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OCG Accountants: Their Advice To Do Nothing, Requests For Disclaimers and the Unanswered Questions

Posted on 19 Jan 202404 Apr 2024 by Richard Gray

Elysium Law has received a number of requests for legal advice as to what to do in the face of the latest letter sent by Chris Bailey (of Less Tax for Landlords and the Bailey Group) on behalf of OCG Accountants.

The letter sent to their clients – which we are still considering in more detail – raises two points of concern.

Reliance

Given our experience in professional negligence claims, my colleague Ruby Keeler-Williams previously advised that advice from between Leading Counsel was NOT one that could be relied upon by the clients of Chris Bailey, LT4L or any other who sought advice. WE WERE CORRECT.

At the time of writing the article we had not seen any disclaimer. In their letter to their clients, OCG accountants set out extensively the excellent background and qualifications of Leading Counsel. However, we can now confirm that this caveat was provided further in the letter:

“We are writing this letter to you after taking (Leading Counsels) advice. However, (Leading Counsel) has asked us to make it clear to you that he is advising only OCG Accountants Ltd and not any of its Clients and that he cannot, for a number of reasons, himself accept any duty of care to any of you or to any other third party”.

Our previous warning has been proven correct. There is no duty of care between the Clients and Leading Counsel and they cannot rely upon his advice.

Who is advising Clients?

The letter then goes on to say:

“The advice to you in this letter thus comes from OCG Accountants Ltd. If you choose not to follow that advice, then we will need to discuss this with you and potentially ask you to sign a disclaimer that you are choosing not to follow our advice. This has been requested by the insurance broker who deals with our Professional Indemnity Insurance.”

This raises the question – what ‘advice’ are OCG giving their clients and are they insured to give such advice?

Our belief is that nothing contained within the letter amounts to advice, save for one small sentence, which advises Clients to do nothing.

We now ask Chris Bailey, Less Tax for Landlords, OCG Accountants or anyone else connected: What ‘advice’ have you been giving your Clients?

Given neither Chris Bailey or OCG accountants are qualified, regulated legal professionals, any advice given is not subject to legal professional privilege and as such can be disclosed.

The letter sets out Leading Counsel’s view, and Leading Counsel’s view as regurgitated in this letter is NOT advice to their Clients, as the retainer makes clear and CANNOT be relied upon by the Clients at all.

Therefore, every reference to what Leading Counsel has advised is of no consequence to the Clients. Further, OCG are not underwriting the advice via their retainer – the whole thing is arguably a smoke and mirror exercise.

The difference between Advice and Information

In claims of professional negligence, English law distinguishes between advice and information given to a client upon which the client may act if they chose. This is a complex area of law and is beyond the scope of this post.

Here, with one caveat as discussed later in this article, there is no advice given.

OCG are simply rehearsing Counsel’s view to their clients

Whilst Leading Counsel’s qualifications and experience are very impressive, rhetorically why is OCG setting this out to clients who cannot rely upon it.

You can read our previous post for more information on reliance upon Counsel’s advice.

The Caveat – OCG’s advice is to do nothing

Lest it be thought that OCG have not offered any advice to their clients. OCG have offered one piece of advice and that is to do nothing.

That one small piece of advice in the letter that may have significant consequences. It is predicated upon the basis that the client has received a nudge letter re Spotlight 63 (some clients of course having not):

“…we advise you on what should be your general response to such a letter… do nothing in response to HMRCs letter.” (our emphasis)

That advice does not tell you either:

What to do if you have not received a letter;

and more importantly:

What the potential consequences are should you not respond either to the letter or to HMRC’s Spotlight 63 registration.

No doubt experienced tax advisers, with whom Elysium Law are currently working, will have far more questions and we are happy to receive them and expand the post.

The Request for a disclaimer – the iniquity of the uniformed choice

In our view, what seems to be iniquitous here is that Clients who are facing unknown consequences have so far received no advice from Chris Bailey, Less Tax for Landlords or OCG Accountants as to the way forward. The Clients are now given a stark choice with uninformed consequences – to sign or not to sign the disclaimer.

Elysium Law assumes (albeit OCG do not specify this) that this is an attempt to bar clients from bringing a claim under OCG Accountant’s Professional Indemnity Insurance should the clients chose not to follow the only piece of advice in the letter; namely to do nothing with regards to Spotlight 63, and should they go to independent and more experienced tax advisers who will give proper, informed, regulated advice.

We ask OCG and LT4L – why only now has this iniquity raised its head and upon what basis is the disclaimer sought?

LT4L and OCG Accountants have been aware of HMRC’s Spotlight 63 since at least 4^th October 2023.

They ought to have informed their professional indemnity insurers at that stage of the potential of a claim or claims to be made.

Can they confirm to their clients that they have done so? If it is not the case, then why?

We therefore ask Chris Bailey and OCG Accountant the following questions:

(we invite every client of theirs to copy them and send them to Chris Bailey and the other Directors and demand answers)

Does the Schedule of Work in the Client Care Letter, which we assume is different to that sent by LT4L, cover work by OCG as regards any investigations/enquiries by HMRC?

Given that HMRC are aware of the LLPs registered at the office of OCG Accountants, what is the harm (or adverse consequences) to clients in simply registering under the Spotlight?

Do you accept that registration is not an automatic admission of any tax that HMRC claim to be owed?

In the event that a Client does not register, will this expose them to issues such as, but not limited to, greater penalties or possibly the unavailability of any settlement facility?

If more penalties and interest may (or do) occur as a result of OCG’s advice, will OCG’s insurance cover ALL penalties and interest that accrue to each and every affected client as a result?

Was it a term of any original contract and did you point out that any insurance might be invalid, as we believe you intimate, if the clients did not stay with you in the event of HMRC issues? If not, why not?

If this is an attempt at variation of the contract or at exclusion for liability in some form of new contract, have you considered the legislation that protects consumers against unfair exclusion clauses and contractual terms? If not, why not?

Rather the discussing matters with individuals, which may go unrecorded in the event of a dispute, will you set out in clear and unequivocal terms so that your clients can take independent legal advice as to the basis of the disclaimer, its validity and consequences if signed?

Will you tell your clients that they should take independent advice before signing the disclaimer? If not, why not?

Acting in the interest of your clients and not your own interests or the interests of a third party such as the insurance broker or the underwriter, have you considered whether there could be a conflict of interest in asking the Clients to sign this Disclaimer? Clearly it would suit OCG and their insurers if the clients had signed such a disclaimer, but is that in the best interests of the clients? As set out at paragraph 12 of the ICAEW’s Guidance on identifying and managing conflicts, in relation to self-interest conflicts, the test is whether: “…the member (OCG) can give, and be seen by a reasonable and informed third party to give, objective advice or service.’
If you assert that you have considered this and are compliant with it, will you let your clients see your written correspondence with the Broker as to why the disclaimer is sought now and prima facie at least, is not in the interests of the plethora of clients you currently represent?

