CL-2018-000297, CL-2018-000404, CL-2018-000590, - [2025] EWHC 2364 (Comm)

Fecha: 02-Oct-2025

C.17.4 Other Advice?

C.17.4 Other Advice?

342.

Some of the trial defendants relied on an absence of complaint or protest from SCP’s compliance or legal functions as fortifying the belief they say they had that there was nothing improper about the trading. How far that can take any given defendant would depend on their circumstances and knowledge, as well as those of the compliance or legal personnel said to have appeared to be content. I therefore do not deal with those defence arguments in this general narrative except to dispose of one point taken by SKAT, which goes back to Mr Pitts’ departure from Solo mentioned in paragraph 171 above.

343.

Mr Pitts’ handover file note, prepared on 29 August 2013, said this as regards the Solo Model trading to that point:

“GSS Platform and legal advice – there is no evidence that the GSS platform as a whole has been reviewed by a single law firm to provide senior management with external comfort that it is fit for purpose. CMS Cameron McKenna opined on the client money/TTCA side (and concluded that we could just about justify it) and they opined on the Custody agreement, but this appears to have been in isolation and they did not see all the other agreements needed to make this work. JB [Mr Bains] and GH [Mr Horn] did agree to having a lawyer look at this, then backtracked. I raised the issue again only for SS [Sanjay Shah] to say no in writing. At present senior management is exposed if the model is wrong – and GP [Mr Pitts] has advised this. In my opinion the firm urgently needs to have a lawyer look at all the docs and have a full description of how the process works so they can confirm whether JB’s work and the assorted advice from different advisers works together.”

344.

I accept Mr Dhorajiwala’s evidence that the holistic review by an external lawyer that Mr Pitts had advocated concerned SCP’s regulatory compliance, that the single law firm he (Mr Pitts) had in mind would have been a London firm advising under English law, and that his concerns were not directed at the foreign tax law validity or invalidity of the tax refund claims the SCP clients were intended to make on the back of Solo Model trading. I also accept Mr Bains’ evidence that he did not backtrack, as Mr Pitts put it, on support for the commissioning of such a review. Any reluctance will have been that of Sanjay Shah and Mr Horn.

345.

Two legal opinions were referred to in evidence in connection with the setting up or implementation of Maple Point Model cum-ex trading:

(i)

In February 2014, Rajen Shah and Mr Horn saw an advice from the Frankfurt office of Norton Rose Fulbright (‘the NR Advice’) addressed to Oban Holdings LLC, through which Messrs Stein and L’Hote were ultimate beneficial owners of NCB. The NR Advice expressly limited itself to “German banking regulatory law and the underlying legislative acts of the European Union”, with civil law covered only as to whether “civil-law provisions compulsorily prohibit the transaction”, and stated in terms that “tax law is excluded from ... scope … . Therefore, in the event of a dividend record date, no statements are made on the party entitled to the dividend and/or tax credits, if any, and who might be obliged to [sic.] compensation payments.”

(ii)

NCB took Danish tax law advice from the Danish firm Bech-Bruun in August 2014 (‘the BB Advice’), although none of the trial defendants saw it at the time. On 20 November 2023, the Danish Supreme Court upheld a claim by SKAT against Bech-Bruun, concluding that the firm acted in reckless disregard of SKAT’s interests as tax authority by advising NCB in the BB Advice, albeit with qualifications, that there should not be civil or criminal liability under Danish law for NCB’s participation as custodian in what was in fact Maple Point Model trading, because (in the Danish Supreme Court’s view) there was “an obvious risk that [NCB], together with others, was involved in drawing up a model for unjustified refund of dividend tax”. After giving credit for recoveries already made by SKAT, the loss to SKAT resulting from Maple Point Model trading involving NCB was said to have been DKK705.8 million. On creative reasoning about foreseeability of loss, the Supreme Court decided that Bech-Bruun should be held liable to pay the round sum of DKK400 million in compensation, plus interest from 8 June 2020 and a contribution towards SKAT’s costs.

346.

The BB Advice was obtained for NCB by the Frankfurt office of Jones Day, which was advising NCB in connection with the possibility of acting as custodian in Maple Point Model trading. Dr Martin Bünning, the responsible partner at Jones Day, made initial contact with Anders Orbey Hansen of Bech-Brunn, explaining that advice was sought:

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“in relation to a dividend stripping transaction in a Danish listed stock …”, where

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“the parties to the transaction will realize a tax benefit in Denmark which probably consists in a double refund of dividend withholding tax (but we have not seen a structure paper)”, noting that

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“Until recently there were loopholes in German tax laws which allowed the double refund of withholding tax. Tax authorities are now looking into these transactions and try to claim that they [are] abusive or even criminal offences.”

347.

In the email exchange that followed, Bech-Bruun explained that “[t]he type of transaction you are describing, which may entail a possibility for two shareholders to reclaim the same withholding tax has been presented to us before (“cum-/ex trades”)” and that such trades were “generally problematic from a legal perspective”, “typically problematic under Danish law”, and “problematic from a Danish legal point of view”, so that providing a ‘should’ opinion, viz. that NCB “should not be subject to criminal prosecution” or similar, would require Bech-Bruun to have “a full overview of the transaction and the role of the client, including what takes place in Denmark”. When in mid-April 2014, a transaction description was given to Bech-Bruun by Jones Day, Bech-Bruun took it to indicate that “USPF acquires cum dividend shares from a Seller which does not own (or delivers) cum dividend shares” and made clear that if that was the position, then “by definition USPF cannot be a holder of cum dividend shares on the dividend approval date, which in our view is a condition for being considered owner of the shares and thus the dividend itself for Danish tax purposes.”

348.

In the SSDs’ Defence, it was said that tax advice relating to other jurisdictions fortified a belief in Sanjay Shah that a share buyer becomes the owner of shares the moment a trade is entered into, whether or not the seller was selling short and whether or not shares were ever delivered. I do not think this was intended to suggest that legal advice (if there was any) that a particular cum-ex trading strategy would work for (say) German shares and German withholding tax refunds could inform a view that the same structure would work for Danish shares and Danish dividend tax refunds. Sanjay Shah’s evidence indeed was that “at no point did I (nor [did] anyone else at Solo to my knowledge) believe that a positive legal opinion about a cum-ex trading structure in one country could be relied upon to say that it would be valid in another country”. To similar effect, Rajen Shah acknowledged in evidence that “it was necessary to obtain legal advice in respect of each jurisdiction in which equities trading was to occur and … you could not assume that the tax position in one jurisdiction would be the same as the tax position in another”.