SEMPRA METALS LTD (FORMERLY METALLGESELLSCHAFT LTD) V HER MAJESTY’S COMMISSIONERS OF INLAND REVENUE AND ANOTHER

[2007] UKHL 34, House of Lords, 18 July 2007

Measure of interest – Compound interest – Restitution - Unjust enrichment.

A company had had to pay part of its corporation tax prematurely and had as a result suffered a timing disadvantage which conferred a corresponding timing advantage on the Revenue. The rule was more unfavourable to foreign companies than to UK corporations and was therefore contrary to article 52 (now 43), EC Treaty. According to a judgment by the European Court of Justice, a remedy had to be provided under domestic law. A majority of the House of Lords (Lord Nicolls of Birkenhead, Lord Hope of Craighead, Lord Walker of Gestingthorpe), allowed the claim for interest: The claim was one for interest losses as damages for breach of a statutory duty, and did not fall within the exception to the general common law rules. It was subject to the same rules as applied generally to damages claims in tort. The House should hold that at common law, subject to the ordinary rules of remoteness which apply to all claims of damages, the loss suffered as a result of late payment of money is recoverable. A claimant wanting to recover compound interest would have to claim and prove his actual interest losses. Per Lord Scott of Foscote and Lord Mance: The restitutionary remedy could not entitle the claimant to recover not only the payment but also interest thereon that the person under the obligation to make repayment has never received or to recover the value of an assumed benefit derived from the mistaken payment which that person had in fact never enjoyed. The conclusion of the majority confused the remedy for a payment made under a mistake with the remedy for loss caused by statutory obligation.