Claimant “does not know” identity of funder backing her case

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Collins Rice: 

The High Court has rejected an attempt to progress a challenge to a major international tax transparency measure where the claimant has refused to identify their litigation funder.

Mrs Justice Collins Rice recorded that Jennifer Webster does not herself know who is backing her action, although her solicitors – London firm Mishcon de Reya – do, saying the funder is acting “for entirely altruistic reasons”.

HM Revenue & Customs (HMRC), however, has questioned the funder’s motivation and made discovering its identity part of its efforts to defend the claim.

Ms Webster has refused to comply with a court order requiring disclosure of the identity and the case has been stayed pending resolution of the issue.

She was born and raised in the USA but moved to the UK in 2000 and became a British citizen in 2010. She renounced US citizenship in 2019.

Her claim complains about the transfer of some of her UK banking/investment data from HMRC to the US tax authorities under 2010 US legislation, the Foreign Account Tax Compliance Act (FATCA).

This requires financial institutions outside the US to provide the US tax authorities with regular information about the accounts of US citizens. This has been systemised in the UK through a treaty that means UK institutions report the necessary information to HMRC, which then passes it to the US annually. US tax authorities pass back information on US citizens resident in the UK.

HMRC argued in its defence that the claim was an abuse of process – Ms Webster, on her own account, was seeking to challenge the treaty for all of those subject to it, rather than herself, and thus should have been brought by way of judicial review.

HMRC said Mishcon de Reya had stated in correspondence that the claim was brought as part of “an international strategic data protection litigation campaign focusing on the implementation of various ‘transparency’ measures for individuals’ fundamental rights” and was intended to force a renegotiation of FACTA and the development of a new system; and was further intended to force reconsideration of other bulk transfers of tax information to other countries.

In autumn 2022, Deputy Master Fine ordered disclosure that covered the motivations for bringing the claim and identified the funder. Permission to appeal was refused but the documents provided redacted the funder’s name.

Ms Webster refused to comply with another order to remove the redactions, saying it would withdraw funding sooner than have its identity revealed.

Last year, a judge stayed the proceedings for four specific purposes: to enable the claimant to discuss with her funder the possibility of identifying it; to allow her to seek alternative sources of funding; to allow the parties to explore whether there was information about the identity of the funder short of naming it, which could be disclosed and captured in evidence and which could enable the case to go forward fairly on the basis of inference; or to enable the claimant to seek a strike out and/or summary judgment of HMRC’s abuse of process defence.

The claimant pursued the latter course, and as an alternative just to strike out the funding issue as a head of abuse of process.

Collins Rice J said: “The relevance of funder identity to the abuse case, as HMRC has consistently explained it, is that it goes to the ‘true’ nature of the claimant’s claim: not, it is said, an individual’s pursuit of vindication and compensation, but a whole-system attack on the FATCA regime, funded as such by hidden interests, with that effect and outcome its objective, and by an entity whose relationship to the UK public interest is in the circumstances a material consideration.”

She noted that Ms Webster could not find out from her own lawyers who the funder was. “Privilege is asserted in these circumstances on a distinctly obscure basis. The information is said to be contractually confidential – presumably to the claimant’s solicitors – but the effectiveness of any such contractual term has not been explained.”

The judge concluded that the abuse defence “cannot fairly be disposed of on an interlocutory basis”, holding similarly in relation to the funder identity, given that its relevance to the defence had “sufficient substance, reality and prospect”.

Writing about the case and “the secret campaign to block international tax transparency initiatives” it appeared to reveal, well-known tax lawyer Dan Neidle, who runs the Tax Policy Institute, explained that FATCA led to the OECD common reporting standard (CRS), “which does much the same thing for most countries in the world”.

He continued: “On the face of it, Ms Webster is seeking a declaration that HMRC’s reporting of her UK bank accounts to the US was unlawful. But the implications are very wide.

“If she succeeded, it’s likely that reporting under CRS would also be unlawful. And if a UK court reached that view, we could easily see courts across the world, striking FATCA and CRS legislation down. This would be a disaster.”