Upper Tribunal Tax and Chancery Chamber

[2025] UKUT 00185 (TCC)

Fecha: 09-Abr-2025

The principles summarised and the issues remaining

The principles summarised and the issues remaining

537.

On the basis of the case law set out above, we summarise the position as follows. To be “knowingly concerned” in a breach:

(1)

a person must have been actually involved in the contravention; merely passive knowledge is not sufficient; and

(2)

must have had knowledge of the facts on which the contravention depends; and

(3)

it is immaterial whether he had knowledge of the law, unless:

(a)

he had received and was relying on independent legal advice that the activity concerned was not in contravention of the law; and

(b)

that advice was based on a correct and complete factual matrix.

538.

We have already found under Issue One that the Bank had issued the Q3 Update which contained an unqualified statement of its RWA, and the capital ratios based on it, at a time when the Bank knew that a material error had been made in relation to the CLIP loans, but it did not inform the market about that. The Bank had therefore breached LR 1.3.3R because it failed to take reasonable care to ensure that the Q3 Update was not false or misleading and did not omit anything likely to affect the import of the information contained within it.

539.

It was common ground that the Applicants were “involved in the contravention” and did not have merely “passive knowledge”. We have also found that the Linklaters’ advice did not satisfy the requirements at §537(3) above. The only remaining issue was therefore whether the Applicants had the necessary “knowledge of the facts on which the contravention depends”.

540.

We have considered this issue in the following stages:

(1)

whether the Applicants knew that CLIP loans had been wrongly risk weighted at 50% and should have been risk-weighted at 100%;

(2)

whether the Applicants knew that the best estimate of the CLIP loan error was material in the context of the figures reported by the Bank in the Q3 Update;

(3)

whether the Applicants knew, based on their reasonable belief, that at the time of the Q3 Update the best estimateof the CLIP loan error was significantly less than the estimate, such that the figure included in the Q3 Update was not materially incorrect; and/or

(4)

whether the Applicants knew, based on their reasonable belief, that at the time of the Q3 Update the effect of one or more mitigants meant that the total RWA figure in the Q3 Update was not materially incorrect.

(1)

Whether the Applicants knew the CLIP loans had been wrongly risk-weighted

541.

We have considered this issue separately for Mr Arden and Mr Donaldson.