When is a duty of care owed to non-clients?

When is a duty of care owed to non-clients? 14 Mar

When is a duty of care owed to non-clients in respect of legal advice on a tax avoidance scheme, where investors have an IFA acting for them in relation to the scheme? The question was helpfully clarified by Mr Justice Zacaroli in his judgment in David McClean & Others v Andrew Thornhill QC [2022] EWHC 457 (Ch), where the non-client claim was dismissed in its entirety.

The claim was brought by investors for an amount of circa £40 million in respect of tax advice given by a leading tax barrister. The decision clarifies the circumstances and considerations that go to whether non-client investors are entitled to rely upon the advice of a specialist professional (in this instance leading tax counsel), in circumstances where disclaimers and warranties are involved and (in this case) investors participated in a tax avoidance scheme that was only available through another professional, being an Independent Financial Adviser (“IFA”).

The decision is therefore welcome clarity for legal professionals and IFAs and their insurers, on claims in these circumstances. Although the barrister in case was found not liable, this was largely due to the specific facts, including that the investors were required to take separate financial advice and there were various disclaimers given in connection with the advice. Accordingly, the case is helpful guidance as to best practice by professionals to limit the scope of their potential liability to third parties.

Adam Elliott considers the judgment in detail HERE