Skatteforvaltningen v MCML Ltd

The Court of Appeal considered whether proceedings brought by Skatteforvaltningen (SKAT) against MCML Ltd (formerly ED&F Man Capital Markets Ltd) should be struck out on the grounds of issue estoppel or abuse of process. The panel analysed the prior rulings on the foreign revenue rule (Dicey Rule 3/20) and the earlier Commercial Court decision of Andrew Baker J that SKAT’s claims as pleaded in the 2018 proceedings were inadmissible as indirectly seeking to enforce Danish revenue law. The court held that issue estoppel prevents SKAT from relitigating the question whether the same Tax Vouchers already litigated in the 2018 proceedings fall within the foreign revenue rule, and accordingly allowed the appeal on issue estoppel in respect of those claims. The court dismissed the strike-out application based on Henderson v Henderson abuse, concluding that SKAT’s conduct, though imperfect in failing to disclose an intention to plead fraud earlier, did not amount to abusive litigation warranting dismissal.

Background and parties:

• Claimant/Respondent: Skatteforvaltningen (the Danish Tax and Customs Administration, “SKAT”).
• Defendant/Appellant: MCML Ltd (previously ED&F Man Capital Markets Ltd, referred to in the judgment as “EDFM”).

Procedural history and nature of the dispute:

SKAT originally brought extensive consolidated proceedings in 2018 in the Commercial Court alleging that a large number of defendants induced it to pay refunds of Danish withholding tax (WHT) by means of misleading Tax Vouchers and supporting documentation. In the 2018 proceedings some defendants were sued for deceit, others (including EDFM) for negligent misrepresentation. Andrew Baker J held, after a preliminary issue, that those claims were inadmissible by virtue of the foreign revenue rule (Dicey Rule 3) and dismissed SKAT’s consolidated claims ([2021] EWHC 974 (Comm)). SKAT appealed. The Court of Appeal allowed the appeal as to many defendants but SKAT decided not to pursue Ground 1 against EDFM; the Court of Appeal accordingly left the claims against EDFM inadmissible ([2022] EWCA Civ 234). The Supreme Court later dismissed the defendants’ appeal in relation to the remaining defendants ([2023] UKSC 40).

New proceedings and the application before Bright J:

SKAT issued fresh proceedings against EDFM in December 2022, this time alleging deceit and fraudulent misrepresentation, limited to a subset of refund applications (principally so-called Cum-Ex trades) and including five Tax Vouchers not before the 2018 proceedings. EDFM applied to strike out the new claim on two grounds: (1) issue estoppel (res judicata) arising from the earlier judgment and (2) abuse of process (Henderson v Henderson). Bright J dismissed the strike-out application ([2024] EWHC 148 (Comm)).

Issues before the Court of Appeal:

• Whether SKAT is precluded by issue estoppel from pursuing the current deceit-based claims because the foreign revenue rule had already been applied to materially similar claims in the 2018 proceedings.
• Whether the issue should be struck out as an abuse of process under Henderson v Henderson, because SKAT could and should have raised the fraud case earlier and failed to do so.

Court’s reasoning and conclusions:

• Issue estoppel: The court analysed the limits of issue estoppel. It held that an estoppel can arise in relation to issues of fact, mixed fact and law, or the legal quality of facts, but that it must be the same issue and must have been fundamental to the earlier decision. Lord Justice Nugee concluded that Andrew Baker J’s decision that SKAT’s claims in the 2018 proceedings (as pleaded) were caught by the foreign revenue rule was fundamental and therefore created an estoppel as to the claims based on the same Tax Vouchers. Nugee LJ allowed the appeal on issue estoppel in respect of all claims that were identical to those pleaded in 2018, but concluded the five Tax Vouchers not before Andrew Baker J were not covered by that estoppel. Popplewell LJ and Newey LJ agreed on abuse of process but would have allowed the appeal on issue estoppel in relation to all claims; Newey LJ considered the estoppel covered the entirety of the current proceedings.
• Abuse of process: The court upheld Bright J’s factual findings that SKAT only became able to plead fraud once complex disclosure had been analysed with expert assistance, and that although SKAT should have notified the earlier courts of its intention to pursue fraud it had not materially prejudiced EDFM. The panel therefore dismissed the abuse argument and refused to strike out on that ground.

Relief sought:

• SKAT sought damages and equitable remedies for deceit and constructive trust in relation to WHT refunds said to have been obtained by fraudulent misrepresentation; EDFM sought strike-out of those claims on estoppel and abuse grounds.

This is an appeal from a strike-out decision. The Court of Appeal allowed the appeal in part on the ground of issue estoppel, holding that SKAT is precluded by res judicata from relitigating claims that were the subject of the 2018 proceedings and of Andrew Baker J’s ruling under the foreign revenue rule, insofar as the present claims rely on the same Tax Vouchers; the court declined to strike out the remainder (claims based on Tax Vouchers not previously pleaded). The court dismissed the alternative ground of abuse of process, concluding that SKAT’s conduct did not amount to Henderson v Henderson abuse warranting dismissal.

High Court (Commercial Court, designated judge Andrew Baker J): preliminary issue on the foreign revenue rule, held claims inadmissible, [2021] EWHC 974 (Comm). Court of Appeal: SKAT appealed; appeal allowed in relation to most defendants but held claims against ED&F Man inadmissible, [2022] EWCA Civ 234. Supreme Court: defendants’ appeal dismissed on the central point concerning the foreign revenue rule, [2023] UKSC 40. Back in Commercial Court: Bright J refused EDFM’s strike-out application, [2024] EWHC 148 (Comm). This Court’s present judgment: [2025] EWCA Civ 371 (appeal allowed in part as to issue estoppel; abuse ground dismissed).