“30. In the light of what the ECJ said in these paragraphs [i.e. paragraphs 188 to 196 of FII (ECJ) I], read in the context of the full judgment, I cannot accept Mr Baldry’s submission [for HMRC] that the only issue which the ECJ was addressing, or remitting to the national court, was the issue whether the denial of a tax credit to the shareholder receiving the FID was a new restriction. As paragraphs 192 to 194 to my mind emphasise, one has to look at the legislative package as a whole in order to ascertain whether the approach reflects a new approach which is different from that of the previous law. Moreover, as Mr Aaronson QC [for the Test Claimants] pointed out, the ECJ was well aware that, ultimately, the question to be determined was whether the Claimants could make claims in respect of ACT paid on third country FIDs and that the ACT charge was already in place under the legislation existing at31 December 1993 . 31. When one turns to consider the judgment of Henderson J in [FII (High Court] I] in what was effectively a liability trial, and the orders and declarations made by him to give effect to his judgment, it is plain to me that he decided that the composite FID regime [Gloster LJ’s emphasis] (and not merely that element of it which involved the denial of a tax credit to the shareholder receiving the FID) was incompatible with Community Law and a new restriction … 32. What is clear from this passage [inFII (High Court) I] at [180] to [191] (and indeed Mr Baldry QC did not dispute this point) was that, before Henderson J, Mr David Ewart QC, leading counsel on behalf of HMRC, was contending that there was a composite scheme and that the inextricable link between payment of ACT and the receipt of a tax credit demonstrated that the FID regime was indeed protected by the standstill provision of Article 57(1)). Basically, Mr Ewart QC was arguing that, although the removal of the tax credit to shareholders was an additional restriction, one had to read it in conjunction with the change to [the] ACT regime, and, viewed as a whole [Gloster LJ’s emphasis], the legislation adopted the same approach and the same logic as the previous statutory regime, and therefore was protected by the standstill provision of Article 57(1). … 35. As quoted above, the declarations which the Court of Appeal made pursuant to its judgment can only be regarded as consistent with the conclusion that the composite FID regime was not saved by the standstill provision … 36. In the light of this approach, in my judgment HMRC’s current assertion before this court that Henderson J and the Court of Appeal focused solely on the removal of the shareholders’ right to a tax credit, and that they had not adjudicated on the Claimant companies’ claims in respect of the time value of ACT is simply not sustainable. Such an argument is inconsistent with the orders of both Courts, which dealt expressly with the Claimant companies’ claims for the time value of ACT. Moreover, Mr Ewart’s submissions before both Courts was that the FID regime should be looked at as a whole, and, as the main purpose of the FID regime as a whole was to alleviate the discriminatory restriction on ACT payments, the regime as a whole should be regarded as falling within the “standstill” in Article 57(1). Both Henderson J and the Court of Appeal rejected this argument. In those circumstances it lies ill in HMRC’s mouth now to change tactics and put forward a wholly different case. 37. Accordingly, in my judgment, the issue which HMRC wishes to raise has been conclusively determined against it by Henderson J and the Court of Appeal. Therefore HMRC is estopped per rem judicatam, from raising the issue a second time: the contention now being advanced by HMRC is inconsistent with the earlier decision in the same case … 38. Alternatively, if I am wrong in my analysis that the issue which HMRC now seeks to raise has been conclusively determined against it by Henderson J and the Court of Appeal, in any event the raising of this argument (namely that one should look at the various elements of the restrictions imposed by the FID regime separately) would be contrary to the public interest and an abuse of process: see Lord Bingham in Johnson v Gore Wood[2002] 2 AC 1 , at 31A, where he explains the principle articulated in Henderson v Henderson.”
“In the light of all this material, it is in my judgment now clear beyond argument that the FID regime not only breached Arts 49 and 63 TFEU in relation to EU FIDs (i.e. FIDs matched with distributions made by companies resident in the EU), as the ECJ expressly held in FII (ECJ) I, but that the regime also breached Art 63 (and could not benefit from the standstill provision) in relation to third country FIDs. It follows that the claimants are in principle entitled to recover the time value of all of the ACT which they were obliged to pay under the FID regime, from the dates of payment until the dates when the ACT was repaid to them.”
