The High Court held that, on the basis of the Civil Procedure Rules 1998 (CPR 1998), Pt. 8, claim forms read in the context of the ACT group litigation order (GLO) and the fact that the taxpayers had subscribed to determination of GLO limitation issues, the claims of all of the test claimants apart from one succeeded in full, having made valid claims in mistake. If that was wrong, the subsequent amendments to make a mistake-based claim took effect only from the dates on which they were made, and by virtue of FA 2004, s. 320(1) could not take advantage of the extended limitation period in s. 32(1)(c) of the Limitation Act 1980.

Facts

On 8 March 2001 the European Court of Justice (ECJ) in Metallgesellschaft Ltd; Hoechst AG & Hoechst UK v IR Commrs & Attorney-General (Joined Cases C-397/98 and C-410/98) [2001] BTC 99; [2001] ECR I-1727 ruled that UK revenue law, which had between 1973 and 1999 allowed companies with parents resident in the UK to elect to pay dividends to those parents free of advance corporation tax (ACT), discriminated unlawfully against companies with parents resident in other member states by not giving them a like right of election. The exaction by the Inland Revenue of ACT from such companies had been unlawful and entitled them to compensation. A GLO was subsequently made to enable the orderly disposal of the resulting litigation. Where a UK company had overpaid ACT in a situation where, had it been able to do so under UK domestic law, it would have made a group income election, there were in principle three different causes of action recognised by English law which might permit the company to recover compensation for its loss from the Revenue. The first was an action for damages, in the nature of an action for breach of statutory duty (i.e. the infringement of art. 43 of the EC Treaty). The second was a claim for restitution of tax unlawfully demanded under the principle established by the House of Lords in Woolwich Building Society v IR Commrs [1992] BTC 470; [1993] AC 70. The third, established by the decision of the House of Lords in Deutsche Morgan Grenfell Group plc v IR Commrs [2006] BTC 781 was a restitutionary claim for tax wrongly paid under a mistake of law.

The first 18 claimants were all in essentially the same position, with some minor differences of detail. They were members of ten multi-national commercial groups. In each case the claimant issued a claim form under CPR 1998, Pt. 8, on dates which ranged from July 1995 (the two Pirelli group claimants) to August 2002 (the Schott group claimant). In each case relief was sought in respect of at least some payments of ACT which pre-dated the issue of the claim form by more than six years. In each case the claim remained in essentially that form until 8 September 2003 when the provisions of FA 2004, s. 320 first came into effect. In each case a subsequent amendment introduced an express reference to mistake of law as an alternative ground for the relief claimed. It was assumed for the purposes of these proceedings that the operation of s. 320 was compatible with EC law, which had yet to be determined.

Issue

Whether the claimants had made valid claims in mistake prior to 8 September 2003 (after which claims were subject to the provisions of FA 2004, s. 320); and what was the effect of FA 2004, s. 320 on claims brought before 8 September 2003 but amended after 20 November 2003 to add a claim in mistake.

Decision

Henderson J (ruling accordingly) said that in each of the 19 cases the claimant had now provided the Revenue with evidence in support of its claim that it paid ACT by mistake, and having considered that evidence the Revenue had accepted it. Accordingly, the Revenue had conceded that in each case the claimant had paid the ACT under a mistake. Furthermore, the Revenue did not argue in any case for a date other than 8 March 2001 to be taken as the date when the limitation period began to run for the purposes of the Limitation Act 1980, s. 32(1)(c). In the context of a GLO a claim form did not need to be more than the simplest of documents. For limitation purposes the individual claims should be construed in conjunction with the applications for the claims to be registered and, from the time of registration, the register (Boake Allen Ltd v R & C Commrs (including NEC Semi-Conductors Ltd) [2007] UKHL 25; [2007] BTC 414 applied).

However, in the context of the ACT GLO, the claim form both could and should be read in conjunction with the order establishing the GLO and the register recording which of the common issues of law each claimant wished to have determined. All of the present claimants had subscribed to determination of the GLO limitation issues, including the questions whether their claim could properly be brought in restitution based on mistake of law, and (if so) when the limitation period for such a claim began to run. That fact was crucial, because it resolved any ambiguity about the ambit of the claim form and made it clear that the claimant wished to rely on the absence of a group income election both to ground a claim in mistake and for causation purposes.

The judgment in NEC Semi-Conductors was authority for the proposition that, even where multiple proceedings were managed through a GLO, the individual claim forms still had to satisfy the basic pleading requirement of setting out the material facts relied upon and the causes of action to which they related. The necessary information might be pleaded in a concise and summary form, particularly if the Pt. 8 procedure was adopted and the facts were unlikely to be disputed; but in the absence of that basic minimum the claim form would not fulfil its primary purpose of defining the issues and enabling the defendant to know what case it had to meet. Those principles were salutary and in accordance with long-established authority. However, there was nothing in the judgments of the Court of Appeal in NEC Semi-Conductors to deter the court from having regard to the register, and the particular GLO issues to which the claimants had subscribed, in considering whether a plea of mistake of law was implicit in the claim forms and in answering that question affirmatively (Boake Allen Ltd v R & C Commrs (including NEC Semi-Conductors Ltd) [2006] EWCA Civ 25; [2006] BTC 266).

If the documents were read together in that way, the pleading (taken in conjunction with the register and the relevant GLO issues) would have fulfilled its purpose of letting the Revenue know that mistake- based restitution was one of the causes of action advanced, and that the alleged mistake lay in the failure to make the group income election which would have been made if the parent company had been UK resident. That was all that the pleading needed to do, for the purpose of asserting the cause of action and stopping time from running for limitation purposes. From then onwards, the Revenue could have been in no doubt that all these companies wished to advance a claim of restitution based on mistake. The Revenue did not object to the amendments in the present case taking effect from the date on which they were made (or, if later, served on the Revenue), because in that case FA 2004, s. 320 would apply to them. In order to escape from that consequence, the claimants had to establish either that the amendments did not have the effect of adding new claims, or (if they did add new claims) that the new claims arose out of the same or substantially the same facts as a claim in respect of which they had already claimed a remedy. It was only in those circumstances that the commencement date of the amendments would relate back to the date of the original claim.

As regards the remaining claimant, the amendments made amounted to a new claim. Mistake was a crucial factual ingredient of a claim for restitution for mistake of law and failure to spell out the precise nature of the mistake relied upon could not disguise the fact that a cause of action of which mistake was a crucial ingredient had been introduced for the first time.

Chancery Division.
Judgment delivered 19 June 2008.