High Court rules HSBC not liable in fraud claim for Disney film financing tax scheme

The High Court has ruled in Upham and others v HSBC UK Bank Plc [2024] EWHC 849 that HSBC did not deceive hundreds of investors in a £1.3 billion fraud claim. The claim alleged that the bank had misled investors into financing a Disney movie tax relief scheme, later judged by HMRC as tax avoidance.


Essentially, the scheme allowed investors to borrow funds to make capital contributions to one of a series of partnerships (the “Eclipse Partnerships”). This offered investors the advantage of setting off the interest on those borrowings against their other income for tax purposes (known as loan interest relief). These arrangements took advantage of tax breaks designed to encourage investment in the British film industry. The Eclipse Partnerships were managed by Future Films Limited (“Future Films”) and advised by HSBC. 

The effect for each investor was that they would obtain significant tax relief until the year the relevant Eclipse Partnership stopped trading, allowing them to defer tax until that point. This produced an overall financial advantage as those sums that would otherwise be paid to HMRC could be invested and generate more profit than the cost of their initial personal capital contribution into the Eclipse Partnerships.

For the Eclipse Partnerships to work in deferring tax liability, it was essential that the Eclipse Partnerships were carrying on “trade”. In April 2007, HMRC decided the Eclipse Partnerships were not carrying on “trade”, meaning that the investors were not entitled to the tax relief that was the purpose of the scheme. This was subject to a number of appeals, in which, ultimately, the Court of Appeal reached the same conclusion and the investors were required to pay their tax liabilities, alongside interest for late payment. 

The complaint

The core claim by the Claimants, certain individual investors in the Eclipse Partnerships, was that they had invested in the scheme relying on the representation that its structure had been approved by Mr Jonathan Peacock QC, a well-known tax barrister, and DLA Pier Rudnick Gray Cary UK LLP (“DLA”), Future Films’ tax solicitors (the “Advice Representation”). 

They alleged this representation was false because the scheme’s final structure was materially different from the structure on which the legal advice was based, as the transaction documents suggested that a certain entity (“MSP”) was not in fact an agent of the partnerships (which had been noted by Mr Peacock QC as a “vital” component for the scheme to be entitled to tax relief). The Claimants contended these false representations were made dishonestly and/or deceitfully by HSBC through its employee Mr Bowman, who had been instrumental in structuring the Eclipse scheme.

The Claimants’ further alleged HSBC was liable as a joint tortfeasor (for assisting or facilitating Future Films to carry out deceitful conduct) or unlawful means conspirator due to representations made by Future Films. In the alternative, they alleged that HSBC was liable for dishonest assistance alongside Future Films’ alleged breach of trust or fiduciary duty, as Future Films’ partner under the Partnership Act 1890 or for breach of statutory duty under the Financial Services and Markets Act 2000 (“FSMA”).

The Advice Representation

The Claimants relied on a representation in the Information Memorandum, which was prepared to provide information about the Eclipse Partnerships to potential investors. It stated: 

“Each Partnership's Business has been structured on the basis of tax advice from English solicitors (DLA Piper Gray Cary UK LLP) and from leading English tax counsel (Mr Jonathan Peacock QC) to the Partnership Consultant and the Promoter.

The Partnership Consultant and the Promoter have followed that advice and therefore expect the investment to work in the manner outlined.”

Mr Bowman played a “very active role” in ensuring the Information Memorandum containing this representation was received by potential investors. He also made a further representation in a note summarising the scheme (the “Note”) (which was also provided to potential investors), which Bright J found impliedly represented that the structure advised by Mr Peacock QC was the same as the final adopted structure. As he was acting in his capacity as Director of HSBC, Bright J accepted HSBC would be vicariously liable.

The Court found that while these representations appeared to be matters of fact, they were in reality representations of opinion. Comparing the actual Eclipse structure and the structure that had been the basis of the legal advice necessarily involved a series of value judgments that amounted to an opinion, including on the technical question of any purported agency relationship between the partnerships and MSP. As Future Films and Mr Bowman were in a stronger position to come to such an opinion than any investor, these representations also implied they had reasonable grounds to believe that the structure was consistent with the basis of the advice.

There was no question that Future Films and Mr Bowman intended these representations to be relied on, and all the sample witnesses did, in fact, rely on them. However, Bright J found that the claim in deceit failed because the representations as to their opinion were not false as Future Films and Mr Bowman had reasonable grounds to believe the matters of expectation and opinion to which the representations related. 

Whilst the claim was not against Future Films, the Judge concluded that as a lay client, Future Films was entitled to rely on the advice it had received from DLA that the relationship between the MSP and the partnership was an agency relationship. Accordingly, it had reasonable grounds for the representation in the Information Memorandum. 

Similarly, Mr Bowman’s role in the transaction was such that there was no expectation that HSBC would itself consult lawyers. It was also not obviously within the scope of HSBC’s engagement that it was responsible for checking whether the implemented structure of the Eclipse scheme matched the basis upon which Mr Peacock QC had given his advice. Consequently, he and HSBC were entitled to rely on the position represented by Future Films and DLA. As such, Mr Bowman also had reasonable grounds for the representations made in the Information Memorandum and his Note. The representations made were therefore not false, and the claim failed on this basis. 

The Court further rejected the Claimants’ contention that Future Films and Mr Bowman acted dishonestly because they knew (i) it was unlikely that Disney would agree to the proposed agency arrangement that was vital to the Eclipse Partnerships effectively deferring tax and (ii) that the final transaction documents were inconsistent with the advice from Mr Peacock QC and DLA. Bright J found Future Films was entitled to rely on the assurances received from DLA following the negotiations, and thought it was “entirely natural” for Mr Bowman to leave it up to Future Films to check that the transaction documents were consistent with Mr Peacock QC’s requirements. 

Hence, the claims in joint tortfeasance and unlawful means conspiracy failed as deceit was not made out.

Other claims

Each of the other claims was rejected. The Court described the claim for dishonest assistance as a “re-branding” of their claim regarding the representations that the Eclipse Partnerships would be carrying on a trade and rejected it for the same reasons. The partnership claim was rejected as the relationship between Future Films and HSBC was not consistent with the criteria for a partnership pursuant to section 2(3) of the Partnership Act 1890. Finally, the claim for breach of statutory duties under FSMA faced the fundamental problem that Mr Bowman genuinely believed the structure was consistent with the basis on which Mr Peacock QC had advised and that the relevant contracts had been reviewed by DLA such that HSBC could not be said to have breached their statutory duties under FSMA . 

The Court also found that the claims were time-barred and that the Claimants had failed to prove their losses. 


This judgment provides further clarification for financial institutions on the tort of deceit and its interaction with transactional advice and the marketing of similar schemes. The judge concluded that Mr Bowman - and consequently HSBC - were neither dishonest, nor reckless or wilfully blind as to whether the implemented scheme reflected the basis on which the tax advice was given. HSBC was entitled to rely on the position represented by Future Films and its lawyers. It was not required to make independent inquiries of its own. 

The judge also emphasised that any claim alleging fraud must be properly thought out and pleaded. In particular claimants must bear in mind the differences between a representation of opinion and a representation of fact. When the relevant representation is a matter of opinion, this necessarily involves a value judgment. Where the defendants have reasonable grounds for believing a representation of opinion, no claim will lie. Therefore, the Court emphasised the need to carefully analyse the specific language of any alleged misrepresentation in its context prior to bringing a claim in misrepresentation.