“Had this been the first time this issue had been considered I would be minded to grant permission. But it seems to me that the position is now well established both at High Court and, more relevantly, Court of Appeal level, particularly by the Court of Appeal order of19 March 2010 . In these circumstances, I am bound to refuse permission to appeal.”
“The court may give summary judgment against a … defendant on the whole of a claim or on a particular issue if: (a) it considers that – … (ii) that defendant has no real prospect of successfully defending the claim or issue; and (b) there is no other compelling reason why the case or issue should be disposed of at a trial.”
“(c) it is satisfied that, if the claim went to trial, the claimant would obtain judgment for a substantial amount of money (other than costs) against the defendant from whom he is seeking an order for an interim payment …”
“The FID regime 23. From1 July 1994 , a resident company receiving dividends from a non-resident company could elect that a dividend which it paid to its shareholders be treated as a “foreign income dividend” (“FID”). ACT was payable on the FID but, to the extent to which the FID matched the foreign dividends received, the resident company could claim repayment of the surplus ACT. 24. While ACT was payable within 14 days of the end of the quarter in which the dividend was paid, surplus ACT was repayable when the resident company became liable for mainstream corporation tax, namely 9 months after the end of the accounting period. 25. When a FID was paid to an individual shareholder, the latter ceased to be entitled to a tax credit, but was treated for income tax purposes as having received income which had borne tax at the lower rate. Tax-exempt shareholders, such as United Kingdom pension funds which received a FID, were also not entitled to a tax credit. 26. For dividends paid after6 April 1999 , the ACT system and the FID regime were abolished.”
“Neither party to this appeal has suggested that the judge’s description of the regime is in any material respect inaccurate.”
“177. … the companies which paid the FIDs … duly paid ACT upon them. The FIDs were matched against qualifying distributable foreign profits received by UK-resident subsidiaries within the group. In order to qualify, it was necessary for the distributable foreign profits to have borne a rate of underlying tax which exceeded the UK corporation tax rate (a requirement which can be extracted, with some effort, from s 246I of ICTA 1988: fortunately it is not in dispute). When the matching had been agreed with the Revenue, the ACT was repayable. In fact, provisional repayments of the ACT were always made nine months after the end of the accounting period in which the FID had been paid. 178. There was a practical problem associated with the operation of the FID regime, described by another of BAT’s witnesses, Mr Thomas Bilton, in his evidence for the first liability trial in 2008. At the time when the election to treat a distribution as a FID had to be made, the underlying tax liabilities on the matching distributable foreign profits were most unlikely to have been finally settled. Thus the group had to make an educated guess what the underlying rate of tax would turn out to be. The consequences of under-estimating the rate could be severe, because if the matching foreign profits failed to satisfy the tax rate criterion the dividend would cease to qualify as a FID, the ACT would no longer be repayable, and by declaring the FID the group would in fact have exacerbated the problem of surplus ACT which the regime was intended to relieve. 179. Two consequences flowed from this. First, the group would aim to err on the safe side by matching FIDs with a greater amount of distributable foreign profits than it thought it would probably need. Secondly, the repayments of ACT which the Revenue made nine months after the end of the accounting period were (as I have said) provisional. 180. With one exception … the claimants’ FID time-value claims are based on matching with foreign profits which was eventually agreed with the Revenue. It follows that the underlying rate of foreign tax paid on those profits equalled or exceeded the UK corporation tax rate, and the associated repayments of ACT became final.”
“140. By question 4, the national court essentially asks whether Articles 43 EC and 56 EC … preclude national legislation, such as the legislation at issue in the main proceedings, which, while allowing resident companies receiving foreign-sourced dividends to elect to recover ACT accounted for on a subsequent distribution to their own shareholders, first, obliges those companies to pay the ACT and to reclaim it subsequently and, secondly, does not provide any tax credit to their shareholders, whereas those shareholders would have received such a tax credit if the resident companies had made a distribution based on nationally-sourced dividends.”
