On October 5, 2020, the UK High Court of Justice ruled that Frasers Group plc, a sports retailer formerly known as Sports Direct International plc, must produce three reports to the Financial Reporting Council Ltd, finding that the documents are not protected by the litigation privilege.
The reports were requested by the FRC as part of its investigation into an international auditing firm’s 2015/2016 audit of Sports Direct. Sports Direct argued that the reports were privileged because they were obtained from an accounting firm, amid concerns by Sports Direct that it faced possible legal proceedings in France, after French authorities presented tax questions to a Sport Direct subsidiary.
While the court acknowledged that the reports may have been sought based on an expectation of legal proceedings, it concluded that the reports were not acquired for the “sole and dominant purpose of conducting” future litigation in France. The court instead drew a marked distinction between tax advice and litigation advice, noting that companies generally seek tax advice not for litigation purposes, but to learn how to structure their affairs — and in this case, the advice was sought by Sports Direct to avoid tax consequences and the administrative inconvenience of having to register in every Member State in the EU for tax purposes.