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FAQS FOR SPOTLIGHT 63 VICTIMS (LT4L, BAILEY GROUP)

Posted on 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 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

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. We anticipate claims worth tens of millions against LT4L and their insurers.

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

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

Posted on 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 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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 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.

Artificial Intelligence in the Legal Industry

Posted on 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.

  1. 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.
  2. 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.
  3. 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.
  4. Complexity: The legal field is complex and nuanced, which can make it challenging for AI systems to accurately understand and interpret legal information.
  5. 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.

Contractors – the ‘loans’ you never needed to repay

Posted on by Ruby Keeler-Williams

In this article, Ruby Keeler-Williams and Richard Gray Barrister of Elysium Law consider claims made against loan charge contractors and the litigation which subsequently ensued and is contemplated going forward.

The ‘Contractor Loan Scheme’ Planning

The ‘contractor loan scheme’ was part of a large-scale marketed tax avoidance scheme. The user would usually be an individual working for what is called an umbrella company or for their own personal service company. Normally, that would attract tax and NICs on a PAYE basis. The responsibility for paying such statutory deductions falls upon the employer. However, in an attempt to reduce tax liability, the employer, who would be acting under a contract of employment would pay the employee the minimum wage and then do one of two things:

  • Pay lumps sums to a trustee who would ‘loan’ the employee (now beneficiary under a trust) money (remuneration) with the arrangements setting out the terms of the repayment.
  • Alternatively, the employer would directly loan the monies collected and then assign the loans to a trust later.

By way of example; if an employee was paid a salary of £150,000, only a basic minimum wage would be paid. Then 85% of what was left (collected by the umbrella company) was ‘loaned’ to the employee and the umbrella would take what was left. It was argued under these schemes that the loan did not constitute earnings and as such was not taxable. “Don’t worry we have Counsel’s advice” was the normal selling point.

Another and more significant inducement was made to the employee that the loan would never need repaying. We have a particular legal view on that arrangement but at he very least it was a misrepresentation which materially induced the employee to enter the contractual arrangements.

The Assignment out of the Trust

Unusually, the purported ‘loans’ in many cases have been assigned out of the Trust and have either directly or via other companies ended up being assigned to a company named Felicitas Solutions Ltd, which was formed and based in the Isle of Man. The company appeared to be purposely set up to receive these assignments and pursue claims for reimbursement from behind the corporate veil, as they threatened to do.

The users of these schemes were then contacted with demands for repayment and as a result many sought advice from Elysium Law and we were instructed by a large group to defend these claims.

The Claims

The ‘demand for repayment’ letters received by Our Clients did not constitute a compliant Letter of Claim under the Pre-Action Protocol. As such, we insisted that prior to providing a response, a compliant Letter of Claim must be produce supported by evidence.

In early 2021, this was provided to us and some 107,000 pages of documents were disclosed and reviewed.

It was clear from the review of these documents, together with evidence from Our Clients, that the loans were ‘circular’ and were never intended to be repaid. This was clearly a tax avoidance arrangement, and the loans were, in our view, unenforceable.

Our stance  was to offer a mediation in order to narrow the issues in dispute.

Following that Mediation, Elysium Law subsequently served upon Felicitas a comprehensive letter of response that rebutted the claims on the following grounds:

  • Collateral Contract and/or Misrepresentation, in that a legal assignment is subject to existing causes of action which are not avoided by assignment (Bibby Factors Northwest Ltd v HFD Ltd). This means that the Beneficiaries may raise against the assignee, any defence, set-off or counterclaim which they could raise if sued by the assignor. Here, there was a verbal collateral contract made that this was a tax avoidance arrangement and that the ‘loan’ would never be enforced against them.
  • Breach of Trust, in that the Trusts into which the user’s money paid was subject to both express and implied fiduciary obligations. The assignment would likely have substantially devalued the assets of the trust and has exploited the beneficiaries.

After service of the letter of response, to which we received no reply, the threat of litigation seemed to disappear.

