Jazztel Plc (as Test Claimant for GLO issues 9A and 9B) v The Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Simon,Lord Justice David Richards,Lord Justice Floyd |
| Judgment Date | 24 July 2019 |
| Neutral Citation | [2019] EWCA Civ 1301 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 July 2019 |
| Docket Number | Case No: A3/2018/1841 |
[2019] EWCA Civ 1301
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
REVENUE LIST
The Hon Mr Justice Roth
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Floyd
Lord Justice Simon
and
Lord Justice David Richards
Case No: A3/2018/1841
Sam Grodzinski QC and Michael Jones (instructed by PricewaterhouseCoopers LLP) for the Appellant
Rupert Baldry QC (instructed by the General Counsel and Solicitors for HMRC) for the Respondents
Hearing date: 9 July 2019
Approved Judgment
This appeal raises the question of the ambit of s.234 of the Finance Act 2013, in circumstances where a Group Litigation Order (‘GLO’) has been made, the lead claimant has succeeded in a judgment at first instance and other claimants in the GLO (‘the Affected Claimants’) wish to advance their claims for the recovery of tax paid on the basis of the judgment. It is common ground that s.234 inhibits such claims: the issue is on what basis and to what extent?
Background
This case is part of stamp duty litigation which has been ongoing for a number of years. The CJEU ruled that the imposition of stamp duty and/or stamp duty reserve tax (‘SDRT’), at the higher rate of 1.5%, rather than the usual rate of 0.5%, on the issue or (in certain circumstances) transfer of shares into a clearance service or to a depositary receipts issuer, was unlawful under EU law, HSBC Holdings plc v. Revenue & Customs Commissioners (Case C-569/07) [2010] STC 58 (‘ HSBC Holdings No.1’) and HSBC Holdings plc v. Revenue & Customs Commissioners (2012) 81 TC 663 (‘ HSBC Holdings No.2’). Following this a large number of claims were brought against the respondents (‘HMRC’) for recovery of duty that had been paid.
On 21 October 2010, the Stamp Taxes GLO was made to manage the claims pursuant to CPR 19.11–13 and Practice Direction 19B.
By an order of 26 November 2014, the GLO was amended so as to identify three issues: issues 9A, 9B, and 10. Issue 9A related to a limitation defence in relation to claims where the stamp duty was paid (i) before 8 September 2003, and (ii) more than six years before the claim was issued. Issue 9B related to a limitation defence in relation to claims where the stamp duty was paid (i) on or after 8 September 2003, and (ii) more than six years before the claim was issued. Issue 10 was whether HMRC was entitled to raise a change of position defence in answer to claims in restitution for the recovery of stamp duty levied in breach of EU law. The order also selected the appellant (‘Jazztel’) as the test claimant for those issues.
Following a trial in January 2017, Marcus Smith J delivered a judgment on the issues: [2017] EWHC 677 (Ch); [2017] 1 WLR 3869. On issue 9A, he held that HMRC could not rely on section 320 of the Finance Act 2004 as a defence to repayment of tax paid before 8 September 2003 and more than six years before the claim was issued. On issue 9B, he held that HMRC could rely on section 320 as a defence to repayment of tax paid on or after 8 September 2003 and more than six years before the claim was issued. On issue 10, he made various findings of fact but made no determination of law, reserving final judgment on the issue, and noting that HMRC accepted that the question of law had been determined in Jazztel's favour in Test Claimants in the FII Group Litigation v HMRC [2016] EWCA Civ 1180 (‘ FII CA No.2’) in which permission to appeal was pending in the Supreme Court.
Marcus Smith J found that various amounts of SDRT in issue had been paid by or on behalf of Jazztel, and that it had made those payments in the mistaken belief that the statutory provisions were lawful. He therefore concluded, in the light of the terms of the Stamp Taxes GLO, that Jazztel was entitled to recover such duty paid before 8 September 2003, subject to a condition that it would repay the monies should HMRC ultimately establish a change of position defence in the Supreme Court.
An order dated 25 April 2017 gave effect to this judgment. HMRC was ordered to repay to Jazztel the duty that had been paid before 8 September 2003. The order provided that, in the event (i) the Supreme Court gave permission in FII CA (No.2), and (ii) it allowed the appeal on terms that HMRC could rely on in support of its change of position defence in Jazztel's case, and (iii) the validity of that defence was either agreed by Jazztel or upheld at a future hearing, Jazztel would be required to repay the sums in question.
Following the making of the order, both sides applied for permission to appeal to the Court of Appeal: Jazztel in relation to issue 9B and HMRC in relation to Issues 9A and 10. On 31 July 2017, Marcus Smith J ordered that the question of permission to appeal and cross-appeal should be stayed pending the decision of the Supreme Court on HMRC's application for permission to appeal on change of position in the FII proceedings. Following the decision of the Supreme Court in Prudential v. HMRC [2018] UKSC 39, (delivered after the decision which is being appealed before us) HMRC decided not to pursue any appeal against Marcus Smith J's decision on issue 10; and it was in the light of this development that the parties renewed their applications for permission to appeal. Marcus Smith J granted permission to appeal on 18 March 2019 to HMRC in relation to issue 9A, and to Jazztel in relation to issue 9B. These limitation issues are therefore currently subject to appeal, although a hearing date for the hearing of the appeals has yet to be fixed.
The application
In the meantime, on 18 April 2018, Jazztel applied on behalf of the Affected Claimants for an order that any GLO claimant should be entitled to payment by HMRC of the principal amounts of SDRT claimed together with interest, subject to proof of particular matters and subject to certain conditions upon which the sums would be repayable (broadly those conditions which applied to Jazztel). The draft order was expressed as follows:
Subject to an Affected Claimant being entitled to restitution from HMRC of the SDRT it has claimed in the proceedings to which the GLO relates, an Affected Claimant shall be entitled on request to payment by HMRC of the principal amount of SDRT claimed and simple interest thereon, on the same terms as those agreed between HMRC and Jazztel plc following the trial of the Test Claim and recorded in paragraphs 4 and 5 of the Order of Marcus Smith J dated 25 April 2017…
HMRC resisted the application relying on the provisions of s.234 of the Finance Act 2013, which so far as material is in the following terms:
Interim remedies
234. Restrictions on interim payments in proceedings relating to taxation matters
(1) This section applies to an application for an interim remedy (however described), made in any court proceedings relating to a taxation matter, if the application is founded (wholly or in part) on a point of law which has yet to be finally determined in the proceedings.
(2) Any power of a court to grant an interim remedy (however described) requiring the Commissioners for Her Majesty's Revenue and Customs, or an officer of Revenue and Customs, to pay any sum to any claimant (however described) in the proceedings is restricted as follows.
(3) The court may grant the interim remedy only if it is shown to the satisfaction of the court –
(a) that, taking account of all sources of funding (including borrowing) reasonably likely to be available to fund the proceedings, the payment of the sum is necessary to enable the proceedings to continue, or
(b) that the circumstances of the claimant are exceptional and such that the granting of the remedy is necessary in the interests of justice.
…
(9) For the purposes of this section, proceedings on appeal are to be treated as part of the original proceedings from which the appeal lies.
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