In the recent case of McClean and others v Thornhill KC, the Court of Appeal has upheld the High Court’s determination that the defendant tax barrister owed no duty of care to over one hundred investors where his professional advice as to the likely tax benefits of certain film financing schemes was shared with them by the scheme’s promoter. Importantly for professional indemnity claims the Court of Appeal’s decision revisits the application of the ‘assumption of responsibility test’.

Lawyers owe a duty of care to their clients but generally not to the party on the opposite side of the transaction. There can be exceptions to this, such as where one party’s legal adviser makes representations to the other party on which they rely, but in such circumstances the adviser must have assumed a responsibility to the other party in respect of their advice. To establish such an assumption of responsibility, a claimant must show both that it was reasonable to have relied upon the advice and for the adviser reasonably to have foreseen that they would do so. The starting point however, following the Supreme Court’s decision in NRAM Ltd v Steel [2018] UKSC 13, is that the principle of caveat emptor (buyer beware) applies in this context such that it would be “presumptively inappropriate” (as Lord Wilson put it in that case) to rely on the advice of a professional acting for the opposite party in a transaction.

That being the case, and whilst Mr Thornhill KC was on the opposite side of the transaction to the investor claimants in this case, the appeal evidently prompted some judicial head-scratching by the Court of Appeal before it was ultimately dismissed, with Lady Justice Carr expressing her initial reservations. This was a case after all where a specialist professional had provided unequivocally positive advice to their promoter client without any disclaimer of responsibility; knowing it would be provided to potential investors, knowing that they would likely “take comfort” from the advice of a leading expert in their field and knowing that they would be assisted by such advice in deciding whether to invest. In such circumstances, an adviser clearly exposes themselves to a risk of claims that they assumed a duty of care to those investors, so why was no duty assumed in this case?

Ultimately, Lady Justice Carr and the Court were persuaded, for reasons given by Lady Justice Simler, that no duty arose on the particular facts of the case because of the gateway through which the barrister’s advice could be obtained; the advice could only be accessed by the investors through the scheme’s Information Memorandum (‘IM’), the clear terms of which rendered it unreasonable for investors to rely on the advice and not reasonably foreseeable to the barrister that they would do so.

Here the barrister was advising on the tax implications of an unregulated collective investment scheme: it was not authorised or approved by the regulator (at that time the FSA) and could not be marketed to the general public. That being so, investment applications had to come through authorised professionals. The IM contained a notice making it clear that the scheme was only directed at investment professionals and that applications would only be considered when received through a duly authorised intermediary. It also advised that prospective investors consult their own tax advisers. Significantly, the IM required that anyone investing would have to warrant that in so doing they had only relied on the advice of (or had consulted with) their own professional advisers on the tax implications of the scheme and that they understood that it was their responsibility to obtain appropriate, independent advice. Of central importance was that the barrister’s consent to the sharing of his advice to investors was given strictly on the understanding that the advice could only be accessed through the gateway of the IM with all of these caveats.

Taking those matters into account, the Court of Appeal determined that investors could not reasonably have understood from the warranties they signed that they were entitled to rely on the promoter’s tax adviser as assuming a responsibility to them for advice on the tax consequences of the scheme and that it was not therefore reasonable for them to have relied upon the barrister’s advice. Furthermore, on the issue of foreseeability, it was relevant that the investors were high net worth individuals who had access to their own professional advisers, and who were required to and did deal through IFAs who would be expected to advise on the risks inherent in a scheme of this nature. As such, the “default expectation” would be that investors would not rely on the defendant’s advice but make their own assessment of the risks. That analysis was supported by the terms of IM itself which made clear that it was merely the promoter’s belief that the scheme should realise the anticipated tax benefits; the promoter was not offering any guarantee that the tax benefits would materialise.

Whilst the barrister could readily have included a disclaimer in respect of his advice – a fair observation in the Court’s view – it concluded that the absence of an express disclaimer was merely one, non-fatal factor in a “multifactorial analysis”, taking into account the numerous caveats in the IM.

Having found that the barrister had not assumed responsibility to the investors in respect of his advice, it did not matter that the Court of Appeal went on to reach a different view to the trial judge in concluding that his advice to the scheme promoter had in fact been negligent. It did so on the basis that Mr Thornhill was wrong to have provided positive advice in such unequivocal terms and without any caveat as to the degree of risk of the scheme not satisfying the necessary tests to secure the tax benefits.


Whilst on the particular facts in this instance the Court of Appeal found that there was no assumption of responsibility in respect of advice to a client which was intended to be made available to third party investors, the decision highlights the risk to lawyers of a duty of care arising where the advice is intended to encourage third party investment and the need for clarity as to the basis upon which the advice is being disclosed. It is also a further reminder of the dangers of providing unequivocally positive advice which fails to identify possible risks, echoing the sentiment expressed by the High Court last year in Richards v Speechly Bircham LLP [2022] EWHC 935 (Comm) that “it is the duty of the lawyer to anticipate the unthinkable but predictable”.