HSBC successfully defends itself against £240 million lawsuit over Disney film tax system
A lawsuit by investors in a film tax scheme against HSBC for a claim of £240 million has failed because a High Court judge ruled that the investors’ significant losses were not sufficient to make a valid claim against HSBC.
More than 500 investors sued British bank HSBC for £240 million over a Disney film tax scheme. The investors claimed the bank caused them losses by marketing film financing schemes from Eclipse Partnerships.
The tax system was developed by HSBC’s Private Wealth Solutions team and marketed to investors by Future Capital Partners (now in liquidation) between 2005 and 2008.
At the centre of the case was Neil Bowman, an auditor at HSBC. He was given the task of creating tax-efficient structures for wealthy individuals by targeting independent films.
Two class actions have been brought against the bank: against City law firm Edwin Coe, led by partners David Greene and Thomas Johnson, and against City law firm Stewarts, led by partners James Le Gallais and Alex Lerner.
The court heard both cases together and the case, known as the “Eclipse Trial,” lasted eight weeks and was heard in February.
But on March 17, in the midst of the trial, Stewarts reached an agreement with HSBC on behalf of its 177 investors. The parties settled the dispute without HSBC admitting any wrongdoing or liability.
Judge Bright’s ruling today was to decide exclusively on Edwin Coe’s lawsuit.
The judge ruled that the plaintiffs had not properly analyzed the legal significance of statements made to them before they invested in Eclipse.
He decided that neither Future Films nor (Neil) Bowman were dishonest.
He also ruled that the claims were time-barred, meaning that the time limit for bringing the claims had expired and the case could no longer be pursued.
In the 152-page ruling, which was announced Friday morning, Judge Bright said he had “great sympathy for the plaintiffs.”
“Their losses are significant, their suffering was real (even for those who did not claim compensation) and they have every right to feel aggrieved. Ultimately, they have been sorely disappointed.”
However, he added: “That is not enough for them to make a good claim against HSBC. I also have some sympathy for HSBC and in particular for Mr (Neil) Bowman, who should not have had to deal with the proceedings or the allegations of dishonesty at the heart of them.”
He added: “It is important to both the claimants and HSBC/Mr Bowman that proceedings for alleged dishonesty are only brought where there are good grounds for doing so. This is of course important to potential defendants who have a right to have their reputations not unfairly damaged.”
“However, it is also important for potential applicants not to give them false hope,” he concluded.
In his closing remarks, the judge thanked all lawyers, attorneys and witnesses and emphasized his admiration and gratitude for their “unparalleled professionalism, courtesy and good humor.”
HSBC was contacted for comment.
