Factual and Procedural Background
This opinion concerns seven applications by claimants enrolled in the FII Group Litigation seeking summary judgment or, alternatively, interim payments for restitution of advance corporation tax ("ACT") paid on foreign income dividends ("FIDs") between 1 July 1994 and 5 April 1999, when ACT was abolished. The claimants represent seven groups with claims totaling approximately £207 million. The litigation follows a complex procedural history involving multiple references to the Court of Justice of the European Union (ECJ), and proceedings in the High Court, Court of Appeal, and Supreme Court. The judgment assumes familiarity with prior decisions in the FII Group Litigation, including key rulings on the unlawfulness of the FID regime and the application of the standstill provision of EU law.
The claimants seek to replicate the success of earlier test claimants (the "BAT test claimants") who succeeded in recovering ACT paid on FIDs. The applications are made under Civil Procedure Rules (CPR) for summary judgment or, failing that, for interim payments. The defendants, representing HM Revenue and Customs ("HMRC"), oppose the applications on the basis that the relevant law is not settled and raise procedural objections including the existence of a stay and statutory restrictions on interim payments.
The factual background includes detailed accounts of the payment, matching, and repayment of FIDs and ACT by each claimant group, reflecting the complex and self-contained nature of the FID regime, which required matching FIDs with foreign profits bearing underlying tax in excess of the UK corporation tax rate.
Legal Issues Presented
- Whether the unlawfulness under EU law of the ACT paid on FIDs has been established so clearly that there is no real prospect of HMRC successfully defending claims for restitution of that ACT and its time value.
- Whether summary judgment is appropriate for the claimants on their FID claims under CPR rule 24.2.
- Whether, alternatively, interim payments should be ordered under CPR rule 25.7(1), subject to restrictions imposed by section 234 of the Finance Act 2013.
- Whether procedural objections raised by HMRC, including the existence of a stay and timing of defence filings, bar the applications for summary judgment.
- Issues concerning the quantification of claims, including the appropriate treatment of compound interest after repayment or utilisation of ACT and the pending dispute relating to one claimant's (Perkins) FID ACT repayment.
Arguments of the Parties
Claimants' Arguments
- The FID regime has been definitively held unlawful by the ECJ and subsequent appellate courts, entitling claimants to restitution of ACT paid on FIDs.
- The claimants satisfy the test for summary judgment because HMRC have no real prospect of successfully defending the claims and there is no compelling reason for trial.
- In the alternative, interim payments should be granted as the claimants would obtain judgment for a substantial amount if the claims proceeded to trial.
- HMRC waived any procedural objections related to the stay by participating in case management and agreeing to directions without raising the stay issue in a timely manner.
- The FID claims relate to a self-contained legislative regime distinct from ordinary dividends, justifying separate treatment and summary disposal.
HMRC's Arguments
- HMRC contend that the law as stated in the High Court judgment is wrong or at least arguable, so summary judgment is inappropriate.
- Technical objections are raised, including that summary judgment is not available on parts of claims, the applications are premature due to a stay, and that CPR rules restrict summary judgment applications against the Crown before the expiry of the defence filing period.
- HMRC accept that interim payment conditions are met in principle but rely on section 234 of the Finance Act 2013 to restrict interim payments in tax matters unless exceptional circumstances are shown.
- HMRC argue that the FID ACT claims should not be distinguished from non-FID ACT claims and that the matching and tracing methodologies should apply.
- HMRC maintain that some quantification issues remain unsettled, including the application of compound interest post-repayment and specific disputes in the Perkins claim.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| FII (ECJ) I, II, III |
Lawfulness of the FID regime under EU law, including Articles 43, 56, and 57(1) EC (now Articles 49, 63, and 64(1) TFEU) |
ECJ rulings established unlawfulness of the FID regime; court relied on these rulings as definitive on the unlawfulness of ACT on FIDs. |
| FII (High Court) I & II |
Application of ECJ rulings to liability and quantification of claims for restitution of ACT on FIDs |
High Court judgments established entitlement to restitution and quantified claims, forming the basis for summary judgment applications. |
| FII (CA) I & II |
Application of standstill provision and estoppel principles; conforming interpretation of domestic tax law |
Court of Appeal confirmed that the standstill provision did not protect the FID regime; estopped HMRC from re-litigating settled issues. |
| Johnson v Gore Wood [2002] 2 AC 1 |
Abuse of process and estoppel principles (Henderson v Henderson doctrine) |
Applied to prevent HMRC from raising arguments inconsistent with earlier decisions in the same litigation. |
| Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850 |
Principles of waiver and estoppel in procedural context |
Used to find HMRC waived their right to object to the stay on procedural grounds. |
| Littlewoods Ltd v Revenue and Customs Commissioners [2015] EWCA Civ 515 |
Appropriate measure of restitution including compound interest |
Supported the claimants' entitlement to compound interest on restitution claims, though appeal pending. |
| Six Continents Ltd and Another v HMRC [2015] EWHC 2884 (Ch) |
General principles for summary judgment and interim payment applications in group litigation |
Principles summarized and applied to the present applications. |
Court's Reasoning and Analysis
The court began by affirming that the unlawfulness of the FID regime under EU law has been definitively established by the ECJ and subsequent appellate courts, including the Court of Appeal. The ECJ considered the FID regime as a composite whole and found it infringed Articles 43 and 56 EC, with the only unresolved issue being the application of the standstill provision to third country FIDs, which was later resolved against HMRC.
The court rejected HMRC's arguments that the law is unsettled or that the FID ACT should be treated similarly to non-FID ACT. It emphasized the self-contained nature of the FID regime, including the matching rules linking FIDs to foreign profits taxed above the UK rate, which precludes HMRC's tracing methodologies.
Procedural objections raised by HMRC were addressed in detail. The court found that HMRC waived their right to object to the stay by participating in case management and agreeing to directions without timely objection. The court construed CPR rules to allow summary judgment on parts of claims and held that the stay and timing of defence filings did not bar the applications.
Regarding quantification, the court accepted that most issues fall away given the unlawfulness of the regime but declined to grant summary judgment on claims for compound interest after ACT repayment or utilisation, due to pending Supreme Court appeal on this issue. The court also declined summary judgment on disputed parts of the Perkins claim pending First-tier Tribunal proceedings.
The court concluded that summary judgment should be granted on the FID ACT claims except for the limited exceptions noted. Because summary judgment was granted, it was unnecessary to rule on the complex issues raised by section 234 of the Finance Act 2013 concerning interim payments.
Holding and Implications
Holding: The court GRANTED SUMMARY JUDGMENT in favour of the claimants on their claims for restitution of ACT paid on FIDs, except for (i) claims for compound interest after repayment or utilisation of ACT and (ii) the disputed portion of the Perkins claim subject to pending proceedings.
Implications: The decision confirms that the unlawfulness of the FID regime under EU law entitles claimants to restitution of ACT paid on FIDs, reinforcing prior rulings and limiting HMRC's ability to defend such claims. The ruling allows the majority of the present claims to be resolved without trial, expediting remedy for claimants. The exceptions identified will proceed to trial or be resolved following further appellate decisions. No new legal precedent was established beyond confirming and applying existing authorities. The court declined to address interim payment issues under statutory restrictions, leaving those questions for future cases.