Does the Broker have any interest in protecting themselves in making the request?

Has the Broker told you why this request is being made, or upon whose authority, and pointed out to you under the original PII policy that your clients will be covered only in the event that you continue to act even in the face of a significant and serious conflict of interest?

Finally, please tell us all now the consequences of not signing the disclaimer as regards your Professional Indemnity Insurance and what you will say to those who want to seek advice elsewhere.

Once again, Elysium Law invite each and every client of OCG/LT4L to reproduce these questions and send them to OCG demanding an immediate response.

Conclusion

The January 31^st deadline for registration is upon the users of the planning and we have numerous affected who, rather like a rabbit in the headlines, are caught without knowing the proper way forward.

OCG’s advice, namely to do nothing, cannot seriously be considered as responsible advice such as would be expected from a competent, independent advisor unless they have considered and set out the consequences of following their advice.

We urge their clients to write to them, setting out and adopting our questions. In the meantime, seek independent advice on registration and its potential consequences.

Elysium Law has an outstanding track record of bringing, defending, and settling high-value and complex cases. With a significant number of taxpayers likely to be affected following Spotlight 63, we are looking to advance a group claim. Contact us today for more information and a free consultation.

Less Tax for Landlords – Are they acting in the best interests of their Clients?

Posted on 16 Jan 202404 Apr 2024 by Ruby Keeler-Williams

Elysium Law understands that Less Tax for Landlords and OCG Accountants have instructed Leading Counsel (KC) about the tax issues relating to income tax distribution, questions about which have been raised by various tax professionals concerning the hybrid LLP planning.

HMRC’s view (and that of every other tax expert) is that the planning does not work. HMRC’s views are set out in Spotlight 63. They can be seen here.

We have several observations:

Potential Conflict of Interest

We fail to understand why LT4L, Chris Bailey and OCG Accountants are continuing to advise clients who may have suffered loss as a result of the planning.

Our view is that clients who may have been affected require independent advice in evaluating their options, specifically tax advice and the possibility of bringing legal action against LT4L, Chris Bailey and/or OCG Accountants. Accordingly, ongoing representation represents a conflict of interest, and it cannot confidently be said that LT4L, OCG Accountants or Chris Bailey are in a position to advise their clients independently and objectively.

If you are a client of LT4L, Chris Bailey or OCG Accountants, our advice is that you seek urgent advice from a competent and respected tax professional, register following Spotlight 63, ascertain all or any tax liabilities and seek advice from legal professionals.

Is it only income tax that affects the clients in the planning?

The simple answer is no.

At this stage, we anticipate the potential liabilities are as follows:

Income tax payments, including interest and penalties;
Capital Gains Tax liabilities (potentially by clients who have sold property) – The transfer into an LLP does not give you a base cost uplift as advised by LT4L and Chris Bailey;
Inheritance Tax – It is generally accepted that Business Property Relief cannot be claimed upon the death of the partners under this planning.
SDLT – as changes in LLP profit sharing automatically trigger SDLT charges under FA 2003, Sch 15, para 14

Elysium Law has been approached by one client who informs us that he sold properties under the mistaken belief of a CGT uplift which is not available, and he had a revised CGT bill of £800,000. There MUST be others in this position.

Clients should be asking LT4L how their instructions to Counsel deal with this, as on the current information their clients have, they don’t appear to.

Can clients rely on Counsels’ advice – who are the clients for the purposes of the retainer?

Traditionally, it was a ‘selling point’ widely used by the tax avoidance scheme providers that ‘Leading Counsel’ had advised. Mostly these were eminent Counsel, with the providers themselves using these ‘names’ to give a form of comfort blanket to the participants who felt very secure knowing that Leading Counsel had advised.

The problem with this is that no matter who Counsel is or was, Counsel’s instructions and advice are governed by the retainer. Leading Counsel will very likely not be retained to advise you. Counsel will likely be retained to advise LT4L or any other of the named entities. In that case, there is no relationship between you as the end client and Counsel and as such his/her advice cannot be relied upon by you. Counsel, we believe, is instructed to advise LT4L and OCG Accountants and only has a duty of care towards them

An example of this is the recent case of McLean v Thornhill [2023] EWCA Civ 466, where it was held that a tax barrister advising the promoter of a tax avoidance scheme owed no duty of care to the tax avoiders who invested in it, even though they had been allowed to see his advice.

In those circumstances, if a client relies on the advice given by LT4L’s KC, and either in the event the advice is not correct, or HMRC does not agree with Counsel’s views, there is no recourse by their clients.

What if HMRC disagrees with Counsel’s views as put forward by LT4L?

If HMRC disagrees with Counsel’s views, the only answer is for you to litigate the matter with HMRC, and this will take considerable time (years) and very significant expense. It is not clear who will pay that expense and it is not at all clear that LT4L insurance will fund this litigation and pay any tax and penalties due to HMRC (as LT4L has informed clients).

The insurance provider will be acting via their solicitors (not via LT4L or any of their representatives) and will not simply ‘payout’ claims. The only way a recovery can be made is by bringing a claim against LT4L and their insurance provider in negligence and breach of contract.

In our further articles, we will demonstrate the effect that relying upon this advice will have on your ability to bring a claim against LT4L or any others who advised that this planning was reliable.

Have the criticisms of the overall planning been answered by LT4L?

The short answer is NO. The informed views namely that the planning does not work, have NEVER been contradicted by Chris Bailey or LT4L since the ineffectiveness of the planning was exposed, principally by Dan Neidle of Tax Policy Associates.

Limitation

There are time limits to bringing civil claims, including claims made against Insurance Companies. These are known as limitation periods. Once those limits have expired, you have no options open to you and your claims will be time-barred, no matter how well-founded.

You must obtain independent and objective legal advice within the limitation period. LT4L will have a complete defence to any claims brought against them once the limitation period has expired.

Conclusion

The deadline to register for Spotlight 63 is rapidly approaching. If you have been affected, you must obtain independent, objective tax advice now.

Furthermore, Elysium Law is still receiving enquiries from clients affected. You can contact us via telephone or email for a free initial consultation.

Elysium Law has an outstanding track record of bringing, defending, and settling high-value and complex cases. With a significant number of taxpayers who are likely to be affected following Spotlight 63, we are looking to advance a group claim. Contact us today for more information

FAQS FOR SPOTLIGHT 63 VICTIMS (LT4L, BAILEY GROUP)

Posted on 29 Nov 202304 Apr 2024 by Ruby Keeler-Williams

Elysium Law have been approached by a number of individuals and professional advisers about what is rapidly becoming a serious issue for those who entered planning with Less Tax For Landlords and Bailey Group.

In response to the mounting questions surrounding this issue, we’ve crafted this Frequently Asked Questions (FAQ) article, accompanied by our suggested answers.

