English v O'Driscoll

CourtHigh Court
JudgeMr. Justice Twomey
Judgment Date25 October 2016
Neutral Citation[2016] IEHC 584
Docket Number[2007 No. 4129P]
Date25 October 2016





[2016] IEHC 584

[2007 No. 4129P]


Professional Ethics & Regulation – Professional negligence – Tax based investment scheme – Setting off of capital allowances – Legality of the scheme – Unlawful purpose

Facts: The plaintiff had filed a claim for professional negligence against the defendants. The plaintiff argued that he was made to purchase fishing boats at a higher price than its market value by the third named defendant, which was nothing, but a sham and fraud. The plaintiff alleged that he had made the said purchases in order to avail benefit under the investment scheme; however, he was duped by the third named defendant as those boats had already been owned by someone and thus, it did not lead to the renewal of the plaintiff's fleet of boats and thus, he was disentitled from claiming benefit under that investment scheme.

Mr. Justice Twomey refused to make any order in the present case in favour of any of the parties. The Court held that since the transaction entered into by the plaintiffs and the defendants had an unlawful purpose, mainly to defraud the revenue, it was unnecessary to look into the key issue between the parties. The Court found that the third named defendant devised the way to incorrectly claim capital allowance, which was within the knowledge of the plaintiff, being a prudent business, and thus, the plaintiff was not entitled for any relief, whatsoever.

JUDGMENT of Mr. Justice Twomey delivered on the 25th day of October 2016.

This is a professional negligence action by the plaintiff (‘Mr. English’) against the defendants, a firm of accountants. The case concerns a tax based investment scheme relating to fishing boats. By investing IR£2,250,000 in the scheme in June of 2001, Mr. English was entitled to set off, against his income, certain capital allowances on the purchase of the boats and thereby reduce his personal income tax bill.


Mr. English is an engineer and is the founder and managing director of a successful engineering company. The first three named defendants are partners in an accountancy firm in Bandon, Co. Cork, Niall & Gearoid O'Driscoll & Company. The first and second named defendants are sued in their capacity as partners in that firm but the main complaint is against the third named defendant (‘Mr. Murphy’), the third partner in the firm. A notice of discontinuance against the fourth and fifth defendants was filed on the 28th May, 2008.


A key issue for the consideration of the Court in this case is whether the investment scheme amounted to an attempt by Mr. English, with the assistance of Mr. Murphy, to incorrectly claim capital allowances from the Revenue Commissioners (‘the Revenue’). This issue was not raised by the parties, but was raised by the Court during the course of the hearing. From the parties' perspective however, the key issue is whether Mr. Murphy was guilty of professional negligence in obtaining a vendor's valuation of the boats being purchased by his client, Mr. English. This is because the valuer of boats, Casebourne & Southern Limited (‘Casebourne & Southern’), was asked by the vendor of the boats to value the boats which Mr. English was buying as part of the investment scheme. It is alleged by Mr. English that this valuation was fraudulent as the valuation ascribed to the boats was approximately IR£1,227,421 greater than their market value. Mr. English claims that if Mr. Murphy had obtained a valuation from an independent valuer (i.e. someone who had not been sourced by the person selling the boats), the boats would not have been overvalued and he would have been saved from overpaying by some IR£1,227,421 for the boats.


For the reasons set out in this judgment, this Court finds that Mr. English and Mr. Murphy were engaged in an investment which was designed to unlawfully obtain capital allowances from the Revenue. It is for this reason that this Court will not make any order against Mr. Murphy for alleged negligence in connection with the financial advice and services he provided to Mr. English in relation to that investment scheme.

The Background to the Investment Scheme

The rationale for the investment scheme was provided by the extension of the incentives for the renewal of Ireland's white fish fishing fleet by the Finance Act, 2001. This scheme provided that the purchaser of a fishing boat was entitled to set off 100% of the purchase price of the boat against his income and in this way reduce his tax bill. This was achieved over a 5 year period, as each year 20% of the purchase price of the boat was set off as capital allowances against an individual's personal income tax bill. It was necessary for the boat to be fished during the period in which the capital allowances were claimed and so it was imperative not only that the boat be purchased by the investor (in this case Mr. English), but also that the boat be used for fishing. The fisherman in this proposed scheme was Mr. Brendan McGrath (‘Mr. McGrath’). The apparent purpose of the tax breaks was to encourage fishermen to renew their fleet by granting attractive capital allowances on the purchase price of vessels. In this case, Mr. English provided the capital for the purchase of two boats and the tonnage which attaches to a fishing boat. The tonnage is necessary in order for the boat to land fish.

