Anonymized Summary of the Opinion
Factual and Procedural Background
This judgment concerns a long-running group litigation (the "FII Group Litigation") about the UK tax treatment of dividends received by UK parent companies from foreign subsidiaries and the restitution of tax paid under a mistake of law. The group litigation has proceeded through multiple references to the Court of Justice of the European Union (CJEU) and several appeals to the Supreme Court.
The central procedural backdrop is a limitation dispute: whether the limitation period for claims in restitution (unjust enrichment) was postponed under section 32(1)(c) of the Limitation Act 1980 because the payments were made under a mistake of law, and if so, when the limitation period began to run (the "date of discoverability").
Four representative test claims were selected to decide the limitation question. For anonymity these test claimants are referred to as Company A (issued 12 July 2002), Company B (issued 18 June 2003), Company C (issued 2 March 2007) and Company D (issued 18 December 2009). The tax authority is referred to throughout as the Defendant.
Earlier decisions material to these proceedings include a High Court trial judgment that found for the claimants on the restitution issue, an appellate decision taking a later date of discoverability, and a Supreme Court judgment that resolved legal questions about the applicable test under section 32(1)(c) and remitted the factual question of when the mistake could with reasonable diligence have been discovered to the High Court. The High Court (Judge Richards) held that the date of discoverability was 6 June 2000 (the date of the CJEU judgment in Verkooijen). The Defendant appealed and Company C cross-appealed. The appeal and cross-appeal were dismissed by the court whose reasons are summarized below.
Legal Issues Presented
- When did the limitation period start to run under section 32(1)(c) of the Limitation Act 1980 in respect of restitution claims based on payments of corporation tax that were later held by the CJEU to have been made under a domestic regime incompatible with EU law (i.e. the correct date of discoverability)?
- How should the test formulated by the Supreme Court be applied to multi-national corporate claimants seeking advice from appropriately qualified advisers — specifically, what would a "well-advised multi-national group in the UK" have discovered with reasonable diligence at relevant dates?
- Whether the High Court erred in fact or law in the identification and application of the relevant professional consensus and in the factual findings about what an Appropriate Adviser would have advised at relevant times.
Arguments of the Parties
Defendant's Arguments (appeal)
- The High Court misapplied the Supreme Court's test from the earlier Supreme Court decision. It required a greater degree of certainty about the law before concluding that a claim was "worthwhile" than the Supreme Court intended.
- The High Court adopted a flawed methodology for ascertaining the date of discoverability by over-emphasising a "high-level" assessment by an Appropriate Adviser, undervaluing detailed case-law analysis, and giving undue weight to a putative UK professional consensus.
- The High Court's finding that there existed a professional consensus that DV and ACT challenges were not worthwhile was irrational; there was insufficient contemporaneous documentary support for such a consensus.
- The High Court failed to account for all relevant evidence (including case law such as Avoir Fiscal, Daily Mail, Commerzbank and Bachmann) and relied unduly on hindsight in parts of its analysis.
Company C's Arguments (cross-appeal)
- The High Court selected too early a date for discoverability for the ACT Challenge. The reasoning in the CJEU decision in Verkooijen did not support the conclusion that an ACT Challenge would have been regarded as a worthwhile claim; the ACT Challenge should only have become discoverable later, for example, when the CJEU decided Hoechst.
- There were substantive differences between the DV Challenge and the ACT Challenge which meant Verkooijen could not reasonably have been treated as triggering discoverability for ACT-based claims.
Claimants' Position (as accepted by the High Court below)
- The payments of tax had been made under a mistake of law as subsequently established by the CJEU decisions, giving rise to restitution claims.
- Applying the Supreme Court's test, a well-advised multi-national exercising reasonable diligence could not have discovered the relevant mistake before the date identified by the High Court (6 June 2000), because the professional consensus and contemporary materials would not have supported the view that the Relevant UK Law contradicted Treaty freedoms earlier than that date.
