Jazztel Plc v The Commissioners for HMRC [2022] EWCA Civ 232

“Member States shall not subject to any form of taxation whatsoever: (a) the creation, issue, admission to quotation on a stock exchange, making available on the market or dealing in stocks, shares or other securities, or of the certificates representing such securities, by whomsoever issued; …”

“Overpayments 14(1) If on a claim it is proved to the Board’s satisfaction that too much tax has been paid in respect of any relevant transaction … the excess (and any interest paid thereon) shall be repaid by the Board. (2) A claim under this regulation shall be made within a period of 6 years beginning with the later of – (a) the date on which the payment was made, and (b) the relevant accountable date.”

“… For many years there has been symmetry within the direct tax system: the Inland Revenue normally has the right to go back six years to assess outstanding tax and those who have overpaid tax have the right to make claims to repayment for a similar period. A recent High Court case has the potential to upset this balance.”

“320 Exclusion of extended limitation period in England, Wales and Northern Ireland (1). Section 32(1)(c) of the Limitation Act 1980 … (extended period for bringing an action in case of mistake) does not apply in relation to a mistake of law relating to a taxation matter under the care and management of the Commissioners of Inland Revenue. This subsection has effect in relation to actions brought on or after 8th September 2003. … (6) The provisions of this section apply to any action or claim for relief from the consequences of a mistake of law, whether expressed to be brought on the ground of mistake or on some other ground (such as unlawful demand or ultra vires act). (7) This section shall be construed as one with the Limitation Act 1980 …”

“Where under the law of a Member State a taxpayer can choose between two alternative causes of action in order to claim restitution of taxes levied contrary to articles 49 FEU and 63 FEU and one of those causes of action benefits from a longer limitation period, is it compatible with the principles of effectiveness, legal certainty and legitimate expectations for that Member State to enact legislation curtailing that longer limitation period without notice and retrospectively to the date of the public announcement of the proposed new legislation?”

“The fact that in the Marks & Spencer case the taxpayer had only one legal remedy, whilst in the case in the main proceedings the taxpayer has two such remedies, cannot, in circumstances such as those in issue before the referring court, lead to a different conclusion.”

“any claim for relief, to the extent that it relates to a payment to HMRC/the Inland Revenue prior to 19 December 2007 [i.e. 6 years before the issue of the claim form] is time barred by virtue of changes made to section 32 of the Limitation Act 1980 by section 320 of the Finance Act 2004 (save to the extent that section 320 operated unlawfully to curtail the Claimant’s rights under EU law).”

“It is admitted that section 320 of the Finance Act 2004 operated unlawfully to the extent it curtailed completely as at 8 September 2003 the Claimant’s right to claim repayment of SDRT paid before 8 September 1997 and claimed more than 6 years after the date of payment.”

“It is denied that section 320 of the Finance Act 2004 operated unlawfully to curtail the Claimant’s right to repayment of SDRT paid after 8 September 1997 to the extent the claim was made more than 6 years after the date of the payment. For those payments made after 8 September 1997 but before 8 September 2003, section 320 did not cause any absolute retrospective curtailment of a right to repayment since a 6 year time limit was still provided for the making of a claim. On the basis of its pleaded case, the Claimant has not identified any payment where they were prevented from making a claim for overpaid SDRT by virtue of section 320. For payments made after 8 September 2003, it cannot be argued that section 320 was in reality retrospective (and so operated unlawfully) since sufficient notice was given of the change in the law by the announcement of the Paymaster General (accompanied by draft legislation). There was no curtailment of the Claimant’s right to repayment of SDRT as none existed at 8 September 2003.”

“3. The grounds of appeal are that the learned judge erred: (1). in holding that Jazztel needed to know that it had a cause of action in order for any transitional period to be effective; (2). by finding that disapplication of section 320 in respect of Payments 1-9 was the only remedy sufficient to protect EU rights that had already accrued prior to 8 September 2003; (3). in failing to hold that section 320 applied in respect of Payments 1-9 with the effect that Jazztel’s claim for Payments 1-9 was time-barred. 4. HMRC’s case is that the introduction of section 320 and its application to Jazztel complies with the principle of effectiveness. The inherent transitional period (well over 2 years) afforded to Jazztel following the introduction of section 320 was sufficient to comply with the principle. Accordingly, there was no need to consider whether, on Jazztel’s facts, section 320 needed to be subjected to a conforming interpretation/disapplication. Further and alternatively, there was no proper basis for adopting a conforming construction or disapplying section 320 in the present case.”

“5. The learned judge further erred in failing to hold that Jazztel is time-barred from recovering Payments 1 to 22 because Jazztel discovered or could with reasonable diligence have discovered its mistake in making those Payments more than six years before it issued its claim for the purposes of section 32 of the Limitation Act 1980.”

“On 18 July 1996 it was announced in Parliament that it was intended in the 1997 Finance Bill to reduce the limitation period for claims to refunds of value added tax from six to three years, and to provide for that change in the law to have taken effect at the date of the announcement. Following a judgment of the [CJEU] in October 1996, from which it was apparent that the manner in which VAT had been levied in the United Kingdom in connection with certain voucher schemes used by traders was not in accordance with article 11 of Sixth VAT Directive 77/388/EEC, the claimant, which had operated such a scheme, made a claim, by letter of 31 October 1996, for a refund of VAT overpaid as from May 1991. The Customs and Excise Commissioners stated that they were only prepared to pay such part of the claim as fell within the new three-year limitation period. Section 47(1) of the Finance Act 1997, amending section 80(4) of the Value Added Tax Act 1994, enacted the new limitation period and section 47(2) provided that it was to be deemed to have come into force on 18 July 1996.”

