Commissioners of His Majesty's Revenue and Customs and another (Appellants) v BAT Industries Plc and others (Respondents)

Permission to Appeal application lodged

Case summary
Permission to Appeal
Previous proceedings

Case summary

Case ID

UKSC/2025/0197

Parties

Appellant(s)

(1) Commissioners of His Majesty's Revenue and Customs (2) Commissioners of Inland Revenue

Respondent(s)

(1) BAT Industries Plc and others; (2) Evonik UK Holdings Ltd and others

Issue

Did the courts below err in their application of the test for the discoverability of a mistake of law within the meaning of s32(1)(c) Limitation Act 1980? If not, should the formulation of that test be revisited?

Facts

This appeal arises in the course of long-running proceedings known as the Franked Investment Income (“FII”) Group Litigation. The respondents to this appeal are test claimants in that litigation. As a consequence of the FII Group Litigation, the respondents have succeeded in demonstrating that when they made certain tax payments to the appellant revenue authorities, they did so on the mistaken understanding that the UK tax regime then applicable to overseas dividends was compatible with the provisions of the various treaties establishing what is now the European Union. The respondents are therefore, in principle, entitled to recover from the appellants amounts that they paid under that mistake of law. This appeal is concerned with the question of the limitation period which applies to the respondents’ claims for the recovery of those amounts. The respondents rely on section 32(1)(c) of the Limitation Act 1980, which provides, insofar as relevant, that the limitation period in relation to an action for “relief from the consequences of a mistake… shall not begin to run until the plaintiff has discovered the… mistake… or could with reasonable diligence have discovered it.” In a previous judgment in these proceedings, the Supreme Court confirmed that section 32(1)(c) is capable of applying to claims for restitution based on payments made under a mistake of law. The Supreme Court further held that a mistake of law is discoverable (within the meaning of section 32(1)(c)) from the point of time when a claimant knows, or could with reasonable diligence know, that he made such a mistake “with sufficient confidence to justify embarking on the preliminaries to the issue of a writ such as submitting a claim to the proposed defendant, seeking advice and collecting evidence,”, which can also be expressed as the point when “he discovers or could with reasonable diligence discover his mistake in the sense of recognising that a worthwhile claim arises.” The Supreme Court remitted the case to the High Court, so that the High Court could determine (applying what the Supreme Court had held to be the correct legal test) the question of whether the mistake of law could have been discovered with reasonable diligence in the FII cases. The High Court (Richards J) held that the respondents could, with reasonable diligence, have discovered the mistake from 6 June 2000 onwards. Richards J found (on the basis of expert evidence presented by Mr Grammie KC, the respondents’ expert witness), that prior to that date there had been a consensus to the effect that the relevant tax provisions were not incompatible with EU law. However, that consensus was “dismantled” when, on 6 June 2000, the CJEU handed down its judgment in Staatssecretaris van Financiën v Verkooijen, Case C-35/98 (“Verkooijen”). In that decision, the CJEU held that similar tax provisions (applied by the Netherlands to individuals who received dividends from companies based elsewhere in the EU) constituted an unlawful restriction on the free movement of capital and were in contravention of EU law. Richards J considered that the Verkooijen decision gave rise to constructive notice of the mistake of law, because the reasoning adopted by the CJEU in that case ‘dismantled’ the previous consensus that such provisions would be compatible with EU law. The appellants appealed to the Court of Appeal. The Court of Appeal dismissed the appeal, and upheld the reasoning of Richards J. The Court of Appeal departed from Richards J only to the limited and non-material extent of holding that the respondents had in fact had constructive notice of the mistake of law from 14 December 1999 (which was the date when the second Opinion of the Advocate General in the Verkooijen case was published). The appellants now appeal to the Supreme Court.