An ex-Clifford Chance partner has accused Osborne Clarke of sending him "threatening" and "misleading" pre-action letters on behalf of Nadhim Zahawi.
Dan Neidle, the former head of Clifford Chance's tax practice in London, queried the Chancellor of the Exchequer's tax affairs on his Tax Policy Associates blog.
When Zahawi set up YouGov in 2000, he gave his 42.5% shareholding in the polling company to a Gibraltar business secretly controlled by his parents. Neidle said that it looked a lot like a tax avoidance scheme to save Zahawi from having to pay £4m to HMRC. "I am a tax expert. And every other tax expert I've spoken to agrees - accountants, solicitors, QCs, and retired HMRC inspectors", said Neidle.
Zahawi's initial explanation for surrendering his entire shareholding to his parents was that his father had given him £7k as "start-up capital". But that didn't make sense to Neidle, who pointed out that at the same time another investor paid £285k for just 15% of YouGov shares.
Zahawi pivoted, adding that his father had given him a huge amount of advice in the venture's early days, and that it was this assistance which entitled his parents' company to his 42.5% shareholding.
"I couldn't understand why he provided the first explanation, and then dumped it and alighted on a new one (itself not very credible)", said Neidle. "I called it what I thought it was: a lie."
Zahawi's solicitors, Osborne Clarke, got in touch with Neidle via Twitter asking for a chat. When he refused, the firm sent him a letter marked "Confidential and Without Prejudice". The firm told him that OC would revert "should you not retract your allegation of lies" and suggested he seek advice from a libel lawyer. OC also warned Neidle that he was "not entitled to publish" its letter, "or refer to it other than for the purpose of seeking legal advice".
Neidle's refusal to comply prompted a second letter from the firm, this time headed "Not for publication".
"The letter they sent me says, rather artfully, that it’s not actually a threat to sue for libel. But it comes from a libel lawyer, and tries to prevent me publishing it", said Neidle on his website.
Instead of retracting his commentary, Neidle posted Osborne Clarke's correspondence on his blog, generating press coverage of both Zahawi's tangled tax affairs and drawing attention to the tactics employed by litigation lawyers to prevent the publication of unflattering stories about their clients.
Neidle has now written to the SRA urging it to take action to stop lawyers claiming inaccurately that their letters asserting potential libel claims cannot be published.
"I spent almost 25 years as a lawyer. I’ve seen all kinds of behaviour by lawyers and clients", Neidle told RollOnFriday. "What’s completely new to me is a world where libel lawyers think they can send threatening letters to people full of factual errors, but those letters are confidential and can’t be published."
"I was amazed when I saw it, and thought it must have been a mistake. Or perhaps everything I knew about confidentiality was wrong, and you can unilaterally impose a duty of confidence just because it’s convenient for you. Turns out it wasn't", he said.
It was the realisation that such tactics were widespread and successful that prompted Neidle to call on the regulator "to specifically address the problem of bogus confidentiality claims", said the tax expert.
"If people freely published libel letters then much of the power would drain out of them", he said. "I’ll be happy if I can make some small progress in that direction. Then I can get back to what I really want to do: writing nerdy analyses of tax policy that 20 people will read".
Osborne Clarke declined to comment (and, for the record, didn't send any letters to ROF behind the scenes, either).
Zahawi did not respond to a request for comment.
Comments
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This is extraordinary. Surely every lawyer knows that just slapping ‘not for publication’ on a letter means absolutely nothing.
I’m surprised this came from OC which is almost universally regarded as an outstanding firm.
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Dan is a corporate lawyer and … when he says lots of tax lawyers agree with him I don’t and I’m an offshore specialist
🙄
why he chooses to start on non doms and not hybrid mismatch rules or whatever it is he used to do is baffling.
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For people with a twitter account their lives are considered awfully important compared to those not on twitter.
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"why he chooses to start on non doms and not hybrid mismatch rules or whatever it is he used to do is baffling."
This particular story has nothing to do with non-doms.
Dan covered non-dom status in an entirely separate article. Rishi Sunak's wife was the non-dom.
In Zahawi's case, there was a Cayman Islands company used to avoid paying UK taxes.
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@anonynous 08:14 - I think this rather misses the point.
Libel (defamation) is obviously all about publications which can cause serious harm to reputations. The use of "not for publication" in that sense is not an attempt unilaterally to impose a duty of confidence, but rather an attempt to address the matter in hand without further publication and/or ventilation of the issues, which could in turn cause further reputational damage.
No doubt the letter will have in any event been drafted with one eye on the fact that it could be published despite the heading.
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The ballsy approach is to sue them, for a declaration that the publication is not defamatory. That tends to concentrate the mind.
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Rookie mistake. Labelling "not for publication" only works if you send it in an email with "privileged" in your signature and 12 lines of disclaimer boilerplate at the bottom.
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I thought the letter was quite well drafted - other than the bollocks about WP letters and trying to prevent publication.
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As an aside, am I the only one to think it's a tad hypocritical of Dan Neidle - who as a previous Head of Tax at CC presumably made millions helping corporations avoid many more millions in tax* - is now posing as a defender of truth, justice and tax probity?
