EF Brosch & Ors v The Commissioner for HMRC
[2023] UKFTT 945 (TC)
David McClean & Ors. v Andrew Thornhill KC
28 April 2023
[2023] EWCA Civ 466
Court of Appeal
Investors lost money in a complicated tax scheme. They sued the tax lawyer who advised the company selling the scheme. The court said the investors should have gotten their own advice, and the lawyer wasn't responsible for their losses because the scheme documents made it clear they should get independent advice.
Key Facts
- •Appeal concerns consequences of failed film finance tax schemes.
- •Appellants are investors in two LLPs (SAD2 and SAD3), promoted by Scotts.
- •Respondent is Andrew Thornhill KC, tax advisor to Scotts, whose opinions were available to investors.
- •Tax relief depended on LLP meeting three statutory tests: carrying on a trade, on a commercial basis, and with a view to profit.
- •HMRC investigated the LLPs, concluding SAD1 wasn't carrying on a trade.
- •Appellants settled with HMRC and sued Thornhill for negligent advice.
- •Trial court dismissed claims, finding no duty of care owed by Thornhill to the investors.
- •Appeal challenges the findings on duty of care, breach of duty, causation, and reliance.
Legal Principles
Assumption of responsibility test for duty of care.
Steel v NRAM Ltd [2018] UKSC 13
Reasonableness of reliance and foreseeability of reliance for negligent misrepresentation.
Hedley Byrne v Heller [1964] AC 465; NRAM
Unfair Contract Terms Act 1977 (UCTA 1977) regarding reasonableness of disclaimers.
UCTA 1977
Tests for determining if a trade is being carried on: trading; commercial basis; view to profit.
ICTA 1988 sections 380, 381, 384, 118 ZA, 353, 362
Ensign Tankers approach to film partnerships.
Ensign Tankers (Leasing) Ltd v Stokes [1992] 1 AC 655
Limitation Act 1980 (six-year limitation period).
Limitation Act 1980
Outcomes
Appeal dismissed.
No duty of care owed by Thornhill to investors; even if a duty existed, no breach; no causation.