- Accueil
- Actualités et publications
- Publications
- Assumption of responsibility: tax schemes and investors
- Sur cette page
22 mars 2022
Disputes Quick Read – 100 de 101 Publications
Disputes Quick Read: Assumption of responsibility - tax schemes and investors
- Briefing
In a recent professional negligence case concerning tax schemes, the High Court has provided further guidance on the application of the assumption of responsibility test in holding that a leading tax QC did not owe a duty of care to prospective investors.
The facts
Mr Thornhill QC advised Scotts Private Client Services Limited (Scotts) who were the promoters of a tax scheme involving a film distribution business (the Scheme). He also advised two out of the three LLPs which were formed for the purposes of the Scheme. Participation in the LLPs was marketed to potential investors on the basis that they would be entitled to tax relief against their income or capital gains for trading losses that the LLPs were anticipated to make. HMRC subsequently refused the tax reliefs claimed by the investors in the Schemes. On or around 22 September 2017 HMRC wrote to the individual investors in each of the three LLPs making a settlement offer.
Assumption of responsibility
The Claimants were over 100 individuals, each of whom were members of one of the three LLPs. Mr Thornhill QC was not engaged to advise any of the Claimants, although he did consent to: (i) being named as tax adviser to Scotts as well as to two of the LLPs in the Information Memorandums (the IMs) and; (ii) the tax opinions he had provided being made available to potential investors, if they requested them.
The Claimants claimed that Mr Thornhill owed them a duty of care concerning advice he gave to the promoters and the LLPs and consented to being made available to potential investors, and that they relied on his advice in entering into the Schemes. The Court disagreed:
- It applied the principles regarding when a professional adviser might assume responsibility to a third party as set out by the Supreme Court in NRAM Ltd v Steel [2018] UKSC 13 and concluded that it would not have been reasonable for investors, in the face of the language of the IM and subscription agreement, to rely on Mr Thornhill QC's advice without independent inquiry, or that Mr Thornhill QC ought reasonably to have foreseen they would do so.
- It was critical that the IM clearly advised potential investors to consult their own tax advisers on the tax aspects of the Scheme and that no investor could subscribe to the LLP without warranting that they had relied only on the advice of or had only consulted with their own professional advisers. The Court also placed importance on the fact that the Schemes could only be marketed via independent professional advisers so that, by definition, all investors would have the benefit of an IFA to help them (either by advising them directly or by assisting them in obtaining such advice).
- This decision was not based on a disclaimer of responsibility, but all the circumstances of the case, such that Unfair Contract Terms Act 1977 was not engaged.
On that basis, no duty of care was owed to the Claimants.
Additional issues
The Court also considered a number of other issues:
- Even if Mr Thornhill QC had owed a duty of care to the Claimants, he could not be said to have breached it because a reasonably competent tax QC could have reached the conclusion Mr Thornhill QC did in 2002 – 2004 as to the tax benefits of the Schemes.
- The Court considered whether a professional adviser has a "duty to warn". In this case, the Court held that Mr Thornhill QC would have been aware that Scotts (his clients) were highly sophisticated and likely to have been fully aware from their experience in promoting tax avoidance schemes of the issues to which they gave rise, and the risks associated with them, such that there was no duty to include an appropriate risk warning for the Schemes. But, the Court also held that, had Mr Thornhill QC owed a duty to the Claimants to include an appropriate risk warning, then the wording in the opinions did not meet that duty.
- The Court concluded that the Claimants had not demonstrated that they would not have invested in the Scheme had Mr Thornhill QC included a risk warning in his opinions and therefore had failed to make out their case as to causation. The Court also considered limitation and found that claims relating to the first Scheme were time-barred under section 14B of the Limitation Act 1980, which sets out a 15 year long-stop date for bringing negligence claims not relating to personal injury.
Conclusion
Issues of assumption of responsibility commonly arise in professional engagements. Care should of course be taken properly to limit the parties to whom an adviser owes a duty of care. While the factual circumstances of the relationship will need to be considered, this decision reflects a continued willingness of the English Courts to place appropriate weight on limitations set out in writing documents; the language of the IM was critical here.
It of course follows a further example a few months ago in Knights v Townsend Harrison Limited EWHC 2563 QB, in which the Court upheld the terms of an engagement letter in respect to the scope of advice to be given. The case provides useful commentary on the extent of a professional adviser's duty of care and will be welcome news for professional advisers.
Dans cette série
Wirral Council v Indivior plc: Court of Appeal upholds strike out of opt-in representative action securities claim
30 January 2025
What are the litigation trends in 2025?
22 January 2025
par plusieurs auteurs
Changes to the privilege rules between companies and shareholders
6 December 2024
Victory for energy companies/defeat for the environment?
