Mr Anthony Barness and Others v Ingenious Media Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 03 December 2019 |
| Neutral Citation | [2019] EWHC 3299 (Ch) |
| Date | 03 December 2019 |
| Docket Number | Case No: HC-2015-004561 |
| Court | Chancery Division |
[2019] EWHC 3299 (Ch)
INGENIOUS LITIGATION
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building, Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
Mr Justice Nugee
Case No: HC-2015-004561
Richard Coleman QC and David Yates QC (instructed by TLT LLP) for Coutts & Co and National Westminster Bank plc
Graham Chapman QC and Mark Vinall (instructed by Peters & Peters Solicitors LLP) for the Claimants
Hearing dates: 8 and 11 November 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This judgment is given on the application of two of the defendants, Coutts & Co ( “Coutts”) and National Westminster Bank plc ( “NatWest”), which I will refer to together as “the Banks” (and each a “Bank”), to dispose of certain claims pleaded against them either on the basis that they can be struck out as disclosing no reasonable grounds for bringing the claims, or on the basis that summary judgment should be given against the claimants.
This is part of the Ingenious litigation. It is not necessary for the purposes of this judgment to give the background to this litigation, of which I am now the Managing Judge, in any detail, but I should give a brief account. From 2002 to 2007 a number of schemes (8 in all) were promoted under the name “Ingenious”. The schemes were promoted as tax-efficient vehicles through which individual taxpayers could contribute funds to a limited liability partnership (or “LLP”) for investing in films (or in one case video games), and set off their share of the LLP's losses against other taxable income. For the schemes to work as intended it was necessary that the LLPs should be trading with a view to profit, and that the losses should be of an income nature so that what is called ‘sideways loss relief’ would be available to the individual investors as members of the relevant LLP.
But HMRC did not accept that the schemes worked as intended, and disallowed the losses claimed by the LLPs, with the effect that the members could not maintain their claims to sideways loss relief. The LLPs appealed to the First-tier Tribunal, which heard the appeals of three of the LLPs as lead cases, and held that most of the claims to allowable losses failed (largely because the claimed losses were for the most part of a capital nature); on a further appeal to the Upper Tribunal by both the LLPs and HMRC, the Upper Tribunal held that the LLPs were not trading at all. Subject to any further appeal, that means that no loss relief is available to the investors. The outcome for the individual participants in the schemes is that they have not only lost the sums which they invested, but have not obtained the anticipated tax relief either, and have been, or may be, exposed to claims by HMRC for arrears of tax with interest and penalties; there may be other losses as well.
A very large number of them (over 500) have issued claims to seek to recover their losses. There are three firms of solicitors acting for them, Stewarts Law LLP, Peters & Peters Solicitors LLP and Mischcon de Reya LLP, and between them they have issued a number of claim forms. These variously seek to recover the investors' losses from a range of defendants, including not only a number of Ingenious entities (and associated individuals) but also intermediaries such as financial advisers. Under an Order made by Morgan J in March 2018 these actions are being managed together, and only a selection of the claimants and defendants have in the first instance been directed to plead their cases. In the event 28 such ‘Pleading Claimants’ have been identified and have served a single pleading (subsequently amended). The main body of these Amended Particulars of Claim consists of generic allegations relied on by one or more of the Pleading Claimants, with individual schedules annexed for each Pleading Claimant in which allegations particular to him (or in one case her) are made.
The Particulars of Claim include what have been conveniently referred to as ‘Lender Claims’ against the Banks. These are claims advanced by claimants who borrowed from Coutts or NatWest the monies required to invest in the relevant LLP. Four of the Pleading Claimants advance such claims, two (Mr Daniel Murphy and Mr Kevin Campbell) against Coutts, and two (Mr Gary Teale and Mr Anthony Barness) against NatWest. (Mr Campbell's claim is in fact now vested in, and brought by, his trustee in bankruptcy, Mr Steven Wiseglass, but this has no effect on the present application and it is easier to refer to Mr Campbell as if he were the relevant claimant). All of them are represented by Peters & Peters. Those are the claims which the current application seeks to have struck out or dismissed, and in the remainder of this judgment references to the claimants mean the four Pleading Claimants who bring the Lender Claims against the Banks. There are another 36 non-pleading claimants, all again represented by Peters & Peters, who make similar claims against the Banks; I am not directly concerned with their claims and there has been as yet no formal direction as to the effect that decisions in relation to the claims of the claimants will have on those of the non-pleading claimants, although no doubt the Banks hope that if this application succeeds, it will have a consequential effect on whether other similar claims are sustainable.
Coutts is also facing claims brought against it as adviser: two of the other Pleading Claimants bring such claims. In those cases Coutts is said to have agreed to provide tax advice, and this application is not concerned with such claims.
