Littlewoods Ltd and Others (Respondents/Claimants) v The Commissioners for HM Revenue and Customs

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLady Justice Arden DBE
Judgment Date21 May 2015
Neutral Citation[2015] EWCA Civ 515
Docket NumberCase No: A3/2014 2122 A3/2014 2127 A3/2014 2128
Date21 May 2015

[2015] EWCA Civ 515




Mr Justice Vos

[2010] EWHC 2771 (Ch) &

[2010] EWHC 1071 (Ch)

Mr Justice Henderson

[2014] EWHC 4302 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL


Lady Justice Arden DBE

Lord Justice Patten


Lord Justice Floyd

Case No: A3/2014 2122

A3/2014 2123

A3/2014 2127

A3/2014 2128

Littlewoods Limited and others
The Commissioners for her Majesty's Revenue and Customs

Jonathan Swift QC, Andrew MacNab, Peter Mantle and Imran Afzal (instructed by the General Counsel and Solicitor to HMRC) for HMRC

Laurence Rabinowitz QC, Steven Elliott, Michael Jones and Maximilian Schlote (instructed by Weil, Gotshal & Manges) for Littlewoods

Hearing dates: 24–27 and 30 March 2015

Index to judgment



Claims for overpaid tax


Interest claims


The issues


Issue 1: Are Littlewoods' restitution claims excluded by sections 78 and 80 of VATA 1994 as a matter of English law and without reference to EU Law?


Issue 2: If Littlewoods' restitution claims are excluded by sections 78 and 80 VATA 1994, is that exclusion contrary to EU law? Specifically, notwithstanding the right to interest under section 78 VATA 1994, does that exclusion violate the principle of effectiveness by depriving Littlewoods of an adequate indemnity for the loss occasioned through the undue payment of VAT?


Issue 3: If issues 1 and 2 are answered in the affirmative:

(A) Can sections 78 and 80 of VATA 1994 be construed so as to conform with EU law (and if so how), or must they be disapplied?

(B) If section 78 and 80 VATA 1994 must be disapplied, must they be disapplied so as to allow only Woolwich-type restitution claims, or (b) both Woolwich-type restitution claims and mistake based restitution claims?




Issue 6: Quantum


Introduction to issue 6


Issue 6A: As a matter of English law, is the benefit to HM Government from the overpayments of tax correctly measured by (a) the "objective use value" of the money measured by reference to the cost to HM Government of borrowing money in the amount of the sums overpaid or (b) by reference to the actual use made by HM Government of the overpayments and the "actual benefit" which HM Government derived from them?


Issue 6B: If, as a matter of English law, the measure of Littlewoods' restitution remedy is less than the objective use value of the overpaid amounts, is that consistent with EU law?


Issue 6C: If compound interest is payable, should it continue to run after the date of the repayment of the principal amounts of the overpaid VAT until the date of judgment?


Issue 6D: Was Vos J wrong to hold that the receipt of the overpayments in "year 1" must have gone to reduce government borrowing at the end of the tax year?


Conclusion and disposition


Lady Justice Arden DBE

In this judgment, which is the judgment of the court to which all members have contributed, we use the abbreviations set out in the table below:


Advance corporation tax

Chalke (High Court)

F.J. Chalke Ltd v Revenue and Customs Commissioners [2009] EWHC 952 (Ch); [2009] STC 2027

"CJEU" or "ECJ"

The Court of Justice of the European Union

Chalke (CA)

F.J. Chalke Ltd v Revenue and Customs Commissioners [2010] EWCA Civ 313; [2010] STC 1640


Deutsche Morgan Grenfell v Inland Revenue Commissioners [2006] UKHL 49; [2007] 1 AC 558

FA 1972

Finance Act 1972

FA 1984

Finance Act 1984

FA 1989

Finance Act 1989

FA 2004

Finance Act 2004

FA 2007

Finance Act 2007


FII Test Claimants v Revenue and Customs Commissioners [2010] EWCA Civ 103; [2010] STC 1251

FII (High Court)

FII Test Claimants v Revenue and Customs Commissioners [2008] EWHC 2893 (Ch); [2009] STC 254


Case C-446/04 Test Claimants in the Franked Investment Income Group Litigation v Inland Revenue Commissioners [2007] STC 326


Case C-362/12 Test Claimants in the Franked Investment Income Group Litigation v Revenue and Customs Commissioners [2014] AC 1161


FII Test Claimants v Revenue and Customs Commissioners [2012] UKSC 19; [2012] 2 AC 337


The Commissioners for Her Majesty's Revenue and Customs

ITC (No 2)