Table of Precedents Cited
All precedent names and references are presented in anonymized form to remove identifying party names while preserving citation details and what the opinion says about each authority.
| Precedent (anonymized) |
Rule or Principle Cited For |
Application by the Court |
| Case A v Case B [1999] 2 AC 349 |
Established that s.32(1)(c) can apply to mistakes of law (i.e. payments made under a mistake of law may be caught by section 32(1)(c)). |
The court treated this precedent as settled authority that s.32(1)(c) is capable in principle of applying to mistakes of law; the case formed part of the legal context but the question of the date of discoverability remained factual and governed by the Supreme Court's later formulation. |
| Case C (Hoechst) [2001] Ch 620 |
This CJEU reference was used in earlier proceedings and is discussed as a date considered by some earlier judges to be relevant to discoverability in similar litigation. |
The judge below and the appellate court considered whether discoverability should be fixed at the date of this decision for ACT challenges; the appellate court rejected the contention that Hoechst was the appropriate earliest discoverability date for all purposes and held that Verkooijen (and related Advocate General opinion) established discoverability earlier for both DV and ACT challenges. |
| Case D (DMG) [2007] 1 AC 558 |
Cited for the proposition that when a point of law is actively disputed the date of discoverability might be the date a final appellate court states the law (the test later criticised by the Supreme Court). |
The Supreme Court overruled the DMG test as creating a logical paradox. In the present proceedings the court applied the corrected test from the Supreme Court rather than DMG. |
| Supreme Court decision (FII SC 2) [2020] UKSC 47; [2022] AC 1 |
Set out the correct legal test under s.32(1)(c) for mistakes of law: discoverability is when the claimant knows or could with reasonable diligence know of the mistake "with sufficient confidence to justify embarking on the preliminaries to the issue of a writ" or when the claimant recognises that "a worthwhile claim arises". Also clarified burden and objective standard of reasonable diligence. |
This Supreme Court formulation was the governing legal test applied by the High Court and affirmed by the appellate court in reviewing the date of discoverability. The appellate court inspected whether the High Court applied the test correctly and whether its factual findings were rational. |
| Case E (Verkooijen) [2002] STC 654 |
Cited for its holding and reasoning that a difference in tax treatment (in the Netherlands case) amounted to an unlawful restriction on free movement of capital where there was no direct link between the tax advantage/exemption and taxation of company profits in another Member State; the case rejected the cohesiveness justification applied in some earlier authorities. |
The High Court found that Verkooijen undermined the then-professional consensus that DV/ACT challenges were not viable. The appellate court accepted that Verkooijen materially dented the consensus and that it was a rational basis for the High Court's finding that discoverability occurred on 6 June 2000 (with a subsidiary view that the Advocate General's second Opinion in December 1999 could justify an even earlier discoverability date, though that did not affect the outcome). |
| Case F (Bachmann) [1992] ECR 1-249 |
Principle of "cohesiveness" of a tax system used in earlier cases to justify differences in tax treatment and to preclude certain Treaty-based challenges to direct taxation measures. |
The court treated Bachmann as a central component of the contemporaneous professional consensus which Verkooijen later distinguished; the High Court found that Verkooijen limited the scope for Bachmann-style cohesion justifications. |
| Case G (Schumacker) [1996] QB 28 |
Recognised an exception to non-comparability in direct tax where a non-resident's factual situation was sufficiently similar to a resident's. |
The opinion notes that Schumacker invited examination of whether member-state tax competences complied with Treaty freedoms; however the judge below found that Schumacker and Hoechst did not undermine the professional consensus prior to Verkooijen as to the viability of DV/ACT challenges. |
| Case H (Avoir Fiscal) [1986] ECR 273 |
One of the CJEU authorities discussed as part of the legal landscape regarding cross-border tax measures and their interaction with Treaty freedoms. |
The judge considered this and other early authorities when evaluating what an Appropriate Adviser would have concluded; the judge concluded that those authorities did not, on their own, provide a basis for discovering the mistake before the date he identified. |
| Case I (Daily Mail) [1989] QB 446 |
Part of the earlier case law examined by the court when considering how legal thinking developed in respect of direct taxation and Treaty freedoms. |
The court considered Daily Mail among other authorities but concluded that those cases did not, at the relevant time, establish that the Applicable UK Law was legally questionable such that a worthwhile claim would have been discovered earlier. |
| Case J (Commerzbank) [1994] QB 219 |
