Deutsche Morgan Grenfell Group - Successful House of Lords appeal against HMRC

25 Oct 2006

Slaughter and May acted for its client, Deutsche Morgan Grenfell Group Plc (DMG), in its successful appeal to the House of Lords in its claim against HMRC. The claim arises from a decision in 2001 by the Court of Justice of the European Communities (ECJ) in the Metallgesellschaft/Hoechst case (in which the claimants were also represented by Slaughter and May). In that decision it was held that certain aspects of the UK’s advanced corporation tax (ACT) regime were contrary to Article 43 (then Article 52) of the Treaty of Rome. DMG’s claim is one of a significant number brought in the High Court, following the ECJ decision, on the question of the compensation payable as a result of the wrongfully exacted payments of ACT. These claims have, since 2001, been grouped within a Group Litigation Order, known as the ACT Group Litigation Order. DMG was appointed the test claimant on the question of applicable limitation periods for claims against HMRC arising from the ECJ decision.

In a judgment delivered on 25 October, 2006 the House of Lords found that under English law there is a general right to recover money paid under a mistake of law or fact and that there is no exception excluding bringing such a claim against HMRC. DMG had mistakenly believed that the ACT regime was lawful at the time the ACT payments were made and had continued to be mistaken as to the true state of the law until the Metallgesellschaft/Hoechst judgment in 2001. The House of Lords found that the limitation period for bringing a claim against HMRC for ACT payments made under a mistake of law therefore did not begin to run until the mistake was discovered when the ECJ judgment was given in 2001. The decision has profound implications as compensation could, for some claimants participating in the ACT Group Litigation Order, stretch back to tax payments made in 1973.

Slaughter and May also acts for Sempra Metals Limited in its test case under the ACT Group Litigation Order. The issue to be determined in that test case is whether the ECJ’s judgment in the Hoechst/Metallgesellschaft cases requires the English court to award the claimants in the ACT Group Litigation compound interest on the sums paid by way of ACT. On 16 June, 2004 the High Court held that compound interest should be awarded. That decision was upheld by the Court of Appeal on 12 April, 2005. HMRC's appeal against that decision will be heard by the House of Lords on 1 and 2 November, 2006.


Sarah Lee (partner), Caroline Edwards (associate), Bridget Bunnell (associate)

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