said:

“By creating a public right of access and then qualifying it with exceptions and limitations without a clear presumption in favour of public access, unless there is very good reason not to disclose the information, the Bill as it stands is seriously defective. …..

“The purpose of these amendments is to remove that serious defect by writing into Clause 2 a clear presumption in favour of public disclosure. I shall explain our understanding of the purpose and effect of the amendments and hope that the Minister, as controller of the Bill in this House, will not only support the amendments but will indicate whether or not he agrees with our understanding of their important purpose and significant effect. …

“Clause 2 is a crucial provision because it prescribes the standards to be applied to the exemptions from disclosure in Part II other than absolute exemptions. ….

“These amendments require the public authority, the information commissioner and ultimately the courts to ask and answer a key question: in all the circumstances of the case, does the public interest in maintaining the exclusion of the duty to confirm or deny outweigh the public interest in disclosing whether the public authority holds the information? In other words, the starting point is the public right of access and the public interest in disclosure, and it is for the public authority to justify non-disclosure on the basis that public disclosure is outweighed in the circumstances of the case by the public interest in non-disclosure.

“The burden of proof, as lawyers would say, is placed upon the public authority to show that there is some pressing need for non-disclosure and that the restriction on the public right of access is necessary in the sense of being a proportionate way of meeting that need. … In each case, it will be for the public authority to justify the exceptional course of relying upon the exception. ….

“We ask the Minister to confirm that his understanding of the effect of these amendments is similar to our own understanding and their acceptance would represent a real shift in the way in which the balance is to be struck and maintained. …..”⁶³

55. Accepting these amendments, Lord Falconer, the promoter of the Bill, said

“I turn to the amendments in the group. I speak first to Amendments Nos. 2 and 4, tabled by the noble Lords, Lord McNally, Lord Lester and Lord Goodhart. We make it clear, and made it clear in Committee, that what we are interested in seeking to achieve is a change of culture in relation to freedom of information.

“Amendments Nos. 2 and 4, and the other amendments in different groups to which the noble Lord, Lord Lester, referred in his remarks, will result in an important and significant shift towards greater openness. They will put beyond doubt the Government's resolve that information must be disclosed except where there is an overriding public interest in keeping specific information confidential. Perhaps I may repeat that: information must be disclosed except where there is an overriding public interest in keeping specific information confidential. …

“I return to Amendments Nos. 2 and 4. These amendments would have the same effect as the noble Lords stated in Committee. Quite apart from making it clear that the position is that there must be disclosure except where there is an overriding public interest in keeping specific information confidential, they also deal with the "tie-breaker" situation, to which the noble Viscount, Lord Colville of Culross, specifically referred. If there is a tie-break, disclosure has to take place. The amendments give a further push to openness; so the Government have concluded that they will support them.”⁶⁴

56. It is therefore clear that s.2(2) of the Act was enacted on the footing that it places the onus on a public authority resisting disclosure to show that there is an overriding public interest in keeping the specific information in issue confidential in the particular circumstances of the case.

57. By enacting s.2(2) of the Act as clarified by Lord Falconer and Lord Lester and making s.42 a qualified exemption subject to it, Parliament clearly rejected the view expressed in some court judgments that the public interest in obtaining legal advice in confidence automatically prevails over almost any other interest. These judgments concerned the different question of what information must be disclosed to another party in litigation. Parliament apparently considered either that this approach was inappropriate in the context of access under the Act to legal advice held by public authorities, or possibly that it put legal advice on too high a pedestal, or both.

58. This interpretation is further confirmed by the purpose of the exemption in s.42 as identified in the White Paper⁶⁵, namely that

“FOI should not disadvantage the government in litigation. For that reason, the Act will not cover legal advice obtained by the government from any source or any other advice within government which would normally be protected by legal professional privilege.”

59. Thus, the purpose of the legal professional privilege exemption is to prevent the government being disadvantaged in litigation, not to ensure that legal advice can be sought by and given to a public authority without being exposed to public scrutiny.

