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Film partnership investors lose claim against lending banks

Thursday, 5 December, 2019

Claims brought against NatWest Bank and Coutts by investors in Ingenious Media's film partnership have been struck down on the grounds that they had no chance of success.

The claimants borrowed large sums from the banks to invest in the partnerships, which were promoted, between 2002 and 2007, as tax-efficient vehicles through which individual taxpayers could contribute funds to a limited liability partnership for investing in films or video games. They would then set off their share of the partnership's losses against other taxable income.

However, most have suffered heavy losses because HMRC disallowed their claims for sideways loss relief, usually on the grounds that the partnerships were not actually trading. HMRC's position has been generally upheld by the First-tier and Upper Tax Tribunals.

Over 500 investors, represented by Stewarts Law, Peters & Peters Solicitors, and Mischcon de Reya, are now suing in the England and Wales High Court to recover their losses. Their litigation is aimed at the investors' financial advisors, the banks that made the loans, and Ingenious Media and the associated individuals.

The recent decision, in Barness and others v Ingenious Media and others (2019 EWHC 3299 Ch), concerns four investors' case against the banks. All were professional footballers, represented by Peters & Peters, who had borrowed between GBP175,000 and GBP1.1 million to fund their investments. The four, Anthony Barness, Kevin Campbell, Danny Murphy and Gary Teale, sued the banks for breach of contract, negligence based on duties of care, and vicarious liability for breaches of duty by the investors' independent financial advisors.

The two banks applied for the claims to be struck out, arguing that there were no contracts between them and the claimants which could have contained the terms sought to be implied. Moreover, they argued, they owed the claimants no relevant duty of care in tort, and there was no basis on which they could be made vicariously liable for the independent advisor company's breaches of duty.

Nugee J, who is now the managing judge for the whole of the Ingenious litigation, accepted the banks' arguments. He duly struck out the contractual and tortious claims, and granted summary judgment against the claimants on the vicarious liability claims. Many more cases remain to be heard.