“whether national legislation retroactively curtailing the period within which repayment may be sought of sums paid by way of VAT collected in breach of provisions of the Sixth Directive with direct effect … is compatible with the principles of effectiveness and of the protection of legitimate expectations.”

“the adoption of national measures correctly implementing a directive does not exhaust the effects of the directive. Member states remain bound actually to ensure full application of the directive even after the adoption of those measures. Individuals are therefore entitled to rely before national courts, against the state, on the provisions of a directive which appear, so far as their subject matter is concerned, to be unconditional and sufficiently precise whenever the full application of the directive is not in fact secured …”

“In that context, a national limitation period of three years which runs from the date of the contested payment appears to be reasonable: see, in particular, Aprile, paragraph 19, and Dilexport, paragraph 26.”

“36. Moreover, it is clear from Aprile[2000] 1 WLR 126, 149, para 28, and Dilexport [1999] ECR I-579, 616, paras 41 and 42, that national legislation curtailing the period within which recovery may be sought of sums charged in breach of Community law is, subject to certain conditions, compatible with Community law. First, it must not be intended specifically to limit the consequences of a judgment of the court to the effect that national legislation concerning a specific tax is incompatible with Community law. Secondly, the time set for its application must be sufficient to ensure that the right to repayment is effective. In that connection, the court has held that legislation which is not in fact retrospective in scope complies with that condition. 37. It is plain, however, that that condition is not satisfied by national legislation such as that at issue in the main proceedings which reduces from six to three years the period within which repayment may be sought of VAT wrongly paid … 38. Whilst national legislation reducing the period within which repayment of sums collected in breach of Community law may be sought is not incompatible with the principle of effectiveness, it is subject to the condition not only that the new limitation period is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging the claims for repayment which persons were entitled to submit under the original legislation. Such transitional arrangements are necessary where the immediate application to those claims of a limitation period shorter than that which was previously enforced would have the effect of retroactively depriving some individuals of their right to repayment, or of allowing them too short a period for asserting that right.”

“Accordingly, legislation such as that at issue in the main proceedings, the retroactive effect of which deprives individuals of any possibility of exercising a right which they previously enjoyed with regard to repayment of VAT collected in breach of provisions of the Sixth Directive with direct effect must be held to be incompatible with the principle of effectiveness.”

“38. Thus, the transitional period must be sufficient to allow taxpayers who initially thought that the old period for bringing proceedings was available to them a reasonable period of time to assert their right of recovery in the event that, under the new rules, they would already be out of time. In any event, they must not be compelled to prepare their action with the haste imposed by an obligation to act in circumstances of urgency unrelated to the time limit from which they could initially count. 39. A transitional period of 90-days prior to the retroactive application of a period of three years for initiating proceedings in place of a ten-or-five-year period is clearly insufficient. If an initial period of five years is taken as reference, 90-days leaves taxpayers whose rights accrued approximately three years earlier in a position of having to act within three months when they had thought that almost another two years were still available. 40. Where a period of ten or five years for initiating proceedings is reduced to three years, the minimum transitional period required to ensure that rights conferred by Community law can be effectively exercised and that normally diligent taxpayers can familiarise themselves with the new regime and prepare and commence proceedings in circumstances which do not compromise their chances of success can be reasonably assessed at six months. 41. However, the fact that the national court has found that a transitional period fixed by its national legislature such as that in issue in this main proceedings is insufficient does not necessarily mean that the new period for initiating proceedings cannot be applied retroactively at all. The principle of effectiveness merely requires that such retroactive application should not go beyond what is necessary in order to ensure observance of that principle. It must, therefore, be permissible to apply the new period for initiating proceedings to actions brought after expiry of an adequate transitional period, assessed at six months in a case such as the present, even where those actions concern the recovery of sums paid before the entry into force of the legislation laying down the new period.”

“The vice of a retrospective period of limitation is that a person who has a valid claim from Day 1 sees it disappear on Day 2 in a puff of smoke.”

“Such transitional arrangements are necessary where the immediate application to those claims [i.e. the claims which persons were entitled to submit under the previous legislation] of a limitation period shorter than that which was previously in force would have the effect of retroactively depriving some individuals of their right to repayment, or of allowing them too short a period for asserting that right.”

“38. It follows that national legislation curtailing, retroactively and without any transitional arrangements, the period within which repayment could be sought of sums collected in breach of EU law is incompatible with the principle of effectiveness: see the Marks & Spencer case [2003] QB 866, para 47.”

“… according to settled case law, the principle of legal certainty, the corollary of which is the principle of the protection of legitimate expectations, requires that rules involving negative consequences for individuals should be clear and precise and that their application should be predictable for those subject to them … As has been observed in para 33 of this judgment above, limitation periods must be fixed in advance if they are to serve their purpose of ensuring legal certainty.”