I mean, hurrah that someone is doing that work, but it's a tad uncomfortable for that person to be someone who sounds to have previously made a fortune from enabling it, isn't it?
* All above board, I'm sure. Just doing the best thing for clients by reducing their tax bill to the lowest possible number by any lawful means possible (which may or may not include trust structures not entirely dissimilar to those used by prominent politicians who were formerly businesspeople). The amounts that corporates like Amazon and Starbucks pay is all totally kosher I'm sure we all agree.
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Hi Anonymous. Tax lawyer from 1995 here, just stepped out of my DeLorean to say that your description of what tax lawyers do is a bit out of date.
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"Tax lawyer from 1995 here, just stepped out of my DeLorean to say that your description of what tax lawyers do is a bit out of date"
Oh I see. The game has changed now. I understand.
They're paying you the big bucks to make sure that they hand over every single penny of tax that they owe, and nothing less.
That makes perfect sense and my opinions have changed entirely.
Do the chaps in Dublin know that btw? I wonder if they might have missed a bulletin somewhere along the line? You should pop back in the De-Lo and let them know.
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"Tax lawyer from 1995 here, just stepped out of my DeLorean to say that your description of what tax lawyers do is a bit out of date"
Is it?
Because Amazon was only founded in 1994... so that feels somewhat unlikely.
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To: Tax lawyer 29 July 22 08:31
"Dan is a corporate lawyer and … when he says lots of tax lawyers agree with him I don’t and I’m an offshore specialist"
Dan Neidle is a tax lawyer - he was at Clifford Chance ultimately leading their tax team.
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OC is not univerrsally regarded as an outstanding firm ffs
Just some drab regional firm with tech marketing. Look at their laughable handling of this for example
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assuming that there were no concessions (I can't be bothered to go read some dreary regional drafting), it was incorrectly marked WP too ffs what a set of clowns
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Poorly conducted lawfare. Zahawi needs PR advice and a lawyer. Not lawyers trying to do his PR. What were they thinking?
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Sighs. Dear clever person saying this has nothing to do with non Dom - it does. His dad is non Dom, the tax argument is that value was diverted on setting up yougov to a non uk company held by his non Dom dad.
So, yanno, non Dom related. 🙄
and yes he’s a tax lawyer. But a corporate tax lawyer. I don’t do hybrid mismatch because I don’t know enough about it.
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It's amazing how difficult it is for a Tory to be an ordinary, decent human being who, for example, pays their taxes. Why is the bar so effing low?
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"It's amazing how difficult it is for a Tory to be an ordinary, decent human being who, for example, pays their taxes."
I know, right?
Why can't they just restrict themselves to being convicted of harassment and perverting the course of justice like ordinary god-fearing Labour MP's, eh?
I bet they don't even click 'like' on clearly anti-semitic Facebook posts either. Dreadful people.
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Anonymous at 12:10 is spot on. Marking something "not for publication" is surely an incitement to do exactly that. Plus it suggests a lack of confidence in the case being advanced.
Lastly, the request to apply a greater degree of "balance" is doomed to fail. Even if Mr Neidle did want to reconsider some of his earlier comments, it is going to be extremely difficult for him to do so without laying himself open to the charge that he is caving in to pressure from the Big Nasty Law Firm. Or perhaps that should be the Just About Medium Nasty-ish Law Firm, given that its Osborne Clarke.
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I actually really like Dan's blog posts.
Not sure what the supposed offshore tax specialist is on about. Doesn't take a genius to work out that a co-founder of a business allocating all of his shares to a company incorporated in a tax haven and owned by his farther is not commercially justifiable, so was obviously done for other reasons.
Hence why he was investigated by the NCA.
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2nd letter was balanced and proportionate
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You even a litigator Yep?
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@yep
A drab regional firm with its HQ in London and 26 offices globally. You ok?
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the “slappdown” joke on the news home link 2 this story seems a bit prejudiced against the follicly-challenged. especially in (glaring reflected) light of the protagonists
harrumph
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Oof, unintentional. As an increasingly nudey-scalped gentleman I would never.
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DeLoreans were awesome!
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There are clearly some people invested in OC in the comments.
”Universally regarded as an outstanding firm”
”I thought the letter was quite well drafted”
I don’t give two clucks about the ex-CC guy and his tax blog, but that letter is crap. It’s embarrassing. We don’t need to give our clients’ response because he has expressed himself to various outlets from time to time so we are writing a long expensive letter to you to kindly inform you to go fish. Furthermore, regarding your allegations of dishonesty, for the avoidance of doubt, our client reiterates he has not gained any tax benefit whatsoever and he have his word to the same. Even if you think otherwise as an ex-tax partner, our client has given you his word, and accordingly we trust this settles the matter. This is not a letter threatening a suit against you, but if you continue in this way our client fully reserves his rights to write to you further in an aggressive manner.
...
All you plants in the comments, pls do one.
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Dan Neidle, Labour candidate: https://labour.org.uk/activist-hub/governance-and-legal-hub/ballots-and-nominations/internal-ballots-2022/ncc-candidate-statements/