Inland Revenue & Anor v Test Claimants In the Franked Investment Income Group Litigation

An issue conclusively determined in earlier proceedings cannot be reopened by recasting the same dispute as separate legal components. Where prior orders and judgments decided that a composite statutory regime was not protected by a treaty standstill clause, a party cannot later plead that one element was separately protected. A point that could have been taken earlier may also be barred as an abuse of process. Proposed amendments lacking a reasonable prospect of success should be refused. The appeal was therefore dismissed.

The appeal arose in the Franked Investment Income Group Litigation. HMRC challenged Henderson J’s refusal to permit re-amendment of its defence in the second stage of the proceedings: [2013] EWHC 3757 (Ch).

Earlier liability decisions had held that the FID regime was a new restriction on the free movement of capital and was not protected by the standstill provisions. HMRC sought to argue that the obligation to account for ACT was a separate, pre-existing restriction protected by Article 64(1) TFEU. The central issue was whether that argument remained open or was barred by issue estoppel or abuse of process.

1. Disposition. The appeal was dismissed. Permission had been granted after full argument, and the appeal was dismissed on 27 March 2014, with reasons given in this judgment.
2. Earlier determination. The earlier FII decisions had addressed the FID regime as a composite legislative scheme. Henderson J held that its introduction was a new restriction for the purposes of Article 57(1) EC and that Article 56 EC was not excluded in relation to third-country FIDs. The Court of Appeal affirmed that conclusion in [2010] EWCA Civ 103. The orders allowed claims for the time value of ACT on third-country FIDs. They could not sensibly be read as deciding only the separate question of tax credits.
3. Issue estoppel. HMRC’s proposed argument that the ACT obligation was independently protected by the standstill provisions was inconsistent with the earlier decisions and with the case advanced before the earlier courts. The issue had been conclusively determined. HMRC was therefore estopped per rem judicatam from raising it again.
4. Abuse of process. Alternatively, the argument was barred by the rule in Henderson v Henderson. It could have been advanced in the earlier proceedings but was not. Seeking to change the case after the earlier decision would be contrary to the public interest and an abuse of process, as explained in Johnson v Gore Wood.
5. Amendment. The proposed re-amendments had no reasonable prospect of success because the proposed contention was barred by issue estoppel and, alternatively, abuse of process. The refusal to allow them was upheld.

• Court of Appeal (Civil Division) dismissed HMRC’s appeal against the refusal to permit re-amendment of the defence. The reasons are reported at [2014] EWCA Civ 1214.
• High Court, Chancery Division Henderson J refused the proposed re-amendments on 29 November 2013, holding that the issue had already been conclusively determined and that the amendments had no reasonable prospect of success: [2013] EWHC 3757 (Ch).