Skatteforvaltningen v MCML Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bright |
| Judgment Date | 02 February 2024 |
| Neutral Citation | [2024] EWHC 148 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2022-000642 |
[2024] EWHC 148 (Comm)
Mr Justice Bright
Case No: CL-2022-000642
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, WC4A 1NL
Charles Graham KC, KV Krishnaprasad and Sam O'Leary (instructed by Pinsent Masons LLP) for the Claimants
Ali Malek KC and Adam Temple (instructed by Rosenblatt) for the Defendants
Hearing dates: 23, 24, 25 January 2024
Approved Judgment
This judgment was handed down remotely at 9:30am on 02/02/2024 by circulation to the parties' representatives by e-mail and by release to the National Archives.
Introduction
In 2018 and 2019, the Claimant (“SKAT”) commenced several actions in this court, in each of which it brought claims against multiple defendants for damages, as well as other relief (“the Original Proceedings”). The various claims all related to payments that SKAT had made between August 2012 and July 2015 as tax refunds in respect of withholding tax (“WHT”) on dividends paid by Danish companies. SKAT said the recipients of those refund payments had not been entitled to them, and that SKAT had been induced to make the refunds by misrepresentations made by the various defendants.
One of the various actions was against the Defendant in this case (“ED&F Man”), which was a global financial brokerage business. Tax reclaim agents had submitted applications for WHT refunds on behalf of ED&F Man's pension plan clients (“PP clients”), supported in each case by a Tax Voucher that ED&F Man had produced. SKAT's case was that some of the Tax Vouchers contained false information about the dividends received by ED&F Man's PP clients and about their entitlement to WHT refunds.
The case against ED&F Man involved over 400 Tax Vouchers and WHT refund payments totalling the DKK equivalent of approximately £70 million.
Similar allegations, both in that action and in the other actions, were made by SKAT in respect of other custodians (and their clients). The total sums claimed were equivalent to approximately £1.5 billion.
In general, SKAT's claims were advanced on the basis that the defendants had acted fraudulently. Such claims were, in general (and along with other causes of action), for the tort of deceit. However, in relation to ED&F Man, SKAT did not allege fraud/deceit but only negligent misrepresentation.
The actions constituting the Original Proceedings were all commenced in 2018 and 2019. The particular action involving ED&F Man (along with various co-defendants) was commenced on 4 May 2018.
On 5 December 2022, SKAT issued fresh proceedings in which ED&F Man was the sole Defendant (“the 2022 Proceedings”). SKAT now alleged that ED&F Man knew that the representations in the Tax Vouchers were false or was reckless. SKAT's claim in these fresh proceedings is for deceit.
On 30 March 2023, ED&F Man issued the application with which this judgment is concerned, for the claim in the 2022 Proceedings to be struck out.
ED&F Man's case before me was principally represented at the hearing by Mr Ali Malek KC. On some of the important factual aspects, ED&F Man's case was presented orally by Mr Adam Temple. It is very pleasing that Mr Malek KC allowed Mr Temple this opportunity. The oral submissions on behalf of SKAT were made by Mr Charles Graham KC.
I am grateful to them all and to both sides' wider teams for the very considerable assistance that I have received. I have in mind not only the submissions made at the hearing (which I know will not have been the work-product only of the advocates who delivered them) but also the very detailed skeleton arguments, the chronology and the extremely helpful and carefully structured electronic hearing bundles (without which this hearing would have taken much longer).
Procedural history
The various actions then in existence were consolidated prior to the first CMC on 16 July 2020. Andrew Baker J was appointed as designated judge (with alternates). This was because the judge in charge of the Commercial Court (then, Cockerill J) had concluded that all the related cases should be managed together. This would best suit the interests of the parties and also the wider interest of using the court's resources efficiently.
At the first CMC, Andrew Baker J made clear his intention to keep a firm hand on the litigation. He analysed its likely future progress as falling into various separate stages. He directed that there should be trials of two separate series of preliminary issues – respectively, the “Revenue Rule” trial and the “Validity” trial – followed by a final trial to determine all the other issues (“the Main Trial”).
