Barker v Baxendale Walker - Court of Appeal of England and Wales finds that a tax solicitor was negligent in not warning that his interpretation might be wrong

A tax solicitor charged £2.4 million for his advice on a tax avoidance scheme. His interpretation of the key statutory provision (including the meaning to be accorded to “is” and “at any time”) was found by the Court of Appeal to likely be incorrect, so that the taxpayer was not to be faulted for settling with HMRC for £11.3 million. The taxpayer would have proceeded with the scheme if he had merely been given a “general health warning” (i.e., that any tax avoidance scheme was subject to a risk of successful challenge), but not if he had been given a specific warning of the significant risk of the particular point of interpretation being successfully challenged.

In finding that the tax solicitor was negligent in failing to warn of this specific risk, Asplin LJ stated:

[I]t is perfectly possible to be correct about the construction of a provision or, at least, not negligent in that regard, but nevertheless to be under a duty to point out the risks involved and to have been negligent in not having done so … .

…There was a significant risk that the … advice was wrong and in all the circumstances, a reasonably competent solicitor would have gone beyond his own view and set out the risks.

Neal Armstrong. Summary of Barker v Baxendale Walker Solicitors (a firm) & Anor, [2017] EWCA Civ 2056 under General Concepts – Negligence and Statutory Interpretation – Interpretation Act – s. 10.