Hughes v HMRC & CPS [2024] EWHC 1765 (KB)

Russell Fortt (led by Alan Payne KC) acts for HMRC in a successful summary judgment application in respect of a claim for damages in excess of £400m for malicious prosecution and misfeasance by a prominent businessman.

The Claimant was a founder and partner in Zeus Partners which provided high risk investment opportunities to ultra-high net worth individuals.  Zeus promoted investments in a number of film, gaming and pharma companies which HMRC believed were not genuine investment opportunities but were designed to fail (in fact 51 out of 52 of the companies failed within 12 months of the investment being made).  In each case nearly all of the ‘investment’ was provided through the use of ‘non-recourse’ bank loans in which the bank retained the funds and which were never in fact invested into the companies.  Upon the investments failing, the investors then presented their losses (including the value of the loans) to HMRC to claim tax relief pursuant to ss.131 and 132 of the Income Tax Act.

After a lengthy and very complex investigation, Mr Hughes was charged with offences relating to cheating the revenue but the prosecution ended at an early stage due to a deficiency in the wording on the indictment.  In subsequent criminal costs proceedings the CPS accepted that there had been significant failings in disclosure, failures to pursue a fundamental line of inquiry into HSBC bank which had been instrumental in devising the investment product and inaccuracies and omissions in the statement of the investigator presented to the CPS.

Both HMRC and CPS sought summary judgement in respect of the claim.  Following a three day hearing, the court (Jay J) accepted the argument that the pleaded case and evidence showed that HMRC’s actions did not render it the prosecutor for the tort of malicious prospection, that there was reasonable and probable cause for the prosecution and that the allegation of malice could not be made out.

The case is believed to be one of the largest damages claims pursued against HMRC.