“144. … That regime permits resident companies receiving foreign-sourced dividends to obtain a repayment of the amount of surplus ACT, that is to say, the amount of ACT which could not be offset against the amount due by way of corporation tax. 145. However, it must be held that the tax treatment of resident companies receiving foreign-sourced dividends and opting for the FID regime remains less favourable in two respects than that which applies to resident companies receiving nationally-sourced dividends. 146. As regards, in the first place, the ability to recover surplus ACT, the order for reference shows that, while ACT must be accounted for within 14 days of the quarter in which the company concerned pays dividends to its shareholders, surplus ACT is repayable only when corporation tax becomes due, that is to say, nine months after the end of the accounting period. Depending on when the company paid the dividends, it must wait between eight-and-a-half months and 17½ months to obtain repayment of the ACT accounted for. 147. Accordingly, as the claimants contend, resident companies electing to be taxed under such a regime by reason of their receipt of foreign-sourced dividends are exposed to a cash flow disadvantage which does not arise in the case of resident companies receiving nationally-sourced dividends. In the latter case, since the resident company making the distribution has already accounted for ACT on the profits distributed, a tax credit is granted to the resident company receiving the distribution, thereby allowing that company to pay an equivalent amount by way of dividends to its own shareholders without having to account for ACT. 148. In the second place, a shareholder receiving a payment of dividends from a resident company which has its origin in foreign-sourced dividends treated as FIDs, is not entitled to a tax credit, but is treated as having received income which has been taxed at the lower rate for the tax year in question. In the absence of a tax credit, such a shareholder has no right to any repayment if he is not liable to income tax or where the income tax due is less than the tax on the dividend at the lower rate. 149. As the claimants contend, that means that a company which has elected to be taxed under the FID regime must increase the amount of its distributions if it wishes to guarantee its shareholders a return equivalent to that which would be achieved from a payment of nationally-sourced dividends. 150. The United Kingdom Government claims that those differences in treatment do not involve any restriction on freedom of establishment.”
“It follows that Article 43 EC precludes a regime having the characteristics of the FID regime described by the National Court in question 4.”
“173. The answer to question 4 must therefore be that Articles 43 EC and 56 EC preclude legislation of a member state which, while exempting from advance corporation tax resident companies paying dividends to their shareholders which have their origin in nationally-sourced dividends received by them, allows resident companies distributing dividends to their shareholders which have their origin in foreign-sourced dividends received by them to elect to be taxed under a regime which permits them to recover the advance corporation tax paid but, first, obliges those companies to pay that advance corporation tax and subsequently to claim repayment and, secondly, does not provide a tax credit for their shareholders, whereas those shareholders would have received such a tax credit in the case of a distribution made by a resident company which had its origin in nationally-sourced dividends.”
“The FID regime is incompatible with Article 56 EC in relation to FIDs matched with dividends paid by a company resident in a country other than a Member State (“third country FIDs”).”
“107. It therefore falls to this Court to determine the appropriate conforming interpretation. In our judgment, a conforming interpretation can be achieved simply by reading in words that make it clear that resident companies can claim a credit under section 231 in respect not only of qualifying distributions made by resident companies (domestic-source income) but also distributions made by other companies (foreign-source income) to the extent that Community law requires a tax credit to be given in respect of that income too. The extent of that entitlement can then be investigated when the section falls to be applied. The difficulties more properly arising at the point of application should not be erected as an objection to conforming interpretation. This interpretation will apply even if the extent of the entitlement is not fully ascertained until after the ECJ has answered any question put to it in a further reference.”