60. It follows that, when applying s.42 of the Act, general concerns that disclosure in one matter might inhibit frank discussion in other matters are either irrelevant or of very little weight in assessing the balance of public interests in the specific circumstances of a particular case in accordance with s.2(2) of the Act as properly interpreted.

61. To the extent that observations in Bellamy⁶⁶ contradict the principles identified above, it is submitted that these observations were wrong and should not be followed. In that case, the Tribunal’s attention was not drawn either to the White Paper or to the statements of Lord Falconer and Lord Lester clarifying the meaning of s.2(2) when the provision in its present form was introduced. The decision in Bellamy was therefore per incuriam. In any case, the Tribunal is respectfully reminded that it is not bound to follow its other decisions, as it accepted in Baker⁶⁷.

62. The Tribunal rightly held in Bellamy at §12 that

“The question remains whether, on the facts of this case, the balance interest which has been referred to comes down in favour of maintaining the exemption or not.”

However, at §35 the Tribunal said

“The Tribunal has come to the unanimous view that the Appellant has failed to adduce sufficient considerations which would demonstrate that the public interest in maintaining the exemption is, in the present case, outweighed by any public interest in justifying a disclosure.”

63. The Tribunal thus wrongly put the onus on the applicant to show that the public interest in disclosure outweighed the public interest in maintaining the exemption. This basic error undermines the rest of this paragraph of the Tribunal’s decision, including in particular the conclusion that

“…it is important that public authorities be allowed to conduct a free exchange of views as to their legal rights and obligations with those advising them without fear of intrusion, save in the most clear case, of which this case is not one. “

It is respectfully submitted that this proposition is contrary to the Act as properly interpreted and should not be adopted in this (or any other) case.

64. Decisions of the Tribunal under s.35 of the Act have rightly held that there is a presumption in the Act in favour of disclosure and rejected the suggestion that information falling within a qualified exemption should only be disclosed if there is an overarching public interest in favour of releasing the information: see e.g. The Secretary of State for Work and Pensions⁶⁸ §§21-33. Similarly, the IC’s Guidance on “The Public Interest Test”⁶⁹observes that “There is a presumption running through FOIA that openness is, in itself, to be regarded as something which is in the public interest”.

65. The observations in §35 of Bellamy are out of line and should be rejected. To the extent that they have been adopted by the Tribunal in other cases, the reasoning of these decisions was also wrong and per incuriam and should not be followed. This does not mean, however, that the actual determinations in Bellamy and such other cases were wrong.

The facts

66. In any event, on the specific facts of this case, the balance of public interests is overwhelmingly in favour of disclosure. On the one hand, there are very good reasons why this advice should be disclosed. On the other hand, the objections to its disclosure are, in the circumstances, particularly weak.

67. There is cogent and unchallenged evidence that:

    1. The professional trustee residence rule was necessary to enable UK professional trustees to compete on a level playing field with professional trustees in other countries⁷⁰.

    2. The abolition of this rule puts UK professional trustees at a serious competitive disadvantage in the international market for the services of professional trustees and is driving investment business out of the UK⁷¹.

    3. It is difficult even for a leading expert in the field to see how the Dti came to the conclusion that the rule was a state aid⁷², and this view is apparently not shared by the government of the Irish Republic which maintains exactly the same rule⁷³. There is no suggestion that the European Commission has challenged either the UK or the Irish rule.

    4. If, however, the rule was a state aid, the current trustee residence rule also appears to be a state aid, exposing British professional trustees to serious potential liabilities⁷⁴.

    5. Without seeing the full advice of the Dti, it is not possible for persons concerned by this state of affairs to identify whether and how this advice is wrong, and to make effective representations to reconsider the abolition of the rule or to consider appropriate alternatives⁷⁵.

68. As mentioned in § above, having not sought to cross-examine the Appellant’s witnesses, and not supplying any evidence to the contrary in their own witness statements, the IC and HMRC are not entitled to impugn their evidence. In any event, the appellant’s witnesses are leading members of their professions of undoubted integrity with highly relevant experience:

    1. Judith Ingham is a Principal at Withers LLP, a leading firm of solicitors specialising in private client work, and Chair of the UK technical committee of the Society of Trust and Estate Practitioners (“STEP”)⁷⁶.