The Revenue Rule trial was to take place in March 2021. The outcome of the Revenue Rule trial was to be binding on all parties, whether or not they chose to file submissions or participate. The Revenue Rule issue was defined as follows:
“Are any of SKAT's claims, as alleged, inadmissible in this court under the rule of law stated, e.g. as Dicey Rule 3… If so, which claims are inadmissible and why?”
Dicey Rule 3 (now Rule 20 of Dicey, Morris & Collins on the Conflict of Laws (16 th ed.) at 8R-001) stated that English courts have no jurisdiction to entertain an action for the enforcement (direct or indirect) of a penal, revenue or other public law of a foreign state.
The intention at that time was that the Validity trial should take place towards the end of 2021, and the Main Trial should take place in January 2023 and last until Easter 2024.
The Claimant was ordered to provide regular progress reports to Andrew Baker J. I highlight this because it shows his vigorous commitment to the active case management of the litigation.
During the run-up to the Revenue Rule trial, the parties provided disclosure. In the event, ED&F Man's disclosure was given in nine tranches, the first on 3 August 2020, the last on 19 March 2021.
The Revenue Rule trial was heard on 22 to 25 March 2021. Judgment and the Judge's order were handed down on 27 April 2021. Andrew Baker J held that all of SKAT's claims were inadmissible under the Revenue Rule. He therefore ordered that all SKAT's claims be struck out.
SKAT applied to the Judge for permission to appeal on two grounds:
(1) That he erred in concluding that SKAT's claims as alleged fell within the Revenue Rule. (This ground was relied on for some but not all individual losses claimed against ED&F Man.)
(2) That he erred in concluding that the Revenue Rule remained applicable to SKAT's claims notwithstanding that they were “civil and commercial” matters under the Brussels Regulations.
The Judge refused permission to appeal on ground 1 but gave permission on ground 2. SKAT renewed its application for permission to appeal on ground 1, but not as against ED&F Man. It is apparent from comments made by counsel in submissions to the Court of Appeal that this decision had to do with the fact that SKAT did not allege fraud against ED&F Man, only negligence.
On 29 September 2021, Males LJ gave permission to appeal on ground 1 – but not, naturally, as against ED&F Man. So far as concerned SKAT's claim against ED&F Man, the Judge's conclusion that they were within the Revenue Rule was not challenged, and SKAT relied only on ground 2.
The appeal on the Revenue Rule issue was heard on 25 to 27 January 2022. Judgment was handed down on 25 February 2022. The Court of Appeal reversed the decision of Andrew Baker J on the basis of ground 1, holding that SKAT's claims were not within the Revenue Rule and so were not inadmissible. This was enough to decide the appeal in respect of all SKAT's claims, apart from the claim against ED&F Man.
The Court of Appeal then held that, because SKAT remained fixed with the Judge's conclusion that its claim against ED&F Man was within the Revenue Rule, the Brussels Regulations did not assist, i.e. SKAT could not succeed on the basis of ground 2, because there it did not challenge the Judge's conclusion as to the applicability of the Revenue Rule (as against ED&F Man).
SKAT's appeal therefore succeeded in respect of all its claims, apart from those against ED&F Man. It is apparent from their judgment that the Court of Appeal would have reversed the Judge's conclusion in relation to the claim against ED&F Man, if SKAT had asked for and obtained permission to appeal on ground 1. The reasoning of the Chancellor, giving the main judgment, would have applied to claims in negligence just as much as to claims in fraud. However, because SKAT did not pursue its application for permission to appeal on ground 1 in respect of its claim against ED&F Man in the Original Proceedings, the conclusion of Andrew Baker J as to the applicability of the Revenue Rule stands, in respect of that claim.
Following the judgment of Andrew Baker J on the Revenue Rule, all progress in the Original Proceedings had effectively stopped, the claims having been dismissed. The effect of the judgment of the Court of Appeal was to reverse this – except as regards SKAT's claim against ED&F Man.
It therefore was necessary to re-start the Original Proceedings and give fresh directions, including new dates for the Validity Trial and the Main Trial. This happened at a further CMC on 11 May 2022. Andrew Baker J gave directions for the Validity Trial to be heard in January 2023 and for the Main Trial to commence in April 2024.
Less than four weeks later, SKAT gave formal notice to ED&F Man of its intention to bring the claim now before the court – i.e., one in which SKAT alleges fraud and which is for the tort of deceit. This was by a letter before claim dated 6 June...
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