Another CJEU decision referred to as part of the body of jurisprudence considered in assessing discoverability. |
The court reviewed Commerzbank but found it did not provide a sufficient basis for an Appropriate Adviser to advise that a worthwhile DV/ACT claim existed before Verkooijen. |
| Case K (Gemalto) [2022] EWCA Civ 782 |
Referenced in relation to the Supreme Court's guidance about not making the date of discoverability turn on complex evaluations of chances of success and strike-out thresholds. |
Used to support the proposition that the test is evaluative and not a merits forecast beyond a reasonable threshold for a "worthwhile claim". The High Court applied this approach and the appellate court endorsed that evaluative standard. |
| Case L (OT Computers) [2021] EWCA Civ 501 |
Referenced for guidance about factual inquiries into what a claimant could have discovered when exercising reasonable diligence. |
Instructed the evaluative factual approach adopted by the High Court in determining what an Appropriate Adviser would have known and advised at the relevant times. |
| Case M (Volpi) [2022] EWCA Civ 464 |
Procedural guidance about appellate review of trial judge factual conclusions (standard for interfering with primary fact-finding). |
Invoked to remind that appellate courts should not overturn trial findings of fact unless plainly wrong; the appellate court applied this standard in reviewing the High Court's factual findings. |
| Case N (Henderson) [2014] UKSC 41 |
Authorities cited for appellate review principles and standards regarding findings of fact. |
Referred to in assessing whether the High Court's factual conclusions could properly be disturbed on appeal. |
| Case O (Perry) [2019] UKSC 5 |
Appellate-review principles relevant to evaluation of primary findings and the approach of an appeal court to such appeals. |
Used to underline the deference due to the trial judge's evaluative fact-finding in this complex historical inquiry. |
| Case P (Byers) [2022] EWCA Civ 43 |
Guidance on caution in overturning a trial judge's evaluation of expert evidence. |
Supported the proposition that the trial judge is entitled to prefer one expert over another and that appellate interference is limited. |
| Case Q (Griffiths) [2021] EWCA Civ 1442 |
Considered in relation to the weight to be given to expert evidence and whether cross-examination is necessary to challenge expert evidence. |
The court recognised that a trial judge may reject expert evidence and that the weight and credibility of experts is for the trial judge. |
Court's Reasoning and Analysis
The appellate court's reasoning is driven by two linked features: (1) the legal test laid down by the Supreme Court for discoverability under s.32(1)(c) and (2) the deference owed to the High Court's evaluative fact-finding about what a reasonably diligent, well-advised UK multi-national would have discovered at particular historical points.
The court began by restating the Supreme Court's two complementary formulations of discoverability: either when the claimant knew or could with reasonable diligence know of the mistake "with sufficient confidence to justify embarking on the preliminaries to the issue of a writ", or when the claimant recognised that "a worthwhile claim arises". Both formulations were treated as equivalent aids to analysis; the High Court used both in its assessment and the appellate court found no error in that approach.
The High Court's analytical framework required asking, objectively, what a "well-advised multi-national group in the UK" exercising reasonable diligence would have done. To answer that factual question the High Court:
- Identified the hypothetical steps such a group and its Appropriate Adviser would have taken when assessing whether the Relevant UK Law was compatible with Treaty freedoms, including what sources and expertise would be consulted;
- Identified the characteristics of an "Appropriate Adviser" (expertise in both UK tax and EU law as relevant to the point in time) and considered how the adviser's knowledge and beliefs might evolve;
- Considered whether an Appropriate Adviser would have advised that a DV or ACT challenge was a "worthwhile claim" at particular dates;
- Assessed contemporaneous professional and academic materials, expert evidence about the state of professional thinking (preference being given to the claimants' expert, Expert Gammie, because of his dual expertise in tax and EU law), and the practical step an Appropriate Adviser would take at the "preliminaries" stage (a high-level assessment rather than exhaustive research).
The High Court found, on the evidence, that prior to July 1996 the professional literature and thinking did not suggest that Relevant UK Law was incompatible with Treaty freedoms. The judge accepted Expert Gammie's evidence that there was a professional consensus that three principal obstacles made such claims unviable at that time: (i) the view that distortions caused by cross-border dividend taxation had to be addressed at Community level or by treaty; (ii) a view that a foreign subsidiary and a domestic subsidiary were not comparable for these purposes; and (iii) the "cohesiveness" principle from previous CJEU jurisprudence (Bachmann) which permitted certain differential treatments to be justified.
