Test Claimants in the Franked Investment Income Group Litigation and Others v Revenue and Customs Commissioners; Test Claimants in the Franked Investment Income Group Litigation and Others v Revenue and Customs Commissioners
| Jurisdiction | England & Wales |
| Judgment Date | 20 November 2020 |
| Neutral Citation | [2020] UKSC 47 |
| Court | Supreme Court |
Limitation of action - Postponement of limitation period - Mistake - Claimants claiming repayment of tax paid under mistake of law - Claimants contending that running of limitation postponed until mistake discovered or discoverable with reasonable diligence - Revenue conceding that postponement of limitation period available in actions for relief from consequences of mistake of law - Whether revenue barred from withdrawing concession on appeal on grounds of res judicata, estoppel or abuse of process - Whether postponement of limitation period applying to mistakes of law as well as fact - Proper approach to date on which claimant “could with reasonable diligence have discovered” mistake of law -
The taxpayers brought claims against the revenue for the restitution of tax paid by them under a mistake of law, the basis of the claims being that the tax regimes pursuant to which the tax had been paid breached European Union law. Pursuant to a group litigation order which was made in order to determine a number of common or related questions of law that arose in similar cases, the taxpayers were chosen as test claimants. Since the payments of tax in issue had been made over the 30 years prior to the issue of the taxpayers’ claims, a large element of their claims would normally have been time-barred under section 5 of the Limitation Act 1980F1. Accordingly, the taxpayers relied on section 32(1)(c) of the 1980 Act, which applied to an “action for relief from the consequences of a mistake” and postponed the commencement of the limitation period until the claimant had discovered the mistake “or could with reasonable diligence have discovered it”. Following a reference from the trial judge, the Court of Justice of the European Union gave a judgment in which it decided that the tax regimes in question were contrary to European Union law. Applying that decision, the judge allowed some but not all of the claims. Both the taxpayers and the revenue appealed. Relying on two decisions of the House of Lords, the taxpayers argued (i) that section 32(1)(c) applied to mistakes of law as well as mistakes of fact and (ii) that when a mistake of law was involved section 32(1)(c) postponed the commencement of the six-year limitation period until the true state of the law had been established by a judicial decision from which there was no right of appeal, which in the present case was when the Court of Justice had given judgment. The revenue conceded that section 32(1)(c) applied to mistakes of law. Considering itself bound by the previous House of Lords decisions, the Court of Appeal found in favour of the taxpayers. The revenue appealed. The taxpayers argued, among other things, that the revenue were barred from raising the argument that section 32(1)(c) did not apply to mistakes of law, on the grounds of res judicata, estoppel or abuse of process.
On the appeal—
Held, (1) that the revenue were not barred from now raising the argument that section 32(1)(c) of the Limitation Act 1980 did not apply to mistakes of law, whether on the grounds of res judicata, estoppel or abuse of process; that, in particular, since res judicata, or cause of action estoppel, operated only to prevent the raising of points which were essential to the existence or non-existence of a cause of action it did not prevent the raising of points relating to a defence of limitation, which had no bearing on the existence or non-existence of the cause of action in question; that, further, the revenue’s challenge did not amount to an abuse of process given that (i) the group litigation raised novel legal issues of unparalleled complexity, (ii) the group litigation had been the subject of case management decisions determining the order in which those issues were to be addressed and (iii) it was understandable why, in the first phase of litigation, the revenue had focused on arguments which, if successful, would have made it unnecessary to mount the present wider challenge; and that, in the light of those factors, as well as the substantial value of the claims, the importance of the issues to other claimants, both within and outside the group litigation, and the potential to remedy any past prejudice, the revenue would be permitted to withdraw their concession (post, paras 63, 69, 71, 76–82, 94–100).
(2) (Lord Briggs and Lord Sales JJSC dissenting) that when section 32(1)(c) of the 1980 Act was enacted, it could only have applied to claims in respect of mistakes of fact, since those were the only mistakes which, at that time, had given rise to an “action … for relief from the consequences of a mistake”; that, however, the subsequent development in the law so as to allow claims to be brought for relief from the consequences of a mistake of law should be addressed by bringing such claims within the ambit of section 32(1)(c); that such a construction reflected the ordinary meaning of the language used in the provision and was consistent with its purpose, namely to postpone the commencement of the limitation period in respect of a claim for relief from the consequences of a mistake where, as a result of the mistake, the claimant could not reasonably have known of the circumstances giving rise to his cause of action at the time when it accrued; that that approach best gave effect to Parliament’s intention to relieve claimants from the necessity of complying with a time limit at a time when they could not reasonably be expected to do so, and did not have unacceptable consequences for the legal certainty which the 1980 Act was primarily designed to protect; and that, accordingly, section 32(1)(c) of the 1980 Act applied to claims for the restitution of money paid under a mistake of law (post, paras 219–222, 225–229, 242, 243).
(3) Allowing the appeal, that section 32(1)(c) of the 1980 Act could not have been intended to have the effect that the date of discoverability of a mistake of law was tied to the date on which “the truth” as to whether the claimant had a well-founded cause of action was established by a court of final jurisdiction, since limitation periods applied regardless of whether the substance of the claim was disputed and regardless of whether there was “in truth” a well-founded cause of action; that the purpose of the postponement effected by section 32(1) was to ensure that the claimant was not disadvantaged by reason of being unaware of the circumstances giving rise to his cause of action as a result of fraud, concealment or mistake; that, where the ingredients of the cause of action included his having made a mistake of law, that purpose was achieved if time ran from the point in time when the claimant discovered, or could with reasonable diligence have discovered, his mistake in the sense of recognising that a worthwhile claim had arisen; that that approach brought section 32(1)(c) into line with section 32(1)(a), concerning fraud, and with other analogous provisions of the 1980 Act, as well as the meaning given by the courts to “discovery” in other statutory contexts and the courts’ interpretation of “reasonable diligence” under section 32(1); that since the Court of Appeal had applied the incorrect approach to discoverability in the present case, the revenue’s appeal would be allowed; but that, since the Supreme Court was not in a position itself to determine, on the basis of evidence, the point in time when the taxpayers could, with reasonable diligence, have discovered their mistake, that question would be remitted to the High Court to determine after the parties had had the opportunity to amend their pleadings (post, paras 173–180, 183, 185–187, 191–193, 195–197, 199, 201–203, 209, 213, 214, 254, 255–257).
The following cases are referred to in the judgments:
AB v Ministry of Defence
Aldi Stores Ltd v WSP Group plc
Anglo-Scottish Beet Sugar Corpn Ltd v Spalding Urban District Council [
Anns v Merton London Borough Council [
Arnold v National Westminster Bank plc [
Aspect Contracts (Asbestos) Ltd v Higgins Construction plc
Assistant Engineer (D1) Ajmer Vidyut Vitran Nigam Ltd v Rahamatullah Khan Alias Rahamjulla
Austin v Southwark London Borough Council
Baker v Courage & Co [
Banque Financière de la Cité v Parc (Battersea) Ltd [
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