Revenue and Customs v IGE USA Investments Ltd & Ors

On an interlocutory application, a proposed claim may proceed only where it has a real, rather than fanciful, prospect of success. The court must avoid conducting a mini-trial, but may assess contemporaneous documents where witness evidence is unlikely to add materially to the issue.

Representations are construed objectively in their full context. A party cannot infer a representation about the factual purpose of a transaction merely because the statement was relevant to the parties’ competing legal analyses. Fraud must be distinctly pleaded with primary facts capable of supporting an inference of dishonesty.

For equitable rescission seeking declaratory relief alone, no limitation period applied by analogy where the equivalent common-law claim also carried no limitation period.

HMRC sought declarations that a settlement agreement with GE concerning anti-arbitrage tax rules had been validly rescinded. HMRC applied to amend its particulars to add representations, fraudulent misrepresentation, deliberate non-disclosure, an utmost-good-faith claim and an implied term. GE applied to strike out an existing representation and part of HMRC’s reply.

The disputed representations concerned the commercial purposes of an Australian investment, whether the investment would have occurred without a hybrid entity, and disclosure of relevant facts. The court also considered limitation, the proposed contractual claims and whether the fraud allegations were sufficiently particularised.

1. Interlocutory standard. Permission to amend and summary judgment engage the same test: the proposed case must have a real, not fanciful, prospect of success. The court must avoid a mini-trial, although it may assess the merits sufficiently to determine whether the case should proceed.
2. Representations. Whether an express or implied representation was made is determined objectively by reference to the words, conduct and context. The context included each side’s competing interpretation of the anti-arbitrage legislation. Statements advancing GE’s legal position that a non-hybrid comparator was objectively reasonable did not, without more, represent that the transaction would in fact have occurred without a hybrid or that no main purpose was to secure a UK tax advantage.
3. The Main Purpose Representation was inadequately supported and had no real prospect of success. The existing Hybrid Opportunity Representation was struck out, although one newly pleaded instance had initially been arguable; reliance on it remained too speculative because HMRC’s contemporaneous documents showed that it had rejected the proposition and no evidence showed that it later influenced the settlement.
4. Fraud and disclosure. Fraud must be distinctly alleged and supported by sufficient particulars. The pleaded primary facts concerning the central involvement, expertise and knowledge of the relevant GE personnel, combined with the assumed non-fraudulent disclosure representation, were capable of tilting the balance towards dishonesty. The deliberate non-disclosure and fraud allegations relating to the Full Disclosure Representation could therefore proceed to trial.
5. Limitation. The court preferred the approach in P&O Nedlloyd BV v Arab Metals Co (No 2) to the extent relevant. The appropriate analogy depends on the nature of the claim and the relief sought. Since HMRC sought declaratory relief and did not need an order to recover tax, no limitation period applied to the equitable claims.
6. The claims that the Settlement Agreement was a contract of utmost good faith and contained the proposed implied term were arguable and better determined at trial. The amendments were permitted, subject to refusal of the Main Purpose and Hybrid Opportunity amendments. Paragraph 68(b) of the Reply was not struck out.