Who are Elysium Law?

We’re a BSB Regulated Entity as a Direct Access Barrister firm with litigation privileges, which means that we can do the same work as a regular law firm but with the prestige and expertise of Barrister working directly on your matter, day to day.

We have successfully represented hundreds of people individually and in large groups in complex and high value group litigation. We are here to help, so please get in touch with us if you’re worried about either of the above matters.

Are there any fees associated with initially getting in touch?

No. At this stage we are inviting potential victims of planning following HMRC’s Spotlight 63 to have an initial consultation with us where we’ll conduct a fact find and discuss the group litigation.

Following this, we’ll register your interest in the group litigation so we can keep you updated regarding our pursuit of the potential claims.

It is important that you appoint a professional tax advisor alongside pursuing any litigation. We are currently working alongside professional advisors.

Will HMRC know I have contacted you?

No. You are entitled to seek advice and we are qualified professional legal advisors and you have legal privilege in all our discussions with you. This means in simple terms that we cannot disclose anything discussed between us without your permission if the communication is kept confidential (apart from if a criminal activity is disclosed).

We’ll advise you further about legal privilege as part of the litigation.

What claims are you looking at?

We’re currently looking at claims in Breach of Contract and Professional Negligence in relation to the planning provided by firms Less Tax For Landlords and the Bailey Group.

Why should I get legal representation sooner rather than later?

There are legal limits as to when a claim can be made, known as limitation.

In Breach of Contract claims, it is 6 years from the date the contract (letter of engagement) was signed.

In Professional Negligence claims, it is 6 years from the date the loss arose. The date of loss will be different depending on the scheme you entered into. Examples here may include the of the tax return was submitted or the date when any tax liability arose.

We must progress through the pre-action protocols before we can issue a claim and ‘stop the clock’ on limitation. It is vital that there is sufficient time to fully assess the matter, fully advise you, issue a letter of claim on your behalf, allow 3 months for the other side to respond, deal with any letter of response and seek any pre-action disclosure necessary.

Additionally, you will need to mitigate (lessen) your loss, which in this case means settling with HMRC and reaching a tax compliant position. HMRC are aware of the planning and have issued Spotlight 63 and ‘One Too Many’ letters to notify taxpayers. You will need to appoint a professional advisor to liaise with HMRC and settle the matter, which will take time.

Is doing nothing an option if you have not received an HMRC nudge letter?

No . Registration with HMRC should be undertaken.

However we suggest that before doing so, you obtain advice from an experienced regulated tax advisory firm, who will assist you in regularising your tax affairs by advising you on the different tax payable, minimising interest and penalties if applicable and will help mitigate your losses in any claim we can assist with. Our advice is to get expert professional tax advice and subject to that advice attempt to settle with HMRC.

Why is it important to mitigate your loss

The rule of mitigation requires a claimant to take steps to minimise its loss and to avoid taking unreasonable steps that increase its loss. Whether arising from a breach of contract or breach of duty, the injured party cannot claim damages for losses that could have been prevented through reasonable measures.

Here, it will be essential to work in tandem with experienced professional advisors who can settle claims with HMRC. This will assist us in calculating your losses and allow us to prove that you acted swiftly and responsibly.

What damages will you be seeking?

The damages will be carefully assessed for each client, but we anticipate claims including:

The Fees paid for implementing the planning
Tax Liabilities (potentially including CGT and SDLT)
Any loss relating to mortgage default due to the planning
Fees of any professional advisors to settle with HMRC and reach a tax complaint position
Accountancy fees regarding the two entities, cessations accounts
Legal Costs

What documents will be important?

We would like to see all documentation, but we’re specifically interested in these documents:

The Engagement Letter: The engagement letter is the contractual obligations of the advisor and we need to look at what they have expressly promised to do.

The Tax Advice: You should have been given solid advice that contain risk warnings. In some cases we are aware of, no advice was given. We will look at the content of the advice to see if it is legally sound and look for the risks warning which you should be made aware of. The absence of the latter will indicate whether there is a potential causation issue depending upon the strength of the warning.

Any Scheme Documentation: We need to see how the scheme has been implemented to see if it is technically correct. This includes any partnership documentation, any deeds of trust, any deeds of transfer, etc

Does it matter whether I have fully implemented the planning?

In a matter such as this, there will likely be different ‘classes’ of Claimant depending on the loss suffered.

This will likely be determined by how much of the planning has been implemented at each stage.

Currently, we envisage the following scenarios:

a. Claimants who have paid fees but not implemented the planning;

b. Claimants who have partially implemented the planning

c. Claimants who have fully implemented the planning

How can I contact you?

You can contact us via telephone or email for a free initial consultation.

Elysium Law has an outstanding track record of bringing, defending and settling high-value and complex cases. With hundreds or even thousands likely affected following Spotlight 63, we are looking to advance a group claim. Contact us today for more information

Legal Insights: A Litigation Overview following Spotlight 63

Posted on 16 Nov 202304 Apr 2024 by Ruby Keeler-Williams

In this article, Ruby Keeler-Williams and Richard Gray of Elysium Law provide an overview of the legal action which can potentially be brought against LT4L and the companies involved within the structure – which is now the subject of HMRC Spotlight 63.

In this article, we’ll give an overview of aspects of the anticipated litigation against scheme providers following HMRC Spotlight 63, with specific regards to various issues that will arise in any claim for Negligence, Breach of Contract and Misrepresentation.

Contractual Position

A professional adviser will enter into a retainer or contract with the client(s) they engage with. The scope of the duties is defined by the retainer letter. A contract contains both express and implied terms. An express term for example, would be the fees paid to enter the ‘planning’. Legally this is known as the consideration and in any breach of contract claim, the claim would naturally include a claim for a return of the fees. An implied term of the contract would be to carry out the contractual duties as expressed by the retainer in accordance with the standards expected of a reasonably competent professional within that field.

Professional Negligence

Given that the duty of care is owed by a professional advisor, there would also be a claim in Professional Negligence. Whilst the formulation of damages claimed are normally different in negligence and breach of contract, in cases such as these, where the loss amounts to professional fees and tax liabilities, it would effectively be the same.

Whilst negligence can be defined as a Breach of Duty of Care owed to the Claimant, which causes Loss and Damage to the Claimant, the position is far from simple.

Causation

In bringing a claim in negligence, the elements of causation is a question of fact. A number of elements will be considered by the court which are evidence-based.

For example, if a person has attended a sales fair, has taken a brochure and having read the brochure signs up to the scheme without further discussion or asking questions, the Defendant (who will act by their insurance company solicitors) will claim that the Claimant would have entered into the scheme in any event.

