Litigation Partner, Sobashni De Silva successfully settles a complex professional negligence claim recovering significant damages for our client

Background

JMW were instructed by a high net worth individual, in a complex claim for professional negligence against (1) leading tax counsel (KC) and (2) a well-known firm of accountants, for their failure to advise the client as part of his Appeal to the First-tier Tribunal (Tax) (FTT) that he could also rely on the Statutory Residence Test (SRT) to determine whether he was UK tax resident for income tax (2012/2013), at a time when the client had declared that he was non-resident and living abroad. As a result of the negligent advice provided by leading tax counsel and the firm of accountants, the client was ordered to pay to HMRC circa £1.8 million, comprising income tax, interest, penalties and HMRC’s legal costs.    

JMW were instructed to recover these losses from leading tax counsel (KC) and/or the firm of accountants as part of the client’s claim for professional negligence.  The claim referred to historic tax returns and income requiring an extensive disclosure exercise.

How JMW helped

JMW’s commercial litigation team, led by Sobashni De Silva (Partner), Kulwant Sokhal (Senior Associate) and Edward Davis (Apprentice Solicitor) commenced pre-action steps (these are the steps to be taken before issuing a legal claim) setting out its detailed claim and losses. Leading tax counsel (KC) denied liability on the basis that counsel had only been instructed to advise on limited and specific aspects of the dispute and that the clients accountants were primary responsible for any negligence. The accountants alleged among other things that our client was commercially minded and a sophisticated businessman who was aware of tax implications and rules generally having filed his own previous tax returns.

JMW counter argued both parties’ points of contention placing reliance on specific instructions and technicalities.

Outcome

JMW’s client was advised to engage with settlement discussions. The insurers (represented by two leading City law firms) for leading counsel (KC) and the firm of accountants respectively made a joint “nuisance value” offers to settle, which were promptly rejected.  JMW argued that at the FTT Appeal hearing, the judgment made it clear that if the client had relied on the SRT provisions, within time, the FTT’s decision would have been different with no further sums payable to HMRC.  JMW continued robust settlement discussions with the parties (whilst also preparing to issue Court proceedings), resulting in a successful settlement for the client where the insurers for leading counsel (KC) and the accountants firm agreed to pay over £1.7m losses claimed by the client, as set out in his Part 36 offer plus legal costs.