Evonik UK Holdings Limited & Ors v Commissioners of Inland Revenue

A consent order declaring a claim’s “Established Value” to be a minimum value does not, without more, prevent the claimant later seeking judgment for a higher amount. Construction turns on the language of the order read in its factual and procedural context. Commercial common sense must not be used retrospectively to rewrite the language.

Permission to withdraw an admission under rule 14.5 of the Civil Procedure Rules 1998 requires consideration of all the listed circumstances. Even where the claimant made a mistake and has a strong underlying claim, the administration of justice and efficient conclusion of complex, long-running litigation may outweigh the prejudice of holding the claimant to its admission.

Evonik, a claimant in the Franked Investment Income Group Litigation, sought judgment for compensation reflecting interest on unlawfully levied advance corporation tax paid on Foreign Income Dividends. Its proposed calculation used the statutory rate under section 85 of the Finance Act 2019 for some periods and the discretionary rate under section 35A of the Senior Courts Act 1981 for others.

HMRC objected, arguing that the application conflicted with a consent order made in 2021 declaring Evonik’s “FID Established Value” and that Evonik had made an inconsistent admission in an agreed statement of facts. The issues were whether the application was inconsistent with the 2021 Order and whether permission should be given to withdraw the admission.

1. Construction of the 2021 Order. The order was a consent order and had to be construed by asking what a reasonable person with the parties’ background knowledge would have understood it to mean, considering its language, purpose, known circumstances and commercial common sense, while disregarding subjective intentions. Those considerations formed a unitary, iterative exercise, with commercial common sense used cautiously and prospectively.
2. The expression “FID Established Value” naturally identified a minimum value established on the hypothesis that the law was that finally determined in the GLO. The order did not identify circumstances in which the minimum could or could not be exceeded, nor did it provide a mechanism for calculating a top-up. Its context, including the related 2019 Order, supported an asymmetric arrangement intended to identify an agreed minimum and did not preclude Evonik from seeking a higher judgment. The application therefore did not conflict with the 2021 Order, and it was unnecessary to decide whether the liberty to apply provision was engaged.
3. Withdrawal of admission. Evonik’s admission was inconsistent with the higher sum claimed and required permission under rule 14.5. There was no new evidence. The mistake involved overlooking a legal possibility, rather than an arithmetic slip. Conduct was neutral, but the application was made at a late stage after extensive litigation.
4. Evonik would suffer prejudice if confined to a remedy below the amount legally due, and its prospects of obtaining the higher amount were good. Nevertheless, HMRC could suffer procedural prejudice through inefficiency and renewed negotiation. The administration of justice favoured preserving progress towards final agreement in litigation lasting over 20 years. The factors favouring refusal were weightier.
5. Evonik’s application for permission to withdraw its admission was refused. It was held to the admission.