Items promised such as less tax to pay, redistribution of income, business property relief on shares at the specific time, are powerful inducements and the court may view that causation is either not proved, or alternatively that the loss has been contributed to by the negligence of the Claimant themselves (known as Contributory Negligence). Contributory Negligence will reduce the degree of damages which otherwise would have then awarded in proportion to the Contributory Negligence demonstrated by the Claimant.

The insurer’s riposte to any claim will almost certainly be one of causation, asserting that the Claimant would have entered the scheme regardless of what they were told. Items such as the evidence required to prove or disprove the assertion is beyond this article. This is a process which requires full engagement with any would-be litigant who wishes to bring the claim.

Professional Indemnity Insurance

Professional Indemnity (PI) Insurance is a type of insurance designed to protect professionals (such as lawyers, tax advisors, accountants, etc.) from financial losses resulting from legal claims made by third parties. These claims typically arise due to alleged negligence or errors and omissions in the professional services provided by the insured or their employees.

Any claims made will be dealt with under LT4L’s PI policy.

A point to concern for litigators is that irrespective of the strength of the claim, any claim of fraud will invalidate the policy. We have seen cases (in which we were not involved) where the lawyers pleaded fraud and immediately the policy was withdrawn.

In any event, fraud has a very high benchmark and ought not to be pleaded unless there is specific evidence which can be proved on the criminal standard of proof (beyond reasonable doubt). This will not apply this claim and if you are advised that this is a fraud by any other party, then we would reject that assertion.

The Insurance Policy

Elysium Law had been approached by a number of individuals or couples, some of whom have sought a copy of Less Tax 4 Landlords’ insurance policy.

Less Tax 4 Landlords are part of the One Consultancy Group, which includes an accounting firm (OCG Accountants), a mortgage broker (OCG Mortgages), an FCA regulated financial services firm (Phare Financial Services) and an SRA regulated ABS (OCG Legal).

We have had sight of the Professional Indemnity Insurance Schedules for Less Tax 4 Landlords, OCG Accountants and OCG Legal. The Professional Indemnity Insurance Schedules only contain the main limits, sums insured, endorsements and excesses but others will apply and will be detailed in the Policy Document, which we have not had sight of.

It must be noted that when a professional adviser ceases to practice, there must be what is known as run-off cover covering the six-year period after the cessation of the practice.

The Limit of Indemnity

The amount of cover provided under a PI policy is determined by the limit of indemnity. This will usually be set out in the schedule to the policy. The limit may be expressed to be on a “per claim” or “per loss” basis or on an “aggregate” basis or both:

”per claim” or “per loss” means that the limit will be available for each and every claim or loss as applicable.
”in the aggregate” means the limit of indemnity will be available for all claims that fall for cover in that policy period.

It is common to see limits expressed to be both on a “per claim” basis and in the aggregate.

For example, if the limit of indemnity was expressed to be “£100,000 each and every Claim and £1 million in the aggregate”, this would mean there was a maximum limit of £100,000 available for each Claim (as defined under the policy) but insurers would pay no more than £1 million in total for all of the Claims covered under the policy.

In the Professional Indemnity Insurance Schedules for Less Tax 4 Landlords, OCG Accountants and OCG Legal (which are an overview and do not reflect the terms of the entire policy) the limit of indemnity is £2 million for Less Tax 4 Landlords, £2 million for OCG Accountants and £3 million for OCG Legal. We have not had sight of the complete policy and as such cannot comment specifically as to whether this is per claim or on an aggregate basis.

Aggregation Clauses

It is common in a PI policy for there to be an aggregation provision. Such a provision provides for two or more separate claims covered by the policy to be treated as one claim when they have a unifying common factor that links them together.

This is of considerable importance because it is likely that claims in respect of LT4L that arise from the same cause of action will be aggregated, meaning that despite the number of individuals who seek compensation, they will all be classed as one claim.

Clearly, if there were 600 Claimants all seeking £20,000 each, the total claim would be £12 million, which is significantly above the limit of indemnity. In order to minimise their losses, insurers make provision for an aggregation clause which means that they avoid claim such as this.

Experience tells us that LT4L will have a policy with an aggregation clause in it. As yet, we are yet to determine every companies or individuals who have provided planning within the arena to this particular DoTAS scheme. It may be that the accountants and the solicitors concerned will each be liable for their part in the provision and implementation of the scheme and therefore, there would be two policies to attack by this litigation.

As far as challenging the aggregation clause, the position will be dependent on the specific wording of the clause and as such at this stage is not clear and cannot be the subject of accurate comment. Generally, the principles are as follows:

It is crucial to look at the words used in the aggregation provision including whether any of the words used are defined terms. Provisions which seek to unify claims by reference to the same ‘act’, ‘error’, ‘omission’ or ‘event’ have a narrow scope and tend to result in fewer aggregated claims (Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd [2003] UKHL 48)

In contrast, provisions which allow for a wider search for a unifying factor such as the same ‘originating cause or source’ are likely to mean more claims can be aggregated together (Axa Reinsurance (UK) Plc v Field [1996] 2 Lloyd’s Rep 223 )

In AIG Ltd v Woodman and others [2017] UKSC 18, the Court held that in order for claims to be aggregated, they must have a unifying factor, such as a common feature, circumstance, or cause.

This was expanded upon in Baines v Dixon Coles and Gill (A Firm) and others [2020] EWHC 2809, in which insurers sought to aggregate claims relating to the theft of client monies by a partner of a firm.

HHJ Saffman provided the following example at paragraph 53 of the Judgment:

“In other words if there is a series of acts A, B and C, it is not enough that act A causes claim A, act B causes claim B and act C causes claim C. What is required is that claim A is caused by the series of acts A, B and C; claim B is also caused by the same series of acts; and claim C too.”

An example of claims being deemed to have the same ‘source or originating cause’ can be seen in Spire Healthcare Ltd v Royal & Sun Alliance Insurance [2022] EWCA Civ 17, where the Court of Appeal held that several claims against the insured all arose out of the same “source or original cause”, namely, the conduct of an individual in disregarding the welfare of his patients and performing operations on them without their informed consent. The claims could, therefore, be aggregated as one claim so that the £10 million policy limit applied, instead of the aggregate policy limit of £20 million. This decision confirms that the negligent or dishonest acts of one individual can be an originating cause for the purpose of an aggregation clause, even though their negligence may take different or multiple forms.

Damages

These will depend upon the specific taxes to be collected by HMRC.

As yet, whilst HMRC have written to people telling them to register if affected by the scheme, there has been no expression of policy with regards taxes they wish to look at collecting. Again, this will be discussed no doubt with the expert selected to liaise with HMRC in any settlement.

Mitigation of Losses

It is important that you demonstrate in any claim that you have tried to mitigate any losses incurred. This should be done via an expert. Damages may be only extra income Tax, interest and penalties for example. If you have been affected, you should seek to instruct a litigator who will compile a schedule of damages each Claimant has incurred.

