Evonik UK Holdings Limited v The Commissioners for HMRC

When a payment made under a court order is later set aside on appeal, the payer is in principle entitled to restitution. Interest on the restitutionary amount is not automatic. It is awarded under the court’s inherent jurisdiction only where the justice of the particular case requires it.

In determining the consequential financial position, the court may treat the payment as a credit or part payment towards the claimant’s claim as ultimately established. Where simple interest is payable, the ordinary rule of thumb is to allocate such a payment to accrued interest before principal, unless fairness requires a different result.

Evonik brought claims in the FII group litigation concerning unlawful advance corporation tax. Henderson J granted summary judgment on the FID element and HMRC paid approximately £6.4 million in March 2016. The Supreme Court later allowed HMRC’s appeal on the Sempra issue, set aside the money-payment order to that extent and remitted the claims.

Richards J subsequently gave final judgment for Evonik and held that the payment should be allocated against interest accrued when the summary judgment orders were made. HMRC appealed, arguing that setting aside the order required restitution with interest, or alternatively that the payment had to be allocated to principal because Evonik had no liquidated interest claim in 2016. The central issue was the proper approach to the payment and interest when the earlier order had been set aside but the final claim exceeded the sum paid.

1. Appeal dismissed. The order requiring final judgment for Evonik, with the £6.4 million payment allocated against accrued interest, was upheld.
2. A payment made pursuant to an order later set aside gives the payer a prima facie entitlement to restitution. The juridical basis is not finally determined, but the restitution is properly understood as sui generis, arising from the appellate court’s decision that the order should not have been made. The ordinary elements and defences of unjust enrichment do not necessarily govern.
3. The court has an inherent jurisdiction to order interest on money to be repaid following the setting aside of an order. There is no automatic entitlement to that interest. The controlling question is what justice requires in the particular case. Section 35A of the Senior Courts Act 1981 is not the source of that power in this context.
4. The Supreme Court’s order set aside the obligation to pay £6.4 million, while maintaining summary judgment on liability for the FID claim and remitting the claims within the limited appeal. It did not substitute the statutory interest amount or remit Evonik’s entire claim.
5. By 2024 Evonik’s overall claim had been established at a substantially higher figure, its limitation issues had been resolved in its favour, and the claim concerned historic payments. Those circumstances entitled the judge to treat the earlier payment as a credit or part payment towards the claim as ultimately established. Applying the ordinary rule of thumb that payments in a simple-interest case are allocated to interest before principal was fair and reasonable. The fact that this might produce an element of compounding did not make the result an excessive or unprincipled benefit.
6. HMRC’s argument that no liquidated interest claim existed until 2024 failed. The judge was assessing the entitlement in 2024, when the statutory entitlement to interest was established; in any event, the interest was required to provide an adequate remedy under EU law and was not merely discretionary.

Grounds 1 and 2 were not made out, and the Respondent’s Notice did not require determination.

• Court of Appeal (Civil Division) [2025] EWCA Civ 1392: dismissed HMRC’s appeal and upheld Richards J’s approach to allocation of the payment.
• High Court (Chancery Division) [2024] EWHC 2897 (Ch): held that the payment should be allocated entirely against interest accrued at the date of the summary judgment orders.
• High Court (Chancery Division) [2024] EWHC 1671 (Ch): held that the Supreme Court’s order did not require restitution of the payment and directed the consequential allocation issue.