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Lloyd's Maritime and Commercial Law Quarterly

UNJUST ENRICHMENT IN A PARALLEL UNIVERSE? RESTITUTION OF TAX, LIMITATION AND EUROPEAN LAW

James Lee*

FII v IRC
The Supreme Court has considered the substantive law of unjust enrichment for the first time in Test Claimants in the Franked Investment Income Group Litigation v Inland Revenue Commissioners. 1 The case is of interest both in the specific context of restitution of tax levied contrary to European Union law, and for the broader law of unjust enrichment. The majority of the Supreme Court adopted a sensible approach, to a large extent correcting the unsatisfactory aspects of the Court of Appeal’s decision. That said, FII may not prove to be as significant as some of the leading House of Lords decisions in the area, not least because many questions remain unanswered at this stage. What is more, yet another reference has had to be sent to the European Court of Justice (“ECJ”).2
FII is one of a number of cases involving claims made against Her Majesty’s Revenue and Customs for the restitution of taxes levied contrary to EU law. The various claimant companies were UK-resident parents with foreign subsidiaries: under the regime, such companies had been unable to claim tax credit in respect of dividends received from the subsidiary.3 The claims were made in the wake of the decision of the ECJ in the Metallgesellschaft case,4 which held that aspects of the UK corporation tax regime were incompatible with EU law. The practical question was how far back in time the claims for restitution of tax could go.
There is no express limitation period prescribed for a claim in unjust enrichment. Instead, the assumption is that the general period is six years5—on the basis that the Limitation Act 1980, s.5 provides that “an action founded on a simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued”. Liability in unjust enrichment generally arises, and therefore the cause of action accrues, from the date of receipt of the relevant payment.6 However, s.32(l)(c) of the same Act provides that the start of the limitation period is delayed to the moment of discovery of the mistake: unjust enrichment claims involving a mistake (whether of fact or law)7 therefore benefit from this more advantageous limitation provision. The effect of s.32(l)(c) for the claimants in FII would be that the limitation period would not be the date


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