A legal challenge against HSBC for £240m by investors of a film tax scheme has failed, as the High Court judge ruled their significant losses was not enough for a good claim against HSBC.
British bank HSBC was sued for £240m by more than 500 investors over a Disney film tax scheme, as the investors claimed the bank caused them losses by marketing film financing schemes by Eclipse Partnerships.
The tax scheme was devised by HSBC’s Private Wealth Solutions team and marketed by Future Capital Partners (now in liquidation) to investors between 2005 and 2008.
Neil Bowman, a chartered accountant at HSBC, was in the spotlight of the case. He was tasked with creating tax-advantaged structures for high-net-worth individuals by approaching independent film.
Two group actions were filed against the bank: City law firm Edwin Coe, led by partners David Greene and Thomas Johnson, and City law firm Stewarts, led by partners James Le Gallais and Alex Lerner.
The court managed both cases together and the case was known as ‘the Eclipse litigation’ which went to trial in February for eight weeks.
However, on 17 March, in the midst of the trial, Stewarts settled its claim with HSBC on behalf of its 177 investors. The parties settled the litigation without any admission of wrongdoing or liability by HSBC.
The judgment Mr Justice Bright was to decide today only on Edwin Coe’s claim.
The judge ruled that the claimants failed to properly analyse the legal significance of the statements made to them before they invested in Eclipse.
He ruled that Neither Future Films nor [Neil] Bowman was dishonest.
He also decided that the claims were time-barred, meaning time permitted to bring forward the issue has passed and it is no longer possible to pursue the case.
In the 152-page judgment handed down on Friday morning, Justice Bright stated that he had “great sympathy for the claimants.”
“Their losses are significant, their suffering has been real (even for those who did not claim for distress), and they have every right to feel aggrieved. When all is said and done, they were badly let down.”
However, he added: “This is not enough for them to have a good claim against HSBC. I also have some sympathy for HSBC and, specifically, for Mr [Neil] Bowman, who should not have had to deal with proceedings or the allegations of dishonesty that were central to them.”
He added: “It is important, both for those in the position of the claimants and for those in HSBC’s/Mr Bowman’s position, that proceedings alleging dishonesty are not launched unless there are proper grounds. This obviously matters to prospective defendants, who are entitled not to have their reputations unfairly traduced.”
“However, it also matters to the prospective claimants, who should not be given false hope,” he concluded.
In his endnote, the judge thanked all the counsel, lawyers, and witnesses, emphasising his admiration and gratitude for their “exemplary professionalism, courtesy, and good humour.”
HSBC has been approached for comment.