“2. As Lord Walker has explained, claims for overpayment of output tax and previously unclaimed deduction of input tax are provided for by section 80 of the Value Added Tax Act 1994 and regulation 29 of the Value Added Tax Regulations 1995. As originally enacted, section 80 provided that no amount paid by way of VAT which was not due to the commissioners could be claimed after the expiry of six years from the date on which it was paid unless an amount had been paid by reason of a mistake, in which event a claim could be made at any time within six years from the date on which the claimant discovered the mistake or could with reasonable diligence have discovered it: subsections (4) and (5). In the ordinary course input tax should be claimed as a deduction on the return for the accounting period to which it relates. As originally drafted, regulation 29 which permits claims for a deduction to be made later did not subject those claims to any time limit. 3. An amendment to section 80(4) of the 1994 Act was enacted by section 47 of the Finance Act 1997 with effect from 18 July 1996. It reduced the six-year time limit for the recovery of overpaid tax to three years and removed the exception in relation to cases of mistake. No provision was made for a transitional period during which a claim could be made in cases where a right to recovery of overpaid tax already existed. A new regulation 29(1A) was inserted into regulation 29 by the Value Added Tax (Amendment) Regulations 1997 with effect from 1 May 1997. It provided that the commissioners were not to allow a claim for deduction of input tax made more than three years after the date of the return for the relevant period. In the case of this amendment too there was no transitional period.”

“Underlying these possible choices is a more fundamental point, which I would express in this way. Where national legislation is defective because it lacks the transitional arrangements that are necessary under EU law, is it for the national court to make good the deficiency by devising such transitional arrangements as it may regard as appropriate? Or must this be left to the legislature or, following the example of what was done in regard to section 80 by means of announcements in business briefs, to the commissioners?”

“In both cases the retrospective time limit is unenforceable as there is no adequate transitional period. But there is a difference in degree between them which affects the ability of the court to make good the defect.”

“9. The other situation is that which applies in the case of these two appeals. Here too the guiding principle is that of effectiveness. Account must also be taken of the principle of protection of legitimate expectations … [which] is infringed by the retrospective introduction of a time limit for the making of claims retrospectively. But this will not be in breach of EU law so long as transitional arrangements are included which allow an adequate period for the lodging of claims which persons were entitled to submit under the original legislation … Sufficient notice of these transitional arrangements must be given to ensure that the exercise of those accrued rights is not rendered virtually impossible or excessively difficult. Unless this is done there will be a breach of the principle of effectiveness. 10. I would not rule out the possibility, in a suitable case, of the court reaching its own decision as to what would be a reasonable time for the making of claims and rejecting claims that were made after a period which it held to be reasonable. But I do not think that the situation disclosed by these appeals lends itself to that treatment. In my opinion this is a step too far for the court to take. The issue is not one of statutory interpretation, for which the court must accept responsibility. There is a gap in the legislation which is unfilled … The primary responsibility for giving a clear indication to taxpayers as to where they stood with regard to the making of claims despite the retrospective introduction of the time limit lay with the legislature and the executive. 11. To be compatible with EU law, taxpayers were entitled to be told in advance of any transitional arrangements that would enable them to submit late accrued claims for the deduction of input tax despite the introduction of the time limit. They were entitled to be given sufficient notice to familiarise themselves with the new regime, including the period of grace that was to be allowed for the submission of accrued claims during a transitional period: Grundig [2002] ECR I-8003, para 40. This was necessary to give effect to the principle of effectiveness. Not all taxpayers affected by a system whose reach is as wide as VAT can be assumed to have been aware of the development of the relevant case law, or even if they were aware of the case law, to have understood the effect of it. Some may have appreciated that they could claim a period of disapplication, but some might not. Such indications as were available to them through the business briefs suggested that, in most cases, any such claims would be rejected by the commissioners. I do not think that the gap in the legislation can be made good on a case by case basis. The nature of the defect is such that a single solution is required that can reasonably be applied to all taxpayers. 12. For these reasons, and for those explained more fully by Lord Neuberger, I would hold that the period has not yet begun and that it is for Parliament or the commissioners, if they choose to do so by means of an announcement disseminated to all taxpayers, to introduce prospectively an adequate transitional period. Until that is done the three year time limit must be disapplied in the case of all claims for the deduction of input tax that had accrued before the introduction of the time limit. I would apply that reasoning to Mr Fleming’s case as well as that of Condé Nast.”

“I agree with [Lord Hope and Lord Neuberger] that it is for Parliament or for the commissioners – who must disseminate the information sufficiently to all value added taxpayers – to introduce prospectively an adequate transitional period which will apply to all claims for the deduction of input tax that had accrued before the introduction of the time limit. That was not done before 27 June 2003 and indeed has not yet been effected. When such a step is taken, the time limit applied by regulation 29(1A) of the 1995 Regulations must be disapplied.”

“In my judgment, the same principle must, as a matter of logic, apply to a transitional period which has to be included when a new retrospective time limit is introduced. After all, the transitional period serves the same function as a limitation period. If that is right, then, as I see it, the period of disapplication envisaged in the last sentence of para 41 of [Grundig Italiana], must also comply with the principle. Again, it serves precisely the same purpose as a limitation period, namely to enable people with a certain type of claim (in this case a claim based on an accrued right) to know within what period they have to bring their claims. Otherwise, where no transitional period has been provided for, persons with accrued claims will not know, or be able to find out, with any confidence by when they have to make their claims. In other words, the Community law requirement of legal certainty would not be met …”

“In my opinion, in the last sentence of para 41 of its judgment in [Grundig Italiana], the ECJ was saying that legislation containing a retrospective limitation period without a transitional provision could be retrospectively effective, provided that what amounted to an effective transitional period (such as a period of disapplication) was accorded by the member state, but that it was for that member state to determine how and when it accorded such a period, and what the period was, provided Community law principles, especially those of effectiveness, legitimate expectation and certainty … were satisfied.”