14 November 2024
par Tim Strong, Kate Hamblin
Failure to prevent fraud offence to come into force in September 2025
14 November 2024
par Emma Allen
Non-Disclosure Agreements - updated guidance from the SRA
8 November 2024
par Edward Spencer
Essex Cricket Club charged by Cricket Regulator
30 October 2024
par plusieurs auteurs
UK introduces mandatory reimbursement rules to combat APP fraud
15 October 2024
par Emma Allen, Andrew Spencer
Notice of Claim: What constitutes 'reasonable detail'?
5 July 2024
par Stuart Broom, Tom Charnley
New SFO Director announces bold plans to tackle fraud
21 March 2024
par Emma Allen, Amy Cheng
What are the litigation trends for 2024?
1 February 2024
par Katie Chandler, Emma Allen
ClientEarth v FCA: Challenging Regulator Decisions
12 February 2024
par Tim Strong, Nicole Baldev
First of its kind judicial guidance on the use of AI in the courts
14 December 2023
Witness familiarisation - does it affect the court's assessment of witness credibility?
13 December 2023
The use of AI in Trial Witness Statements post-PD 57AC
23 October 2023
par plusieurs auteurs
CAT to hear the first application for a collective settlement approval order
17 October 2023
Failure to prevent fraud – a new offence?
14 August 2023
par plusieurs auteurs
Supreme Court rules that APP fraud victims cannot rely on Quincecare Duty
4 August 2023
par plusieurs auteurs
The Law Commission's Consultation Process on the Arbitration Act 1996 – taking stock
21 July 2023
What does the latest decision of the CAT in the Mastercard/Visa proceedings mean for class actions?
10 July 2023
Disputes Quick Read: ClientEarth refused permission to pursue directors of Shell
1 June 2023
par plusieurs auteurs
Disputes Quick Read – developments in the fixed costs regime
3 May 2023
par James Bryden
Disputes Quick Read: Service by email – are the rules any clearer?
20 April 2023
par James Bryden
Disputes Quick Read: Breaking the north/south divide?
5 April 2023
par Tom Charnley
Disputes Quick Read - What do practitioners think about making alternative dispute resolution (ADR) compulsory?
8 March 2023
Disputes Quick Read: What are the litigation trends for 2023?
2 March 2023
par Katie Chandler, Emma Allen
Disputes Quick Read: further guidance on witness statement preparation rules
14 February 2023
Disputes Quick Read: A cautionary tale – settlement agreement (un)wittingly releases all claims for fraud
13 February 2023
Disputes Quick Read: Why the UK should join the Hague Judgments Convention 2019
8 February 2023
par Jessie Prynne
Disputes Quick Read: extensive information orders granted against crypto exchanges following hack
19 January 2023
par Georgina Jones
Disputes Quick Read: A new approach to giving evidence? WhatsApp with that?
3 October 2022
par Gemma Broughall
Disputes Quick Read: Ethereum Merge - what legal issues arise?
22 September 2022
par Ben Jones, Emma Allen
Disputes Quick Read: New obligations on cryptobusinesses to report under the UK sanctions regime
9 August 2022
par Nick Maday
Disputes Quick Read: Disclosure - What information can be redacted?
25 July 2022
par Edward Spencer
Disputes Quick Read: what claims exist when a smart contract is breached?
6 July 2022
par Emma Allen
Disputes Quick Read: New gateway for serving Norwich Pharmacal Orders and Bankers Trust orders out of the jurisdiction
Welcome news for those pursuing fraud claims in the English Courts
28 July 2022
Disputes Quick Read: Disclosure Pilot Scheme – here to stay
21 July 2022
par Edward Spencer
Disputes Quick Read: Defining the duty - the limits of the responsibility assumed by professionals
27 July 2022
par Stuart Broom
Disputes Quick Read: Climate change litigation – successful challenge to government's Net Zero Strategy
29 July 2022
par Jess Thomas, Lucy Waddicor
Disputes Quick Read: Judicial Review and Courts Act 2022 – now in force
17 June 2022
par Stephanie High
Disputes Quick Read: an important reminder of the duty to disclose electronic documents in native format
13 June 2022
par Edward Spencer
Disputes Quick Read: ENRC prevails in claim against former solicitor
26 May 2022
Disputes Quick Read: Climate change litigation update – McGaughey v Universities Superannuation Scheme Limited
31 May 2022
par plusieurs auteurs
Don't lose your keys: Bitcoin developers do not have a duty to assist owners in recovering lost cryptocurrency
4 April 2022
Disputes Quick Read: The new witness statement preparation rules – a year on
5 April 2022
par Stephanie High
Disputes Quick Read: ClientEarth v Shell – climate change litigation shifts focus to UK companies
31 March 2022
par plusieurs auteurs
Disputes Quick Read: High Court rules that failure to provide adequate data security is not a positive act
21 September 2021
Disputes Quick Read: Key changes to the Disclosure Pilot Scheme
13 September 2021
par Edward Spencer
Disputes Quick Read: Judicial Review and Courts Bill – unpacking the UK government's proposed amendments
6 September 2021
par Stephanie High
Disputes Quick Read: Will litigants be compelled to participate in alternative dispute resolution?
