I realise Lent has not even kicked off (it does next Wednesday, Valentine’s day) yet the judicial year already has seen a miraculous resurrection. In Skatteforvaltningen v MCML Ltd [2024] EWHC 148 (Comm) (MCML are formerly known as ED&F Man Capital Markets) SKAT did exactly what I suggested they do namely to amend their claim against these defendants to one for deceit.
(I dare say the did not do it upon the blog’s instruction; otherwise a charitable donation might be in order; note here btw for my review of the UKSC judgment in same.)
As Bright J summarises [5], SKAT’s claims at the start of current proceedings were advanced on the basis that the defendants had acted fraudulently. Such claims were, in general (and along with other causes of action), for the tort of deceit. However, in relation to ED&F Man, SKAT did not allege fraud/deceit but only negligent misrepresentation.
[7] On 5 December 2022, SKAT issued fresh proceedings in which ED&F Man was the sole Defendant. SKAT now alleged that ED&F Man knew that the representations in the Tax Vouchers were false or was reckless. SKAT’s claim in these fresh proceedings is for deceit, just as the initial claim against the other defendants which unlike that against ED&F Man, did survive Dicey Rule 3 /the foreign revenue rule.
In my review of the Court of Appeal judgment, under the title “Skat v Solo Capital Partners. When faced with Dicey rule 3, I’ll see your tax claim and raise it to a fraud one.”, I concluded
The title of this piece of course hints at the relevance of claim formulation. It is also exaggerated: SKAT cannot conjure up fraud elements out of nowhere to reinvent a tax claim as one in mere tortious and fraudulent misrepresentation. However it is clear that in cases that are somewhat murky, claim formulation will be crucial to navigate Dicey Rule 3.
I did not suggest that such claim reformulation ought to be tried in the current case for, well, SKAT it would have seemed have spent their powder. Yet this is exactly what SKAT now have done (and given the size of the claim, who can blame them for trying). Yet prima facie the hurdles for such new attempt seem quite formidable:
[33] ff issue estoppel: the arguable identical issue being tried formulated [43] by defendant’s counsel as “… whether SKAT’s claims for compensation for making tax refunds it was not obliged to make was a foreign revenue claim for the purpose of Dicey Rule 3, now Dicey Rule 20.” That the claim is now in deceit and not negligence arguably does not change that (in light of claimant being the same, and having their cake and eating it).
The judge sees that differently: [48]: “mere similarity and/or a possible inference or deduction is not sufficient to bring into play the doctrine of issue estoppel.”
[50] Henderson v Henderson abuse of process: the fraud claim if it was to be brought at all, could and should have been brought earlier. The discussion on this is lengthy. For their to be abuse, it is necessary both (a) that the claimant could have raised the matter in the earlier proceedings and (b) that the claimant should have done so. A claimant is not lightly to be deprived of the possibility of a genuine claim. Some kind of harassment or serious prejudice is required, and the judge did not find that infringement of the Aldi joinder rule suffices.
The judge adds
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- In reaching this conclusion, I principally have in mind that the court must be cautious about shutting litigants out of their right to justice. The need for caution features prominently in several of the authorities in this area (see paragraph 55 above), and is also required by article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms.
- However, it also seems to me relevant that the case SKAT wishes to bring is one of fraud. The general interests of justice, and the wider interests of society as a whole, are not well served if serious financial fraud is not brought to light. If fraud has been committed, the fraudsters should be exposed.
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These latter comments of course do not displace the more detailed analysis of the authorities in the previous paras.
The judge refused permission to appeal which the defendants may of course still seek direct from the Court of Appeal. I would have thought there are some unresolved issues of law at stake here.
Geert.