Littlewoods Retail Ltd and Others v HM Revenue and Customs

JurisdictionEngland & Wales
CourtChancery Division
JudgeMR JUSTICE VOS,Mr Justice Vos
Judgment Date04 November 2010
Neutral Citation[2010] EWHC 2771 (Ch)
Docket NumberCase No: HC08C03780 AND HC08C03781
Date04 November 2010

[2010] EWHC 2771 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Before: Mr Justice Vos

Case No: HC08C03780 AND HC08C03781

Between
(1) Littlewoods Retail Limited
(2) Shop Direct Home Shopping Limited (formerly Littlewoods Shop Direct Home Shopping Limited)
(3) Reality Group Limited
(4) Shop Direct Group (formerly Shop Direct Group Limited)
(5) Shop Direct Limited
Claimants
and
The Commissioners for Her Majesty's Revenue and Customs
Defendants
Between
(1) Littlewoods Limited
(2) Brian Mills Limited
(3) Burlington Warehouses Limited
(4) Janet Frazer Limited
(5) John Moores Home Shopping Service Limited
(6) Littlewoods Warehouses Limited
(7) Peter Craig Limited
(8) Littlewoods Retail Limited
(9) Reality Group Limited
(10) Shop Direct Group
(11) Kay and Company Limited
(12) Abound Limited
Claimants
and
The Commissioners for Her Majesty's Revenue and Customs defendants

Mr David Anderson QC, Mr Laurence Rabinowitz QC, Mr Steven Elliott, Mr Richard Vallat (instructed by Weil, Gotshal &Manges) for the Claimants

Mr Jonathan Swift QC, Mr Andrew Macnab, Mr Peter Mantle, and Mr Imran Afzal (instructed by Solicitors for HM Revenue &Customs) for the Defendants

Hearing dates: 1–2 November 2010

Approved Judgment

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.

MR JUSTICE VOS Mr Justice Vos

Mr Justice Vos:

1

I delivered my preliminary judgment in this matter on 19 th May 2010 (the “Judgment”) dealing with 5 issues, and directing that 5 questions (arising from issues 2, 3 and 4) be referred to the ECJ. In this judgment, I will use the same abbreviations and defined terms as are contained in the Judgment.

2

After the parties had had time to consider the Judgment in detail, they returned to argue the following points:—

i) Which of the questions proposed in the Judgment should actually be referred?

ii) The precise form of the reference.

iii) Whether there should be an immediate declaration on issue 1, and whether Littlewoods should be granted permission to appeal issue 1.

iv) Costs.

3

I have dealt with the question of costs in an ex tempore judgment, so I shall not consider it again here. In relation to the other matters, there was more consensus than had originally been supposed, so this judgment can be kept relatively brief.

4

I have settled the form of reference, having heard argument on a number of points from the parties. The reference as settled that will go to the ECJ (the “Reference”) is attached to this judgment.

Which of the questions proposed in the Judgment should actually be referred?

5

The Commissioners have always maintained that my draft question 4 was unnecessary. They contend that the appropriate extent of the disapplication of national law restrictions to give effect to the EU law right is a question of national law. Littlewoods, on the other hand, proposed a question for the ECJ during the hearings that led to the Judgment. They then changed their stance after the Judgment and submitted a skeleton argument agreeing with the Commissioners that question 4 was unnecessary. When the hearing was brought on, however, Mr David Anderson QC, leading counsel for Littlewoods, softened his approach. Mr Anderson accepted that he might want to argue in the alternative, if it were held after the reference, or on appeal from the Judgment, that Littlewoods did not have the right, as a matter of English law, to choose which or both of the Woolwich and mistake based claims it could bring, that the EU law principle of effectiveness required the English court to disapply the restriction in sections 78 and 80 of VATA so as to allow Littlewoods to bring any remedy otherwise available to it, including its mistake-based claims.

6

In these circumstances, it seems to me that the reasons I gave for wanting to refer question 4 to the ECJ in paragraphs 93 and 94 of the Judgment hold good, and that question 4 should be referred. I have redrafted question 4 slightly to take account of the detailed submissions of the parties, as shown in the attached reference that I have now settled.