The High Court further found that the CJEU's judgment in Verkooijen (6 June 2000) materially undermined that consensus because the CJEU rejected arguments based on non-comparability and cohesiveness in that factual context and treated the difference of treatment as an unlawful restriction on free movement of capital. The High Court concluded that a well-advised multi-national exercising reasonable diligence would, from that date, have had sufficient confidence to embark on the preliminaries to litigation in respect of both DV and ACT challenges — i.e. that the mistake was discoverable on 6 June 2000.
The appellate court examined the Defendant's complaints that the High Court had set the "worthwhile claim" threshold too high, had confused what could have been discovered with what would have been discovered, and had improperly relied on a UK professional consensus to the exclusion of continental developments. The appellate court rejected those criticisms for the following reasons:
- The High Court applied the Supreme Court's test and expressly addressed the burden of proof and the objective standard of reasonable diligence.
- The High Court's methodology (focusing on what an Appropriate Adviser would have told a client at the preliminaries stage, informed by a high-level assessment of relevant principles and contemporaneous professional thinking) was a legitimate evaluative approach consistent with the Supreme Court's guidance. The judge did not require claimants to forecast success or to conduct the in-depth litigation-level analysis appropriate only once a worthwhile claim has been identified.
- The judge reasonably preferred the evidence of Expert Gammie to the Defendant's expert (Professor Barnard) because of relative expertise in tax and EU law and because the judge tested the consensus evidence against contemporaneous materials (textbook chapters, committee reports, and published opinion) rather than accepting it blindly.
- The judge was entitled to conclude that Verkooijen, and the Advocate General's second Opinion, undermined the professional consensus and therefore that an Appropriate Adviser in the UK would have had grounds from about June 2000 (and arguably December 1999 when the second Opinion was published) to advise that a worthwhile claim existed.
On the cross-appeal about ACT challenges, although Company C argued ACT challenges were different and discoverable later, the court concluded that the Advocate General's reasoning and the CJEU's later treatment in Hoechst did not require a later discoverability date for ACT challenges as a matter of the reasonable-diligence standard; the analytical point was that a claimant in the preliminaries need not anticipate every nuance of the court's ultimate reasoning, only have sufficient confidence, based on competent advice, that a worthwhile claim existed.
Holding and Implications
Holding: The appellate court DISMISSED the Defendant's appeal and DISMISSED Company C's cross-appeal. It upheld the High Court's conclusion that the date on which the claimants could with reasonable diligence have discovered the mistake of law was 6 June 2000 (the date of the CJEU judgment in Verkooijen). The court noted a minor alternative view that the Advocate General's second Opinion in December 1999 could, on the High Court's reasoning, have been sufficient to engender discoverability, but that this did not affect the outcome.
Implications:
- Direct effect on the parties: the court's endorsement of the High Court's factual findings means that for limitation purposes the relevant limitation period for the representative group claims began to run from 6 June 2000 (subject to the precise application to each claimant depending on their claim issuance dates). As a consequence, some claims may be time-barred if six-year limitation rules apply from earlier dates, while others remain within allowable periods depending on their issue dates.
- The judgment confirms that the correct legal test under s.32(1)(c) (as articulated by the Supreme Court) is an evaluative, objective inquiry about when a claimant exercising reasonable diligence and taking appropriate advice would have had sufficient confidence to embark on the preliminaries to litigation or recognised that a "worthwhile claim" arose.
- The court emphasised deference to trial judge findings of fact in such historical and expert-evidence driven inquiries: appellate interference is constrained unless a finding is plainly wrong or irrational.
- Broader jurisprudential effect: the decision resolves the particular factual application of the Supreme Court test in this long-running group litigation and confirms that Verkooijen was a pivotal decision that materially changed the state of professional thinking about the viability of DV and ACT challenges; however, the court did not purport to create a general new principle beyond applying the Supreme Court's framework to the facts of these cases.
This summary is based exclusively on the material contained in the provided opinion. No external facts, commentary or inferences beyond what is stated in that opinion have been added. All personal and corporate identifiers appearing in the original text have been replaced with anonymized placeholders for consistency and privacy.