Tax litigation war is on for DLA Piper, Dorsey, McGrigors and RPC

McGrigors had an almighty row with DLA Piper in the High Court during the summer over the court's appointment of the lead solicitor in a group litigation order (GLO) relating to missing trader intra-community (MTIC) fraud.

The fiery confrontation was won by DLA Piper, but the episode highlighted the fierce rivalry between the four firms that specialise in tax litigation and the related GLOs.

DLA Piper made its intentions towards the practice area abundantly clear in December 2005 when it scooped half of the Dorsey & Whitney team that had dominated this practice area and that had led the way with the groundbreaking Marks & Spencer case - hiring the team just as the judgment on that case was being handed down.

It was that same ex-Dorsey team that won the controversial MTIC GLO, but DLA Piper had already made progress in building up that practice area. It hired Hartley Foster from - you guessed it - McGrigors in September 2004 and, in typically expansionist fashion, it has hired another 10 lawyers into the practice since then.

DLA Piper is now up against the other tax litigation players in the arena - McGrigors and Reynolds Porter Chamberlain (RPC) - and it is internecine warfare. Just last week RPC made its second move on McGrigors with the hire of the Scottish firm's former head of civil tax litigation Mark Whitehouse, as first revealed by The Lawyer (25 September).

Whitehouse was joined at RPC by newly qualified Dorsey lawyer Claudine Raggett.

"It's a small world," says Whitehouse with masterly understatement. "If you want to do tax litigation you need to have access to the essential multipliers." (He means the accountancy firms.)

And this was a big driver in his move to RPC. Of the four, DLA Piper and RPC are freer from the ties of the big four accountants, which have pioneered this work.

Whitehouse and his former colleagues at McGrigors were previously part of KLegal, which was tied to KPMG, and the Dorsey team had been at Landwell, part of PricewaterhouseCoopers (PwC). RPC's tax litigation team is headed by Fiona Walkinshaw, who was at Garretts, the Andersen-tied firm.

Of course, with Andersen no more Walkinshaw has been free to develop relationships with Deloitte and Ernst & Young (E&Y). She will be hoping that Whitehouse's arrival will boost links with KPMG.

Many of the Dorsey GLOs came from PwC, which was very active in marketing the early EU claims. Dorsey is, of course, independent from PwC, but its ties go back a long way and there are perennial questions as to where Dorsey will stand now that PwC has relaunched Landwell as PwC Legal. The firm's taciturn head of tax litigation Simon Whitehead did not return calls for comment.

While McGrigors has completely split from KPMG, the law firm retains close ties with the accountant and would not be allowed to market itself to KPMG's rivals within the big four. It is a point that McGrigors is not quite prepared to admit publicly.

"We have no formal relationship with KPMG," is the phrase that is parroted time and again by McGrigors partners - but clearly, they still get a great deal of business from KPMG. Cosying up with KPMG's fierce rivals would therefore be suicidal. Any growth in its client base is from accountancy firms outside the big four.

McGrigors partner Jason Collins inevitably claims that KPMG is now leading the way with GLOs. PwC and E&Y would beg to differ. Of the big four, only Deloitte does not focus on this area. But McGrigors partner Rupert Shires is handling the foreign income dividends GLO for KPMG, which is spearheaded by the BT Pension Scheme for another 64 pension funds.

While the departure of Whitehouse, one of the founding fathers of tax litigation at McGrigors, was a blow, the firm has not stood still in the recruitment market. Its recent recruitment of barristers from HM Revenue & Customs (HMRC) and 18 Red Lion Court reveals its desire to expand.

Collins admits: "There's a state of flux in the sector. The world and his wife want to start up tax litigation practices, but we're the longest-established and we're the only one with a full-service tax litigation practice."

Bullish? Certainly. One DLA Piper partner is quick to suggest that it was, in fact, McGrigors that was aping its model, which puts tax litigation under one large umbrella labelled 'regulation'.

DLA Piper, of course, is independent of the big four and claims to get work from all all of them, although slightly less from KPMG because of the latter's close relationship with McGrigors.

So why is the sector booming? The high-profile GLO work, which has been created by UK clashes with EU regulations, grabs the headlines because it is spearheaded by some of the UK's largest companies: for example BT, Cadbury's and Marks & Spencer. It also grabs the eye because of the huge number of companies that join GLOs.

But in terms of fee generation, GLOs are actually a very efficient way of running litigation. By bundling a number of claims together it saves the courts a considerable amount of time. DLA Piper national tax investigations director Simon Airey explains: "You get paid the same whether it's one client or a hundred."

However, Collins warns: "There's so much work that goes into a GLO that it's not necessarily as remunerative as you'd think." The real reason is a more general rise in tax litigation cases, which most put down to the merger of the Inland Revenue and Customs & Excise, which created HMRC last year.

Whitehouse says: "If you look at the merged department, some of the more high-profile positions have gone to Customs people and it's been pushed a little bit further. Customs were undoubtedly more aggressive and prepared to litigate."

Collins agrees, saying: "Given that HMRC is more geared up to squeeze the lemon, there's two ways to go. Either you're a nice, fluffy taxpayer and you pay up, or you're going to fight it."

And if you're going to fight it, these are the four firms which will do it for you.

The Tax Litigation Stars

DLA Piper
The tax investigations and disputes team is led by Jonathan Pickworth and is part of Neil Gerrard's regulation group. DLA Piper made a splash when it recruited a four-lawyer team, headed by Simon Airey, from Dorsey.

Dorsey & Whitney
The team is led by tax litigation partner Simon Whitehead, who joined Dorsey from Landwell in 2003 with a team of six lawyers. Whitehead's management style has been called into question after a series of departures, but he has been the leading figure on a series of group litigation orders.

McGrigors
James Bullock leads the risk advisory services (litigation) team and is one of two partners, together with head of tax litigation Jason Collins, who leads the tax litigation team. Recent recruit Jonathan Fisher QC will become a partner when he passes his solicitor exams.

Reynolds Porter Chamberlain
Fiona Walkinshaw heads the team, which has been bolstered by the arrival of McGrigors' former head of civil tax litigation Mark Whitehouse and his senior assistant Guy Adams.