Amalgamated Metal Corporation Plc v Wragge & Company (A Firm)and Another
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice David Steel |
| Judgment Date | 08 April 2011 |
| Neutral Citation | [2011] EWHC 887 (Comm) |
| Docket Number | Case No: 2009 FOLIO 1280 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 08 April 2011 |
[2011] EWHC 887 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice David Steel
Case No: 2009 FOLIO 1280
Mr Ben Hubble QC and Mr Scott Allen (instructed by Farrer & Co LLP) for the Claimant
Mr Justin Fenwick QC and Mr Graham Chapman (instructed by Barlow Lyde & Gilbert LLP) for the Defendants
Hearing dates: 1st February – 10th February 2011
Introduction
The Claimant ("AMC") is the holding company of a group of companies that is involved in the supply of raw materials and, in particular, in metals trading. Up until 2003, the Claimant was owned by Preussag AG (which changed its name in about 2003 to TUI AG), a German company which was, for all material purposes, its parent. In 2003 AMC was the subject of a management buyout.
The First Defendant was, at all material times, a firm of solicitors. The Second Defendant is a limited liability partnership that is the successor practice to the First Defendant. The First Defendant was for several years retained by AMC as its solicitors. Together they are referred to as "Wragge".
The ACT Group Litigation was concerned with claims by UK companies that had paid advance corporation tax ("ACT") on dividends paid to non-resident parent companies. UK companies with UK-resident parent companies could avoid the payment of ACT by making a group income election. This was not open to UK companies with a non-resident parent company. In the Metallgesellschaft decision 1 the European Court of Justice decided that these arrangements infringed EU law and that UK companies that had been unlawfully required to pay ACT were entitled to compensation.
Following the decision of the European Court of Justice, the ACT Group Litigation proceeded through the English Courts and a series of issues arose as to the entitlement of the claimant companies as against the Revenue ("HMRC"). These claims concerned the ACT paid on dividends to non-resident parent companies ("relevant ACT"). 2 AMC instructed Wragge to act on its behalf in relation to the ACT Group Litigation and, in due course, AMC became a claimant in that group litigation. 3
Like many of the claimants in the ACT Group Litigation, AMC had claims in respect of ACT that it had paid which were obviously not statute-barred and those in respect of losses which were incurred in excess of six years prior to the issue of the claim form. It also had claims in respect of both utilised ACT (being ACT that had later been used by setting it off against mainstream corporation tax ("MCT") liabilities) and unutilised ACT (being ACT that had been paid but not yet used to discharge other tax liabilities).
One issue that arose in the ACT Group Litigation was as to the calculation of compensation and interest to which the claimants were entitled in respect of the relevant ACT that had been paid wrongfully. 4 On 15 April 2003 Wragge accepted an offer from HMRC to compromise AMC's claims as to compensation and interest in respect of both the claims brought within 6 years and the pre-limitation claims, subject to AMC succeeding on the limitation issue as regards the latter. Pursuant to
the settlement, interest was calculated on the basis of simple interest. In the event it was decided in a test case pursued by one of the claimants 5 that interest was calculable on a compound basis.HMRC accepted that the settlement reached in 2003 did not compromise AMC's pre-limitation claim in respect of unutilised ACT and AMC was able to present, and HMRC accepted, a claim for interest in respect of this ACT on a compound basis. Thus, AMC's complaint focuses on its pre-limitation claim in respect of utilised ACT which was settled with HMRC on the basis of simple interest alone. AMC contends that it did not agree to, authorise or ratify this part of the settlement. AMC says that otherwise it would have remained subscribed to the Group Litigation on the issue of how pre-limitation losses should be calculated, and would therefore have been one of the claimants who succeeded in the House of Lords in the Sempra case in establishing that the losses in question were to be calculated on a compound interest basis.
AMC settled its claim with HMRC in respect of utilised ACT on the basis of simple interest and unutilised ACT on a compound interest basis for the sum of £9,413,279.81, of which £4,829,569.02 related to utilised ACT and £4,583,710.79 to unutilised ACT. AMC alleges that had compound interest been applied to its pre-limitation utilised ACT claim then its total claim against HMRC would have been £17,068,752.94 such that it has received £7,655,473.13 less than should have been the case.