You will also claim extra accounting fees for the entities involved, your experts fees and of course the consideration (fee) paid to LT4L. These will be set out in a Schedule of Loss and it is more cost effective and easier to mount a claim of significance. In other cases, we have seen individuals taking on the insurance company alone and given the costs of such litigation, their claims have been ignored simply upon the basis that the Claimant cannot afford the costs.

Conclusion

If you find yourself impacted by the issues discussed, Elysium Law are ready to offer expert guidance and assistance. Please contact us today.

Exiting Tax Avoidance Schemes following HMRC’s Spotlight 63

Posted on 14 Nov 202304 Apr 2024 by Richard Gray

In this article, Richard Gray and Ruby Keeler-Williams of Elysium Law provide practical guidance for individuals navigating the exit process from tax planning schemes, notably those promoted by Less Tax For Landlords.

Let us start by thanking the CIOT for publishing the letter which is being sent by HMRC following Spotlight 63. This communication sheds light on the potential fallout from the tax planning schemes orchestrated by Less Tax For Landlords (LT4L) and other promoters.

To see this, you can access the article containing the posted letter on the CIOT website: HMRC One to Many letters concerning ‘Spotlight 63’ LLP property tax planning

Elysium Law have been approached by numerous victims of this particular mess and are looking at bringing claims in professional negligence, amongst other causes of action, against the perpetrators. Note, there are in fact a few providers presently in our sights.

One issue that we raised with the professional advisors with whom we work is the policy HMRC are adopting in relation to the recovery of the many specific tax liabilities this scheme will cause.

Following these discussions, we’ve put together this short practical guide for those affected.

Exit

Exiting a tax planning scheme such as those implemented by LT4L demands careful consideration and strategic planning, especially in the aftermath of HMRC’s Spotlight 63.

Reassessing the Declaration of Trust

The first crucial step in the exit strategy involves evaluating the effectiveness of the declaration of trust over the beneficial ownership of properties within the LLP. If deemed necessary, a change may be required to shift the beneficial interest back to the individual(s). However, it is essential to note that there are significant considerations in this regard, which we will address shortly.

Income Declaration and Section 24 Implications

Once the beneficial ownership is realigned, landlords must declare the income and expenses on the properties as they did before. This reinstatement to individual ownership brings Section 24 of the Finance Act 2015 into focus, particularly impacting the calculation of taxable profits for those with mortgages.

Liquidation of the LLP and Limited Company

In certain scenarios, the LLP and Limited Company member may need to be liquidated, but exercising caution is paramount. This step should only be taken post-settlement to avoid potential complications.

Potential Pitfalls of the ‘Transfer Back’

One of the critical issues in the ‘transfer back’ process involves the change in the corporate member’s entitlement to profits. The looming question is whether HMRC would perceive this transfer as triggering SDLT or CGT charges. While we remain hopeful that it wouldn’t, seeking professional advice before taking any action is essential. Waiting for HMRC’s confirmation or agreement on any arguments presented is equally crucial.

Filing Returns: Exercise Caution and Transparency

For those compelled to file returns before HMRC confirms their stance, it is advised to base your position on professional advice. Full transparency in filing, accompanied by a clear rationale for the chosen position, is vital. Acknowledge the possibility of amendments and be prepared to provide evidence if HMRC disagrees, as filing without proper advice poses the risk of penalties and additional taxes.

Settlement

Mixed Membership and Reallocation

In addressing the mixed membership issue, it is anticipated that HMRC may seek to reallocate profits back to individual members. Moreover, there’s a possibility that HMRC might go a step further and consider ignoring the LLP structure entirely, leading to the computation of tax on the individual(s) based on a ‘normal’ basis.

Corporate Income Tax Offset in Settlement

For corporates that have previously paid income tax on profits, there is a potential avenue to offset or include this in an overpayment claim. This can effectively reduce the ‘cash’ cost of settlement, subject to time limits. Similarly, income tax paid by individuals on dividends from the corporate may be repayable, further alleviating the financial impact of settlement.

Inheritance Tax Implications

While we hope that no participants in these arrangements have passed away, considerations must be made. If Business Property Relief has been claimed for Inheritance Tax (IHT), and it is deemed ineffective, HMRC would expect necessary amendments.

CGT and SDLT Liabilities

The transaction and reallocation of profits may have triggered liabilities in terms of Capital Gains Tax (CGT) and Stamp Duty Land Tax (SDLT). HMRC’s perception of the effectiveness of these events will determine the course of settlement. There’s a possibility (albeit a significant one) that HMRC may choose to ignore these issues. If not, computation and payment of SDLT and CGT become necessary, requiring careful consideration of available reliefs.

HMRC Registration and Policy Pause

While HMRC advises victims of this scheme to register, responsible professionals should encourage compliance. However, we recommend pausing a moment. As of now, HMRC has not disclosed its policy on these matters, making it crucial to stay informed and navigate the registration process with a clear understanding of potential implications.

Next Steps

In the initial phase, Elysium Law strongly advises seeking assistance from a professional adviser. Rushing into decisions without expert guidance may inadvertently lead to the creation of further tax liabilities. A professional adviser can provide invaluable insights, helping you make informed choices tailored to your unique circumstances.

It is highly likely that discussions with HMRC will be necessary to navigate the complexities of settlement and exit. Achieving a clear understanding of the precise terms for both settlement and exit is crucial. This ensures that you can leverage the benefit of any tax already paid, contributing to a smoother resolution of the situation.

Should you find yourself impacted by the aftermath of LT4L and the tax planning issues discussed in this article, Elysium Law is here to offer guidance and assistance. We recognise the complexity of the situation and the potential legal challenges involved, and our team stands ready to advise. Contact us today for advice on your personal circumstances.

Less Tax, More Risk: Professional Negligence Claims Against Less Tax 4 Landlords

Posted on 23 Oct 202304 Apr 2024 by Ruby Keeler-Williams

In this article, Ruby Keeler-Williams of Elysium Law explores the tax avoidance scheme advocated by Less Tax for Landlords (LT4L), examining its implications for landlords and the potential basis for professional negligence claims

Following enquiries from individuals affected, we have commenced a review of the tax avoidance scheme being aggressively marketed to landlords by Less Tax 4 Landlords (LT4L).

The circumstances suggest that participating landlords face a perfect storm of adverse consequences – additional tax liabilities, interest, penalties, and even potential mortgage default if lenders deem the structure to breach loan terms.

In this article, we will refer to the meticulously detailed report provided by Dan Neidle at Tax Policy Associates, which serves as an invaluable and comprehensive summary of the prevailing tax position. The report can be found here (Less Tax for Landlords: the £50m landlord tax avoidance scheme that HMRC say doesn’t work, and can trigger a mortgage default)

We have also had sight of client files, in addition to correspondence between numerous tax advisors and Less Tax 4 Landlords regarding their concerns and technical observations.