“Such transitional provisions are only effective where the affected party is aware of the effect the legislation will have on him or her, and is able to take protective steps.”

“The real mischief, which I consider must be addressed in order to render section 320 compliant with Community law, is the loss of accrued rights of which there owner is ignorant – that is, the hidden retrospectivity of section 320.”

“In my judgment, it is necessary to have regard to this basic fact – that the taxpayer has a claim that he or she knows nothing about – when fashioning a remedy to render section 320 compliant with Community law. The only remedy that will sufficiently protect the rights that have already accrued is to exclude from the section 320 regime those accrued rights.”

“The claimants were United Kingdom resident companies which had paid corporation tax on dividend income received from non-United Kingdom resident companies. Between 2012 and 2014 they brought common law claims in mistake, unjust enrichment and damages, seeking repayment of and interest on overpaid corporation tax on the basis that the statutory provisions concerning overseas dividend income were incompatible with European Union law. The revenue contended that the claims were ousted by paragraph 51(6) of Schedule 18 to the Finance Act 1998, which provided that the revenue was not liable to give relief in respect of overpaid corporation tax except as provided by specified tax legislation. In particular the revenue contended that paragraph 51(6) was not incompatible with the European Union law principle of effectiveness because the claimants could have sought double taxation relief under section 790 of the Income and Corporation Taxes Act 1998 [“ICTA 1998”]. The claimants contended that section 790 was not an effective remedy because they had not actually known that they had such a remedy before it had become time-barred … Further, the revenue contended that the claims were time-barred as a result of section 320 of the Finance Act 2004 … A number of preliminary issues were ordered to be tried, including (i) whether the claimants’ claims were ousted by paragraph 51(6) of Schedule 18 to the 1998 Act and (ii) whether section 320 of the 2004 Act had effect in relation to claims for restitution of tax paid before its introduction.”

“In my judgment, this is a misunderstanding of the EU law cases and of the EU law principle of effectiveness itself. The principle was best expressed in FII CJEU 3[2014] AC 1161, para 32 as follows: ‘The detailed procedural rules governing actions for safeguarding a taxpayer’s rights under EU law … must not be framed in such a way as to render impossible in practice or excessively difficult the exercise of rights conferred by EU law: …’ It is the procedural rules that must not be framed in such a way as makes it impossible to claim. The knowledge of the claimant as to the existence of a claim is nothing to the point.”

“90. What these authorities [i.e. Marks & Spencer and Grundig Italiana] did not say is that the limitation period can only be attenuated when the claimant is shown to have known that he or she had the accrued right in question. That would be contrary to principle, and would … mean that taxpayers could have claims that had accrued in respect of many years past that would be impossible to remove until it could be shown that the taxpayers knew about them.”

“In the absence of express statutory provision making the claimant’s knowledge relevant to limitation (such as section 32(1)(c) and section 14A of the Limitation Act 1980), it is not relevant.”

“122. I have already dealt, in substance, with this issue, which asks whether section 320 has effect in relation to claims for restitution of tax paid before and/or after its introduction, and if so, whether its effective date was its date of taking effect on 8 September 2003 or the date of Royal Assent on 22 July 2004. 123. I have already said that I am unable to agree with Marcus Smith J in Jazztel …, when he held that the legislature’s ability to deprive taxpayers of an existing claim to recover overpaid tax depended on whether those taxpayers knew that they had such a claim when the right was removed. In these circumstances, in my judgment, section 320 was effective to remove common law claims to restitution in respect of tax paid before section 320 took effect. Mr Aaronson accepted that this court was bound by Leeds City Council … as regard claims relating to tax paid on or after 8 September 2003, but reserved his position in the event of any appeal. 124. Accordingly, the answer to the third issue is that section 320 has effect from 22 July 2004, whether the claim relates to tax paid before or after 8 September 2003. After a draft of this judgment was provided to the parties, the claimants sought to re-argue this issue by referring to the decision in FII SC[2012] 2 AC 337 and FII CJEU 3[2014] AC 1161 as reasons why the issue should be answered differently whether or not Jazztel was correctly decided. As Mr Ewart [leading counsel for HMRC] submitted, however, the claims that were in issue in FII CJEU 3 were claims in relation to tax paid more than six years before 8 September 2003. It was those claims which had been removed by section 320 with immediate effect and without a transitional period. In this case, the argument is about whether section 320 was effective to remove claims that had accrued before the legislation took effect, but in respect of which a part of the limitation period (at least six months) had still to run when the legislation took effect. The claimants argued that Jazztel meant that section 320 was not compliant with EU law, because of its hidden retrospectivity i.e. that the taxpayer might not have known that it had such claims before they were removed. It was that argument that I have held to be wrong. As it seems to me, without it, the decisions in FII do not affect the facts of this case, because, as I say, in these cases there remained an unexpired part of the limitation period after section 320 was introduced, which was not the case on the facts in FII.”

“In relation to the section 320 issue, that section has effect from 22 July 2004, whether the claim relates to tax paid before or after 8 September 2003.”