Evidence
There was an enormous quantity of documentary material incorporated into some 20 files concerning the period from 1998 to 2006. Only a very small proportion of this material was referred to during the trial. This documentary evidence was supplemented by oral evidence from a number of witnesses.
AMC called two witnesses:
a) Mr Victor Sher, Chief Executive of AMC and a member of the board of directors;
b) Mr Michael Hoffman, Taxation Manager of AMC.
Mr Sher gave his evidence in a clear and convincing manner. He had a good grasp of the documents and I felt confident that I could rely on his testimony. Wragge sought to undermine his credibility by suggesting that, with a view to taking advantage of AMC's parent company during the negotiations for the management buy out, he concealed the scale of the claim against HMRC. I reject that contention. Indeed his agreement to allow Wragge to act for the parent company is wholly inconsistent with any such plan. The reality was that the full scale of the claim only emerged after the archives for the period more than 12 years back were unearthed.
Mr Hoffman was an important player in terms of preparing figures. His evidence was manifestly reliable. But the reality was that responsibility for the ACT claim below
board level was that of Mr Derek Farmer, AMC's General Counsel, to whom Mr Hoffman reported. He was the point of liaison with Wragge. No doubt if available, Mr Farmer would have been called but tragically he died in May 2006.Wragge called three witnesses:
a) Ms Lara Young, an associate solicitor in the litigation department of Wragge from 2000 to 2005;
b) Mr Kevin Lowe, a partner of Wragge from May 1999 in the taxation department;
c) Ms Ann Benzimra, a partner from May 1999 until April 2004.
Ms Young gave the impression of being anxious to assist the court but I fear she sought to do so by way of reconstruction rather than recollection. Mr Lowe's involvement was limited. I have little doubt that his evidence could be relied upon. Ms Benzimra did not pretend to have any significant recollection of events.
Nonetheless I must bear in mind that these witnesses were seeking to recall events which occurred many years earlier. It is accordingly another paradigm case for applying the following dictum of Lord Goff in Grace Shipping v. Sharp & Co [1987] 1 Lloyd's Law Rep. 207 at p. 215–6:
"And it is not to be forgotten that, in the present case, the Judge was faced with the task of assessing the evidence of witnesses about telephone conversations which had taken place over five years before. In such a case, memories may very well be unreliable; and it is of crucial importance for the Judge to have regard to the contemporary documents and to the overall probabilities. In this connection, their Lordships wish to endorse a passage from a judgment of one of their number in Armagas Ltd v. Mundogas S.A. ( The Ocean Frost), [1985] 1 Lloyd's Rep. 1, when he said at p. 57:-
"Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth."
That observation is, in their Lordships' opinion, equally apposite in a case where the evidence of the witnesses is likely to be unreliable; and it is to be remembered that in commercial cases, such as the present, there is usually a substantial body of contemporary documentary evidence."
A proper appreciation of the overall probabilities, and of the possible motives of the participants, sufficient to resolve any fundamental conflict of evidence as to what took place orally between them, requires a quite detailed appreciation of the underlying background facts and some appreciation of subsequent events. It is therefore necessary for me to set out the detail of the written material at some length.
Advance Corporation Tax
ACT, which was abolished in 1999, was corporation tax payable in advance of the date on which it would otherwise have been payable. A company resident in the United Kingdom pays corporation tax on profits arising in a given accounting period and, generally speaking, the tax was payable nine months after the period ended. A company which paid a dividend became liable to account to the HMRC for ACT calculated as a proportion of the dividend. This could afterwards be set off against the corporation tax (MCT) which became chargeable on its profits....
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...at least, helpful) in enabling me to weigh the respective contentions of each side: see Amalgamated Metal Corporation v Wragge & Co [2011] EWHC 887 (Comm) at paragraph 16. Although that evidence could theoretically be provided through books and articles, there are a number of practical adva......