    2. Emma Chamberlain is a barrister, Fellow of the Chartered Institute of Taxation (“CIOT”) and Chair of its Succession Tax Committee⁷⁷.

    3. The Appellant is a QC specialising in taxation and trusts with over 20 years experience of lobbying on tax-related matters with the Revenue Law Committee of the Law Society, the Technical Committee of CIOT and STEP⁷⁸. He is particularly well known for his book on making wills and trusts more accessible by drafting them in plain English.

    4. Christopher Vajda QC is a leading practitioner in European law who wrote the chapter on state aids in the current edition of the pre-eminent textbook, Bellamy & Child⁷⁹.

69. This appeal is supported by STEP and CIOT⁸⁰, the leading UK professional societies in the fields of trusts and taxation respectively⁸¹.

Assessment of the balance of public interests

70. In the circumstances summarised above, disclosure of the Dti advice is highly desirable to enable a wider examination of the suspect justification given by HMRC for a government measure which is causing serious damage to British business. If, on examination, the justification is seen to be wrong, a better decision can be taken. If, on examination, it is seen to be right, there will be better understanding and confidence in Government on the part of those affected by the measure and others who genuinely seek in the public interest to improve Government policy and legislation in this area⁸². It will also be possible for those concerned to suggest alternatives which are compatible with both EC law and the legitimate needs of professional trustee and investment businesses in the UK.

71. These benefits of disclosure are precisely of the kind which the Act is intended to achieve. As the first paragraph of the White Paper⁸³ said:

“Unnecessary secrecy in government leads to arrogance in governance and defective decision-making. The perception of excessive secrecy has become a corrosive influence in the decline of public confidence in government. Moreover, the climate of public opinion has changed: people expect much greater openness and accountability from government than they used to.”

72. It is generally acknowledged that the state of UK tax legislation is far from satisfactory⁸⁴. The Government has itself accepted that UK tax legislation needs to be simplified with the assistance of those affected by it. The announcement on tax simplification accompanying the Pre-Budget Report of 9 October 2007⁸⁵ states:

“1.1 The Government is committed to ensuring the UK provides a world-class environment for business. To help achieve this, Budget 2007 announced improvements which made the tax system fairer, simpler and more efficient by:

• modernising and simplifying both the personal and business tax systems …

“1.2 Building on these and other reforms, the Government is renewing its commitment by launching a significant programme of tax simplification – setting out new principles, new reviews and a package of measures - to enhance UK productivity and competitiveness.

“1.3 The Government commits to three principles of tax simplification, which underpin this new programme:

• simplification will be a priority when designing and reviewing tax policy, alongside sound public finances and fairness;

• the Government will work in partnership with business to identify further opportunities to simplify the tax system; and

• the Government will share its findings on the viability of tax simplifications with business.”

73. Disclosure of the Dti advice in this case accords with this policy and is mandated by this commitment.

74. By contrast, the normal objections to disclosure of confidential legal advice are non-existent or seriously weakened in the present case:

    1. The Government could not resist disclosure of the Dti advice in the very proceedings which it contemplates, namely enforcement of EC state aid rules by the EC Commission: see §§- above. Accordingly, Government officers cannot rely on it remaining confidential. On the other hand, disclosure of this advice under the Act in the light of this consideration will not imply that legal advice in matters outside the field of EC competition law will be disclosed. Thus it should not undermine confidence in the confidentiality of legal advice generally.

    2. The Government has already disclosed the existence, source and conclusion of the advice and invoked it as the sole justification for abolishing the professional trustee residence rule. Even if (contrary to §§- above) privilege has not been waived in the whole of the advice, these factors seriously diminish any legitimate interest in not disclosing the body of it, as the IC rightly held in the case of the Law Officers’ advice on the legality of military intervention in Iraq⁸⁶. Again, disclosure under the Act in these circumstances will not mean that the Government will be required to disclose all legal opinions which it obtains. The Government will be able to choose whether to invoke its legal advice publicly and risk its disclosure or to keep it confidential.

