Europcar UK Ltd & Others v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE HENDERSON,Mr Justice Henderson |
| Judgment Date | 19 June 2008 |
| Neutral Citation | [2008] EWHC 1363 (Ch) |
| Docket Number | Case No: HC01C05049 & ors |
| Court | Chancery Division |
| Date | 19 June 2008 |
[2008] EWHC 1363 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Honourable Mr Justice Henderson
Case No: HC01C05049 & ors
ACT Group Litigation (A1)
Mr David Cavender (instructed by Dorsey & Whitney) for the 1st to 17th Test Claimants
Mr David Cavender (instructed by Reynolds Porter Chamberlain LLP) for the 18th Test Claimant, Iveco (UK) Ltd
Mr Francis Fitzpatrick (instructed by Farrer & Co LLP) for the 19 th Test Claimant, Amalgamated Metal Corporation Plc
Mr Rupert Baldry (instructed by the Solicitor for HMRC) for the Defendants
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Hearing dates: 15, 16 and 17 April 2008
Approved Judgment
Introduction and Background
This is my judgment on the trial of 19 claims brought by test claimants within the by now many times amended Group Litigation Order (“GLO”) relating to Advance Corporation Tax (“ACT”) (“the ACT GLO”) which was originally made by Chief Master Winegarten on 26 November 2001. The main purpose of these particular claims is to determine four out of five of a new sub-category of EU Issues, know as the “Class 1 Post Judgment Issues”, which were added to the ACT GLO by an order made by Rimer J (as he then was) on 20 July 2007. The questions raised by those four issues are, in summary:
(a) whether the claimant paid the ACT in question under a mistake;
(b) for limitation purposes, whether the claimant made a valid claim in mistake prior to 8 September 2003 (the significance of that date being that claims brought on or after 8 September 2003 are subject to the provisions of section 320 of the Finance Act 2004); and
(c) what is the effect of section 320
(i) on claims brought before 8 September 2003 but amended after 20 November 2003 (that being the date specified in section 320(2)) to add a claim in mistake; and
(ii) on a claim re-issued as a new claim after 8 September 2003 in respect of the same subject matter.
The remaining Class I Post Judgment Issue raises the fundamental question whether the provisions of section 320 of the Finance Act 2004 are contrary to European Community (“EC”) law in so far as they restrict the application of section 32(1)(c) of the Limitation Act 1980 with retrospective effect in relation to claims amended on or after 20 November 2003. By virtue of paragraph 13 of Rimer J's order of 20 July 2007, trial of that issue was directed to await developments in the Aegis test case for Issue P in the Franked Investment Income (“FII”) Group Litigation. It is now one of the questions due to be determined (as Issue Q) in a hearing fixed for July of this year in the FII GLO. It is therefore common ground that the issues with which I am now concerned fall to be determined on the assumption that section 320 is compatible with EC law.
The general background to the ACT GLO is by now well known and has been described in a number of authoritative judgments. It forms part of what Lord Hoffmann has aptly termed “the forensic fall-out” from the decision of the Court of Justice of the European Communities (“the ECJ”) in Joined Cases C-397 and 410/98 Metallgesellschaft Limited and others v IRC and Hoechst AG and another v IRC [2001] Ch 620 (“Hoechst”). For the purposes of this judgment, it will suffice if I quote from the introductory paragraphs of Lord Hoffmann's speech in Deutsche Morgan Grenfell Group Plc v IR C [2006] UK HL 49, [2007] 1 AC 558 (“ DMG”):
“1. … On 8 March 2001, the [ECJ] decided that United Kingdom revenue law, which had since 1973 allowed companies whose parents were resident in the United Kingdom to elect to pay dividends free of [ACT], discriminated unlawfully against companies with parents resident in other member states: [ Hoechst]. The exaction of the tax from such companies had been contrary to the EC Treaty and they were entitled to compensation.
2. The forensic fall-out from this decision has been very considerable. Large numbers of subsidiaries of companies resident in other member states have lodged claims for compensation or restitution, some raising difficult ancillary points of law. The High Court has made a [GLO] to enable these points to be resolved in an orderly fashion. The main point in this appeal concerns the period of limitation applicable to such claims. But that in turn raises some fundamental questions about the cause of action upon which the claimants rely.
3. Before coming to these questions, I must briefly enlarge upon the provisions relating to [ACT] which the [ECJ] held to be contrary to Community law. The tax, which was abolished in 1999, was in theory 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 is payable nine months after the period ends. But the trigger for the payment of corporation tax was the payment of a dividend. A company which paid a dividend became liable to account to the Inland Revenue for ACT calculated as a proportion of the dividend. This could afterwards be set off against the corporation tax (“mainstream corporation tax” or “MCT”) which became chargeable on its profits. The revenue thereby obtained early payment of the tax and, in cases in which the company's liability for MCT turned out to be less than it had paid as ACT, payment of tax which would not otherwise have fallen due.
