Group Litigation Orders: Binding Effect Of Decisions In Test Cases

• Jurisdiction: European Union
• Law Firm: Herbert Smith Freehills
• Subject Matter: Litigation, Mediation & Arbitration, Tax, Trials & Appeals & Compensation, Corporate Tax
• Author: Mr Alan Watts, Gregg Rowan and Maura McIntosh
• Published date: 22 May 2023

A recent High Court decision illustrates the complexities that can arise in determining the effect a decision in a test case will have on all the other claims pursued under a group litigation order (or "GLO"): Axa Sun Life Plc v Commissioners of Inland Revenue [2023] EWHC 944 (Ch).

The purpose of a GLO is to enable the court to determine the common or related issues that arise in multiple similar claims, known as the "GLO issues", more efficiently and cost effectively than if the claims were dealt with individually. With that aim in mind, CPR 19.23 (formerly 19.12) provides that where a GLO has been made, a judgment or order in a claim on the group register in relation to one or more GLO issues is binding on the parties to all other claims on the group register at that time, unless the court orders otherwise.

However, where the court determines GLO issues through the use of sample or test cases, it is not always straightforward to discern precisely what impact the court's decision will have on the other claims under the GLO. A distinction may be drawn for these purposes between issues which are truly common, in the sense that they apply in precisely the same way to all the claims - eg whether a product supplied by the defendant was defective - and those which are common or related in a looser sense. A classic example in this latter category is limitation, as it is often included among the GLO issues but its determination will often vary at least to some extent by reference to individual circumstances.

The decision in the present case underlines the importance of ensuring that the GLO issues are properly and adequately defined, before the court tries any test claims, so that it is clear what the judge is deciding and disputes do not later arise as to the broader impact.

Background

The judgment was given in the context of the CFC and Dividend GLO, which was established in 2003 and relates to claims for the repayment of corporation tax and/or advance corporation tax which was levied by the UK in contravention of EU law, and was therefore paid under a mistake of law. It is now settled law that, in principle, taxpayers are entitled to a restitutionary remedy, but quantification and limitation issues relating to the claims are still to be determined.

Under s.32(1)(c) of the Limitation Act 1980, the limitation period for a claim based on a mistake does not begin to run until the claimant has discovered the mistake or could with reasonable diligence have...