In our opinion, as a firm with a proven track record of success in professional negligence claims, the assertions set out below, if substantiated, would support a strong claim against LT4L and associated entities for negligent tax advice. Their guidance appears to betray fundamental misunderstandings on key areas of tax law. The scale of the scheme, impacting potentially hundreds or thousands of taxpayers, is deeply troubling. Urgent action is required to mitigate the fallout.

Flawed Inheritance Tax Analysis

A core plank of LT4L’s promotional strategy is the claim that their structure qualifies for business property relief, eliminating inheritance tax exposure. Yet this cannot be correct.

Letting residential property is plainly not “wholly or mainly” a trading activity, but rather an investment activity, as per IHTA 1984 s.105(3). The analysis focuses on the underlying business, not the choice of wrapper. This is confirmed by HMRC guidance and cases like Graham v HMRC [2018] UKFTT 380 (TC). Unless actually operating hotels or quasi-hotels, landlords cannot obtain BPR. No actions or “box ticking” will change this, contrary to LT4L’s suggestions.

Advising that BPR is achievable for ordinary buy-to-let investors is clearly negligent advice. It suggests LT4L fundamentally misunderstands settled inheritance tax law and principles. Clients participating in the scheme likely remain fully exposed to IHT, despite paying large fees to implement LT4L’s flawed structure. This negligent advice may support substantial claims by affected landlords.

Mixed Partnership Muddle

The report highlights equally serious errors regarding the taxation of partnerships. LT4L’s structure hinges on allocation of profits from the LLP to a corporate member to access lower corporate tax rates.

However, the 2014 mixed partnership rules specifically counter contrived profit allocations made for tax reasons. This occurs automatically based on the facts – any tax avoidance purpose is irrelevant. Yet LT4L repeatedly assert the precise opposite in client materials: that tax avoidance purpose is required for the rules to apply.

This betrays a disturbing failure to comprehend a basic pillar of partnership tax law. The rules operate mechanically based on the terms of Profit allocation to a non-contributing partner is ineffective for tax purposes, “tax motivation” aside. By suggesting otherwise, LT4L potentially demonstrates negligent advice, giving rise to claims.

Mistaken Capital Gains Tax Positions

The report evidences similarly flawed advice regarding CGT. Contrary to LT4L’s claims, transferring property into the structure should not “rebase” the base cost for CGT. The landlord retains legal ownership, with the LLP holding the beneficial interest, as reflected in the capital account. Equally, allocation of profits to the corporate member should trigger an immediate CGT charge, not deferred gains.

These are fundamental errors no competent tax adviser could make. LT4L’s advice seems driven by a mistaken belief that accounting treatment dictates tax analysis. This conflation is negligent and likely to lead to significant unexpected CGT liabilities. It further supports negligence claims by participating landlords against LT4L.

Stamp Duty Land Tax: A Litigation Timebomb

Potentially most concerning is the critique of LT4L’s SDLT advice. The report persuasively argues that changes in LLP profit sharing automatically trigger SDLT charges under FA 2003, Sch 15, para 14. This is contrary to LT4L’s assurances of SDLT mitigation. Worse, their structure may incur significantly higher SDLT than normal incorporation, given the loss of reliefs.

The SDLT analysis accords with the legislation and HMRC guidance. Should it be correct, LT4L has exposed clients to major unexpected tax liabilities – plus interest and penalties – which could crystallise many years in the future. The SDLT involved could easily exceed hundreds of thousands of pounds per client. We anticipate a wave of litigation when these liabilities surface.

A Demonstrable Lack of Competence

Most disturbing is the report’s evidence of LT4L demonstrating a lack of basic understanding across multiple areas of tax law. This is perhaps most apparent in their advice regarding partnership taxation. Partners are taxed on profits as they accrue, not when physically distributed – a fundamental principle LT4L appear ignorant of.

Taken collectively, the flawed advice summarised above evidences serious negligence and incompetence regarding key pillars of the UK tax system. The scale of the scheme, potentially impacting hundreds or even thousands of taxpayers, is alarming. LT4L knew or ought to have known their interpretations were unfounded, yet continued promoting the scheme for substantial fees. In our opinion, this conduct easily meets the threshold of actionable professional negligence.

Avoiding Defaulting on Mortgages

Perhaps the most urgent priority is addressing the risk of mortgage default triggered by LT4L’s structure. Declaring a trust over mortgaged properties to transfer them to an LLP may breach the loan terms, causing default. Contrary to LT4L’s assurances, a “letter of trust” has the same effect. Landlords remain the legal owner but lose the beneficial interest the lender may require them to retain.

The potential consequences of default are severe – forfeiture of assets, immediate repayment, litigation costs. Affected clients should seek urgent advice on rectifying the position with lenders. In instances where default has occurred or is unavoidable due to LT4L’s advice, this may represent a further head of claim in negligence against them.

Avenues for Redress

Clients affected by LT4L’s negligent advice should seek urgent tax advice on their position, and strongly consider claims against LT4L and associated entities to recover resulting losses. Potential heads of claim could include:

– Negligent tax/legal advice

– Breaches of contract, failing to advise accurately on the scheme

– Breach of fiduciary duty, giving advice tainted by conflict

– Misrepresentation regarding the scheme and its consequences

– Violations of financial regulation, given links to FCA-authorised firms

Claimants may also have direct recourse against LT4L’s professional indemnity insurers under the Third Parties (Rights Against Insurers) Act 2010. Contrary to LT4L’s misleading suggestions, their standard insurance will likely not cover tax liabilities or interest/penalties – but should respond to successful negligence claims.

Litigation will prove challenging – professional negligence claims always are. But the strength of evidence outlined in the report provides a robust foundation. We anticipate multiple claims against LT4L by landlords facing large, unexpected tax bills thanks to LT4L’s flawed scheme and negligent advice.

Pre-Action Steps

Before commencing litigation, affected landlords should:

– Take urgent tax advice to understand their potential liabilities;

– Instruct a lawyer experienced in these claims such as Elysium Law to advise on their position;

– following your instruction, allow us to Assess the merits of your claim

– Formally put LT4L on notice regarding potential claims;

– Gather all relevant documentation;

– Review funding options including potentially CFAs.

Contact Elysium Law

Elysium has extensive experience running professional negligence group actions against negligent tax advisers. We would be happy to assist any landlord facing significant losses thanks to LT4L’s deeply flawed scheme. With hundreds or even thousands likely affected, we are looking to advance a group claim. We anticipate claims worth tens of millions against LT4L and their insurers. If you have been affected, please contact us.

Norwich Pharmacal Orders: Understanding the Procedure and Application

Posted on 23 Mar 202304 Apr 2024 by Ruby Keeler-Williams

In this article, Ruby Keeler-Williams of Elysium Law discusses Norwich Pharmacal Orders, when they are suitable, and the application procedure

As part of our role in assisting Clients with Litigation, it is important to have a clear understanding of the tools available to obtain evidence and information. One such tool is a Norwich Pharmacal Order (NPO).

