The Prudential Assurance Company Ltd & Ors v Revenue & Customs

In group litigation, the ordinary rules of precedent and judicial economy apply. A first-instance court bound by a later Court of Appeal decision should not determine substantive issues which, on the law as it stands, are unnecessary or incapable of affecting the result. Any such reasoning would be obiter. The court should also respect the statutory allocation of tax disputes to the specialist tribunal and must not use group litigation to circumvent that procedure. Where pending appellate proceedings and possible further references are likely to determine most of the issues, the appropriate course may be to adjourn the trial and review the position after those proceedings. The adjournment should be no longer or more prescriptive than current uncertainties justify.

The claimants, UK-resident insurance companies, challenged the former UK taxation regime for portfolio dividends under EU free-movement-of-capital principles. The proceedings formed part of the CFC and Dividend Group Litigation and followed a reference to the ECJ, which had addressed several questions but left matters requiring determination by the national court.

After the first hearing, the Court of Appeal delivered judgment in related FII litigation, materially changing the applicable law on liability, remedies, limitation and the statutory tax-repayment procedure. The Revenue sought an adjournment pending any appeal in that litigation. The claimants argued that the High Court should decide the remaining substantive and ACT-related issues. The central question was whether the present trial should proceed or be adjourned in light of the binding appellate decision and the pending higher-court proceedings.

1. The trial was adjourned. The proceedings were to stand adjourned until the Supreme Court had heard and determined any appeal in the related FII litigation, or had refused permission to appeal.
2. The ordinary rules of precedent applied to group litigation. The court was bound by the Court of Appeal’s decision in FII and would therefore have been required to dismiss most claims on limitation or procedural grounds. Determining their substantive merits would have been unnecessary and obiter.
3. The pending appeals in FII and Thin Cap, together with possible further ECJ references, were likely to resolve, or materially guide the resolution of, most issues in the present litigation. The balance of convenience therefore favoured waiting rather than generating an avoidable appeal and duplicating judicial work.
4. The court rejected the submission that it should determine issues falling within the statutory tax-repayment regime to assist the tribunal or the Supreme Court. The principles in Autologic Holdings Plc v IRC required respect for the tribunal’s jurisdiction, and the GLO procedure did not justify circumventing it.
5. The judge left open the ultimate limitation issue concerning ACT used to discharge unlawful mainstream corporation tax. His preliminary view was that the ACT discharged part of the corporation-tax liability under section 239(1) of ICTA 1988; the claim was therefore not time-barred but fell within section 33 and had to be dealt with, if at all, in the tribunal. That view was provisional and unnecessary to the adjournment order.

The judgment describes related proceedings in which the Court of Appeal had delivered [2010] EWCA Civ 103. The present court was bound by that decision and adjourned the trial pending any appeal to the Supreme Court.