Nugee J has handed down the latest judgment in the Ingenious Litigation, following a CMC which largely concerned disclosure issues.
The Ingenious Litigation arises out of a number of film production partnerships set up by the Ingenious group in the mid-2000s. Individual investors made capital contributions to the partnerships, which then produced a number of leading films including Hot Fuzz and Avatar. The investors expected that they would be able to secure certain tax benefits from their investments but some years later, HMRC challenged the tax treatment of the partnerships.
A number of investors have brought claims against Ingenious and some have also brought claims against their financial advisors, alleging that they entered into their investments as a result of misrepresentations and that the advisers gave them negligent advice. A number of the claimants have been selected as “Pleading Claimants”, who are due to give disclosure.
Nugee J was required to determine whether the Pleading Claimants should be required to give disclosure regarding other investments they had made and other investment advice they had received. The defendants argued that disclosure on such issues would go to the sophistication of the claimants and their appetite for risk, as well as to the causation of their alleged loss. Disclosure is being given pursuant to the disclosure pilot scheme set out in PD 51U.
Having previously resisted such disclosure, during the hearing the Claimants volunteered to produce a schedule of other investments made (with various exceptions) and, in respect of Claimants suing both the Ingenious Defendants and their adviser, to give disclosure of documents “sufficient to show” the nature of the investments and the degree of risk. Nugee J used this proposal as the basis for his decision, explaining what sort of detail would be required in such a schedule and over what time period, rather than adopting any particular model of Extended Disclosure in respect of these matters.
In relation to Pleading Claimants pursuing claims against both Ingenious and their adviser(s), Nugee J held that other investments made from three years before the date of the investment in an Ingenious partnership were relevant, and the schedule should also include potential investments considered but not made which related to tax planning schemes as “the real question…is a claimant’s understanding of, and appetite for, the risks involved in tax planning schemes.”
In relation to Pleading Claimants only bringing claims against the Ingenious Defendants, Nugee J held that the same approach should be used, save that the disclosure of “sufficient to show” documents need only be given in relation to actual or potential investments in tax planning schemes. Although the central claim against Ingenious concerned misrepresentation and not the giving of advice, Nugee J recognised that such documents could be relevant to the case on loss. He held that whilst there is no onus of proof on claimants to prove what they would otherwise have done with the money they invested in the partnerships, nonetheless it is open to the defendants to test the Claimants’ case on loss by investigating whether, if a claimant had not invested in Ingenious, they would, on the balance of probabilities, have invested in a different scheme which failed.
Nugee J made clear that nothing in his judgment precluded further disclosure on these matters if appropriate.
The judgment also contains a summary of certain of the principles applicable to disclosure under PD 51U, following the guidance given by Vos C in McParland v Whitehead, and includes some comments about proportionality in the context of high value claims.
The judgment is here.
Simon Birt QC, Craig Morrison, Geoffrey Kuehne and Sophie Shaw represented the Defendants from the Ingenious group, instructed by RPC. Tim Lord QC and Andrew McIntyre are also instructed in the underlying proceedings.