What is a Norwich Pharmical Order?

A Norwich Pharmacal Order is a court order that compels a third party, such as a bank or internet service provider, to disclose information or documents that are relevant to an alleged wrongdoer’s involvement in a wrongdoing. The order is named after the Norwich Pharmacal case, which established the principles of this type of order in English law.

In Norwich Pharmacal Co. and Others v Customs and Excise Commissioners [1974] AC 133, the House of Lords held that a person who is innocently involved in wrongdoing could be compelled to disclose information about the wrongdoing to the claimant. The case involved a group of companies that had unwittingly imported goods that were subject to excise duty. The companies sought an order compelling HM Customs and Excise to disclose the identity of the wrongdoers who had evaded the duty. The House of Lords granted the order, stating that the companies had a legitimate interest in the information and that HM Customs and Excise had facilitated the wrongdoing.

When is a Norwich Pharmacal Order suitable?

NPOs are typically used when a claimant knows that a wrongdoing has occurred but does not know the identity of the wrongdoer or the location of relevant evidence. This situation commonly arises in cases involving intellectual property infringement, defamation, or fraud. In such cases, the claimant may need to obtain information from third parties who have been innocently involved in the wrongdoing but who possess information or documents that are relevant to the claim.

An NPO can be granted if the following conditions are met:

The applicant must have a good arguable case against the alleged wrongdoer. This means that the applicant must show that they have a reasonable chance of success if they were to bring legal proceedings against the alleged wrongdoer.
The respondent must be mixed up in the wrongdoing, and it must be reasonable to expect that they have the information sought. This means that the respondent must be connected in some way to the wrongdoing. For example, if the alleged wrongdoer has used the respondent’s services or products, the respondent may have information that could help identify the alleged wrongdoer.
The order must be necessary to enable the applicant to bring or defend legal proceedings. This means that the information sought must be relevant to the legal proceedings that the applicant intends to bring or defend.
The order must not be sought for an improper purpose. This means that the applicant cannot seek an NPO for purposes such as harassment, or to obtain information for use in a personal vendetta or to gain a commercial advantage.

What is a Norwich Pharmacal Order?

In British Coal Corporation v Dennis Rye Ltd (No. 2) [1988] EWCA Civ J0225-4, the court clarified that NPOs can be granted even if the respondent is not directly involved in the wrongdoing, as long as they have information that is relevant to the case. The court also emphasised the importance of balancing the interests of the applicant and respondent and ensuring that the order is not overly burdensome.

In Ashworth Hospital Authority v MGN Ltd [2002] UKHL 29, the House of Lords clarified that NPOs are not limited to situations where the claimant has no other means of obtaining the information. The Court held that an NPO could be granted even if the claimant had other means of obtaining the information, as long as the order is necessary to facilitate the litigation and is proportionate. The Court also emphasized that an NPO is an equitable remedy, and its availability depends on the specific circumstances of each case. The claimant must establish that there is a legitimate interest in the information sought, and that the respondent is likely to have the information or documents that are sought.

This was expanded upon in Rugby Football Union v Viagogo Ltd [2012] EWHC 1908 (Ch). In this case, the court held that an NPO can be granted against a non-party to litigation, provided that the non-party is likely to have information that is relevant to the claim. This ruling expanded the scope of NPOs, allowing claimants to obtain information from third parties who may not be directly involved in the wrongdoing but may possess relevant information.

There are limits to what information can be obtained by a NPO, demonstrated in KPMG LLP v Harbottle & Lewis LLP [2018] EWCA Civ 1460, where the Court of Appeal held that an NPO can be granted against a solicitor who is not a party to the litigation but who possesses relevant information, but that this is subject to the solicitor’s professional duty of confidentiality.

Can Norwich Pharmacal Orders be used against foreign respondents?

In general, a NPO may be obtained against a foreign respondent, but there are limitations.

The case of Mitsui & Co Ltd v Nexen Petroleum UK Ltd [2005] EWHC 625 (Ch) dealt with the issue of whether an NPO can be granted to obtain information from a foreign respondent. The court held that NPOs can be granted against foreign respondents, as long as there is a sufficient connection to the UK jurisdiction and the order would not offend principles of comity (respect for other countries’ legal systems).

JSC BTA Bank v Mukhtar Ablyazov & ors (No. 12) [2011] EWHC 202, the court granted an NPO against a foreign respondent who had no assets in the UK, but who had used UK banks to launder money. The court found that there was a good reason to grant the order, as it was necessary to obtain information that would assist in recovering misappropriated assets.

It is important to note that enforcing an NPO against a foreign respondent can be challenging, as the order may not be recognised or enforceable in the respondent’s home jurisdiction. As such, it is important to consider the practicalities of enforcing the order before seeking an NPO against a foreign respondent.

How to apply for a Norwich Pharmacal Order?

To obtain an NPO, a claimant must file an application in court. The application must include specific information about the wrongdoing, the information or documents sought, and the respondent’s likely possession of the information or documents. The application must also show that the disclosure is necessary for the claimant to pursue the litigation and that the order is proportionate. The court will consider several factors when deciding whether to grant an NPO, including the nature of the wrongdoing, the legitimate interest of the claimant in the information sought, and the potential harm to the respondent or third parties. The respondent will have an opportunity to be heard before the court makes a final decision. It is important to note that NPOs can be costly and time-consuming to obtain, and they are not always granted. However, when an NPO is granted, it can be a powerful tool for obtaining relevant information in litigation proceedings.

Conclusion

Norwich Pharmacal Orders can be a valuable tool in Litigation, especially in cases involving intellectual property infringement, defamation, or fraud. NPOs allow claimants to obtain information from third parties who have been innocently involved in the wrongdoing but who possess information or documents that are relevant to the claim. However, obtaining an NPO can be a complex and costly process, and it is important to carefully consider the specific circumstances of each case before filing an application.

If you require more information or are think of instructing a firm to act for you in litigation, please Contact Us.

Protecting Yourself After a Data Breach: A Guide

Posted on 07 Mar 202304 Apr 2024 by Ruby Keeler-Williams

In this article, Ruby Keeler-Williams of Elysium Law aims to clarify what your first steps should be if you have been affected by a personal data breach.

In recent years, data breaches have become increasingly common, and unfortunately, any individual is at risk of falling victim, however carefully they safeguard their data. If you have recently suffered from a breach of your personal data, it’s important to understand what steps you should take to protect yourself and your data.

6 Essential Steps to Take After a Personal Data Breach

Gather all the information related to the breach. This includes any emails or messages you’ve received about the breach, the type of data that has been compromised, and any other relevant details that may help in identifying the extent of the breach.