    3. It is not suggested, and seems improbable, that any confidential information was provided by HMRC to the Dti in order to obtain the advice or that any such information was included in the advice. The consideration that a person should be able to make a “clean breast” of his position to his legal adviser without fear of disclosure does not apply in the circumstances of this case.

    4. Nor is it suggested that disclosure of the Dti’s advice would disadvantage the Government in any legal proceedings. Indeed, if relevant proceedings are brought, the Government could be required to disclose the advice anyway: see §§- above. As explained in §§- above, the purpose of s.42 is to protect this interest, which is not engaged in the present case.

    5. Disclosing the advice would not impair any current decision making process. The suggestion in §§34-37 of Ms Fearn’s statement⁸⁷ that disclosure of the Dti’s advice on the professional trustee residence rule would prejudice current discussions with STEP is misconceived. As explained in the Appellant’s 2nd statement⁸⁸, the current discussions relate to a completely different point. The Appellant’s evidence on this issue should be preferred both in view of its cogency and the points made in §§- above.

As the IC’s Awareness Guidance No.4 points out⁸⁹, “where legal advice has served its purpose … there may be a stronger public interest argument in favour of disclosure particularly if, in fact, no harm would be created.”

1. The Dti’s advice in this case was not required with any particular urgency. The professional trustee residence rule had been in force for many years. Finance Bills are promoted in Parliament at least once a year. Indeed, the evidence now reveals that HMRC asked for the legal advice on 19 October 2005 and did not receive it until 24 February 2006⁹⁰. The concerns expressed by Mr Hartnett at §12 of his statement⁹¹ are irrelevant to the present case.

2. The present case does not relate to tax avoidance. The concerns expressed in §13 of Mr Hartnett’s statement⁹² are also irrelevant.

The candour argument

75. In the absence of any specific detriment to the public interest which could result from disclosure in this case, the IC and HMRC contend that the disclosure of legal advice in any case undermines confidence in the process of obtaining and giving legal advice generally. From this they conclude that disclosure of legal advice should never be required unless there are exceptional circumstances, which they say have not been demonstrated here. We refer to this as “the candour argument”.

76. The candour argument should be rejected in this case for the following reasons:

    1. It is contrary to the Act as properly interpreted taking into account the White Paper and the statements in Parliament by the promoters of the Bill and the relevant amendments: see §§- above. The Act requires disclosure of legal advice unless it is shown that the public interest in disclosure is outweighed in the particular circumstances of the case by the public interest in exempting the information from disclosure.

    2. The candour argument is no more relevant to legal advice than it is to the formulation of government policy. In relation to the latter, the Tribunal has rightly rejected contentions that any disclosure is liable to discourage candour and should therefore be refused save in exceptional circumstances; instead, the Tribunal has correctly held that information should be disclosed unless in the particular circumstances the public interest in disclosure is outweighed by the public interest in maintaining the exemption: see § above.

    3. Reliance on the candour argument in this case presupposes that an order for disclosure of the Dti advice on the professional trustee residence rule would imply that all or most other legal advice must be disclosed. This is not correct. If the Dti advice is required to be disclosed in this case in the light of the particular and unusual circumstances identified above, it does not follow that legal advice must be disclosed in other circumstances. In this connection, it is significant that David Hartnett concludes in his statement⁹³ that

“for the reasons set out above, I do fear that it would harm the relationship with lawyers and the effectiveness of the Department if the situation arose that usually rather than rarely legal advice and the requests for advice were liable to be disclosed under the Freedom of Information Act.”

Disclosure in this case will not mean that legal advice and requests for advice will be liable to be disclosed “usually rather than rarely”. Therefore, the concerns expressed by Mr Hartnett do not in fact apply.