“Subject to subsections (3), (4A) and (4B) below, where in the case of any action for which a period of limitation is prescribed by this Act, either— (a) the action is based upon the fraud of the defendant; or (b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or (c) the action is for relief from the consequences of a mistake; the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.”

“as soon as a paying party recognises that a worthwhile claim arises that he should not after all have made the payment and accordingly is entitled to recover it (or, as here, to compensation for the loss of its use), he has ‘discovered’ the mistake within the meaning of section 32; and, by the same token, I would hold that if he makes any further payments thereafter, they are not to be regarded as payments made under a mistake of law”

“Where, I would respectfully ask, is there any injustice in this? No one is suggesting, let me repeat, that the moneys are not recoverable or that the payee should remain unjustly enriched. All that is required is that the payer does not sit upon what ex hypothesi he recognises to be a worthwhile legal argument for more than six years. Provided he acts within that (surely ample) time, he can pursue his claim (whether in respect of past payments or, indeed, payments he may choose to continue making) under whatever may be the appropriate cause of action: restitution for mistake of law in respect of past payments made when he had no reason to question his liability to make them, total failure of consideration, or a claim based on the Woolwich principle.”

“The purpose of the postponement effected by section 32(1) is to ensure that a claimant is not disadvantaged, so far as limitation is concerned, by reason of being unaware of the circumstances giving rise to his cause of action as a result of fraud, concealment or mistake. That purpose is achieved, where the ingredients of the cause of action include his having made a mistake of law, if time runs from the point in time when he 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, taking advice and collecting evidence’; or, as Lord Brown put it in Deutsche Morgan Grenfell [2007] 1 AC 558, he discovers or could with reasonable diligence discover his mistake in the sense of recognising that a worthwhile claim arises. We do not believe that there is any difference of substance between these formulations, each of which is helpful and casts light on the other.”

“Lord Donaldson of Lymington MR gave valuable guidance in Halford v Brookes [1991] 1 WLR 428, 443. He noted that knowledge does not mean knowing for certain and beyond possibility of contradiction. It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence: ‘Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.’ In other words, the claimant must know enough for it to be reasonable to begin to investigate further.”

“210. In practice, the application of that approach will depend on the circumstances of the case. For example, in cases where the claimant has made a payment on the basis of a mistaken understanding of the law which has resulted from ignorance, the mistake will normally have been discoverable immediately, by seeking legal advice. Section 32(1) only has effect where a mistake could not have been discovered at the time of the payment with the exercise of reasonable diligence. On the other hand, where the payment was made in reliance on a precedent that was subsequently overruled, or an understanding of the law that was later altered by a judicial decision, the question will be whether the claim was brought within the prescribed period beginning on the date when it was discoverable by the exercise of reasonable diligence that the basis of the payment was legally questionable, so as to give rise to a worthwhile claim to restitution. Depending on the circumstances, it may be difficult to identify a specific date, but doubtful cases can be resolved by bearing in mind that the burden of proof lies on the claimant to prove that his claim was brought within the prescribed limitation period. 211. Clearly, where a payment was made in accordance with the law as it was then understood to be, the point in time at which the claimant could, with reasonable diligence, have discovered that the basis of the payment was legally questionable, so as to give rise to a worthwhile claim to restitution, will have to be established by evidence. The focus of that evidence is likely to be upon developments in legal understanding within the relevant category of claimants and their advisers …. Thus, in the circumstances of the present case, Lord Walker JSC referred in FII (SC) 1 [2012] 2 AC 337 … to there being a reasonable prospect that the limitation period could be deferred until the time when ‘a well advised multi-national group based in the UK would have had good grounds for supposing that it had a valid claim to recover ACT levied contrary to EU law’. This point is considered in greater detail in para 255 below. Evidence in relation to matters of this kind may well include expert evidence concerning the state of understanding of the law within the relevant categories of professional advisers during the relevant period.”

“This court cannot, however, determine in the abstract the point in time when the test claimants could with reasonable diligence have discovered, to the standard of knowing that they had a worthwhile claim, that they had paid tax under a mistaken understanding that they were liable to do so. That depends on an examination of the evidence. As we have explained, EU law, in relation to tax regimes which discriminated between companies based in one member state and companies based in another, developed through a series of judgments of the Court of Justice, including Verkooijen [2000] ECR I-4071, Lenz [2004] ECR I-7063 and Manninen [2005] Ch 236 … , Hoechst [2001] Ch 620 and FII (CJEU) 1 [2012] 2 AC 436. Each of those judgments was itself the result of a claim made some years earlier. In Hoechst, for example, the claim was filed in 1995, 11 years before the judgment of the Court of Justice. DMG was aware of the claim almost immediately, and it was for that reason that, in Deutsche Morgan Grenfell, Lord Brown considered that time began running for DMG in July 1995. But the date when the claimant became aware of another claim, and appreciated its potential implications for its own situation, is not conclusive, if a claimant acting with reasonable diligence could have discovered that it had a worthwhile claim at an earlier time. Equally, the answer to the question arising under section 32(1) does not depend upon the characteristics of the particular claimant: whether, for example, it was inclined to await further developments, and to allow other taxpayers to make the running. The standard is ‘could’, as Millett LJ emphasised in Paragon Finance [1999] 1 All ER 400 …. And the test is objective, as Millett LJ explained in the same passage of his judgment, and as Lord Walker JSC made clear in FII (SC) 1 [2012] 2 AC 337, when he referred … to the time when ‘a well advised multi-national group based in the UK would have had good grounds for supposing that it had a valid claim to recover ACT levied contrary to EU law’.”

