When is the date of constructive knowledge of a claim?

Facts:

The claimants are members of a litigation group (referred to as FII GLO) established in October 20003. They had paid tax to the HMRC under a mistake of law. The mistake stands from the incompatibility between English and European tax regimes applicable to overseas dividends. With respect to the claim, the Court had to take into consideration not only English case law but also European case law to determine the issue of limitation and constructive knowledge. 

Decision:

The Court was required to ascertain the date on which the Claimants could, with reasonable diligence, have discovered that they had made a tax overpayment and were, therefore, entitled to claim it back. It was necessary to establish this in respect of two aspects of the Claimants’ case, being in relation to the payment of corporation tax paid on income chargeable under Case V of Schedule D and advance corporation tax. 
Mr Justice Richards restated the general principle, especially the fact that the limitation period for a claim in unjust enrichment is set at six years from the date of accrual of the cause of action. This rule can be varied by section 32(1)(c) of the Limitation Act 1980 which provides alternative triggers, most notably the date of actual knowledge or the date of constructive knowledge of a mistake. This section applies to claims for restitution of sums paid under a mistake of law as held by the Supreme Court in FII Group Litigation v Revenue and Customs Commissioners [2020]. 

The Court analysing the existing case law concluded that: the task of identifying the mistake is on the Claimant and that the burden is on them. He made clear that the question is whether the mistake ‘could’, with reasonable diligence, have been discovered rather than ‘should have been’. Moreover, the criterion of ‘reasonable diligence’ is an objective one based on the standard of a “well-advised multi-national group in the UK.” The establishment of this standard leads to two further questions, specifically “when, having exercised reasonable diligence, would the Claimants have had sufficient confidence to justify embarking on the preliminaries to the issue of proceedings such as submitting a claim to HMRC, taking advice and collecting evidence?” and “when, having exercised reasonable diligence, would the Claimants have discovered that they had a ‘worthwhile claim’?” These questions are not directed at when the claimants “could have expected that their pleaded claims would succeed nor are they directed at a complex evaluation of chances of success.” In this case, the claimants were successful as the constructive discovery was in June 2000 following the CJEU’s judgment in Verkooijen.

Implications:

This judgement addresses the issues of limitation and constructive knowledge of a claim by the claimant. The Judge took it upon himself to provide a detailed summary of the litigation in FII Group Litigation Orders as well as how a court should assess constructive knowledge. 
The judgement also highlights the importance of claimants to monitor their rights. Defendants should be aware that they may face some claims after the expiry of the usual limitation period.