However, Elysium Law are now aware that last week, a large number (if not all) of these ‘loans’ have been assigned by Felicitas to a company known as West 28th Street Limited, who have subsequently sent letters demanding repayment, albeit they have made an offer to settle at a reduced rate of 50% adding that if the offer is not accepted they will instruct Solicitors to claim from the recipients. We have been contacted by our previous clients seeking further advice and have organised conferences after hours to assist them.

Our view is that action must be taken to ensure that these demands for repayment and subsequent assignments do not continue.

Elysium Law have a litigation strategy to bring these claims to an end. If you have received one of these demands from Felicitas or West 28th Street Limited and wish to have advice on this matter, please contact Elysium Law on 0151 328 1968 or via clerks@elysium-law.com.

Data Breach: What Are My Rights

Posted on by Ruby Keeler-Williams

In this article, Ruby Keeler-Williams of Elysium Law considers the consequences of a personal data breach and what rights you have. The article briefly looks at the legislation and considers quantum and case law.

The General Data Protection Regulation (GDPR) and the Data Protection Act 2018 set out rules as to how data is collected, used, stored, and protected.

Under the legislation, any organisation which holds and determines the purpose of the processing of personal data must implement appropriate technical and organisational measures to ensure that the processing of personal data complies with the rules.

A breach of personal data can occur if appropriate measures are not in place. A breach of security may lead to the destruction, loss or unauthorised access to personal data.

This infringes your rights as an individual and can have serious consequences. We have been instructed on matters where a breach in the security of a company led to the unauthorised disclosure of employee identity documents and bank details. These details were then distributed to criminal groups and companies were fraudulently set up in the employees’ names.

If a company that holds your data processes it in breach of the legislation or holds your data in such a way that it is disclosed in an unauthorised way, whether accidentally or deliberately, then you are entitled to claim for compensation.

If your claim is successful, you will receive damages, also known as compensation. You will be able to claim for any identifiable losses which have arisen from fraudulent transactions caused by identity theft. You will also be able to make a claim for general damages if the breach in your data has caused you distress. We will discuss your case at length and identify which damages are relevant to your specific matter.

Your level of compensation will depend on the nature of the data breached. If the data breached does not contain sensitive information (such as name alone) and/or is quickly remedied, then whilst you have a right to claim, in reality the claim will be worth very little and may not be worth pursuing. It is for this reason why you should seek legal advice at the earliest possible opportunity.

Decisions in recent years illustrate that the High Court will not condone claims that are exaggerated and unnecessarily complex. An example is Stadler v Currys Group Ltd [2022] EWHC 160 (QB), whereby a refurbished device was resold without a factory reset to remove the previous users purchase details, leading to a £3.49 purchase being made on the user’s account. The Claimant issued high court proceedings seeking £5,000 in damages for breach of confidence, misuse of private information, negligence and breach of data protection law, seeking injunctive relief. The defendant made an application to strike out the claim and was successful save for the breach of data protection law. The judge also transferred the claim down from the High Court to the County Court and suggested that the small claims court was the appropriate allocation.

In some cases the data breached is sensitive, such as medical records, identity documents, bank details, etc. In these cases, there will be a substantial claim for damages.

Due to the relatively recent developments in technology and the sensitive nature of such claims, there is limited case law detailing the quantum of awards of damages. Many cases settle before they reach the courts. Each case will be assessed on its own merits and due to the individual nature of a claim for distress, a group of individuals who have suffered the same category of data being breached may receive different awards.

Generally, damages for breach of data will be awarded within the following guidelines

  • Personal details (home or email address, date of birth, etc) – £1,000 to £1,500
  • Medical information (depending on who it is disclosed to/the nature of the information) – £2,000 – £5,000
  • Financial information (depending on who it is disclosed to/the nature of the information) £3,000 to £7,500

If you have suffered as a result of a breach of your personal data, please contact us via telephone on 0151 328 1968 or via email at clerks@elysium-law.com to have a discussion with the team. We will have a free, no obligation discussion with you to help determine the merits of your claim and can advise you on the next steps if you wish to pursue it further.