Three causes of action are relied on in relation to the Lender Claims. I give the detail below but in very brief summary they consist of (i) claims for breach of contract, based on terms that are said to be implied into contracts between each of the claimants and the relevant Bank; (ii) claims for negligence based on duties of care owed in tort (a) concurrent to the contractual duties of care said to have been owed or (b) arising from an assumption of responsibility; and (iii) claims based on the Banks being vicariously liable for breaches of duty by a company now called Formation Asset Management Ltd ( “Formation”), although it was at the time of the events complained of called Kingsbridge Asset Management Ltd. Formation carried on business as a firm of independent financial advisers (or “IFA”) and each of the claimants was a client of Formation and on his own case relied on its advice when investing in the Ingenious schemes.
In equally brief summary the Banks' answers to the claims are (i) that there were no contracts between them and the claimants which could have contained the terms sought to be implied; (ii) that they owed the claimants no relevant duty of care in tort because they neither (a) owed the suggested contractual duties nor (b) assumed any such responsibility; and (iii) that there is no basis on which they could be made vicariously liable for Formation's breaches of duty. They say that the relevant claims are neither sustainable on the facts pleaded, nor supported by anything in the evidence, and that they should be struck out or dismissed now.
I accept the Banks' submissions and propose to grant their application accordingly, for reasons that I will now try and explain.
Factual basis for the claims
I will start with the factual basis relied on by the claimants as they underpin each of the causes of action pleaded. The facts have of course not yet been found, and it is well established that it is not the function of the Court on an application like this to conduct a mini-trial, but it is necessary to give some account of the facts as they appear to be from the material in evidence to explain the claimants' case.
Each of the claimants was at the time of his investment in Ingenious a professional footballer. Each was a client of Formation. Each was introduced to the Ingenious schemes by Formation. In each case the claimant was told that they could borrow all or most of the necessary money for investing into the scheme from Coutts or NatWest as the case may be. Each claimant did borrow the money from the relevant Bank, taking out a loan for each investment and opening a current account into which both the loan, and the anticipated tax refund which would be used to repay it, could be paid.
The particular loans made were as follows:
(1) Mr Murphy
Mr Murphy was provided by Coutts with a £640,000 loan for investment in an Ingenious scheme known as Ingenious Film Partners LLP ( “IFP”) in December 2004; and a second loan of £296,000 (secured by a mortgage over his and his wife's home) for investment in Ingenious Film Partners 2 LLP ( “IFP2”) in October 2005.
(2) Mr Campbell
Mr Campbell was also provided with two loans by Coutts, one of £567,813 for investment in Inside Track 3 LLP ( “IT3”) in March 2004; and one of £525,600 for investment in IFP in February 2005.
(3) Mr Teale
Mr Teale was provided with two loans by NatWest, one of £91,000 for investment in IFP in January 2005; and one of £84,000 for investment in IFP2 in March 2006.
(4) Mr Barness
Mr Barness was provided with two loans by NatWest, one of £138,000 for investment in Inside Track 1 LLP and Inside Track 2 LLP ( “IT1” and “IT2”) in December 2003; and one of £107,000 for investment in IFP in January 2005.
Mr Graham Chapman QC, who appeared for the claimants, relied on four features of the arrangements which he said meant that the relationship between the Banks and the claimants was not a conventional...
To continue reading
Request your trial
-
Mr Nigel Rowe & Others v Ingenious Media Holdings Plc & Others
...the points I reserved. 4 By way of background I can conveniently repeat what I said in my judgment in Barness v Ingenious Media Ltd [2019] EWHC 3299 (Ch) at [2]–[4]: “2. This is part of the Ingenious litigation. It is not necessary for the purposes of this judgment to give the background t......
-
Andrew Cole & Others v Scion Ltd & Others
...relief as they have in some others. It bears some similarity to the Ingenious litigation (for which see Barness v Ingenious Media Ltd [2019] EWHC 3299 (Ch) and Rowe v Ingenious Media Holdings plc [2020] EWHC 235 (Ch)), and was initially brought as part of that litigation until deconsolida......
-
Mr Nigel Rowe & Others v Ingenious Media Holdings Plc & Others
...if anyone else is interested they can find a sufficient account in two reserved judgments I have given: Barness v Ingenious Media Ltd [2019] EWHC 3299 (Ch) and Rowe v Ingenious Media Holdings plc [2020] EWHC 235 3 CMC3 was largely devoted to disclosure issues. The parties were able to agr......
-
High Court Strikes Out Claim Against Banks In Their Capacity As Lenders To Investors Of A Tax Deferral Scheme
...sums to the investors for the purpose of investing in the scheme: Mr Anthony Barness & Ors v Ingenious Media Limited & Ors [2019] EWHC 3299 (Ch). In the context of the current wave of tax deferral scheme litigation (including in respect of the film financing schemes Samarkand, Prote......