Vincent James Walsh v Greystone Financial Services Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 04 July 2019 |
| Neutral Citation | [2019] EWHC 1719 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2016-001362 |
| Date | 04 July 2019 |
[2019] EWHC 1719 (Ch)
Mr Justice Nugee
Case No: HC-2016-001362
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, EC4A 1NL
Mr Tony Beswetherick and Mr Sam Goodman (instructed by Coyle White Devine) for the Claimant
Mr Matthew Hardwick QC and Mr Christopher Burdin (instructed by DAC Beachcroft LLP) for the Defendant
Hearing dates: 25, 26, 27, 28 and 29 March, 1, 2 and 8 April 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.
| Index | Para |
| Introduction | 1 |
| Background | 9 |
| Tax year 2003/04: Zodiac 1 and Zodiac 2 | 14 |
| Tax year 2004/05: Aquarius 4 and 5 | 18 |
| Tax year 2005/06: Aquarius 10,11 and 12 | 20 |
| Tax year 2006/07: Edinburgh & Walsh LLP | 23 |
| Tax year 2007/08: the other members join Edinburgh & Walsh LLP | 27 |
| The other members | 31 |
| HMRC enquiries | 39 |
| Mr Walsh's arrest and criminal trials | 45 |
| Mr Walsh's dismissal | 53 |
| HMRC demands | 59 |
| The witnesses | 67 |
| Mr Walsh's evidence | 73 |
| Claims in relation to Zodiac and Aquarius | 91 |
| Lack of due diligence | 97 |
| The low risk advice – Zodiac | 121 |
| What advice did Mr Williams-Denton give? | 123 |
| Was what Mr Williams-Denton said deceitful? | 137 |
| Are Mr Walsh's claims statute-barred? | 149 |
| Was Mr Williams-Denton's advice negligent? | 159 |
| Reliance and loss | 162 |
| The Aquarius schemes | 163 |
| Conclusion on Zodiac and Aquarius schemes | 173 |
| E&W scheme claims – investment advice | 174 |
| Deceit claim: representation that scheme was bona fide | 177 |
| Dishonest commission payments | 178 |
| Dishonest payments to Mr Williams-Denton personally | 181 |
| Commission based on grossed-up amounts | 186 |
| Eligibility for uncapped sideways loss relief | 198 |
| HHJ Beddoe's sentencing remarks | 207 |
| Negligence claims | 221 |
| Conclusion on the E&W investment claims | 230 |
| The HMRC enquiry claims | 231 |
| The 10-hour requirement and the members' activities | 235 |
| The BIM meeting | 254 |
| The opening of the HMRC enquiry | 265 |
| Initial response | 276 |
| Creation and submission of the diaries | 282 |
| March to July 2010 | 297 |
| July to December 2010 | 307 |
| The query about whether the members had their employer's permission | 313 |
| The electronic version of the diaries | 319 |
| Mr Walsh's account of the diaries in 2012 | 321 |
| Conclusion | 322 |
Introduction
The Claimant in this action (“ Mr Walsh”) was formerly a successful and very highly paid equities trader employed in the City of London, latterly by a company in the Royal Bank of Scotland group. It is not generally necessary to distinguish between his employer and the wider Royal Bank of Scotland group and I will use “RBS” for both.
The Defendant ( “Greystone”) is an authorised and regulated provider of regulated financial advisory services. From 2003 onwards Mr Walsh took financial advice from Mr Neil Williams-Denton, a director and employee of Greystone. That advice led to Mr Walsh putting over £1m between 2004 and 2008 into a succession of so-called film partnership schemes under which the participants became members of a limited liability partnership or LLP and which were designed to enable them, among other things, to claim relief against losses which could be used to reduce their income tax liability. The film schemes in question were promoted by Mr Terence Potter and were recommended to Mr Walsh by Mr Williams-Denton. Mr Potter was a chartered accountant and chartered tax adviser who was formerly a partner in Ernst & Young, and who ran a specialist tax consultancy under the name Sefton Potter.
The film schemes initially seemed to work well for Mr Walsh, and starting in 2004 he received a number of substantial payments from HM Revenue and Customs ( “HMRC”) by way of repayment of income tax. But in the end they have proved nothing short of catastrophic for him. HMRC opened enquiries into his tax returns, and asked increasingly difficult questions, not least into how Mr Walsh and the other members of the LLP could demonstrate that they had, as required for the final scheme, personally spent an average of 10 hours per week on partnership business. Those enquiries appeared to be still ongoing when, in February 2012, Mr Walsh was arrested without warning on suspicion of conspiring to cheat the revenue, the basis for this being that he and the other members had submitted detailed records of the time they had spent on partnership business in the form of daily diaries which were entirely fictitious. Mr Walsh's position is that he knew nothing about his fictitious diary, which was created for him by Mr Potter and submitted for him by Greystone.
