Shepherd v Byrne And Partners LLP

A solicitor advising on voluntary disclosure of undeclared offshore income must advise on relevant disclosure routes known to the solicitor, or which a reasonably competent solicitor in the field ought to know. The Liechtenstein Disclosure Facility could be available to a UK taxpayer who opened a qualifying Liechtenstein account, even where the undeclared assets were held elsewhere. Eligibility to register was distinct from the separate limitation on prosecution immunity for criminal property. A disclosure prompted by fear of discovery could remain voluntary and unprompted where HMRC had not contacted the taxpayer or received the relevant information.

The claimant brought a claim in contract and negligence against his former solicitors. He alleged that advice given in 2010 caused him to abandon the Liechtenstein Disclosure Facility and make a voluntary disclosure under HMRC’s Code of Practice 9. The defendant disputed the scope of the retainer, the advice given, eligibility, reliance, causation and loss.

The claimant had undeclared income credited to Swiss bank accounts. His wife was involved in some accounts, but HMRC ultimately accepted that she had no beneficial interest in the relevant income. The central issues were whether the facility was available, whether the claimant acted on the defendant’s advice, and whether that advice caused the additional penalties and interest claimed.

1. The retainer covered advice on voluntary disclosure routes known to the defendant, or which a reasonably competent solicitor practising in the relevant area ought reasonably to have known. It therefore included advice concerning the Liechtenstein Disclosure Facility.
2. The court applied the approach in Onassis and Calogeropoulos v Vergottis and Gestmin SGPS SA v Credit Suisse (UK) Limited. Contemporary documents, admitted facts and inherent probabilities were preferred to unsupported recollection. The absence of expected documents could assist in resolving disputed events.
3. The defendant’s advice was materially wrong. The facility remained available and could have been made available by opening a qualifying Liechtenstein account. Registration was barred only by specified events, including arrest, caution or notification of a Code of Practice 9 investigation. None had occurred before the claimant’s disclosure.
4. Eligibility to register was distinct from the prosecution immunity addressed by paragraph 9 of Schedule 7 to the Memorandum of Understanding. That paragraph concerned criminal-property limitations on immunity, not eligibility to register or the availability of the facility. It was therefore unnecessary to determine whether the funds were criminal property.
5. The claimant’s disclosure was voluntary and unprompted. Fear that HMRC might discover the accounts did not alter that conclusion because HMRC had not contacted him and had not received the relevant information when disclosure was made. His wife was also eligible to register; if she had no beneficial interest, she had no relevant tax liability or prosecution risk.
6. The claimant relied on the defendant’s advice and would have registered under the facility if properly advised. The additional fees claim was abandoned. The difference between the penalties and interest paid and the amount payable under the facility was £318,372.10. The supplied judgment records these findings but does not state a formal final order.