4. Furthermore some of the concerns expressed on behalf of HMRC appear to be unduly sensitive or defensive. Fear of unaccustomed public scrutiny may lead officials to lose sight of the main policy of the Act, namely that exposing the reasons for Government decisions to public scrutiny enables errors to be corrected and decision-making to be improved.

The Prime Minister’s Preface to the White Paper⁹⁴ noted that “The traditional culture of secrecy will only be broken down by giving the people in the United Kingdom the legal right to know.” Accepting Lord Lester’s amendments, Lord Falconer said “We make it clear, and made it clear in Committee, that what we are interested in seeking to achieve is a change of culture in relation to freedom of information”⁹⁵.

With all due to respect to Mr Hartnett, the philosophy expressed in his statement⁹⁶ does not appear to have accommodated the “change of culture” which Ministers and Parliament intended to achieve by the Act. Mr Hartnett concludes: “I consider that there are no overwhelming reasons why the balance of public interest favours release of the legal advice itself”. This appears to be diametrically opposed to the application of the public interest test contemplated by Lord Falconer when he said: “Perhaps I may repeat that: information must be disclosed except where there is an overriding public interest in keeping specific information confidential”⁹⁷.

5. The advice in question was given by the Dti’s Legal Director⁹⁸. As the Tribunal observed in DfES⁹⁹ and Baker¹⁰⁰:

“In judging the likely consequences of disclosure on officials’ future conduct, we are entitled to expect of them the courage and independence that has been the hallmark of our civil servants since the Northcote-Trevelyan reforms. These are highly–educated and politically sophisticated public servants who well understand the importance of their impartial role as counsellors to ministers of conflicting convictions. ….

“Likewise, decisions should not assume the worst of the public. The answer to ill-informed criticism of the perceived views of civil servants is to inform and educate the critic, however hard that task may be, not to deny information, simply through fear that it may reflect adversely and unfairly on a particular official”.

Disclosure in cases of this kind would not impeach the freedom of senior legal advisers to give the best advice or undermine its reliability. On the contrary, the prospect of exposure to public scrutiny should encourage them to ensure that the advice is comprehensive and correct.

6. The statements made by HMRC and the Minister (no doubt briefed by HMRC) clearly indicated that the advice given by the Dti was unequivocal. They said¹⁰¹

“it would indeed constitute a State aid” and

“the new test would constitute a state aid – it would have been unfair competition against professional trustees in other European states – and … there were no grounds on which the European Commission would have approved the measure as a state aid”.

The comments of the Appellant here must be speculative as HMRC successfully opposed the appellant’s request for sight of the disputed documents, even on a wholly confidential basis. If, however, it is the case that the Dti’s advice was in any way qualified or equivocal then HMRC have not represented that advice to the public with full candour, and have not acted to the very high standards with which they are historically associated, and which the public are entitled to expect.

If that were the case, it would certainly be in the public interest that this should be known. Where legal advice to a public authority is or is intended to remain secret, a public authority which discloses that advice is under a duty to represent its contents fully, accurately and fairly, without omission of any qualification or other aspect which it is considered inconvenient to disclose.

Any significant discrepancy between the actual advice and the HMRC representation of that advice is of importance here. An example would be if the Dti had advised that

(1) there are arguments both ways, but… or

(2) the question was a difficult one, but on balance … or

(3) this is an uncertain area of law but in their view…

it would be a State aid.

The effect of such qualifications (even qualifications of the kind that are common when advising on difficult areas of law) would be that the Dti advice was not fully, accurately and fairly represented by saying without qualification that “the Dti have advised that it would constitute a State aid.”

1. If, as HMRC urge, disclosure of the Dti advice in this case is liable to affect the expectations of officials in other matters, then so is non-disclosure. The latter course may reinforce the culture of secrecy which Ministers and Parliament intended the Act to change; and could even encourage a lack of candour in cases where legal advice is deployed to justify the decisions of public authorities.

1. When proper weight is given to the particularly strong public interest in disclosure in the circumstances of this case and the factors substantially diminishing any public interest in maintaining the exemption are recognised, it is submitted that the balance comes done firmly in favour of disclosure.