“The nature of the claims, depending as they do on a developing area of law, means that it is important that this court address the legal questions which the revenue wish to raise. The size of the claims and their impact on the public purse are also relevant considerations, as it would be wrong to uphold such claims if they are based on an incorrect understanding of the law. As we have said, even if the revenue’s challenge to the application of section 32(1)(c) succeeds, the claimants will have claims of substantial value. The legal question is also of great importance to other claimants outside the FII Group Litigation, including claimants in the litigations to which we have referred in paras 5–6 above, who also have claims of high value.”

“As you know, the company is liable to pay SDRT at a rate of 1.5% on the 11,500,000 new shares issued for listing on EASDAQ/NASDAQ. Bearing in mind the exchange rate on the date of issue of the shares we calculate that the company’s liability is £1,819,060. This amount should be paid to the tax authorities by 7 January 2000 to avoid any penalties being incurred. … In view of the rather complex arrangements for SDRT, I attach a note setting out the definitive position for the different charges. As I mentioned to you a while ago, there is some criticism of the application of SDRT to transactions with a European dimension. This is a very complex issue, but I thought it important to write to you to clarify the arguments before you make the payment. The attached note therefore also goes into some detail on this, all of which I think you need to have the full picture. I would, however, briefly summarise the position as follows: There are good arguments that the operation of SDRT in some circumstances is against European law, particularly that relating to the freedom of movement of goods. In the context of Project Saxo, we think the arguments are weak in relation to the SDRT payable on transfers by existing shareholders and on the issue of ADR’s, and stronger in relation to the issue of new shares into Euroclear. In relation to the latter the position is not free from doubt, but any attack on the duty would be very strongly resisted by the UK Inland Revenue as this would have wide implications for stamp duty generally, which brings in significant revenue for the government. In view of the fact that the duty is likely to be payable on the shares issued in ADR form in any event, we are looking at an amount of about £700k at stake. There must be doubts about whether this is worth pursuing in the case of Project Saxo, but this is one for the company to decide. The note does raise the possibility of paying the duty but trying to preserve a subsequent claim. Let me know if you would like me to discuss the feasibility of this with a litigating colleague ….”

“As you are aware, the liabilities to SDRT and stamp duty referred to above arise because Jazztel plc is a UK incorporated company and would not arise if it were incorporated in a different country. This may appear illogical and unfair, but is, unfortunately, the state of UK legislation. For completeness, however, we thought that we should mention that it appears to us that there may be grounds for questioning the validity of some or all of these charges on the basis of EU law. We summarise the grounds for the possible invalidity of these charges below. lt may be, however, that, as a practical matter, and having regard to the sums of money involved for which Jazztel is liable and the length and complexity of any potential litigation that would be required to successfully challenge the charges, you may well conclude that it would not be worthwhile taking the matter any further and that the prudent action is simply to pay the 1.5% SDRT charge arising to Jazztel on the issue of its new shares. The grounds for considering that the SDRT charge levied on the issue of new shares to a clearance system may not be valid under EU law are, broadly, that the charges are contrary to: (a) Article 58 of the Treaty of Rome, relating to the freedom of movement of capital throughout the EU; (b) Article 49 of the Treaty of Rome, relating to the prohibition of restrictions on the freedom to provide services within the EU; and (c) the provisions of Article 11 of Council Directive 69/335, prohibiting member states from subjecting to any form of taxation whatsoever the creation, issue, admission to quotation on the stock exchange, making available on the market or dealing in shares or other securities. In the context of a UK incorporated company acquiring the shares in a target company incorporated in another EU member state in circumstances where the shares in the target company are held within an EU clearance service and the acquisition is effected by means of a share for share exchange under which the shares in the UK incorporated company are put into such clearance service, we consider that there are very strong grounds for questioning the validity of a specific exemption from the 1.5% charge which exempts such acquisition by one UK incorporated of another UK incorporated company but not the acquisition by a UK incorporated company of a company incorporated in another EU member state. While the grounds for questioning the validity of the 1.5% charges arising on the issue and transfer of shares into a clearance service referred to above remain, they become less clear cut as one moves away from the scenario of a UK incorporated company acquiring a company incorporated in another EU member state. The difficulties in attempting to question the validity of the charge include: (a) the uncertainty of whether Euroclear should be considered to be an EU clearance service (since it is ostensibly operated from Belgium) or a clearance system operated by the non-EU incorporated company of Morgan Guaranty Trust Company of New York, and whether the latter interpretation would undermine arguments about the invalidity of the charge based on EU law; (b) whether the validity of a charge related to the issue of ADRs by a non-EU resident entity (ie. Morgan Guaranty Trust Company of New York) could be questioned under EU law; (c) whether, even if an argument about the invalidity of the charge arising on the issue of shares by a UK company into a clearance service could be sustained, the provisions of Article 12 of Directive 69/335, which permit the levying of tax on the transfer of shares, would prevent any successful attack on the charge relating to the transfer by existing shareholders of their shares into Euroclear or the charges arising on the movement of shares from NASDAQ to EASDAQ; and (d) the unlikelihood of being able to challenge the 1.5% charge arising on the transfer of shares from EASDAQ to NASDAQ where the issue of the ADRs is not an EU incorporated entity. You should also be aware that any attack on the 1.5% SDRT charge on the issue of shares into a clearance service could fundamentally undermine the UK SDRT regime, which raises a significant amount of money for the UK Inland Revenue. lt is almost certain, therefore, that any attack on this charge would lead to strenuous opposition from the Inland Revenue that would be most likely to result in litigation that would not be decided without referral to the European Court of Justice. This would obviously require lengthy and expensive litigation with no guarantee of success or that the existing charge would not be replaced by an equivalent, but valid, tax. On this basis we would consider that there are two options available to ,Jazztel in relation to the 1.5% charge arising on the issue of their new shares: (a) to pay the charge on the basis that it is not large in the context of the funds raised by the issue as a whole and that the time and expense that is likely to be involved in challenging it does not, in practice, make any challenge against such shares feasible or desirable; or (b) to pay the charge, but with a lodgement of some sort of protective claim stating the grounds under which it is considered that the charge is invalid and as a result of which it may be possible to reclaim the SDRT paid if a successful challenge were mounted against such charge in the future. As far as (a) is concerned, you may well consider that the amount of money that is likely to be open to challenge, being the proportion of €2.5-3m (based on the share issue price of €17 each) that equates to the proportion of the issue to be listed on EASDAQ compared to that to be listed on NASDAQ and EASDAQ in total, means that the potential time and expense involved in challenging the charge and the fact that the Inland Revenue is likely to fight extremely strenuously against any such challenge, may lead you to consider that the prudent approach would simply be to pay the SDRT. As far as (b) is concerned, in order to be in a position to lodge a considered case for questioning the validity of the charge, it would be necessary for us to undertake a detailed analysis of the position under EU law and of the structure of the clearance systems involved and, probably, to seek Counsel’s advice on the question of the validity of the charge. In addition, since the party technically liable for the SDRT on the issue of your shares into Euroclear is Euroclear (or Morgan Guaranty Trust Company of New York as the operator or Euroclear), it would be necessary to involve them closely in any attempt to attack the validity of the charge. They may consider that, since the tax does not ultimately rest with them but with Jazztel, who will pay the SDRT, they would not want to enter into arguments about the validity of the charge with the Inland Revenue. lt may be, of course, that they would consider that the challenge to the validity of the charge would be to their long term benefit, since it would remove one of the disadvantages for UK incorporated companies to issue their shares into Euroclear and may, therefore, be happy to put their name to any challenge made to the Inland Revenue. As stated above, we should emphasise that we do not feel that the grounds for challenging the validity of the charge in relation to the transfer by existing shareholders of their shares into an EU clearance service, or on the issue of ADRs by a non-EU resident entity are anywhere near as clear as those relating to the issue of new shares into an EU clearance service and, even in the latter case, the complexity of the structure under which Euroclear operates makes it unclear exactly how the charge relating to the issue of new shares to Euroclear would be analysed under EU law. We would, of course, be happy to pursue this matter for you if you consider that it is worth taking further at this point and in relation to the present issue of shares ….”

