The Claimants in the Royal Mail Group Litigation v Royal Mail Group Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 23 January 2020 |
| Neutral Citation | [2020] EWHC 97 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2015-000702 |
| Date | 23 January 2020 |
[2020] EWHC 97 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Mann
Case No: HC-2015-000702
Roderick Cordara QC and Lyndsey Frawley (instructed by Mishcon de Reya LLP) for the Claimants
Javan Herberg QC and Emily Neill (instructed by Macfarlanes LLP) for the Defendant
Hearing dates: 14 th to 18 th, and 21 st to 22 nd October 2019
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.
| Introduction | |
| History and background — more detail | |
| The possible consequences of ultmate success for the claimants | |
| The facts and assumptions on which this judgment is based | |
| The issues | |
| The main relevant UK legislation | |
| Issue 1 — the alleged statutory duty — source and arguments | |
| The structure of VAT so far as it concerns the provision of invoices — European legislation | |
| Issue 1 — other relevant legislation and the width of the discretion to accept alternative evidence of the payment of input tax | |
| Issue 1 — Statutory duty — conclusion | |
| Issue 6 — Contractual duty — general background and general law | |
| Contractual duty — background facts and factual matrix | |
| Contractual duty — construction | |
| Contractual duty — implication | |
| Issue 6 — contractual duty — conclusions | |
| Issue 9 — EU law obligations | |
| Issues 3, 4, 11 and 12 — limitation points on speciality, tort and actions for recovery of money due under a statute | |
| Action for a sum recoverable under a statute | |
| Conclusions on applicable limitation periods | |
| Issue 2 — Accrual of cause of action and continuing duty — statutory duty | |
| Issue 7 — accrual and continuing breach in contractual claims | |
| Issue 9 — the direct cause of action | |
| Issue 10 — the direct claim — continuing cause of action and accrual date | |
| Issue 5 — the applicability of limitation periods to injunctive relief | |
| Issue 8 — the applicability of limitation periods to specific performance | |
| Issue 13 — section 8 and equivalence | |
| Determinations |
Introduction
This action is the trial of certain issues that arise in this managed litigation in which around 340 claimants seek to establish that they are entitled to demand, or to have, VAT invoices from the defendant (“Royal Mail”) for a period spanning several decades. The actions derive from the fact that until 2009 it was, by and large, generally assumed that no VAT was chargeable on the postal services provided by Royal Mail because the services were exempt. The English VAT legislation seemed so to provide, and HMRC certainly acted on that footing. Then on 23 April 2009 the Court of Justice of the European Union (“CJEU”) ruled in a case called, for short, TNT1, that not all postal services were exempt. The universal postal service was exempt, but arrangements that were individually negotiated were not. That decision is said to have been a general surprise. 1 It took almost 2 years for English legislation to be brought into line (or so it was thought) but disputes as to what services are and are not within the realm of chargeable VAT continue to be the subject of dispute.
The claimants, who include commercial and non-commercial organisations such as universities and local authorities, all mount claims that in the circumstances the amounts that they paid for their services for the period up to, and in some cases beyond, the revised legislation were VATable even though Royal Mail did not seek to charge VAT through its invoices, and claim to be entitled to VAT invoices from Royal Mail so that they can use those invoices to reclaim input tax from HMRC. Mr Cordara QC, who appeared for the claimants before me, said that an optimistic ball-park figure for the total of the claims, if successful, was £500m. Any global recoveries to which they may be entitled may be very much less than that, depending on such things as whether there is a cause of action, and if so its scope; limitation; whether certain services rendered since 2011 were VATable but not properly so treated by Royal Mail; and other matters. The ball-park figure gives an idea of the potential scope of the claims.
The litigation gives rise to a large number of issues. The view has been taken that it would not be sensible to try them all at once, even by taking individual litigants and running the whole of their claims, so attempts were made to separate out some issues to try to break up the litigation into manageable and sensible chunks and perhaps to whittle down some of the claims. The issues which I am invited to decide are principally targeted at answering some questions about limitation, which has an obvious potentially limiting effect on the scope of the claims. Unfortunately, the attempt at useful preliminary issues has suffered in part from the defects which not infrequently attend such attempts, in that the argument demonstrated that they were not really set up adequately, contrary to the expectations of the parties, as will appear.
In this action Mr Roderick Cordara QC led for the test claimants; Mr Javan Herberg QC led for the defendant Royal Mail.
History and background — more detail
In these preliminary issues no distinction is drawn between Royal Mail and its predecessors, including the Post Office and Consignia plc. They can be treated as one for the purposes of liability in this judgment. I shall use “Royal Mail” throughout.
From more or less the outset, European and UK VAT legislation provided for exemption for postal services. It is unnecessary to trace the versions of the exemption from time to time, and it is sufficient to take Directive and UK statute law in force at the time the matter took an unexpected turn in 2009.
Article 13A of the Sixth Directive stated:
“1. Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse:
(a) the supply by the public postal services of services other than passenger transport and telecommunications services, and the supply of goods incidental thereto …”
In the UK this was given effect to by section 31 and Schedule 9 of the Value Added Tax Act 1994 (“ VATA”). Section 31 provides for exempt supplies if they are as described in Schedule 9, and the Schedule describes:
“1. The conveyance of postal packets by the Post Office.
2. The supply by the Post Office of any services in connection with the conveyance of postal packets.”
Royal Mail operated, and operates, a number of services in addition to what the consumer would understand to be the regular mail delivery service. There were and are various parcel services, with differing provisions for delivery, collection and sorting. Some examples appear below. They were provided by Royal Mail under various contracts, and (in the case of franking services) statutory schemes.
Until the 2009 decision of the CJEU Royal Mail did not distinguish between those services for VAT purposes. They were all treated by all concerned as being within the statutory VAT exemption. The result was that no VAT invoices showing VAT were rendered. All concerned (Royal Mail, customers and indeed HMRC) worked on the footing that that was the correct approach — that is one of the agreed asssumptions (“the Assumptions”) for the purposes of this hearing, as will appear. Accordingly, Royal Mail did not account to HMRC for any output tax, and customers did not claim credit for any input tax. So far as invoices were concerned, when rendered they did not show, or purport to charge, VAT. Not all services necessarily generated any invoices in respect of all payments — for example, it is not apparent that invoices were generated in respect of all payments for franking services.
That state of affairs was challenged by another provider of mail and parcel services and the challenge was referred to the CJEU by the Administrative Court. The result was the decision in R (on the application of TNT Post UK Ltd) v HMRC [2009] STC 1438 — “TNT1”. In that decision the CJEU held:
“44. It follows from the requirements referred to at [31] of this judgment that the exemption provided for in art.13A(1)(a) must be both strictly interpreted and interpreted consistently with the objectives of that provision, that the supplies of services and of goods incidental thereto must be interpreted as being those that the public postal services carry out as such, that is, by virtue of their status as public postal services.
…..
49. Consequently, the answer to the second and third questions is that the exemption provided for in art.13A(1)(a) of the Sixth Directive applies to the supply by the public postal services acting as such—that is, in their capacity as an operator who undertakes to provide all or part of the universal postal service in a Member State—of services other than passenger transport and telecommunications services, and the supply of goods incidental thereto. It does not apply to supplies of services or of goods incidental thereto for which the terms have been individually negotiated.”
That required a reconsideration of how to implement the law, and the UK sought to bring its legislation into line with that decision by amending Schedule 9 with effect from 31 January 2011 to read:
“1. The supply of public postal services by a universal...
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