Morten Høegh v Taylor Wessing LLP
| Jurisdiction | England & Wales |
| Judge | Master McQuail |
| Judgment Date | 28 February 2022 |
| Neutral Citation | [2022] EWHC 392 (Ch) |
| Docket Number | Case No: BL-2020-002279 |
| Court | Chancery Division |
[2022] EWHC 392 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Deputy Master McQuail
Case No: BL-2020-002279
Mr Patrick Lawrence QC and Mr Charles Phipps (instructed by Fieldfisher LLP) for the Claimants)
Mr Christopher Greenwood (instructed by Clyde & Co LLP) for the First Defendant
Mr Ben Hubble QC and Mr Ben Smiley (instructed by Mayer Brown International LLP) for the Second Defendant
Hearing date: 27 January 2022
Approved Judgment
This is an application by the claimants to amend their particulars of claim. The claim form was issued on 22 December 2020 and the particulars of claim dated 19 April 2021 POC) were served on 22 April 2021. This application was issued on 17 September 2021; defences have not yet been served.
The form of the draft proposed amended particulars of claim for which permission is sought is not that originally accompanying the application, but a version sent to the solicitors for the defendants on 7 December 2021 with the proposed amendments shown in red ( APOC).
The first defendant has consented to the amendments. The second defendant resists the application to amend.
The evidence that has been filed in connection with the application is as follows:
(i) the third statement of Jonathan Ray-Smith (partner in Fieldfisher LLP, solicitors to the claimants) dated 17 September 2021 (“Ray-Smith 3”), in support of the application;
(ii) the second statement of Jonathan Oulton (partner in Mayer Brown International LLP, solicitors to the second defendant) dated 27 October 2021 (“Oulton 2”), in opposition to the application;
(iii) the first statement of Peter Golden (now partner in Fieldfisher LLP, formerly partner in Linklaters LLP) dated 24 December 2021 (“Golden 1”), in support of the application;
(iv) the first statement of the first claimant dated 29 December 2021 (“Morten 1”), in support of the application;
(v) the first statement of the second claimant dated 31 December 2021 (“Thomas 1”), in support of the application;
(vi) the fourth statement of Mr Oulton dated 13 January 2022 (“Oulton 4”), in opposition to the application; and
(vii) the second statement of Mr Golden dated 21 January 2022 (“Golden 2”), in response to Oulton 4.
Summary of the Claim
By their claim the claimants seek damages from the first defendant, Taylor Wessing LLP, their former solicitors, and the second defendant, MSR LLP, their former accountants, for negligent advice in relation to their tax affairs. The claimants are and were at all material times resident in the UK but domiciled abroad.
The claimants engaged the first defendant to provide legal advice including tax advice and engaged the second defendant to prepare and submit the claimants' tax returns and provide connected tax advice for the tax years 2008/9 to 2016/17 ( the Relevant Tax Years).
The claimants allege that the defendants were in breach of duty in failing to provide proper advice following changes to the remittance basis of taxation introduced by the Finance Act 2008 ( FA 2008). During the Relevant Tax Years payments were made which under the statutory regime were to be treated as remittances giving rise to tax liabilities for the claimants.
The claimants say that properly advised they would have arranged their affairs differently to avoid any making of remittances which gave rise to tax liabilities in the years 2011/12 to 2016/17 ( the Assessable Tax Years).
The claimants therefore claim to be entitled to be compensated for the loss suffered by the making of the avoidable remittances in the Assessable Tax Years.
In the POC the claimants say that numerous payments were made which constituted taxable remittances of the claimants ( the Original Remittances), in circumstances where the claimants were unaware that they were assessable as such. By the APOC the claimants seek to say that there were further remittances ( the Further Remittances) which they have only more recently become aware were taxable and which they now wish to add to their claim.
The POC
Paragraph 3 of the POC identifies persons connected to the Claimants as follows:
(i) Høegh Capital Partners Limited ( HCP London)…;
(ii) Høegh Capital Partners Services (Guernsey) Limited ( HCP Guernsey) (collectively referred to as HCP);
(iii) Dana Høegh ( DH)
(iv) Julie Høegh ( JH)
Paragraph 4 of the POC goes on to explain that the claimants held offshore investments through offshore trust structures ( the Structures) and identifies the following entities within the Structures as follows:
(i) The Pomor Trust;
(ii) The Goran Trust; and
(iii) Pomor Holdings Limited ( PHL), Pomor (BVI) Ltd ( Pomor) and Goran Enterprises Ltd ( Goran) as well Aequitas Investments Ltd ( AIL) and (from 22 September 2009) Aequitas Holding ARL ( ARL). PHL, Pomor Goran, ARL and AIL being collectively referred to as the Holding Companies.
