Judges praises use of junior counsel in major film tax scheme case

Pirates of the Caribbean: Two sequels part of the scheme

A judge has expressed his “delight” that all the leading counsel in a major claim brought by investors in a failed film tax scheme delegated significant portions of the oral advocacy to their juniors.

Mr Justice Bright made the comments after dismissing the £240m claim brought against HSBC by around 400 people who said the bank was instrumental in developing, marketing and implementing the Eclipse scheme, alongside Future Films, a company now in liquidation.

Last November, the heads of the judiciary told judges and instructing solicitors to give junior counsel who were being led every chance to address the court as well.

“Those junior counsel rose to the challenge with flair,” Bright J said. “It was a real source of joy to see the pleasure with which they went about their allotted tasks, and to note that this pleasure appeared undimmed even when each of them, in turn, had to fend off a series of chest-high bouncers hurled down from the bench.

“They returned to the pavilion bruised but exhilarated, and with the scorecard in each case reading ‘Not Out’. They may or may not be grateful to me for the experience, but I know that it will have made all of them even better advocates than they were before the trial commenced.”

Eclipse was designed by HSBC director Neil Bowman and intended to enable UK taxpayers to defer their tax liabilities for several years by investing in LLPs associated with the film industry.

The money went into Disney films, including two of the Pirates of the Caribbean sequels, National Treasure: Book of Secrets and Confessions of a Shopaholic.

The scheme was successfully challenged by HM Revenue & Customs, which prevailed at every level up to the Court of Appeal.

As a result, the investors did not succeed in deferring their tax liabilities and sought to recover their losses from HSBC. London firm Edwin Coe acted for them.

A smaller group of 178 claimants, represented by Stewarts, settled their claim shortly before the trial concluded last month, with no admission of wrongdoing or liability from HSBC.

In a 152-page ruling, Bright J held that the claimants “failed to analyse properly the legal significance of the statements made to them before they invested in Eclipse”.

He continued: “Properly analysed, the statements that related to the advice of [tax counsel Jonathan Peacock QC, as he then was] did not constitute misrepresentations. Future Films and Mr Bowman had reasonable grounds for believing that the scheme as implemented was consistent with the basis on which Mr Peacock QC had advised.”

Further, neither Future Films nor Mr Bowman was dishonest, as had been alleged, and the claims were time-barred.

In closing comments, the judge expressed “great sympathy” for the claimants. “Their losses are significant, their suffering has been real (even for those who did not claim for distress) and they have every right to feel aggrieved. When all is said and done, they were badly let down.

“However, this is not enough for them to have a good claim against HSBC. I also have some sympathy for HSBC and, specifically, for Mr Bowman, who should not have had to deal with proceedings or the allegations of dishonesty that were central to them.”

Bright J went on to praise all involved in the case – counsel, solicitors and witnesses – but, given the outcome, singled out Philip Coppel KC, who led the claimants’ team, “for the skill, clarity, charm and good judgment with which he advanced even the less attractive elements of the claimants’ case”.

The judge continued: “He found himself having to do so, no doubt, not because of his own spontaneous decisions while on his feet, but because of a host of earlier strategic and tactical decisions.

“What those decisions were, and when, by whom and in what circumstances they were made, is all beyond my ken. However, I have noticed that Mr Coppel KC’s name does not appear on the claimants’ pleadings, from which I infer that he is a relative newcomer to the case.”

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