Background
AXA Insurance UK plc and Guardian Royal Exchange Assurance plc, now AXA Insurance plc, participated as follower claimants in group litigation challenging the United Kingdom’s discriminatory taxation of dividends from non-UK companies. Their proceedings were stayed while a Prudential group test case determined common issues. AXA Insurance UK sought restitution of corporation tax paid under a mistake of law, while Guardian Royal Exchange sought interest for the period during which unlawfully levied advance corporation tax had been paid prematurely before being set off against lawful mainstream corporation tax.
The Prudential High Court decision appeared to support a common-law claim for the time value of the prematurely paid tax. Later Supreme Court decisions established that no such common-law claim existed and changed the test for determining when a mistake of law could reasonably have been discovered under section 32(1)(c) of the Limitation Act 1980. The Court of Appeal held that the Prudential ruling on the interest claim should not bind the AXA proceedings under CPR 19.23(1)(a), and that Prudential had not decided the limitation start date as a group-litigation issue. AXA appealed both conclusions.
The Court’s Holding
The Supreme Court unanimously dismissed both appeals. On the set-off issue, it upheld an order under CPR 19.23(1)(a) that the Prudential decision would not bind Guardian Royal Exchange. Although judgments on group-litigation issues ordinarily bind registered follower claims, a court may “order otherwise” in exceptional circumstances. The power is narrow and must be exercised without undermining the finality, consistency and efficiency that group litigation is designed to secure.
Those exceptional circumstances existed here. Subsequent Supreme Court authority established that Guardian Royal Exchange had no common-law claim for compensation, by interest or otherwise, for the time value of the utilised advance corporation tax. Its remedy was instead the statutory simple-interest regime in section 85 of the Finance Act 2019. Requiring HMRC to meet a substantial liability on a legal basis now known to be wrong would be unjust, and the follower claimants’ contributions to the test-case costs did not outweigh that consideration.
On limitation, the Court held that the Prudential test case had not determined the discoverability date under section 32(1)(c) as a binding group issue. The point had neither been pleaded nor argued, and the judge’s remarks reflected an assumption rather than a decision. AXA Insurance UK’s claim therefore remains governed by the current test: time begins when the claimant knew, or could with reasonable diligence have known, enough to recognise that it had a worthwhile claim. The applicable date must be agreed or determined in the High Court.
Key Takeaways
- A decision on a group-litigation issue normally binds follower claims, but CPR 19.23(1)(a) permits departure in exceptional circumstances to avoid injustice.
- A later change in law does not automatically justify disapplying a test-case ruling; courts must protect the finality and effectiveness of the group-litigation regime.
- A test-case judgment binds followers only on issues actually decided; an unargued assumption or provisional observation is not a binding determination.
- For mistake-based restitution claims, discoverability turns on when the claimant could reasonably recognise a worthwhile claim, not necessarily the date of an authoritative judgment declaring the law unlawful.
Why It Matters
The judgment clarifies the balance between finality and legal correctness in group litigation. Parties generally may rely on test-case rulings, including rulings based on concessions or admissions, but that reliance is not absolute when exceptional circumstances make continued application of a demonstrably incorrect rule unjust.
The decision also underscores the importance of precisely identifying, pleading and determining common issues. Courts and litigants cannot treat a matter as conclusively resolved for an entire group merely because a test-case judgment proceeded on an unstated or unexamined assumption.