Contact the company or organisation responsible for the breach. They have a legal obligation to inform you of any data breaches that occur, and they should be able to provide you with more information about the breach and how it occurred. You can also ask them what steps they are taking to prevent future breaches and what measures they have put in place to protect your data.

If you’ve suffered any financial loss or identity theft as a result of the breach, you should report this to the relevant authorities immediately. In the UK, you can report these incidents to Action Fraud, which is the UK’s national fraud and cybercrime reporting centre. They will investigate the incident and provide you with advice on what to do next.

Consider contacting CIFAS, a not-for-profit organisation that offers protective registration services to help protect individuals from identity theft. This involves placing a warning flag on your credit file, alerting lenders to the potential risk of fraudulent applications.

Monitor your bank accounts, credit reports, and any other financial information for any unusual activity. If you notice anything suspicious, you should contact your bank or financial institution immediately.

You may be entitled to compensation for the damage caused by the breach. You should seek legal advice from a reputable law firm that specialises in data breach claims to determine whether you have a case and what steps you should take. Elysium Law have extensive experience in these matters and can assist you with this.

In conclusion, data breaches can be stressful and overwhelming, but there are steps you can take to protect yourself and your data. By gathering information, contacting the relevant authorities, monitoring your financial information, and seeking legal advice in addition to protective registration services from CIFAS, you can mitigate the damage caused by a data breach and protect yourself from future incidents.

If you have been affected by a Data Breach, please call Elysium Law via 0151 328 1968 or contact us via clerks@elysium-law.com to see if we can assist you.

AI and Data Privacy: The Increasing Risk of Personal Data Breaches

Posted on 28 Feb 202304 Apr 2024 by Ruby Keeler-Williams

In this article, Ruby Keeler-Williams of Elysium Law considers whether the recent developments in Artificial Intelligence have increased the risk of data breaches.

I was recently asked whether the recent developments in AI, particularly in relation to deep learning, and natural language processing have increased the risk of personal data breaches.

In my view, whilst AI will undoubtedly transform the way we live and work (in the legal profession alone, Allen & Overy have announced the use of an OpenAI developed prompt based generation tool, which I imagine will revolutionise how legal research and drafting is performed), it also poses unique risks and challenges when it comes to data privacy and security.

One potential risk is the use of AI in data processing. As AI algorithms become more sophisticated, they can be used to process vast amounts of data quickly and accurately. However, this will inevitably increase the demand for personal data as a ‘product’, meaning that increasing amounts of data will be collected and processed by companies. This will inevitably increase the risk of a breach of data, as the volume of data stored in systems vulnerable due to outdated software or hardware, or with unpatched vulnerabilities will only increase. The impact of a human error can also never be understated.

However, of particular interest is the potential, following the developments in natural language processing, for ‘Phishing’ scams to become more sophisticated and difficult to identify. NLP powered phishing scams have the potential to be particularly convincing because they can mimic human language and behaviour more accurately and, perhaps more pertinently, in a manner personalised to that individual. There is the potential for criminals to use NLP algorithms to analyse an individual’s social media activity, emails, or messages to create personalised, targeted phishing messages that appear genuine. The use of language will also inevitably make the messages more difficult to detect by traditional spam filters.

It has never been more important for individuals to be vigilant and cautious when receiving messages or emails that ask for personal information or include suspicious links or attachments. Businesses and organisations must also ensure that appropriate security measures are implemented to mitigate the risks posed by NLP-powered phishing scams. This should include training employees to recognise and report phishing attempts, implementing spam filters and firewalls.

If you have been affected by a breach of your personal data, please call us on 0151 328 1968 or contact us via clerks@elysium-law.com to see if we can assist you.

Artificial Intelligence in the Legal Industry

Posted on 19 Jan 202304 Apr 2024 by David Brogelli

In this article, David Brogelli of Elysium Law examines the increasing use of Artificial Intelligence in the Legal Industry and its practical applications going forward.

Artificial intelligence (AI) has been increasingly used in the field of law both in the United Kingdom and across the globe. There are a number of ways in which AI is being used to improve the legal process, including legal research, document review, and case prediction.

Uses

One of the main ways in which AI is being used in UK law is in the area of legal research. AI-powered legal research tools can quickly and accurately search through vast amounts of information, such as case law and statutes, making it easier for lawyers to find relevant information and make decisions. This can save time and money for both lawyers and more importantly their clients.

Another key area where AI is being used is in document review. This process is typically time-consuming and laborious, as it involves reading through large amounts of text to identify relevant information. AI-powered document review tools can help to automate this process, making it more efficient and accurate. This can be particularly useful in the context of e-discovery, where large volumes of electronic documents need to be reviewed in the context of litigation. Elysium Law uses powerful software which can help us sift through hundreds of thousands of pages to get the information we require.

Interestingly AI is also being used to predict the outcome of cases. By analysing patterns in past cases, AI algorithms can be trained to predict the likelihood of a particular outcome in a future case. This can be useful for lawyers and clients in planning their strategy and making decisions, although practically this is still in its infancy.

In addition, AI is being used to automate the contract review process, helping lawyers to identify errors, inconsistencies and identify missing information. This is particularly useful in the area of due diligence, where large numbers of contracts need to be reviewed.

However, it’s worth noting that AI isn’t without its limitations and challenges, such as bias and lack of transparency, etc. In order to ensure that AI is used in a responsible and ethical way, it’s important to have proper governance and regulations in place.

Risks

Of course, with any new development comes risk below are some of the limitations and concerns regarding the use of AI in the legal industry.

Bias: AI systems may perpetuate and even amplify existing biases in the data they are trained on. This can lead to unfair or inaccurate decisions and is of course a very important consideration as the use of AI evolves. It also highlights the importance of human involvement.
Lack of accountability: It can be difficult to determine who is responsible for errors made by AI systems, which can make it challenging to hold anyone accountable for those errors.
Loss of jobs: The use of Artificial Intelligence in the legal industry may lead to job loss for lawyers and other legal professionals, as tasks that were previously done by humans may be automated. This is of course a global issue that will need addressing over the coming years as automation continues to increase and society develops.
Complexity: The legal field is complex and nuanced, which can make it challenging for AI systems to accurately understand and interpret legal information.
Lack of transparency: Some AI systems may be difficult to understand or explain, which can make it challenging for humans to understand how they are making decisions.

Regulation

Overall, AI has the potential to significantly improve the legal industry both in the UK and globally, making it more efficient, accurate and cost-effective. As technology continues to develop, it’s likely that we will see more and more applications of AI in the legal field and we are certainly seeing significant investment from the UK Legal Industry. This of course will require regulation and the EU is leading in that regard. The European Commission already has a regulatory framework proposal that identifies the risks and uses of AI in the legal sector.

At Elysium Law we use several sophisticated programs to help us deal with clients’ matters efficiently and to save costs to the client. We continue to watch this development with interest.