4. The rule that ACT was payable on dividends was however subject to an exception if the dividend was paid to a parent company in the same group. Under section 247 of the Income and Corporation Taxes Act 1988 the company and its parent could jointly make a group income election which gave them the right to be treated for the purposes of ACT as if they were the same company. No ACT would be payable on the distribution by the subsidiary. It would however be payable on any distribution by the parent. The Act confined the right of election to cases in which the parent was resident in the United Kingdom. Otherwise a subsidiary which had elected would not be liable to ACT and the parent, being non-resident, would not be liable either.
5. In [ Hoechst] the [ECJ] decided that these arrangements infringed the right of establishment guaranteed by article 52 (now 43) of the EC Treaty in that they discriminated against companies resident in other member states. It held that the companies which had been unlawfully required to pay ACT were entitled to restitution or compensation. The nature of the remedies, the procedures by which they could be enforced and matters like the appropriate limitation periods were said to be matters for domestic law. The only specific qualification imposed by the [ECJ] was that English courts could not apply the rule in The Pintada… [1985] AC 104 to deny any recovery of interest to a claimant whose ACT had been set off against MCT before the commencement of proceedings. The claimant was entitled to be compensated for loss of the use of the money between the date on which it was paid and the date when MCT became due.”
A fuller account of the legislative background and the decision of the ECJ in Hoechst may conveniently be found in the judgment of Rimer J in Pirelli Cable Holding NV v Revenue & Customs Commissioners (No.2) [2007] EWHC 583 (Ch), [2008] STC 144 (“ Pirelli”), at paragraphs 7–15, 19–21 and 23–24.
Where a United Kingdom company has overpaid ACT in a situation where, had it been able to do so under UK domestic law, it would have made a group income election, there are in principle three different causes of action recognised by English law which may permit the company to recover compensation for its loss from the Revenue (an expression which I shall use to refer to HMRC and their predecessors the Commissioners of Inland Revenue). The first is an action for damages, in the nature of an action for breach of statutory duty (i.e. the infringement of article 43), in accordance with the well-known principles laid down by the ECJ in the Factortame litigation: see Brasserie du Pecheur SA v Federal Republic of Germany and R v Secretary of State for Transport, ex parte Factortame Limited (No. 4) (Joined Cases C-46/93 and C-48/93), [1996] QB 404. The second is a claim for restitution of tax unlawfully demanded under the principle established by the House of Lords in Woolwich Equitable Building Society v IRC [1993] AC 70 (“Woolwich”). The third, established by the decision of the House of Lords in DMG, is a restitutionary claim for tax wrongly paid under a mistake of law.
It is important to note at this early stage that, although the second and third of the above causes of action are both founded on the developing law of restitution, they are (at any rate as the law now stands) conceptually distinct and subject to differing requirements. As Lord Hoffmann pointed out in DMG at para 21, English law as yet “has no general principle that to retain money paid without any legal basis (such as debt, gift, compromise, etc) is unjust enrichment”. Accordingly, a claimant in England “has to prove that the circumstances in which the payment was made come within one of the categories which the law recognises as sufficient to make retention by the recipient unjust” (ibid). See too the valuable observations of Lord Walker of Gestingthorpe at paras 150–158 under the sub-heading “The foundations of unjust enrichment”. Although mistake is, self-evidently, a crucial ingredient of the third cause of action, it is not a necessary ingredient of the second ( Woolwich) cause of...
To continue reading
Request your trial
-
Test Claimants in the Thin Cap Group Litigation v HM Revenue and Customs
...Kleinwort Benson and DMG. For the reasons which I have already given in FII Chancery and the earlier ACT GLO case of ( Europcar UK Ltd v Revenue and Customs Commissioners Europcar [2008] EWHC 1363 (Ch), [2008] STC 2751), I do not consider that the extended limitation period is available f......
-
Prudential Assurance Company Ltd v Revenue and Customs Commissioners
...Lords) is binding on us as regards the subject matter of the cross-appeal. Henderson J was right so to hold in Europcar UK Ltd v HMRC [2008] EWHC 1363 (Ch), [2008] STC 20 Although the underlying claims depend on EU law, procedural questions are (at least in general) governed by national l......
-
Test Claimants in the FII Group Litigation v HM Revenue and Customs
...of the cause of action. I commented briefly on this argument in my recent decision in a case under the ACT GLO, Europcar UK Limited v Revenue and Customs Commissioners [2008] EWHC 1363 (Ch), [2008] STC …. (“Europcar”) at paragraphs 59 to 64, and expressed the view that it was not suitable ......
-
Amalgamated Metal Corporation Plc v Wragge & Company (A Firm)and Another
...between the parties and it was eventually determined, in HMRC's favour, by Mr Justice Henderson, in the case of Europcar UK Ltd & ors v Revenue and Customs Commissioners [2008] EWHC 1363 (Ch). Following this judgment, Mr Hoffman prepared revised schedules of AMC's ACT history, using his bes......