Issue Estoppel from Legal Determinations Bars Re‑Litigation Across Different Transactions: Court of Appeal in Skatteforvaltningen v MCML Ltd [2025] EWCA Civ 371

Introduction

The England and Wales Court of Appeal (Civil Division) has handed down a significant judgment refining the scope of issue estoppel and its application to determinations of law made on preliminary issues. In Skatteforvaltningen v MCML Ltd (Rev 1) [2025] EWCA Civ 371, the Court (Nugee, Newey and Popplewell LJJ) addressed whether a fresh deceit action brought by the Danish tax authority (SKAT) against MCML Ltd (formerly ED&F Man Capital Markets Ltd, “EDFM”) should be struck out as barred by issue estoppel and/or as an abuse of process (Henderson v Henderson).

The litigation arises from the extensive “cum‑ex” dividend arbitrage claims in which SKAT alleges it was induced to refund Danish Withholding Tax (WHT) to applicants who were not entitled to it. Following a 2021 preliminary issue decision, Andrew Baker J had dismissed all SKAT’s claims as inadmissible under the “foreign revenue rule” (Dicey Rule 3, now Rule 20), a conclusion reversed on appeal as to other defendants but left standing as to EDFM because SKAT chose not to pursue Ground 1 of its appeal against EDFM.

In 2022, SKAT issued new proceedings against EDFM, now pleading fraud (deceit) and focusing on 286 applications supported by EDFM “Tax Vouchers” (with 5 vouchers not featured in the 2018 proceedings). EDFM applied to strike out on two grounds: (i) issue estoppel, and (ii) Henderson v Henderson abuse of process. Bright J rejected both grounds. On appeal, the Court of Appeal has held that issue estoppel provides a complete defence (by majority), though it agreed there was no Henderson abuse.

The case sets a noteworthy precedent: a legal determination made on a preliminary issue—here, the application of the foreign revenue rule to SKAT’s private law claims—can generate an issue estoppel extending to later, similar claims even when they concern different transactions and even if later events (including Supreme Court guidance) suggest the earlier legal conclusion was wrong in general. Finality prevails where the party elected not to pursue the appeal against a particular opponent.

Summary of the Judgment

• Background: In 2018, SKAT sued numerous defendants, including EDFM (then ED&F Man), alleging that WHT refund payments were induced by misrepresentations. Against EDFM, SKAT pleaded negligent misrepresentation. Andrew Baker J dismissed all claims as inadmissible under the foreign revenue rule. SKAT appealed only as against other defendants (on the core “rule does not apply” ground) and succeeded in the Court of Appeal and the Supreme Court. Claims against EDFM remained dismissed because the appeal was not pursued against them.
• Current proceedings: In 2022, SKAT sued EDFM afresh in deceit over 286 tax voucher-backed claims (including 5 vouchers not previously pleaded). EDFM sought strike‑out for issue estoppel and abuse of process. Bright J refused.
• Court of Appeal outcome:
  • Issue estoppel (majority: Newey and Popplewell LJJ): The appeal was allowed in full. A prior determination that SKAT’s private law claims to recover WHT refunds based on applications conveying misinformation were barred by the foreign revenue rule was fundamental to the earlier decision and creates an issue estoppel precluding the entire new action, including vouchers not previously pleaded.
  • Issue estoppel (Nugee LJ, partial view): Nugee LJ would have barred the claims only insofar as they concerned the same 420 vouchers pleaded in 2018, but allowed the 5 “new voucher” claims to proceed. The majority disagreed.
  • Henderson v Henderson abuse: All Lords Justices agreed there was no abuse of process. Although SKAT breached the Aldi guidelines by not flagging its intention to bring fraud claims earlier, the breach did not oppress or prejudice EDFM and did not justify striking out on abuse grounds.
• Effect: The current proceedings are struck out in their entirety by reason of issue estoppel. The abuse ground fails but is overtaken by the estoppel outcome.