A diagram illustrating the structure of the Pomor and Goran Trusts and the Holding Companies is annexed as Schedule 5 to the POC.
Paragraph 8 of the POC contains the following summary of the claim:
“8.1. Taylor Wessing was engaged to provide legal advice, including tax advice, to the Claimants. So far as relevant to this claim, that advice related in particular to the tax years 2008/09 to 2016/17 ( the Relevant Tax Years). As set out below, Taylor Wessing owed a duty to advise on the changes made to the remittance basis of taxation by the Finance Act 2008 ( FA 2008) and on the measures that should be taken to avoid unnecessary tax liabilities.
8.2. Moore Stephens was engaged by the Claimants to prepare and submit their tax returns for the Relevant Tax Years, and to provide tax advice in connection with the preparation of the said returns. Moore Stephens owed a duty to make appropriate enquiries, and to give appropriate advice, so as to ensure (so far as reasonably possible) the accuracy of the tax returns; in particular, by taking reasonable steps to ensure that remittances were identified, having regard to the relevant provisions of FA 2008.
8.3. Taylor Wessing was in breach of the said duty to advise. As a result various payments were made ( the Relevant Payments) which constituted taxable remittances of the Claimants, without the Claimants being aware that they were assessable as such. The Relevant Payments were made by the Holding Companies and are set out in full, as apportioned to each of the Claimants, at Schedule 2.
8.4. Moore Stephens was in breach of the said duty to advise, and to make appropriate enquiries. As a result payments continued to be made (including all the Relevant Payments) which constituted remittances of the Claimants, without the Claimants being aware that they were assessable as such.
8.5. As a result the Claimants have suffered loss, consisting in their tax liability plus interest in respect of the tax years 2011/12 to 2016/17 ( the Assessable Tax Years), together with professional fees incurred as a result of the erroneous returns for the Relevant Tax Years (including, without limitation, professional fees incurred making disclosure, putting the position right and negotiating settlement with HMRC). There is also a risk of tax penalties being issued by HMRC.”
The original Schedule 2 to the POC sets out the Relevant Payments as follows:
(i) a chronological schedule of payments in respect of the first claimant in the period April 2011 to February 2017 running to some 10 pages and totalling in excess of £18 million; and
(ii) a chronological schedule of payments in respect of the second claimant in the period April 2011 to January 2017 running to some 15 pages and totalling nearly £3.5 million.
The common feature of the Relevant Payments in the original Schedule 2 is that the payer was in each case one of the Holding Companies.
At paragraph 13 the POC sets out that:
“The new definition of “remitted to the United Kingdom” in s.809L ITA 2007 was fundamentally different to the previous definition(s), in that:
13.1. It became necessary to identify who was a ‘relevant person’ in respect of each taxpayer, as under the s.809L definition there was no distinction between the taxpayer themselves and a ‘relevant person’ in respect of the taxpayer. That is to say, any act or omission of a ‘relevant person’ which would be a remittance if carried out by the taxpayer (including receipt of funds) would constitute a remittance of the taxpayer and be taxable on them.
13.2. The statutory definition of relevant person (a concept which had not previously existed) included the taxpayer's spouse, minor children and grandchildren and certain legal persons connected to the taxpayer.”
Paragraph 58 of the POC pleads that the scope of the second defendant's duty was
“…to make appropriate enquiries, and to give appropriate advice, so as to ensure (so far as reasonably possible) the accuracy of the tax returns; in particular, by taking reasonable steps to ensure that remittances were identified, having regard to the relevant provisions in the statutory regime including but not limited to FA 2008. This duty to enquire required, in particular and without limitation, making proper enquiries as to the following matters:
58.1. What persons were, or might be, relevant persons in respect of one or both of the Claimants (such persons, so far as relevant to this claim and in the Assessable Tax Years, included the Holding Companies,...
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Morten Høegh v Taylor Wessing LLP
...this year. I gave permission for those amendments to be made and gave a judgment dated 28 February 2022 with neutral citation number [2022] EWHC 392 (Ch). I will not unnecessarily repeat matters recorded in that judgment 3 The evidence that was filed in connection with the amendment applic......