British Telecommunications Plc v Revenue and Customs (Rev 1)

A statutory bad debt relief scheme may exclude common law restitutionary remedies where, construed as a whole, Parliament intended it to be comprehensive and exclusive. Relevant indicators include the scheme’s coverage of the same subject matter, substantive and procedural conditions, specialist appellate machinery, time limits, repayment provisions and statutory repeal. An express ouster is unnecessary. The existence of an EU-law right does not prevent exclusion where the statutory scheme, properly adapted, provided an effective domestic remedy. A complex question whether tax was transferred as a consequence of a mistake, and whether the mistake was discoverable with reasonable diligence, may be unsuitable for summary determination.

BT claimed restitution from HMRC for VAT allegedly overpaid on customer bad debts between 1 January 1978 and 31 March 1989. The claim was stayed pending statutory proceedings. In British Telecommunications plc v Revenue and Customs Commissioners [2014] EWCA Civ 433, the Court of Appeal held that BT had directly effective rights under article 11C(1) of the Sixth Directive, that aspects of the Old Scheme were unlawful, but that the scheme’s repeal prevented BT from pursuing relief after 19 March 1997. BT subsequently advanced common law restitutionary and set-off claims.

HMRC sought strike-out or summary judgment. The application raised whether the Old Scheme excluded common law remedies, whether HMRC had been unjustly enriched, and whether the claims for the nine-month period before implementation of article 11C(1) were time-barred.

1. Summary judgment principles. The court may determine a short, clear point of law or construction summarily where the evidence is sufficient and the parties have had a proper opportunity to argue it. It should avoid difficult or fact-sensitive issues requiring prolonged argument or a mini-trial. The relevant question is whether the claim has a realistic, rather than fanciful, prospect of success (paras [59]-[62]).
2. Exhaustive statutory scheme. The Old Scheme was enacted to implement article 11C(1) of the Sixth Directive and covered precisely the subject matter of BT’s proposed restitutionary claim: VAT accounted for on supplies where customers failed to pay. It imposed substantive conditions, including insolvency and property conditions, procedural requirements for claims, documentary requirements, specialist tribunal appeals, time limits, rules for quantifying relief, repayment provisions and a separate statutory route for overpaid tax (paras [74]-[89]).
3. Those features had to be considered cumulatively. Parliament intended the Old Scheme to be a comprehensive and exclusive regime. Common law restitutionary claims and equivalent rights of set-off were therefore excluded, notwithstanding the absence of an express ouster. The unlawful elements of the scheme did not alter that conclusion, because the Court of Appeal had held that the scheme could be moulded to provide an effective remedy for BT’s directly effective EU-law rights (paras [82], [96]-[105]).
4. The decision in Test Claimants in the FII Group Litigation v Revenue and Customs Commissioners [2012] UKSC 19 did not assist BT. That case concerned a statutory provision which, if exclusive, would have left the taxpayer without an effective remedy. BT had an effective statutory route available, although it failed to use it before repeal (paras [93]-[102]).
5. Unjust enrichment. The court declined summarily to determine whether HMRC had been unjustly enriched. BT had a realistically arguable case, based on a broad causal approach, that its mistaken failure to claim relief or set off amounts caused a transfer of value. Whether the tax paid was due, and whether the mistake caused the alleged enrichment, required more extensive argument and potentially evidence (paras [106]-[119]).
6. Nine-month period. BT also had a realistically arguable case that section 32(1)(c) of the Limitation Act 1980 applied to its restitutionary claim. The discoverability issue was fact-sensitive and had to be assessed without hindsight, from the perspective of an adequately resourced taxpayer in BT’s position. It could require evidence, including expert evidence concerning contemporary legal understanding. The claim for this period was therefore not suitable for summary dismissal (paras [120]-[135]).
7. HMRC’s application succeeded for claims relating to 1 October 1978 to 31 March 1989. Those claims were dismissed. The application failed for claims relating to 1 January 1978 to 30 September 1978 (para [137]).

• Court of Appeal: In British Telecommunications plc v Revenue and Customs Commissioners [2014] EWCA Civ 433, BT’s statutory bad debt relief and section 80 claims were dismissed. Permission to appeal to the Supreme Court was refused.
• High Court (Chancery Division): The present court granted summary judgment or struck out the common law claims for the period 1 October 1978 to 31 March 1989, but refused to summarily determine the claims for the preceding nine months.