Analysis

Precedents Cited and Their Influence

• Foreign Revenue Rule lineage:
  • Government of India v Taylor [1955] AC 491: foundational authority for the foreign revenue rule (no enforcement in English courts of a foreign state’s penal, revenue or other public laws).
  • Dicey, Morris & Collins Conflict of Laws (Rule 3, now Rule 20): English courts will not entertain actions that directly or indirectly enforce a foreign revenue law.
  • SKAT v Solo Capital Partners (CA) [2022] EWCA Civ 234; (SC) [2023] UKSC 40: The appellate decisions establishing that SKAT’s claims against other defendants were not revenue claims because no tax was ever due from those recipients—refining the scope of the foreign revenue rule for fraud claims. Crucially, these later rulings did not apply to EDFM because SKAT did not pursue Ground 1 against EDFM in 2022.
• Issue estoppel and res judicata:
  • Duchess of Kingston’s Case (1776) 20 State Tr 355: early articulation of finality on issues directly decided.
  • Thoday v Thoday [1964] P 181: Diplock LJ’s classic statement distinguishing cause of action estoppel and issue estoppel (para 57 of the judgment).
  • New Brunswick Railway Co v British and French Trust [1939] AC 1: relied upon by Nugee LJ to argue that a previous decision on one contract does not estop construction of a distinct contract; distinguished by the majority as involving a default judgment and different instruments.
  • Hoystead v Commissioner of Taxation [1926] AC 155: Privy Council—estoppel extends to points which were “in substance the ratio of and fundamental to” the decision; supports estoppel on issues of law and of mixed law and fact.
  • Arnold v National Westminster Bank [1991] 2 AC 93: acknowledges “special circumstances” where issue estoppel may not apply (e.g., further material or a change in law), but no such argument was pursued here.
  • Mills v Cooper [1967] 2 QB 459; Carl Zeiss Stiftung v Rayner & Keeler (No 2) [1967] AC 853; Watt v Ahsan [2008] 1 AC 696: confirm that issue estoppel can attach to determinations of law and mixed law and fact, not only to facts.
• Abuse of process and case management:
  • Henderson v Henderson (1843) 3 Hare 100: the foundational principle against raising in later proceedings matters that should have been raised earlier.
  • Johnson v Gore‑Wood [2002] 2 AC 1: Lord Bingham’s “broad, merits‑based” approach; no rigid rule that everything that could have been raised must be raised.
  • Aldi Stores v WSP [2007] EWCA Civ 1260: litigants must tell the court about additional claims and how they propose to pursue them to enable efficient case management.
  • Virgin Atlantic v Zodiac [2013] UKSC 46: a restatement of the taxonomy of res judicata and abuse.
  • Investec Trust (Guernsey) Ltd v Glenalla [2018] UKPC 7; Finzi v Jamaican Redevelopment Foundation [2023] UKPC 29: cited on burden and fairness in abuse contexts; overall burden remains on the party alleging abuse, though lack of explanation by a claimant can be telling.

Legal Reasoning

1) Issue Estoppel: When a Preliminary Legal Determination Binds Later, Different Transactions

The core dispute was whether SKAT was estopped from arguing—against EDFM—that its private law claims for compensation (to recover payments made in ostensible WHT refunds based on misinformation) were not caught by the foreign revenue rule in circumstances where Andrew Baker J had previously determined the opposite on a preliminary issue, SKAT had not appealed that determination as against EDFM, and an order in 2022 had recorded that the claim against ED&F Man “as alleged” was inadmissible under Dicey Rule 3.

Three positions emerged:

• Nugee LJ (partial estoppel): The issue estoppel bars SKAT’s claims insofar as they concern the same 420 Tax Vouchers pleaded in the 2018 proceedings. However, it does not bar claims on five additional vouchers not previously pleaded. Nugee LJ considered that extending estoppel to the five new vouchers would convert a legal proposition into an abstract rule untethered to the specific facts that were before the court in 2018 (paras 80–83). He drew on New Brunswick to emphasise that an issue in a later case, even if “precisely similar”, is not necessarily “the same” issue unless tied to the same transaction(s).
• Newey LJ (complete estoppel): The issue decided by Baker J was a determinate legal conclusion tied to a defined factual situation—whether private law claims to recover WHT refunds paid on applications conveying misinformation amount to indirect enforcement of Danish revenue law (para 131). That conclusion was fundamental to the previous decision and engages issue estoppel. Estoppel can (and does) arise on issues of law or mixed law and fact (paras 134–135), and New Brunswick is distinguishable (default judgment; construction of distinct documents). No Arnold “special circumstances” were invoked. Hence the estoppel extends to all like claims between these parties, including the five new vouchers (paras 139–143).
• Popplewell LJ: Agreed with Newey LJ. Issue estoppel provides a complete defence to the current proceedings.