The parties and their advisers

Mr. English was introduced to Mr. Murphy by Mr. Ian Lawrie (‘Mr. Lawrie’) of Liberty Asset Management Limited. Mr. Murphy, as an accountant and financial adviser, was involved in negotiating the structure of the investment scheme on behalf of Mr. English, with Mr. Mossie Power (‘Mr. Power’), the accountant to Mr. McGrath and Mr. Randal Doherty (‘Mr. Doherty’), the solicitor to Mr. McGrath. The solicitor to Mr. English was Mr. Sean Whelan (‘Mr. Whelan’) of Whelan Solicitors, who had been recommended to Mr. English by Mr. Murphy on the basis that Mr. Whelan had experience of the fishing industry. Two firms of tax advisers were involved in advising on the scheme, Barr Pomery and Robson Rhodes. Mr. English's investment was financed by AIB. The legal advisers to AIB were Barry C. Galvin & Son Solicitors. In addition to these advisers, Mr. English was further assisted by his own personal solicitor, John McDonald of F.H. O'Reilly & Co (‘Mr. McDonald’), who reviewed the documentation for the scheme, but who was not paid for this work. Mr. English's personal accountant, Mr. Stephen O'Halloran (‘Mr. O'Halloran’) of the Hopkins O'Halloran Group also provided advice to Mr. English. This was because Mr. O'Halloran attended to Mr. English's tax returns and he ensured that the scheme made sense in the context of Mr. English having sufficient income to claim the capital allowances. Both Mr. McDonald, solicitor and Mr. O'Halloran, accountant acted as personal advisors to Mr. English (since the solicitor and accountant advising on the scheme itself were Mr. Whelan and Mr. Murphy, respectively) and accordingly they fulfilled background roles in advising Mr. English in relation to the transaction. Finally, the company used by Mr. McGrath for the purposes of providing the fishing services was called EiraPiscado Limited.

Mr. English - a successful business man who pays attention to detail

Mr. English is a successful businessman as evidenced by the fact that when contemplating investing in this scheme, some 16 years ago, he was confident that he would have income of approximately IR£380,000 for each of the following five years (since this level of income was necessary in order to use up the capital allowances of IR£380,000 per annum). He is a fastidious individual, as is evidenced by the five page attendance of his meeting with Mr. Murphy and Mr. Whelan at Cork Airport on the 23rd May, 2001 (the ‘Attendance’), to discuss, inter alia, the completion of the investment and the legal documentation. This Attendance records that Mr. English raised matters such as Mr. McGrath fishing outside the jurisdiction and the difficulties of enforcement against him under the agreements in those circumstances, he sought a break down of Mr. McGrath's fishing plan and he raised the issue of life insurance for Mr. McGrath.


This attention to detail is particularly evident in relation to costs. Mr. English gave evidence that he negotiated with AIB directly in relation to the reduction of the arrangement fee from 1% to 0.5%. It is apparent Mr. English is also very numerate, since in his own evidence he stated that he was able to make his own assessment of the audited accounts of Mr. McGrath, without the need of assistance from his own personal accountant, Mr. O'Halloran.


It was clear from the evidence of both Mr. Lawrie and Mr. English that Mr. English had invested in an earlier investment scheme prior to 2001 which had been promoted by Mr Lawrie. As a result he intimated to Mr. Lawrie that he was interested in investing in tax based schemes which would facilitate a reduction of his personal tax bill. The scheme at issue was one such scheme and to Mr. English its primary attraction was that it was a tax based scheme.


For all these reasons, it was clear to this Court that the tax breaks and therefore the tax allowability of the vessels and the tonnage, and as well as the tax allowability of professional fees and costs would have been to the forefront of Mr. English's mind in approaching this investment, which is an important backdrop to a consideration of the issues that arise in this case.

Financing of the investment

Mr. English drew down a bank loan on 6th June, 2001,...

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2 cases
  • English v O'Driscoll
    • Ireland
    • Court of Appeal (Ireland)
    • 29 May 2019
    ...plaintiff/appellant, Mr English, appealed to the Court of Appeal from the judgment and order of the High Court dated 25th October 2016 ([2016] IEHC 584). The appeal raised a fundamental question as to whether the plaintiff was afforded a fair opportunity to address an issue raised, not by t......
  • English v O'Driscoll
    • Ireland
    • High Court
    • 15 November 2016
    ...that litigation was primarily concerned with professional negligence, this Court found (see the judgement of English v. O'Driscoll [2016] IEHC 584), that the scheme in which Mr. English invested was in fact an illegal investment scheme, since it was designed to claim capital allowances fro......

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