The IC’s decision

78. The IC’s decision on this issue¹⁰² was primarily based on the observations in §35 of the Tribunal’s decision in Bellamy¹⁰³, which he cited at §19. As discussed in §§- above, these observations contradict the basic requirement of the Act that information must be disclosed unless it is shown that the public interest in disclosure is outweighed by a public interest in keeping the specific information in issue confidential in the particular circumstances of the case.

79. The IC’s decision further relied in §20 on a series of arguments by HMRC which he had set out at §17. These arguments are either incorrect or inapplicable to the present case:

    1. HMRC maintained that “There is a strong public interest in a person seeking access to legal advice being able to communicate freely with his legal advisors in confidence and being able to receive advice in confidence”.

This consideration is inapplicable to the present case, where

1. no confidential information had to be or was disclosed in order to obtain the legal advice; and

2. the existence, source and conclusion of the legal advice have already been published.

1. HMRC argued that “If legal advice were routinely disclosed, caveats, qualifications or professional expressions of opinion might be given in advice which would therefore prevent free and frank correspondence between government and its legal advisers.”

This consideration is also inapplicable. The Appellant does not contend that legal advice should be routinely disclosed; he merely asks that the Dti’s advice be disclosed in the particular circumstances of this case. This consideration is also incorrect, at any rate in relation to advice given by a senior legal adviser, as in this case. Such an adviser may fairly be expected to give frank advice, including qualifications which are properly applicable and excluding those which are not, whether or not the advice is exposed to public scrutiny.

3. HMRC then said that “there is a strong public interest in ensuring the legal advice relating to policy matters is made with[out] the risk of that advice being prematurely disclosed”.

This consideration is inapplicable to this case. The policy had already been formulated in draft legislation even before the advice was given¹⁰⁴, and long before its disclosure was sought by the Appellant¹⁰⁵. By the date of the IC’s determination¹⁰⁶, the decision to reverse the policy on the basis of the advice had been made, enacted and brought into force. It cannot be said that disclosure would now be premature or would have been premature when sought by the Appellant.

4. The next point was that “it is important that legal advice includes a full assessment of all aspects of an issue, this may include arguments both for and against a conclusion, publication of this information may undermine public confidence in decision making and without comprehensive advice the quality of decision-making would be reduced because it would not be informed and balanced”.

This point is the polar opposite of point (b) and does give the unfortunate impression that HMRC are dredging up any excuse to avoid disclosure. It is wrong for the reasons expressed by the Tribunal in DfES and Baker cited in § above.

5. Finally, it was said that “There is a significant risk that the value placed on legal advice will be diminished if we are not confiden[t] that it has been provided without fear that it might be disclosed”.

This is also wrong. The advice is more likely to be accurate if it has been prepared in the knowledge that it may have to withstand public scrutiny, particularly where (as here) it is likely to be scrutinised by experienced professionals. If, however, this point be correct, the value placed on the Dti advice should in any event be diminished by the risk of disclosure in EC enforcement proceedings, and disclosure under the Act should not make any difference.

The IC’s Reply

80. The IC’s Reply on this issue¹⁰⁷ is founded on a series of incorrect suppositions and assertions:

    1. At §9 the IC cites the observations of the Tribunal in §35 of Bellamy, which are erroneous for the reasons set out in §§- above.

    2. At §§29(1) and 30, the IC supposes that the Appellant must establish irrationality in order to succeed in this appeal; this is also wrong: see § above.

    3. At §30(1)(a)(i), the IC says that “HMRC has not claimed that the advice given by the Dti’s solicitors was unqualified. It has made no reference to the advice at all. In the alternative, if it did refer to the advice, it cannot be inferred that the HMRC was publicly stating or otherwise implying that the advice given was unqualified.”

These contentions are factually incorrect. The statements quoted in §§- clearly referred to the advice and the plain meaning of the words used was that the advice was unqualified.

§30(1)(a)(ii) is based on an inaccurate statement in §30(1)(a)(i) and falls with it.

