A leading tax silk has fought off a negligence claim about advice given on film financing schemes, with the High Court today ruling he owed investors no duty of care.
Andrew Thornhill QC, 78, was sued by more than 100 people over his advice that three similar schemes, advertised in the early 2000s, would provide tax benefits.
The schemes were later shut down by HM Revenue & Customs causing ‘dire financial consequences’ for investors, the court heard last year.
Ten claimants – who between them invested more than £3m in the schemes – had their cases tried as sample claims as investors tried to recover their losses from Thornhill, who was said to have advised there was ‘no doubt’ the proposed businesses would be trading.
Thornhill testified that he ‘did not make any mistakes’ while, in closing submissions, his barrister Tom Adam QC described the claim against his client as ‘a classic piece of reverse engineering’.
Mr Justice Zacaroli today dismissed the claim and ruled that Thornhill, called to the bar in 1969, ‘owed no duty of care to the claimants in respect of the advice he gave in relation to the schemes’.
He found that ‘it was objectively reasonable to assume that independent professional advice would indeed be taken by investors, as they were advised to do’, noting that some claimants did take their own advice which was to the effect that the schemes should achieve tax benefits.
The claimants argued there could be no reasonable expectation that any investor would make their own independent enquiries given Thornhill’s unequivocal advice and professional reputation.
Zacaroli accepted that Thornhill was ‘undoubtedly one of the leading tax QCs in the country at the time’ and that his advice ‘was likely to carry more weight’ given his status.
He said: ‘It does not follow, however, that he should have reasonably foreseen that investors would rely on his opinion without consulting their own tax adviser.’
‘Even if he had been the “top” barrister, it is a nonsense to suggest that, because he was the best, there would be no point in a potential investor getting their own advice,’ the judge added.
Zacaroli also held that, even if Thornhill had owed a duty of care to the claimants, ‘he would not have breached that duty in providing his opinion that the schemes would achieve the tax benefits’.
The claimants also failed to establish that the loss suffered by them was caused by any breach of duty by Thornhill in any event, the judge concluded.
Thornhill’s solicitor Will Glassey – previously a partner at Mayer Brown and now at Herbert Smith Freehills – said the ruling is ‘an important illustration that an assumption of responsibility to a third party does not arise simply because advice is shared with that third party’.
He added that, where the prospective investors were commercial counterparties who had to tell to the scheme sponsor they had taken their own advice, ‘it would have been most surprising for the sponsor's adviser to owe them a duty of care’.
James Le Gallais, a partner at Stewarts who represented the claimants, said: ‘We are taking time to consider this lengthy decision with our clients, who are carefully considering their options. We have no comment to make at this stage.’