The majority thus clarifies that:

• Issue estoppel can arise from a legal determination that is fundamental to a prior decision on a preliminary issue.
• The estoppel may transcend individual transactions where the same issue arises between the same parties in materially indistinguishable circumstances, even if the later action pleads a different cause of action (deceit instead of negligence) or varies immaterial factual particulars.
• The fact that the Supreme Court later explained the foreign revenue rule more narrowly (in relation to other defendants) does not relieve the party from the earlier binding determination where it declined to pursue the point of law against this particular defendant—and no Arnold “special circumstances” were relied upon to avoid the estoppel.

As to distinctions between negligence (2018) and deceit (2022), the Court observed that Andrew Baker J’s characterisation of SKAT’s claims as revenue enforcement did not turn on the degree of fault (paras 24, 85–87). Hence, restating the claims in fraud did not alter the legal issue that had been decided and now estops SKAT.

2) Henderson v Henderson Abuse: Breach of Aldi Guidance, But No Oppression or Prejudice

The Court endorsed Bright J’s structured analysis and his “broad merits” evaluation per Johnson v Gore‑Wood.

• When could SKAT have pleaded fraud? On the evidence, SKAT needed to review EDFM’s sizeable disclosure (nine tranches to March 2021) with expert input. Mr Wade’s first expert report (31 December 2021) enabled SKAT to plead fraud by early January 2022 (paras 102–103).
• Aldi guidance breach: SKAT should have told the Court of Appeal (January 2022) and Andrew Baker J (May 2022) of its intention to plead fraud (paras 111–113). However, the failure did not oppress or prejudice EDFM: it would not have changed the practical litigation posture or outcomes in a way that made EDFM worse off (paras 113–118).
• Public interest vs court resources: While the non‑notification hindered case management efficiency (para 115), the countervailing public and private interests—particularly that serious fraud allegations should be ventilated—meant striking out for abuse would be unjust (paras 120–121).
• Burden of proof: The overall burden to show abuse lies on the applicant (EDFM). The Court rejected a “shifting evidential burden” formulation as determinative, though lack of claimant explanation can be relevant. On the facts, the conclusion would have been the same (paras 96–103).

The upshot is clear guidance: breach of the Aldi guidelines is a serious case management failing, but it is not ipso facto abusive; the party alleging abuse must demonstrate real oppression, harassment or prejudice or other circumstances justifying the court in shutting out the claim.

Impact and Implications

1) Finality and Litigation Strategy in Multi‑Defendant, Multi‑Transaction Cases

• Appeal decisions must be inclusive: Parties who tactically limit an appeal on a preliminary issue (here, SKAT not pursuing the core revenue rule point against EDFM) may become irrevocably bound by an adverse determination in relation to that party, even if later appellate authority favours their position generally as against others.
• Issue estoppel can bind across transactions: The majority confirms that an issue estoppel rooted in a fundamental legal determination is not confined to the specific transactions that happened to be pleaded the first time. Where the issue is the same between the same parties, later claims on different but materially similar transactions can be barred.
• Cause of action “re‑badging” will not avoid estoppel: Reframing negligence claims as deceit will not sidestep an earlier binding determination on a fundamental legal issue, if fault levels did not matter to that earlier determination.
• Consider Arnold “special circumstances” early: Where there has been a later change in the law or new material not reasonably available earlier, a party wishing to escape an estoppel should squarely invoke Arnold. SKAT did not do so. Absent such “special circumstances”, finality prevails.

2) Cum‑Ex and the Foreign Revenue Rule

• Substantive law vs procedural finality: The Supreme Court has clarified that where no tax was due by the refund recipient, claims to recover payments induced by fraud are civil claims, not revenue enforcement. Yet as to EDFM, SKAT remains bound by the earlier contrary determination because it did not appeal against EDFM. Finality can trump subsequently clarified legal correctness between the same parties.
• Party‑specific outcomes: For other defendants in the cum‑ex litigation, SKAT’s claims continue (the Validity Trial and ongoing Main Trial). For EDFM, the claims are now definitively barred by estoppel.