7

The position is different in relation to the draft question 5 concerning the change of position defence that I proposed at paragraph 140 of the Judgment. In relation to that question, based on the factual findings that I made in the Judgment, the parties agreed that a reference was not appropriate at this point, because my factual findings determined that a change of position defence was not available to the Commissioners. My thinking on this issue was set out at paragraphs 138 and 139 of the Judgment. I wanted to refer question 5 because I anticipated that the Commissioners might wish to appeal my factual findings at a later stage in these proceedings, and because the question of the availability of a change of position defence may be relevant to the nature of the EU law right established in answer to questions 1–3. That said, I accept the parties' submissions that the point does not strictly arise at this point, and that there may be a jurisdictional impediment to referring a question upon which the referring court does not need the views of the ECJ before it can decide the issues before it. I have been referred to authority on this point, but do not think I need to deal with it in this judgment. Suffice it to say that, whilst it might, as a matter of good case management, have been beneficial to be able to send all the possible questions that might arise for determination in future to the ECJ at one time, I accept the parties' submissions that this is not appropriate on this occasion, particularly because the parties would be put to considerable expense in preparing arguments on the change of position question, which either may never be relevant, or which the ECJ might decline to entertain. If the point does become relevant at a later stage in the proceedings, it can, of course, always be referred to the ECJ at that stage.

The precise form of the reference

8

As I have said, I have now settled the form of Reference. I shall not spend time in this judgment dealing with each and every minor point of drafting that was argued before me. Perhaps the only major issue that developed was as to whether it should be made clear in the Reference and the questions that Littlewoods' claim was for compound interest. Mr Anderson argued, on this point, that it was not Littlewoods' case that, in every case, there was an EU law right to compound interest, only that EU law required in this case that Littlewoods should recover compound interest as representing the use value of the overpaid tax in the hands of the Member State. It seems to me that the fact that Littlewoods are seeking compound interest in this case should be made clear in both the questions, and, up front, in the Reference, and I have made the appropriate drafting changes to achieve this.

Whether there should be an immediate declaration on issue 1, and whether Littlewoods should be granted permission to appeal issue 1?

9

This issue turned out to be less controversial than it initially appeared. Mr Lawrence Rabinowitz QC argued this point for Littlewoods. He submitted that what his clients really wanted was to ensure that the Court of Appeal hearing the appeal from the Upper Tribunal in the case of John Wilkins (Motor Engineers) Limited v. HMRC [2009] STC 2485 and [2010] STC 2418 could, if it wished, hear argument on an appeal on issue 1 in this case at the same time as it dealt with related issues in the John Wilkins case.

10

It seems to me that there are a number of significant case management disadvantages in allowing an appeal from issue 1 to proceed at the same time as the Reference and before I have reached final conclusions on the remaining issues in this case. Whilst I have indeed reached a final decision on issue 1, I have not reached any final decisions on most of the other issues. The final decisions I reach may be affected by the ECJ's ruling on the Reference. It is possible, for example, that my ruling on issue 1 may become academic in the light of the ECJ's decision on issues 2 and 3 (questions 1–4), because Littlewoods may establish that it has an EU law right to compound interest, and an EU law right to choose to bring its mistake-based claims for compound interest. If that were to happen, an appeal on issue 1 might be rendered unnecessary in this case. There are also, as acknowledged by Littlewoods, multiple timing issues, since it is not yet known whether the procedural part of the appeal in John Wilkins (which has already been determined by the Court of Appeal) will be going to the Supreme Court. If it is, it is unlikely that the substantive appeal in John Wilkins will proceed in the Court of Appeal until after the Supreme Court has ruled. At that stage, it might be touch and go whether, if issue 1 were to be heard with the appeal in John Wilkins in the Court of Appeal, it would be heard before or after conclusion of the Reference, or before or after the resumed hearing of the trial in this case.

11

It seems far preferable to me, on pure trial management grounds, for Littlewoods to be required to wait until all the issues have been decided by this court before pursuing its application for permission to appeal issue 1. I shall, nonetheless, make the declaration that reflects my judgment on issue 1, since that is a final decision, and it will not be affected by the result of the Reference. But I shall adjourn Littlewoods' application for permission to appeal the declaration made in respect of issue 1 until after judgment in this action.

12

I shall, however, allow the parties liberty to apply on the question of permission to appeal issue 1, notwithstanding the general stay of these proceedings pending the decision of the...

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