This was the key question considered in McClean & Ors v Thornhill [2023] EWCA Civ 466, in which the Court of Appeal unanimously found that the defendant, Andrew Thornhill KC, did not owe a duty of care to third parties when he provided advice to the promoters of a film finance investment scheme.
Group litigation by investors
The claimants were a sample of ten, taken from over 100 of the investors in a series of LLPs set up to acquire and exploit film distribution rights. This investment scheme had been promoted as a means for mitigating personal tax liabilities by allowing the investors to offset their personal income against the LLP's losses.
The defendant provided several opinions to the promoter of the scheme in which he confirmed the statements made in the promotors' Investment Memorandum on the taxation consequences of investing in the LLPs were correct.
The investors claimed that this advice had been negligent and the defendant had breached a duty of care owed to them.
At first instance, the High Court judge dismissed the investors' claims and held that the defendant owed no duty of care to them. He also found that the defendant's advice was not negligent and the investors would have invested in the scheme regardless.
The investors appealed.
No assumption of responsibility
The Court of Appeal applied the duty of care test in NRAM v Steel [2018] UKSC 13, which acknowledges that, for a professional to owe a duty of care to third parties, they must have assumed responsibility to them. This requires there to have been: (a) reasonable reliance by the third party on the professional's advice; and (b) for that reliance to have been reasonably foreseeable to the professional.
The investors pointed to the fact the defendant had consented to his being identified as tax adviser to the scheme and to a copy of his opinions being distributed to the potential investors.
However, the court noted that the investors had also been advised to consult their own tax advisers and could only invest after warranting that they had relied only on the advice of their own independent advisers. The investors could not, therefore, have reasonably understood that they were entitled to rely on the advice given by the defendant to the promoter of the scheme.
This finding meant the Court of Appeal did not need to rule on whether the defendant's opinion itself had been negligent, although the judgement nevertheless concluded that the unduly unequivocal nature of the opinion would have represented a breach of duty had a duty of care been owed.
Key takeaway: The importance of disclaimers
This case stands as another example of the difficulties non-client claimants face when trying to establish claims against professionals as third parties and the paramount importance to professionals of including appropriate disclaimers and statements in any written advice to limit the possibility of a duty of care to third parties being created.
Each case depends on individual circumstances and the Court of Appeal warned professionals of the dangers of providing unequivocally positive opinions knowing that a third party would rely on that advice.
If you would like to speak to one of our experts relating scope of duty, please get in touch with our Professional Negligence team or your usual contact at Brodies.
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