4. At §30(i)(a)(iii), the IC asserts that “If HMRC has erred in its decision that the residence rule amounts to a State aid, then it is open to the Appellant or any other member of the public to challenge that error, whether through a process of political lobbying or potentially via judicial review proceedings. The Appellant does not need to see or consider the advice in order to pursue such action vis-à-vis the HMRC’s decision.”

This factual assertion is repeated at §§30(1)(b)(i), 30(1)(b)(ii), 30(1)(c), 30(2)(a) and 30(2)(b) and forms the backbone of the defence of the IC’s decision in his Reply. It is also invoked in §6 of HMRC’s Reply¹⁰⁸. It is firmly contradicted by the unchallenged and undisputed evidence of the Appellant, Vajda, Ingham and Chamberlain¹⁰⁹.

5. At §30(1)(c), the IC contends that “The strong public interest in maintaining legal privilege is not met or outweighed because one or more members of the public have concerns that the advice which has been given may be wrong in its analysis or conclusions.”

With due respect to the learned pleader, such a generalised approach is contrary to the Act, which requires the public interest to be weighed in the particular circumstances of each case. If a decision based on legal advice is causing serious economic damage and there is good reason to suspect that it is wrong, there is a strong public interest in favour of disclosure. If disclosure of the advice could not be resisted in the event of proceedings; its existence, source and conclusion have already been disclosed and invoked by the Government in public announcements; no confidential information had to be provided in order to obtain it; and there is no real risk of the Government being disadvantaged in legal proceedings by its disclosure under the Act, then the public interest in maintaining the exemption is weakened.

6. At §30(2)(c), the IC submits that “the protection of confidential information is not the only or even the principal objective of legal professional privilege” and implies that this proposition is supported by the House of Lords in Three Rivers v Bank of England¹¹⁰.

With due respect to the pleader, the speeches in that cases confirm to the contrary that the objective of legal advice privilege is indeed to enable clients to disclose confidential information to their lawyers: see §§30-31, 34 (Lord Scott), 54-56 (Lord Rodgers), 61 (Lady Hale), 85-87, 90-91 (Lord Carswell) and 120 (Lord Brown); as indeed the Tribunal correctly appreciated in Husbands¹¹¹.

7. At §30(2)(d), the IC dismisses the Appellant’s submission that the public interest in exempting the advice from disclosure is diminished by the fact that “the decision to abolish the professional trustee residence rule has been taken and implemented; disclosing the advice would not impair any current decision making process”. It is said that, if this is right, disclosure could only assist an academic exercise. This contention of the IC overlooks the possibility that public scrutiny of the advice may identify reasons for revisiting the decision.

8. At §30(2)(e), the IC disputes the Appellant’s contention that the advice was not required with any particularly urgency. As to this, § above is repeated. Furthermore, the IC’s approach is based on his assumption that the burden rests on the Appellant to justify disclosure. On the contrary, the burden of proof rests on those asserting that the exemption from disclosure should prevail.

The IC should not have relied, as he did in §20 of his decision, on the suggestion that “disclosing confidential legal advice could undermine HMRC’s ability to obtain this advice in a timely fashion” without this being substantiated by HMRC. The evidence filed by HMRC now reveals that it took over four months to obtain the advice¹¹². It is, with respect, difficult to see that it could have taken longer if those involved had feared disclosure.

1. At §30(2)(f)(i), the IC submits that the public interest in maintaining the exemption is not weakened by the fact that the advice is subject to legal advice privilege rather than litigation privilege. The Appellant respectfully submits the contrary, particularly in view of the fact that the purpose of the exemption indicated in the White Paper is to ensure that the government is not disadvantaged in litigation: see § above. The remainder of this paragraph is based on the incorrect premise that the Appellant must establish that the IC’s decision was irrational.

2. At §30(2)(g)(i), the IC submits that it must be presumed that the efforts of the Dti’s solicitors “would not and could not be improved upon merely because there was a risk that the advice would be disclosed to members of the public”. This suggestion is contrary to one of the basic premises of the Act, namely that “Unnecessary secrecy in government leads to arrogance in governance and defective decision-making”¹¹³.