2 August 2021
Disputes Quick Read: Freezing injunctions – maximum custodial sentence imposed for breach
21 July 2021
Disputes Quick Read: The online future of civil justice – the end of the legal profession or the end of legal drudgery?
15 July 2021
par Jess Thomas
Disputes Quick Read: Will the courts change forever post-COVID?
26 May 2021
par David de Ferrars
Disputes Quick Read: One Blackfriars administrators cleared of misfeasance
5 May 2021
par Stephen O'Grady
Disputes Quick Read: Not your prerogative – the Independent Review of Administrative Law reports its recommendations on judicial review
21 April 2021
par Stephanie High
Disputes Quick Read: Amendments to the Disclosure Pilot Scheme – a step in the right direction
31 March 2021
Disputes Quick Read: UK Supreme Court rules on the territorial extent of the SFO's powers
26 February 2021
par Tim Strong
Disputes Quick Read: No dropping anchor – parent company liability for environmental claims
24 February 2021
Disputes Quick Read: What lawyers need to know about new witness statement preparation rules
20 January 2021
par Stephanie High
Disputes Quick Read: Should you still choose the English courts to have jurisdiction in your international contracts after Brexit?
12 January 2021
par Tim Strong
Disputes Quick Read: Privilege lost in the EU post-Brexit (with exceptions)
23 November 2020
Disputes Quick Read: Law on interest applicable to US dollar awards reaffirmed
16 October 2020
Disputes Quick Read: Care required when drafting SPA claim notices
23 September 2020
Disputes Quick Read: Why the modernised LCIA rules are a welcome update
7 October 2020
par Nick Storrs
Disputes Quick Read: The importance of proper service
26 May 2020
par Edward Spencer
Disputes quick read: Mandatory changes to Statements of Truth
18 May 2020
par Katie Chandler
Disputes Quick Read: COVID-19 and supply chain disruption – key issues
9 April 2020
par plusieurs auteurs
Disputes Quick Read: High Court orders parties to explore options for 5-week remote trial
15 April 2020
Disputes Quick Read: Tomlin Orders – ensuring the confidentiality of settlement terms
27 April 2020
par plusieurs auteurs
Disputes Quick Read: UK's OFSI fines Standard Chartered Bank £20 million for sanctions breaches
21 April 2020
par Stephanie High
Disputes Quick Read: A different approach to witness evidence
11 March 2020
par James Bryden
Disputes Quick Read: Coronavirus - a growth in virtual courts?
17 March 2020
par Stuart Broom
Disputes quick read: climate change activism by litigation
26 February 2020
par Tim Strong, Andrew Howell
Disputes Quick Read: Commercial Court's arbitral power shift
21 February 2020
par Andrew Howell
Disputes Quick Read: Court stays evictions during COVID-19 – is this lawful?
2 June 2020
par Georgina Jones
Disputes Quick Read: Will the civil justice system change forever post COVID-19?
16 June 2020
par Georgina Jones
Disputes Quick Read: Privilege waiver warning
2 July 2020
par Tim Strong, Georgina Jones
Disputes Quick Read: Retailers reign supreme in Visa and Mastercard proceedings
9 July 2020
Disputes Quick Read: Scope of duty and the SAAMCo counterfactual following Manchester Building Society
3 December 2021
Disputes Quick Read: Facilitating transactions in cryptoassets - Lord Leggatt and the point of commercial law
24 November 2021
par Stuart Broom
Disputes Quick Read: Privy Council clarifies the law on freezing injunctions in aid of foreign proceedings
8 October 2021
par Katie Chandler
Disputes Quick Read: Climate change litigation – what's the latest?
10 January 2022
par Tim Strong, Jess Thomas
Disputes Quick Read: Court decisions on the Disclosure Pilot Scheme – the 2021 roundup
20 January 2022
Disputes Quick Read: Climate change litigation update
8 March 2022
par Jess Thomas, Lucy Waddicor
Disputes Quick Read: Assumption of responsibility - tax schemes and investors
22 March 2022
Disputes Quick Read: Dealing in crypto? Be careful what you call it
7 April 2022
par Emma Allen, Georgina Jones
Related Insights
Prismall v Google: Court of Appeal upholds strike out of representative action claim for misuse of private information
par Katie Chandler et Samantha Brendish
Wirral Council v Indivior plc: Court of Appeal upholds strike out of opt-in representative action securities claim
par Katie Chandler et Samantha Brendish
Notice of Claim: What constitutes 'reasonable detail'?
par Stuart Broom et Tom Charnley