“The following claims are successful in relation to the GLO issues determined in the trial: (a) claims for the repayment of surplus ACT … or ACT refunded under the FID regime, paid on or after1 January 1973 , by claimants which received dividend income from subsidiaries established in other Member States in so far as (i) the ACT paid was not due after taking into account the tax credit available under section 231 ICTA 1988 in respect of those dividends and (ii) the claims are made within the applicable limitation periods; (b) claims for the time value of ACT on third country FIDs paid on or after1 July 1994 and refunded under the FID regime in so far as (i) the ACT paid was not due after taking into account the tax credit available under section 231 in respect of those dividends and (ii) the claims are made within the applicable limitation periods; (c) claims for interest based on claims under (a) and (b) above.” (a) claims for the repayment of surplus ACT … or ACT refunded under the FID regime, paid on or after1 January 1973 , by claimants which received dividend income from subsidiaries established in other Member States in so far as (i) the ACT paid was not due after taking into account the tax credit available under section 231 ICTA 1988 in respect of those dividends and (ii) the claims are made within the applicable limitation periods; (b) claims for the time value of ACT on third country FIDs paid on or after1 July 1994 and refunded under the FID regime in so far as (i) the ACT paid was not due after taking into account the tax credit available under section 231 in respect of those dividends and (ii) the claims are made within the applicable limitation periods; (c) claims for interest based on claims under (a) and (b) above.”
“24.1 This Part sets out a procedure by which the court may decide a claim or a particular issue without a trial. … 24.2 The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if …”
“In this paragraph, where the context so admits, the word “claim” includes – (1) a part of a claim, and (2) an issue on which the claim in whole or part depends.”
“(1) judgment on the claim, (2) the striking out or dismissal of the claim, (3) …”
“All claims listed in Schedule 1 save for those identified to proceed as test claims pursuant to Paragraph 11 above be stayed until further order with permission to apply for the stay to be lifted on giving 14 days’ notice in writing to the other parties.”
“Notwithstanding Paragraph 12 of this Order, every party to this Order shall have permission to apply on giving not less than 14 days’ notice in writing to every other party.”
“So it becomes necessary to consider whether the respondents did waive this requirement. “Waiver” is a word which is sometimes used loosely to describe a number of different legal grounds on which a person may be debarred from asserting a substantive right which he once possessed or from raising a particular defence to a claim against him which would otherwise be available to him. We are not concerned in the instant appeal with the first type of waiver. This arises in a situation where a person is entitled to alternative rights inconsistent with one another. If he has knowledge of the facts which give rise in law to these alternative rights and acts in a manner which is consistent only with his having chosen to rely on one of them, the law holds him to his choice even though he was unaware that this would be the legal consequence of what he did. He is sometimes said to have “waived” the alternative right, as for instance a right to forfeit a lease or to rescind a contract of sale for wrongful repudiation or breach of condition; but this is better categorised as “election” rather than as “waiver” … The second type of waiver which debars a person from raising a particular defence to a claim against him, arises when he either agrees with the claimant not to raise that particular defence or so conducts himself as to be estopped from raising it. This is the type of waiver which constitutes the exception to a prohibition such as that imposed by section 29(3) of the Landlord and Tenant Act, 1954, and other statues of limitation. The ordinary principles of estoppel apply to it.”
“One of the essential elements as respects the quasi-estoppel by acquiescence is that [the party debarred from relying on the relevant right] must have encouraged the other party to act as he did; and this encouragement may be active, as in the instant case by agreeing to the postponed date, or passive by refraining from asserting his own inconsistent legal right. But in contrast to estoppel in the strict sense of the term the party estopped by acquiescence must, at the time of his active or passive encouragement, know of the existence of his legal right and of the other party’s mistaken belief in his own inconsistent legal right. It is not enough that he should know of the facts which give rise to his legal right. He must also know that he is entitled to the legal right to which those facts give rise.”
“A step taken in the High Court in breach of the CPR will not be void and any irregularity will be waived by election or estoppel if the party affected fails to challenge it within a reasonable time or takes a fresh step, or if the other party would be prejudiced.”
“(1A) In civil proceedings against the Crown, as defined in rule 66.1(2), a claimant may not apply for summary judgment until after expiry of the period for filing a defence specified in rule 15.4.”