Then in June 2012 RBS terminated Mr Walsh's employment for gross misconduct. The ground of dismissal was in effect that he had been running a business on RBS premises without permission, and had brought RBS into disrepute. Mr Walsh's case is that the real reason was the adverse publicity caused by his arrest and a simultaneous raid by HMRC officers on RBS premises. He has until recently not worked again, and although now back in employment, his income is very much less than it was.
In 2013 he was charged; and from April to July 2015 stood trial at Southwark Crown Court on a charge of conspiring to cheat the revenue, along with Mr Potter, Mr Williams-Denton and some of the other members of the final scheme. The jury were unable to reach a verdict on them, and Mr Walsh was tried again at Southwark at a second trial between October and December 2015. This time Mr Potter pleaded guilty (having been convicted of another offence in an earlier, related trial) and the jury convicted Mr Williams-Denton, but they acquitted Mr Walsh and the other members. Although acquitted, he incurred very heavy defence costs.
More recently HMRC have decided that he was not entitled to the relief he had originally claimed and have demanded that he pay back the tax repayment he received in 2004 together with substantial penalties and interest. Further demands are likely to follow.
In this action he seeks to recover all his losses from Greystone. That includes the monies originally paid into the film schemes; the penalties, surcharges and interest payable to HMRC (and an indemnity against similar future sums); his criminal defence costs; and his loss of earnings. (There was also pleaded a claim for loss of the income that would have been generated from alternative investment of the sums in fact paid into the film schemes, but Mr Beswetherick, who appeared with Mr Goodman for Mr Walsh, confirmed on Day 2 that that claim was not being pursued, albeit that there is a claim for interest under s. 35A of the Senior Courts Act 1981). The total claim runs to nearly £6m to date and continuing.
Mr Walsh brings his claims in negligence and deceit. (Claims were also pleaded for breach of fiduciary duty and conspiracy but have not been pursued and I need say no more about them). Mr Walsh's case is that Mr Williams-Denton was negligent and/or deceitful in his initial recommendation of the schemes, and in various aspects of the handling of the HMRC enquiries, and that Greystone is vicariously liable. Greystone, as well as taking issue with the underlying claims, relies on all the claims being statute-barred, the claim form having been issued on 5 May 2016. Mr Walsh relies in answer on the provisions of s. 32 of the Limitation Act 1980 ( “ LA 1980”) under which time can be extended in the case of fraud or deliberate concealment.
Background
I will set out here the facts in more detail, without at this stage seeking to resolve any of the more contentious issues.
Mr Walsh has spent his career in the world of stock markets and equities trading. He was born in November 1961, which means that he was aged 50 when he was dismissed by RBS in 2012, and 57 at the trial of the present action. After finishing school in 1980, he started out as a back-office clerk to a ‘stock jobber’ on the London Stock Exchange, working for the firm of Bisgood Bishop & Co Ltd. He made rapid progress, becoming first an authorised trader and then by 1985 or 1986 a member of the Stock Exchange. He subsequently worked for Merrill Lynch, Morgan Stanley, Lehman Brothers and Hoare Govett, which he joined in April 1996 as a senior trader. Hoare Govett became ABN AMRO Equities (UK) Ltd ( “ABN”) in 1998, with Mr Walsh being promoted to Head of Global Trading, Cash Equities, Global Banking & Markets in around 2000. RBS bought ABN in October 2007, and the company Mr Walsh was working in became RBS Equities (UK) Limited. He was transferred to Head of European Trading, Cash Equities, Global Banking & Markets in 2007. He remained at RBS, where he was given the additional title of Corporate MD, until his dismissal in June 2012.
Mr Walsh was in the relevant period a busy professional and an extremely high earner. The figures in evidence show that his income from employment (which fluctuated up and down with bonuses) was by the tax year 2000/01 (that is, for the year ending on 5 April 2001) about £745,000, and for subsequent years as follows (to the nearest £5,000):
| 2001/02 | c £845,000 |
| 2002/03 | c £425,000 |
| 2003/04 | c £550,000 |
| 2004/05 | c £1,110,000 |
| 2005/06 | c £850,000 |
| 2006/07 | c £1,005,000 |
| 2007/08 | c £1,480,000 |
| 2008/09 | c £840,000 |
| 2009/10 | c £590,000 |
Mr Walsh had no large outgoings apart from mortgage interest, and spending on holidays, and so had surplus cash to invest. He had had a financial...
To continue reading
Request your trial
-
Charan-Jyothi Ramamurthie Naidoo v David Barton
... [2007] EWHC 1314 (Ch) Thompson v Foy [2009] EWHC 1076 Turkey v Awadh [2005] EWCA Civ 382 Walsh v Greystone Financial Services Ltd [2019] EWHC 1719 (Ch) Wright v Hodgkinson [2004] EWHC 3091 (Ch) Jordan Holland (instructed by Hill Dickinson LLP) for the Joseph Chiffers (instructed by POCA......