Evonik Degussa UK Holdings Ltd and Others v Revenue and Customs Commissioners
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henderson |
| Judgment Date | 22 January 2016 |
| Neutral Citation | [2016] EWHC 86 (Ch) |
| Docket Number | Case No: HC-2002-000002, (Formerly HC02C01907 & Others) |
| Court | Chancery Division |
| Date | 22 January 2016 |
[2016] EWHC 86 (Ch)
Mr Justice Henderson
Case No: HC-2002-000002, (Formerly HC02C01907 & Others)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
FII GROUP LITIGATION
Rolls Building
Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
Mr Graham Aaronson QC and Mr Jonathan Bremner (instructed by Joseph Hage Aaronson LLP) for the Claimants
Mr David Ewart QC and Ms Barbara Belgrano (instructed by the General Counsel and Solicitor for HMRC) for the Defendants
Hearing dates: 17 and 18 November 2015
Introduction
These are seven applications by claimants enrolled in the FII Group Litigation for summary judgment, or alternatively interim payments, in respect of their claims for restitution of advance corporation tax ("ACT") paid on foreign income dividends ("FIDs"). The claims relate to the period between 1 July 1994, when the FID regime was introduced in the United Kingdom, and 5 April 1999, when ACT was abolished.
The seven groups of claimants, and the value of their FID claims (including compound interest) as at 16 November 2015, are as follows:
(1) Evonik Degussa UK Holdings Limited and Others ("Evonik") £13,080,501.00
(2) Imperial Chemical Industries Limited and Others ("ICI") £11,846,379.99
(3) Invensys International Holdings Limited and Others ("Invensys") £117,104,839.20
(4) Rhodia Reorganisation and Others ("Rhodia") £1,011,862.08
(5) Richemont Holdings (UK) Limited and Others ("Richemont") £1,010,605.68
(6) Perkins Foods Limited and Others ("Perkins") £1,518,578.00
(7) Prudential Plc and Others ("Prudential") £60,956,221.61
The total amount of the claims is therefore approximately £207 million.
This judgment assumes a general familiarity with the protracted and complex history of the FII Group Litigation, including in particular the decisions of the Court of Justice of the European Union (formerly the European Court of Justice) ("the ECJ") upon the first, second and third references ("FII (ECJ) I", "FII (ECJ) II" and "FII (ECJ) III" respectively), the English liability proceedings in the High Court, Court of Appeal and Supreme Court (" FII (High Court) I", "FII (CA) I" and " FII (SC)"), and the quantification proceedings in the High Court in which judgment was delivered after a lengthy hearing on 18 December 2014 ("FII (High Court) II", [2014] EWHC 4302 (Ch), [2015] STC 1471). In general, I will without further explanation use the same definitions, abbreviations, and so forth as I have adopted in earlier cases in the series.
A very brief survey of the history of the FII Group Litigation down to and including the quantification proceedings may be found in the introductory section of my judgment in FII (High Court) II, at [1] to [5]. Of particular relevance to the present applications is paragraph 5, where I recorded that in March 2014 the Court of Appeal had dismissed an appeal by HMRC from my decision in November 2013 ( [2013] EWHC 3757 (Ch), [2013] All ER (D) 341 (Nov)) that it was no longer open to HMRC to argue that the FID regime introduced in 1994 could benefit from the "standstill" protection then contained in Article 57(1) EC (now Article 64(1) TFEU), on the basis that the point had already been conclusively determined by the Court of Appeal in FII (CA) I. The Court of Appeal gave its reasons for dismissing the appeal in judgments handed down on 2 September 2014, to which I will refer as "FII (CA) II": see [2014] EWCA Civ 1214, [2014] All ER (D) 76 (Sep). The leading judgment was delivered by Gloster LJ, with whom McFarlane and Moore-Bick LJJ agreed.
The judgment of Gloster LJ in FII (CA) II contains a helpful summary of the background to the proceedings and the FID regime: see in particular [6] to [13]. Furthermore, although her discussion of the issues at [27] to [38] was of necessity focused on the particular issue under appeal (namely whether HMRC should be permitted to re-amend their defence so as to rely on the standstill provision in relation to the obligation on a UK company to pay ACT on "third country" FIDs), her reasoning contains a valuable review of the way in which the FID issues generally were dealt with, first by the ECJ in FII (ECJ) I, and then by the High Court and the Court of Appeal in FII (High Court) I and FII (CA) I. A central point which Gloster LJ derived from this review was that, at all stages, the FID regime had been considered as a composite whole by each court which had examined it: see her judgment at [30] to [36].
