The High Court clarifies the effect of a change of law during ongoing group litigation orders.
A new ruling by the High Court in London has made clear that, in some circumstances, decisions in a test case might not apply to all claimants in a group litigation order (GLO): Axa Sun life plc and others v HMRC [2023] EWHC 944 (Ch) (see Tax Journal, 5 May 2023).
Over the last 20 years, there have been a number of GLOs relating to the extent to which various UK direct tax provisions breached EU law, and the remedies available to taxpayers. The latest High Court decision relates to a number of preliminary issues arising for claimants in what is known as the ‘CFC/dividend’ GLO, who were not the GLO ‘test’ claimants. The CFC/dividend GLO was established in 2003 and the Supreme Court decision in the test claimants’ case was in 2018.
During this time, the law on the limitation period for making restitution claims based on mistakes of law changed. Under the old law, the limitation period started to run from the date of the judicial ruling that established the unlawfulness of UK law. But in 2020, in another GLO known as the ‘FII GLO’, the Supreme Court ruled instead that time started to run when a taxpayer had discovered – or could with reasonable diligence have discovered – that they had a worthwhile claim. Depending on the circumstances, this decision might have shifted the commencement of the limitation period earlier for some taxpayers, which could have had the effect of making their claims out of time.
At the High Court, the CFC/dividend GLO claimants argued that an earlier decision in 2013 had determined that the timeliness of the claims in that GLO was based on the old House of Lords approach and that this was determinative for all claimants under the Civil Procedure Rules (CPR). According to CPR 19.12, when a judgment is given in relation to one or more ‘GLO issues’, it is binding on the parties to all other claims on the group register at the time the judgment is given – unless the court orders otherwise.
But HMRC argued that the 2013 High Court decision did not determine the timeliness of the claims and, even if it had, there were other reasons the ruling did not take effect for other claimants in the GLO. The High Court decided that the claimants’ claims were not conclusively determined to have been in time by the 2013 High Court decision. Therefore, the question of whether the claims are in time has to be determined in accordance with the Supreme Court’s 2020 FII GLO ruling instead.
In coming to this conclusion, the High Court had to consider a number of complex issues. First, it decided that the question of the limitation period was a GLO issue, which would, in principle, render it binding on all claimants. Secondly, it found that the 2013 decision, and 2014 order from the judge that followed, had decided conclusively that the test claimants’ claims were in time. However, that decision did not extend to all claims for other claimants.
The relevant decision and order had not determined the test for discovery which had instead been set by the existing House of Lords authority at the time. The decision and order also did not go as far as fixing a date for constructive discovery for all claimants. HMRC was therefore free to argue for a date of constructive discovery, in the context of claimants other than the test claimants, based on the new discovery test laid down in the 2020 Supreme Court FII judgment.
The ruling highlights the importance of making sure an issue being argued in the test case has also been properly framed and identified as a GLO issue. It is also important to ensure that, when the court is determining an issue in the test case, there is a clear ruling on the issue and that it is framed as answering a GLO issue in a way that is applicable to all claimants, provided that is required.
There was also a point on interest considered. The test claimant had been awarded interest as a restitutionary remedy on utilised ACT due to a concession made by HMRC at the High Court phase of the CFC/Dividend GLO test case. However, in the recent decision in relation to the non-test claimants, the High Court confirmed that this issue of principle had been decided against other claimants in the GLO by the Supreme Court. Therefore, the restitutionary claim is not available and they can only receive statutory interest.
The High Court clarifies the effect of a change of law during ongoing group litigation orders.
A new ruling by the High Court in London has made clear that, in some circumstances, decisions in a test case might not apply to all claimants in a group litigation order (GLO): Axa Sun life plc and others v HMRC [2023] EWHC 944 (Ch) (see Tax Journal, 5 May 2023).
Over the last 20 years, there have been a number of GLOs relating to the extent to which various UK direct tax provisions breached EU law, and the remedies available to taxpayers. The latest High Court decision relates to a number of preliminary issues arising for claimants in what is known as the ‘CFC/dividend’ GLO, who were not the GLO ‘test’ claimants. The CFC/dividend GLO was established in 2003 and the Supreme Court decision in the test claimants’ case was in 2018.
During this time, the law on the limitation period for making restitution claims based on mistakes of law changed. Under the old law, the limitation period started to run from the date of the judicial ruling that established the unlawfulness of UK law. But in 2020, in another GLO known as the ‘FII GLO’, the Supreme Court ruled instead that time started to run when a taxpayer had discovered – or could with reasonable diligence have discovered – that they had a worthwhile claim. Depending on the circumstances, this decision might have shifted the commencement of the limitation period earlier for some taxpayers, which could have had the effect of making their claims out of time.
At the High Court, the CFC/dividend GLO claimants argued that an earlier decision in 2013 had determined that the timeliness of the claims in that GLO was based on the old House of Lords approach and that this was determinative for all claimants under the Civil Procedure Rules (CPR). According to CPR 19.12, when a judgment is given in relation to one or more ‘GLO issues’, it is binding on the parties to all other claims on the group register at the time the judgment is given – unless the court orders otherwise.
But HMRC argued that the 2013 High Court decision did not determine the timeliness of the claims and, even if it had, there were other reasons the ruling did not take effect for other claimants in the GLO. The High Court decided that the claimants’ claims were not conclusively determined to have been in time by the 2013 High Court decision. Therefore, the question of whether the claims are in time has to be determined in accordance with the Supreme Court’s 2020 FII GLO ruling instead.
In coming to this conclusion, the High Court had to consider a number of complex issues. First, it decided that the question of the limitation period was a GLO issue, which would, in principle, render it binding on all claimants. Secondly, it found that the 2013 decision, and 2014 order from the judge that followed, had decided conclusively that the test claimants’ claims were in time. However, that decision did not extend to all claims for other claimants.
The relevant decision and order had not determined the test for discovery which had instead been set by the existing House of Lords authority at the time. The decision and order also did not go as far as fixing a date for constructive discovery for all claimants. HMRC was therefore free to argue for a date of constructive discovery, in the context of claimants other than the test claimants, based on the new discovery test laid down in the 2020 Supreme Court FII judgment.
The ruling highlights the importance of making sure an issue being argued in the test case has also been properly framed and identified as a GLO issue. It is also important to ensure that, when the court is determining an issue in the test case, there is a clear ruling on the issue and that it is framed as answering a GLO issue in a way that is applicable to all claimants, provided that is required.
There was also a point on interest considered. The test claimant had been awarded interest as a restitutionary remedy on utilised ACT due to a concession made by HMRC at the High Court phase of the CFC/Dividend GLO test case. However, in the recent decision in relation to the non-test claimants, the High Court confirmed that this issue of principle had been decided against other claimants in the GLO by the Supreme Court. Therefore, the restitutionary claim is not available and they can only receive statutory interest.