“Under Article 11 of the Directive, Member States shall not subject to any form of taxation whatsoever the creation, issue, admission to quotation on the stock exchange, making available on the market or dealing in stocks, shares or other securities of the same type, or of certificates representing such securities, by whomsoever issued. The charge to SDRT arising pursuant to Section 96 FA 1986 clearly imposes taxation on the issue of shares by a UK incorporated company. In cases, such as the Issue [i.e. Jazztel’s issue of new shares], where an issue of shares is to be listed on a stock exchange such as EASDAQ (as is the case with the Issue) and it is a requirement of the listing that the shares should be settled through a clearance service such as, in the case of listing on EASDAQ, Euroclear and Cedelbank, the charge under Section 96 FA 1986 would also be a form of taxation on the admission to quotation on a stock exchange and the making available on the market of shares in a UK incorporated company. Further the charge under Section 93 FA 1986 constitutes a charge on depositary receipts and, therefore, a charge on certificates representing shares of UK incorporated companies. We consider, therefore, that the charge to SDRT under Section 96 and Section 93 FA 1986 should be considered to be invalid since they impose a form of taxation on both the issue of shares by UK incorporated companies or certificates representing such shares and, where such shares or certificates are to be listed on a stock exchange that requires settlement through a clearance service, on the admission of those shares or certificates to quotation on a stock exchange and on the making available on the market of or of dealing in such shares or certificates. Since Article 11 has direct effect, its provisions can be relied on by residents of the EU and can be enforced by domestic courts. Further, the provisions of Sections 96 and 93 FA 1986 have been introduced after the date on which the Directive came into force, being 1 January 1972.”

“Accordingly, we would request that you would instruct the Stamp Offices in Worthing and London to return to us the money paid to them relating to the Issue and the Transfers if you agree with our analysis set out above, so that we may remit such sums to our client. In the event that you are not able to agree with our arguments set out above, we would request that you would write to us setting out the basis for your conclusions, so that we may discuss your position further with our client. In addition, we would of course be happy to meet with you to discuss these issues further in the light of your considered view on the matter if you feel that this would be helpful.”