Investment Trust Companies (in liquidation) v Revenue and Customs Commissioners [2013] EWHC 665 (Ch); [2013] STC 1129

Kleinwort Benson

Kleinwort Benson v Lincoln City Council [1999] 2 AC 349


The Respondents to Appeals A3/2014/2122 and A3/2014/2123; and the Appellants in Appeals A3/2014/2127 and A3/2014/2128

Littlewoods (ECJ)

Case C-591/10 Littlewoods Retail Ltd and others v Revenue and Customs Commissioners [2012] STC 1714

Littlewoods (No 1)

Littlewoods Retail Ltd and others v Revenue and Customs Commissioners [2010] EWHC 1071 (Ch); [2010] STC 2072

Littlewoods (No 2)

Littlewoods Retail Ltd and others v Revenue and Customs Commissioners [2014] EWHC 868 (Ch); [2014] STC 1761


Case C-106/89 Marleasing SA v La Commercial International de Alimentacion SA [1990] ECR I-4135; [1992] CMLR 305


Mainstream corporation tax


Joined Cases C-397/98 and C-410/98 Metallgesellschaft v IRC; Hoechst AG v IRC [2001] Ch 620

San Giorgio

Case C-199/82 Amministrazione Finanze dello Stato v SpA San Giorgio [1983] ECR 3595


Sempra Metals Limited v Inland Revenue Commissioners [2007] UKHL 34; [2008] 1 AC 561

Thin Cap (High Court)

Test Claimants in the Thin Cap group Litigation v HMRC [2009] EWHC 2908 (Ch); [2010] STC 301

TMA or TMA 1970

Taxes Management Act 1970


Value added tax

VATA or VATA 1994

Value Added Tax Act 1994


Woolwich Equitable Building Society v IRC [1993] AC 70


Over the period 1973 to 2004 Littlewoods overpaid a total of some £204 million in VAT to HMRC. HMRC have now repaid the principal sums together with simple interest at the rates provided for in section 78 of VATA 1994. By these two claims Littlewoods seek to recover in restitution the time value of the sums which they wrongly paid, which they claim exceeds the simple interest available under VATA by a sum which is of the order of £1 billion.


The appeals which are before us are from two separate judgments. The first is the judgment of Vos J (as he then was) given on 19 May 2010 in a first stage of the trial mainly concerned with liability: Littlewoods (No 1). The second is the judgment of Henderson J given on 28 March 2014 in a second stage of the trial concerned with outstanding issues of liability and with quantum: Littlewoods (No 2).


Vos J decided in Littlewoods (No 1) to refer certain questions to the CJEU. A Grand Chamber of the CJEU heard the reference on 22 November 2011 and gave its decision on 19 July 2012: Littlewoods (ECJ).


The combined effect of Littlewoods (No 1), Littlewoods (ECJ) and Littlewoods (No 2) is that Littlewoods have been successful thus far on their claim. HMRC appeal from parts of both Littlewoods (No 1) and Littlewoods (No 2). Littlewoods have a cross appeal which, if successful, allows them to succeed by a different route.


On this appeal Mr Jonathan Swift QC argued the case for HMRC. Mr Laurence Rabinowitz QC and Mr Steven Elliott argued the case for Littlewoods.

Claims for overpaid tax


It is not necessary for the purposes of this judgment to explain in any detail why Littlewoods paid tax which was not due. There is no longer any live dispute between the parties over whether the tax was in fact wrongly paid, and the details of why that is the case are not relevant to any issue we have to decide. The details are, in any event, comprehensively explained in the judgment of Henderson J in Littlewoods (No 2). It is sufficient to point out, because it is relevant to the way in which the jurisprudence in this area has developed, that this is not a case of the premature levying of tax, but of tax being levied which should not have been paid at all.


It is, however, necessary for a proper understanding of the issues in this case to identify and distinguish between the two types of cause of action in the English law of restitution about which there is argument in this case, and the way in which they have developed. The first type of action is based on the principle in Woolwich. In that case the House of Lords recognised the existence of a claim in restitution based solely on payment of money pursuant to an unlawful demand by a public authority. Prior to that decision the common law had only permitted recovery where the payment had been made under a mistake of fact (but not law) or under limited categories of compulsion. It is of relevance that the limitation period for a Woolwich claim is six years from the date of payment.


The second type of action has been referred to in argument as a "mistake-based restitution claim". In Kleinwort Benson v Lincoln City Council [1999] 2 AC 349 the House of Lords held that the rule of law which precluded the recovery of money paid under a mistake of law could no longer be maintained. A cause of action in restitution therefore lay wherever money was paid under a mistake, whether of fact or law. This second type of cause of action had advantages in some circumstances because of the limitation period which applied. By section...

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