3. At §30(2)(g)(ii), the IC argues inconsistently that “Where public disclosure is a possibility, it is to be expected that solicitors will want to couch their advice in such a way as to minimize any legal, political or other exposure for the client department”. As to this point, firstly public disclosure of this advice was always a possibility for the reasons set out in §§- above. Secondly, the observations in DfES and Baker cited in § above are repeated. Thirdly, the best way of minimising legal, political or other exposure is to give correct advice.

4. §§30(2)(h), 30(2)(i) and 32 of the IC’s Reply are based on the incorrect premise that the Appellant has to show irrationality. In addition §30(i) wrongly denies that the IC approached the assessment on the basis that the onus lay on the Appellant to show that the public interest in disclosure outweighed the public interest in non-disclosure. On the contrary, the IC did so approach the assessment, relying as he did on the erroneous observations in §35 of Bellamy¹¹⁴.

HMRC’s Reply

81. §5 of HMRC’s Reply¹¹⁵ reflects, it is submitted, an outdated approach which is inconsistent with the Act. It claims that “a government department … is no less entitled to the benefit of legal professional privilege than any other legal or natural person”. Yet the Act clearly provides that legal professional privilege is only a qualified exemption. It does not accord information subject to legal professional privilege the status of absolute exemption which it provides for some types information. In contrast to private persons, government departments are required by the Act to disclose information subject to legal professional privilege unless the public interest in maintaining the exemption outweighs the public interest in disclosure. The policy of the legislation is clearly to require a greater degree of openness on the part of government than is required of private persons.

82. §6 of HMRC’s Reply claims that since the basis of the final decision to abolish the professional trustee residence rule “has been clearly and publicly stated”, “disclosure of the disputed information would neither further nor assist any legitimate public interest”. This contention appears to be based on the erroneous factual premise that it is open to those concerned to challenge the accuracy of the advice without seeing it. This premise is contradicted by the undisputed evidence in this case: see § above.

83. None of the points made in the Reply of the IC or HMRC alter the position that in the specific circumstances of this case, there is a particularly strong public interest in disclosure of the Dti’s advice, while the public interest which commonly exists in not disclosing legal advice is either non-existent or greatly diminished. The public interest in disclosure is certainly not outweighed by any public interest in exemption. Disclosure should therefore be ordered in accordance with the basic principle of the Act.

Issue (d): Is the advice exempted from disclosure under s.35 of the Act?

84. HMRC also claimed that the Dti advice and the letter requesting it are exempt from disclosure under s.35 of the Act on the ground that they are information which “relates to … the formulation or development of government policy”.

85. This issue was not determined by the IC, but all parties have invited the Panel to address it and it is submitted that the Panel should do so for the reasons set out in §§- above.

86. The Dti advice did not relate to the formulation or development of government policy. On the contrary, it was advice as to the legality of a government policy which had already been developed and formulated in draft legislation¹¹⁶. Disclosure of this advice would not prejudice the process of formulation or development of policy; this case is outwith the purpose of this exemption. If s.35 were interpreted as covering information such as this on the effects or consequences of government policies, it is difficult to see what it would not cover. On a proper interpretation, it is submitted that s.35 does not apply to this case.

87. Even if s.35 applies, it is a qualified exemption and it would be necessary to determine whether the public interest in disclosure is outweighed by any public interest in maintaining the exemption. The points made in §§- above are repeated. Furthermore, if the material is not protected by legal professional privilege, the main arguments in favour of exemption from disclosure are without foundation.

88. Withholding disclosure cannot be justified under s.35 of the Act.

Conclusion

89. The Dti advice and the letter requesting it should be disclosed in accordance with the policy and provisions of the Act.

Jonathan D.C. Turner

13 Old Square, Lincoln’s Inn

London WC2A 3UA

Tel: 020 7831 4445

Fax: 020 7841 5825

24 October 2007 mail@jonathanturner.com

Counsel for the Appellant