“We consider that the preservation of the entitlement of Member States to charge duties on the transfer of securities in Article 12(l)(a) applies to both types of transaction. We agree that s.67 and s.70 (as well as, we believe, s.93 and s.96) are taxes on the anticipation of future transfers in the securities where - by virtue of s.90(5) and s.99(6) - those future transfers are themselves exempted from tax. However, we consider that Article 12(1)(a) should be interpreted purposive1y so as to include such transaction in accordance with normal Community law practice. All these charges to tax are in substance composition payments in lieu of charges on future transfers. This is highlighted by the fact that operators of clearance services may elect to pay the normal 0.5% Stamp Duty or SDRT on each share transfer in which case the 1.5% charge does not apply (s.97A FA 1986).

“To interpret the term ‘transfer’ referred to in Article 12(1)(a) of the directive in a way such as that proposed by the United Kingdom Government and by the Commission of the European Communities, namely that SDRT at the rate of 1.5% is a charge on share transfers in the form of a ‘season ticket’, would effectively deprive Article 11(a) of the directive of its practical effect and call in question the clear distinction established by Articles 11(a) and 12(1)(a) of the directive between the concepts of ‘issue’ and ‘transfer’. In fact, such an interpretation would have the consequence that issues could nevertheless be subject to a tax or duty, although they, while necessarily involving an acquisition of newly issued securities, must not, under that provision, be subject to any taxes or duties other than capital duty.”

“As we have mentioned in the past to your colleagues, there are, in fact, questions as to the validity of the UK SDRT charge to clearing systems under EU law. Given the increase in the number of cases that have recently been brought contesting UK tax law on the basis of being incompatible with EU law it is conceivable that the charge to SDRT may be challenged before too long. With this in mind, when we forward your payment to HMRC, we would propose making clear that it is being paid without prejudice to Jazztel’s rights to contest the validity of the charge at any time in the future. I would be grateful if you could confirm that you are agreeable to us doing this.”

“We wish to make clear … that the Company has been advised that the charge under Section 96(2)(a) FA 1986 may be contrary to the terms of Council Directive 69/335/EEC and therefore not lawfully levied. The above amount is, therefore, being paid without prejudice to the Company’s right to contest the validity of the charge at any time in the future and/or its right to reclaim payment of the SDRT, with any relevant repayment supplement, in the event that it is determined that it was not due and payable at any time in the future.”

“Whilst I consider that Jazztel must have had some doubt as to whether the tax was lawfully due because of the 22 December 1999 SDRT Advice, my conclusion is that this doubt was a marginal one and that Jazztel’s state of mind was predominantly as it had been prior to the 22 December 1999 SDRT Advice – namely that the tax was due.”

“the date on which he first had knowledge of the following facts— (a) that the injury in question was significant; and (b) that the injury was attributable in whole or in part to the act or omission which is alleged to constitute negligence, nuisance or breach of duty; and (c) the identity of the defendant; and (d) if it is alleged that the act or omission was that of a person other than the defendant, the identity of that person and the additional facts supporting the bringing of an action against the defendant; and knowledge that any acts or omissions did or did not, as a matter of law, involve negligence, nuisance or breach of duty is irrelevant.”

“In my view … , it is a legal impossibility for a claimant to lack knowledge of attributability for the purpose of section 14(1) at a time after the date of issue of his claim. By that date he must in law have had knowledge of it. Pursuant to CPR r 22.1(1)(a)(4), he must verify his claim form by a statement that he ‘believes’ that the facts stated in it are true. The word in the statement of truth is ‘believes’ rather than ‘knows’ only because—of course—the assumption that the cause of action exists does not apply to the claim form. That it exists is indeed only a claim. Although the statement of truth covers wider ground, it can in my view be regarded as an explicit recognition by the claimant that he then has knowledge of attributability for the purpose of section 14(1)”; ii). Lord Wilson said at [6]: “It is in my view heretical that a claimant can escape the conventional requirement to assert his cause of action for personal injuries within three years of its accrual by establishing that, even after his claim was brought, he remained in a state of ignorance entirely inconsistent with it. Indeed it is, as Smith LJ observed in the course of argument in the Court of Appeal, ‘a bit Alice in Wonderland’”; iii). Lord Walker said at [67]: “I do not see how a claimant who has issued a claim form claiming damages for personal injury can be heard to suggest that he did not, when it was issued, have the requisite knowledge for the purposes of the 1980 Act”; iv). Lord Brown, after expressing agreement with Lords Walker, Mance and Wilson, observed at [70] that “[p]erhaps the most critical proposition to which each of the above three judgments commits is (in Lord Wilson JSC’s words at para 3): ‘it is a legal impossibility for a claimant to lack knowledge of attributability for the purpose of section 14(1) at a time after the date of issue of his claim’”, going on to say at [71]: “In short, once a claimant issues his claim, it is no longer open to him to say that he still lacks the knowledge necessary (by reference to sections 11 and 14) to set time running”; v). Lord Mance said at [84]: “A claimant bringing proceedings necessarily asserts that he or she has a properly arguable claim. In the present cases, the claims were expressly to the effect that the claimants had suffered personal injuries by reason of the negligence of the defendant in exposing them to radiation, radioactivity or contaminated material in one way or another. In modern procedure, such an assertion is attested by a statement of belief, as Lord Wilson JSC notes in para 3, and so it was here. Once proceedings are begun, it is by reference to the facts asserted as giving rise to the claim that the question of knowledge must be tested. The claimant cannot avoid this. Indeed, it is difficult in normal circumstances to think of a claimant trying to do so.”

“I do not understand the doctrine to extend to a case where, if different arguments had been placed before it or if different material had been placed before it, it might have reached a different conclusion.”