Mehjoo v Harben Barker (a firm) & Anor

An accountant’s duty is determined by the terms and limits of the retainer. A general accountant providing routine tax compliance and advice on ordinary reliefs is not subject to a roving obligation to investigate every tax-planning opportunity. Occasional proactive advice does not, without more, vary the retainer to impose a duty to provide specialist tax-planning advice.

A duty to raise non-dom status or refer a client to a specialist arises only where that status and its tax consequences are relevant to the transaction and the adviser knew or should reasonably have known of a useful advantage. Where the adviser had no reason to know that a scheme could change the situs of UK shares, it was enough to alert the client generally that tax-saving schemes might exist. Appeal allowed; claim dismissed.

Harben Barker had acted for Mr Mehjoo for many years as his general accountants. Mr Mehjoo alleged that, before the sale of his shares in Bank Fashion Limited, the firm should have advised him that he was probably non-domiciled, explained the associated tax advantages and referred him to a specialist adviser. He said that this would have led to a bearer warrant scheme avoiding capital gains tax.

Silber J found the firm negligent and awarded damages, including the capital gains tax and costs associated with a later tax scheme. Harben Barker appealed on liability, causation and remoteness. The central issue was whether the retainer, the parties’ course of dealing or the October 2004 meeting imposed a duty to give specialist tax-planning advice without a specific request.

1. Disposition. The appeal was allowed and the claim was dismissed. Having found no breach of duty, the court considered it unnecessary to decide the issues of causation and remoteness.
2. Scope of the retainer. The 1999 engagement letter required general accounting services, tax-return work and advice on conventional reliefs. It did not impose a general duty to advise on every aspect of the client’s affairs. The terms and limits of a professional retainer determine the duty of care: see Regent Leisuretime Ltd & Ors v Skerrett & Anor [2006] EWCA Civ 1184; [2007] PNLR 9. A request was required for more specialised services.
3. Course of dealing. Mr Purnell’s occasional proactive advice concerned routine tax consequences and ordinary tax-efficient choices. It did not amount to specialist tax planning of the kind exemplified by the bearer warrant scheme. Since HB had never held itself out as specialist tax planners and had never provided such advice, no substantial variation of the retainer could be inferred.
4. Non-dom status and referral. The court explained that sections 1, 2(1), 12 and 275(e) of the Taxation of Chargeable Gains Act 1992 meant that the shares were UK assets and that non-dom treatment did not assist with their disposal. A reasonably competent general accountant therefore had no duty to raise domicile or refer the client to a non-dom specialist when HB neither knew nor could reasonably have known of a scheme capable of changing the shares’ situs without a charge to tax. Under the test in Hurlingham Estates Ltd v Wilde & Partners [1997] STC 627, HB had discharged its duty by alerting Mr Mehjoo generally that tax-saving schemes might exist.
5. The October 2004 meeting did not enlarge the retainer. The checklist identified conventional possibilities and referred generally to other schemes, but did not create a duty to identify a particular specialist or undiscovered scheme.

• Court of Appeal (Civil Division): [2014] EWCA Civ 358. Appeal allowed and claim dismissed.
• High Court of Justice, Queen’s Bench Division: Silber J found Harben Barker negligent and awarded damages for capital gains tax, the cost of the later tax scheme and interest.