Mr Nigel Rowe & Others v Ingenious Media Holdings Plc & Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 10 February 2020 |
| Neutral Citation | [2020] EWHC 235 (Ch) |
| Court | Chancery Division |
| Docket Number | INGENIOUS LITIGATION Claim Nos: HC-2015-004561, HC-2016-001674 HC-2017-001049, BL-2018-000507 Claim No: FS-2017-000005 |
| Date | 10 February 2020 |
[2020] EWHC 235 (Ch)
Mr Justice Nugee
INGENIOUS LITIGATION
Claim Nos: HC-2015-002715, HC-2015-004581 HC-2017-000490, BL-2018-000279 BL-2018-001466, BL-2018-002554
Claim Nos: HC-2015-004561, HC-2016-001674 HC-2017-001049, BL-2018-000507
Claim No: FS-2017-000005
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
Nicholas Bacon QC (instructed by Stewarts Law LLP and Peters & Peters Solicitors LLP) for the Stewarts Claimants and the Peters & Peters Claimants
P J Kirby QC (instructed by Stewarts Law LLP, Peters & Peters Solicitors LLP and Therium) for the Stewarts Claimants, the Peters & Peters Claimants and Therium
Tom Mountford (instructed by Mishcon de Reya LLP) for the Mishcon de Reya Claimants
Simon Birt QC, Craig Morrison and Geoffrey Kuehne (instructed by RPC) for the Ingenious Defendants
Ben Quiney QC and Carlo Taczalski (instructed by Kennedys Law LLP) for SRLV (a firm)
James Duffy and Nick Daly (instructed by Herbert Smith Freehills LLP) for UBS AG
Andrew Green QC, Simon Pritchard and Harry Adamson (instructed by Eversheds Sutherland (International) LLP) for HSBC Private Bank (UK) Ltd
David Yates QC (instructed by TLT LLP) for Coutts & Co, The Royal Bank of Scotland plc and National Westminster Bank plc
Hearing dates: 19, 20 and 21 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
On 19 to 21 November 2019 I heard a number of applications in relation to the funding of this litigation. These consisted of an application by the Claimants for a costs-sharing order; and a number of applications by Defendants for security for costs.
The costs-sharing order put forward by the Claimants sought to deal with a number of aspects of costs-sharing, but the focus of the argument was whether the Claimants' liability for any adverse costs should be several and not joint, and this aspect of it was referred to in argument as a “several liability order”. The terminology is not of course overly important but I will use this term where appropriate as it makes clear that what is sought is an order that seeks to limit the Claimants' potential liability to the Defendants, rather than simply regulating the position of the Claimants as between themselves. As was pointed out at the hearing, the latter does not necessarily need an order at all, as the Claimants can always agree amongst themselves how the costs incurred by them should be borne. In what follows I will try and distinguish between (i) what each Claimant is liable to contribute to an adverse costs order made in favour of one or more Defendants (ie the question whether a several liability order should be made); (ii) what each Claimant is able to recover from a Defendant under a costs order made in favour of (some or all of) the Claimants; and (iii) what each Claimant is liable to contribute to their own solicitors' costs. There was in some of the submissions a tendency to run these together under the rubric of costs-sharing, but it is helpful to keep them distinct.
I asked counsel to agree a numbered list of the questions that required decisions from me, and such a list was very helpfully provided. At the conclusion of the argument on 21 November 2019, I was able to give the parties answers to a number of those questions in the form of a brief oral judgment (the neutral citation number of which is [2019] EWHC 3234 (Ch)), but there were various questions which I was not able to give a decision on there and then, either because I wished to consider them further or (on one point) because I invited further submissions in writing. In addition I asked the parties to indicate whether they wished me to set out my reasoning in more detail, and Mr Nicholas Bacon QC, who appeared for the Stewarts and Peters & Peters Claimants, subsequently sent my clerk an e-mail indicating that those instructing him needed a further short judgment on two points which I had decided, described by him as “the several / quid pro quo point” and “the pro-rata point”; Mr P J Kirby QC, who appeared for a litigation funder called Therium Litigation Finance AF IC ( “Therium”), also asked for expanded reasoning on certain points. This judgment therefore contains my reasons for my decisions on those points in more detail, as well as my decisions on the points I reserved.
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 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 Mishcon 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.”
That I think serves as an adequate introduction, with the addition of the fact that many of the Stewarts Claimants, and all the Peters & Peters Claimants, have the benefit of funding from Therium, against whom various Defendants seek security for costs. Some of the Stewarts Claimants however are self-funded and are paying their own costs.
The several / quid pro quo point
What I understand Mr Bacon to be referring to as “the several / quid pro quo point” is a point that was not actually on counsel's list of questions but was argued and that I thought I ought to answer. What I said in my oral judgment was as follows:
“1. … Taking the very helpful list of issues however, there is before we get to issue 1, in fact a prior question, which is: are the two applications necessarily linked in the quid pro quo sense?
2. My answer to that is: no, I think they are separate applications and that there is nothing wrong with the claimants bringing their application for several liability and the question of security does not need to be resolved at the same time and they do not form parts of the same coin.
3. On the other hand, as I think both Mr Bacon and Mr Kirby accepted, if I accede to the claimants' application it will have a knock-on impact on the question of security.”
The point arose because the Defendants said that the two applications were linked in that it was impossible to address the Claimants' application for a several liability order fairly without at the same time dealing with the application for security. Mr Simon Birt QC, who appeared for the Ingenious Defendants, said for example that they saw the two applications as “very clearly linked”, and that “ there needs to be a quid pro quo and the only basis on which the defendants ought to bear that risk [the risk of having to pursue individual Claimants] is that there is adequate security for costs on appropriate terms to safeguard the...
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