[2025] UKUT 00185 (TCC)

The other passage from Forster relied on by the Applicants concerned reliance on legal advice. In Forster, the Authority had decided, inter alia, that:

Mr Forster’s case relied in part on the fact that the investment companies had obtained legal advice in the form of two Opinions from “experienced independent Counsel” who had confirmed that the CIS provisions did not apply, and it was submitted that Mr Forster was therefore not “knowingly concerned” because he had relied on those Opinions.

Gleeson J first considered the legal point. He noted that in Burton v Bevan, Scandex, and Avacade, it had been held thatan incorrect view of the law was irrelevant, because the director was assumed to know the law. At [246] he summarised the submissions made on Mr Forster’s behalf:

“where a lay client seeks and obtains legal advice from an appropriately qualified professional, he cannot reasonably be expected to form a view on the correctness or otherwise of the legal advice which he has received”.

Gleeson J then said:

“This is, in principle, a good argument. To describe a person as ‘knowingly concerned’ in a contravention of the law in circumstances where he has obtained independent advice that the activity concerned is not in contravention of the law is to strain the meaning of the word ‘knowingly’ beyond any reasonable compass.”

However, he went on to say at [249] that a lay client “both can and must interrogate the factual assumptions on which the advice which he has received is based”. He then considered the factual assumptions provided for the first Opinion, and said “Mr Forster must have known that this was not the way in which the scheme actually operated”. He continued at [253]:

“If he had read the McGee opinion dispassionately, it should immediately have been clear to him that what it was in fact saying was that, in different
circumstances, and against a different factual matrix, the contracts which had been put in place would not necessarily constitute participation in a scheme. This opinion is entirely correct. However, it does not help Mr Forster in this case.”

The second Opinion was, said Gleeson J, also based on incorrect facts. He summarised the position at [257]:

“The key points here seem to me to be twofold. First, it is absurd to suggest that a lay client should not rely on the advice which he has received as regards the legal analysis which it contains. Provided that he has sought the advice of an appropriate professional, he cannot be criticised for relying on the advice which he has received. Second, however, is that all legal advice is necessarily based on assumed facts. Legal advice cannot take any other form than that “if the facts are X, the conclusion is Y”. The lay client cannot be expected to hold any view as to the legal content of such an opinion. However, what he can be expected to do is to consider the statement of facts on which the opinion he has received is based. If that statement of facts does not correspond to the truth as he knows it to be, he cannot rely for any purpose on the advice which he has received because he knows it to be based on false premises. Where he knows (or should know) that the factual matrix on which the advice given to him is based is incorrect, it is simply not open to him to say that he relied upon that advice.”