AXA SUN LIFE PLC & Ors. v COMMISSIONERS OF INLAND REVENUE & Anor.

In group litigation, a judgment binds other group claims only to the extent that it determined a specified GLO issue. A judgment that decided particular test claims were in time did not determine universally applicable dates of constructive discovery where that question was neither identified nor decided. Later Supreme Court authority governed the limitation issue.

A subsequent appellate judgment may also determine a GLO issue notwithstanding that an issue was conceded in the test claim. Here, the Supreme Court’s decision established that no restitutionary remedy was available for unlawful ACT utilised against lawful corporation tax.

A broadly pleaded claim for restitution of tax paid in consequence of the unlawful treatment of foreign dividends could encompass tax paid through the loss of unused double-taxation relief. Later particulars did not create a new claim where they particularised an existing claim.

The claimants were members of the CFC and Dividend Group Litigation Order. AXA Insurance UK plc made corporation tax claims concerning the treatment of dividends received from non-UK companies. GREA made claims concerning advance corporation tax.

Three preliminary issues and related sub-issues were listed: whether earlier judgments in the Prudential test case conclusively established limitation; whether restitution was available for unlawful ACT utilised against lawful corporation tax; whether the pleadings covered restitution of tax paid because unused double-taxation relief could not be carried forward; and related issues concerning statutory exclusion and income tax set off against corporation tax.

The central questions were the binding effect of earlier GLO judgments under CPR 19.12 and the scope of the restitutionary claims pleaded.

1. Limitation. The Prudential judgment and 2014 order determined limitation as GLO issues, but only decided that the particular PAC and PHL claims were in time. They did not determine an earliest date of constructive discovery binding on all GLO claimants. The wording that constructive discovery was not understood to have occurred before a particular date was not a firm judicial determination. The claims therefore had to be considered under the law stated in FII SC2, rather than being conclusively established as in time by the Prudential orders.
2. Utilised ACT. The earlier Prudential judgment and order determined, as a GLO issue, that a restitutionary claim existed for unlawful ACT utilised against lawful mainstream corporation tax and that compound interest was payable. However, the Supreme Court’s later judgment was given in relation to that GLO issue. Its reasoning rejected the restitutionary basis derived from Sempra Metals, including for utilised ACT. The claimants were therefore not entitled to restitution for unlawful ACT utilised against lawful tax or repaid before the claims were issued.
3. Pleading. The pleadings sufficiently identified a claim for restitution of tax overpaid because the UK corporation tax regime unlawfully treated foreign dividends less favourably than domestic dividends. The claim extended to tax paid in later accounting periods where the inability to carry forward unused double-taxation relief produced the economic double charge identified in Salinen and FII SC3. Any lack of particularisation was procedural and did not mean that no claim had been pleaded.
4. Statutory issues. Paragraph 51(6) of Schedule 18 to the Finance Act 1998 did not exclude the claim because the claim was made in 2003, even though some tax was paid in later accounting periods. The claim was treated as one for restitution of tax overcharged on the dividends.
5. Income tax set off. The claimants were entitled, subject to limitation, to restitution of the economic double charge relating to dividends received between 1992 and 1995, comprising the specified corporation tax paid in 1995 and 1997. The 1996 accounting period was excluded because it had been settled.
6. The Limitation Issue and Set-Off Issue were determined for HMRC. The Pleading Issue and sub-issues C(ii) and C(iii) were determined for the claimants.