3) Case Management: Aldi Compliance and Henderson Abuse

• Notify the court: Litigants must inform the managing court of intended further claims or amendments, especially in complex consolidated proceedings. A failure may not automatically be abusive, but it risks sanctions and strategic disadvantage.
• Abuse requires prejudice or oppression: The Court’s emphasis on a merits‑based assessment underscores that strike‑out for abuse is a last resort, especially where serious allegations of fraud remain to be determined and the opposing party cannot demonstrate material prejudice from the timing or forum.

Complex Concepts Simplified

• Danish Withholding Tax (WHT): Danish companies withhold 27% of declared dividends and pay that amount to SKAT. Certain non‑resident investors (e.g., US tax‑exempt pension plans) are entitled by treaty to refunds of WHT.
• Tax Vouchers: Documents produced by intermediaries (here, EDFM) used in support of refund applications, stating holdings, dividend receipts, and WHT suffered. SKAT says false vouchers induced it to pay refunds to those not entitled.
• Ex Date, Record Date, Pay Date: Dividends are declared and then paid on a Pay Date to shareholders on the Record Date. After the Ex Date, shares trade without the dividend entitlement.
• “Cum‑Ex” trading: A trade executed before the Ex Date but settled after the Record Date, meaning the buyer does not receive the dividend. Structures of this kind provided the context for the alleged misrepresentations in some refund claims.
• Foreign Revenue Rule (Dicey Rule 3/20): English courts will not enforce foreign penal or revenue laws, directly or indirectly. The Supreme Court has clarified that where no tax was due from the recipient, claims to recover fraud‑induced payments are not barred by the rule. However, party‑specific estoppel may still bite.
• Issue estoppel vs cause of action estoppel: Issue estoppel prevents relitigation of an issue (fact, law, or mixed) that was necessary and fundamental to a previous decision between the same parties, even if the later claim is a different cause of action. Cause of action estoppel bars relitigation of the same cause of action itself.
• Henderson v Henderson abuse: A party should not raise in later proceedings matters that could and should have been raised earlier. The test is a broad, merits‑based assessment focused on fairness and the avoidance of oppression, not a rigid rule.
• Aldi guidelines: Litigants must alert the court managing existing proceedings to any intended additional claims or separate actions, so the court can coordinate and avoid duplication.
• Arnold “special circumstances” exception: Even where an issue estoppel exists, if there has been a material change in the law or new material not reasonably available earlier, a court may permit the issue to be revisited to work justice. This exception was not relied upon by SKAT in this appeal.

Conclusion

The Court of Appeal’s decision in Skatteforvaltningen v MCML Ltd makes two clarifying contributions of general importance:

• Issue estoppel can spring from legal determinations on preliminary issues and extend across different transactions. Where a legal conclusion was fundamental to a previous decision between the same parties, it will bind them in later, similar cases—even if the later claim reframes the cause of action (e.g., negligence to deceit) or involves additional transactions—unless “special circumstances” justify departure. The majority’s approach narrows the room for re‑litigation by re‑pleading or by slicing claims into new transactions.
• Breach of Aldi guidelines does not automatically equal Henderson abuse. While parties must alert the court to intended claims, strike‑out for abuse demands a concrete showing of oppression or prejudice and a merits‑based evaluation of the public interest in resolving serious allegations. The Court’s stance is pragmatic: sanction procedural failings through costs or directions, not by summarily extinguishing potentially meritorious claims absent real injustice.

Practically, the decision is a cautionary tale for complex, multi‑defendant litigation. A party’s tactical choice not to pursue an appeal against a particular opponent on a preliminary issue can cement an adverse legal finding into a binding estoppel, even if later appellate authority favours its general position against others. Where a later change in the law or new material might justify reopening, the Arnold route must be squarely invoked and justified.

For the cum‑ex litigation, the result is party‑specific: SKAT’s claims continue against others, but as to EDFM they are finally barred—not because of the foreign revenue rule as now understood in general, but because of the binding effect of the earlier unappealed determination. Finality prevails.