I will have to return to this forensic history later in my judgment, and examine it in the broader context of the present applications for summary judgment. For now, I will set out the following extracts from Gloster LJ's judgment, omitting the lengthy citations from the cases and the orders made by the English courts:
"30. In the light of what the ECJ said in these paragraphs [ i.e. paragraphs 188 to 196 of FII (ECJ) I], read in the context of the full judgment, I cannot accept Mr Baldry's submission [ for HMRC] that the only issue which the ECJ was addressing, or remitting to the national court, was the issue whether the denial of a tax credit to the shareholder receiving the FID was a new restriction. As paragraphs 192 to 194 to my mind emphasise, one has to look at the legislative package as a whole in order to ascertain whether the approach reflects a new approach which is different from that of the previous law. Moreover, as Mr Aaronson QC [ for the Test Claimants] pointed out, the ECJ was well aware that, ultimately, the question to be determined was whether the Claimants could make claims in respect of ACT paid on third country FIDs and that the ACT charge was already in place under the legislation existing at 31 December 1993.
31. When one turns to consider the judgment of Henderson J in [ FII (High Court] I] in what was effectively a liability trial, and the orders and declarations made by him to give effect to his judgment, it is plain to me that he decided that the composite FID regime [ Gloster LJ's emphasis] (and not merely that element of it which involved the denial of a tax credit to the shareholder receiving the FID) was incompatible with Community Law and a new restriction …
32. What is clear from this passage [ inFII (High Court) I] at [180] to [191] (and indeed Mr Baldry QC did not dispute this point) was that, before Henderson J, Mr David Ewart QC, leading counsel on behalf of HMRC, was contending that there was a composite scheme and that the inextricable link between payment of ACT and the receipt of a tax credit demonstrated that the FID regime was indeed protected by the standstill provision of Article 57(1)). Basically, Mr Ewart QC was arguing that, although the removal of the tax credit to shareholders was an additional restriction, one had to read it in conjunction with the change to [ the] ACT regime, and, viewed as a whole [ Gloster LJ's emphasis], the legislation adopted the same approach and the same logic as the previous statutory regime, and therefore was protected by the standstill provision of Article 57(1).
…
35. As quoted above, the declarations which the Court of Appeal made pursuant to its judgment can only be regarded as consistent with the conclusion that the composite FID regime was not saved by the standstill provision …
36. In the light of this approach, in my judgment HMRC's current assertion before this court that Henderson J and the Court of Appeal focused solely on the removal of the shareholders' right to a tax credit, and that they had not adjudicated on the Claimant companies' claims in respect of the time value of ACT is simply not sustainable. Such an argument is inconsistent with the orders of both Courts, which dealt expressly with the Claimant companies' claims for the time value of ACT. Moreover, Mr Ewart's submissions before both Courts was that the FID regime should be looked at as a whole, and, as the main purpose of the FID regime as a whole was to alleviate the discriminatory restriction on ACT payments, the regime as a whole should be regarded as falling within the "standstill" in Article 57(1). Both Henderson J and the Court of Appeal rejected this argument. In those circumstances it lies ill in HMRC's mouth now to change tactics and put forward a wholly different case.
37. Accordingly, in my judgment, the issue which HMRC wishes to raise has been conclusively determined against it by Henderson J and the Court of Appeal. Therefore HMRC is estopped per rem judicatam, from raising the issue a second time: the contention now being advanced by HMRC is inconsistent with the earlier decision in the same case …
38. Alternatively, if I am wrong in my analysis that the issue which HMRC now seeks to raise has been conclusively determined against it by Henderson J and the Court of Appeal, in any event the raising of this argument (namely that one should look at the various elements of the restrictions imposed by the FID regime separately) would be contrary to the public interest and an abuse of process: see Lord Bingham in Johnson v Gore Wood [2002] 2 AC 1, at 31A, where he explains the principle articulated in Henderson v Henderson."
The judgment in FII (CA) II is final, no application having been made by HMRC for permission to appeal to the Supreme Court.
In the quantification trial, I had to consider three questions relating to FIDs, of which the first two were these:
a) Should dividends which were elected to be FIDs be treated differently and, if...
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