BAILII [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE]

England and Wales High Court (Chancery Division) Decisions


You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Evonik UK Holdings Ltd & Ors v Commissioners of Inland Revenue & Anor [2025] EWHC 939 (Ch) (17 March 2025)
URL: https://www.bailii.org/ew/cases/EWHC/Ch/2025/939.html
Cite as: [2025] EWHC 939 (Ch)

[New search] [Printable PDF version] [Help]


Neutral Citation Number: [2025] EWHC 939 (Ch)
Claim No. HC-2015-001224 & Ors

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
REVENUE LIST (ChD)

The Rolls Building
Fetter Lane,
EC4A 1NL
17 March 2025

B e f o r e :

Mr Justice Richards
____________________

EVONIK UK HOLDINGS LIMITED AND OTHERS
("Evonik")
Claimant
- and -

(1) THE COMMISSIONERS OF INLAND REVENUE
(2) THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS
("HMRC")
Defendant

____________________

Digital Transcription by Epiq Europe Ltd,
Lower Ground 46 Chancery Lane WC2A 1JE
Tel No: 020 7404 1400
Email: civil@epiqglobal.co.uk
(Official Shorthand Writers to the Court)

____________________


____________________

HTML VERSION OF JUDGMENT (APPROVED)
____________________

Crown Copyright ©

    WARNING: reporting restrictions may apply to the contents transcribed in this document, particularly if the case concerned a sexual offence or involved a child. Reporting restrictions prohibit the publication of the applicable information to the public or any section of the public, in writing, in a broadcast or by means of the internet, including social media. Anyone who receives a copy of this transcript is responsible in law for making sure that applicable restrictions are not breached. A person who breaches a reporting restriction is liable to a fine and/or imprisonment. For guidance on whether reporting restrictions apply, and to what information, ask at the court office or take legal advice.

    MR JUSTICE RICHARDS:

    Introduction

  1. The purpose of today's hearing is to finalise the form of order to bring to an end Evonik's claim in the Franked Investment Income GLO. The process of finalising that order started in February 2024.
  2. In principle, it is common ground between the parties that Evonik:
  3. a. is entitled to restitution of capital sums;
    b. it is entitled to interest under s85 (Section 85) of the Finance Act 2019 (FA 2019) in respect of certain unlawful ACT that was set off or repaid before it commenced proceedings; and
    c. it is entitled to interest under section 35A (Section 35A) of the Senior Courts Act 1981 in respect of certain causes of action for restitution of unutilised ACT.
  4. That calculation will produce an aggregate judgment debt. It is common ground that this judgment debt attracts interest until it is paid with the rate of interest being governed by s52 of the Finance (No 2) Act 2015 (Section 52).
  5. The dispute before me today is about the date from which interest under Section 52 should start to accrue. HMRC say it should start to accrue from the date of the final order, and Evonik says that it should start to accrue from 10 May 2024.
  6. The various interest rates

  7. I do not think I need to say much about Section 35A. It is common ground that I should apply the rate of base rate plus 2 per cent to unutilised surplus ACT until the relevant principal amount of that ACT is paid. It is also common ground that in principle, the Section 35A rate applies to unlawful ACT on FIDs that had not been repaid as at 12 July 2002, the date these proceedings were commenced. (In fact Evonik is not obtaining the full benefit of the Section 35A rate as a consequence of my judgment of 18 December 2024 (the December 2024 Judgment) reported at [2024] EWHC 3239 (Ch) by which I held Evonik to a concession that it had made earlier in these proceedings).
  8. The Section 85 interest rate is low. It is currently fixed at 0.5 per cent per annum and has been at that rate since 2009. Section 85 interest accrues in two ways on utilised unlawful ACT:
  9. a. First, it accrues under s85(3)(a) of FA 2019 from the date the ACT was paid until the date it is set off. That produces what Mr Bremner KC aptly describes as a "notional principal amount".
    b. Section 85(3)(b) then provides for some measure of compounding because the notional principal amount itself attracts interest at the Section 85 rate until payment.
  10. Section 85 does not distinguish between post-judgment or pre-judgment interest.
  11. Section 52 interest accrues at base rate plus 2 per cent. It operates by varying the 8 per cent rate that would otherwise apply under s17 of the Judgments Act 1838 (the Judgments Act). The general rule is that Section 52 interest starts to accrue from the date of judgment although, as will be seen, the court has power to direct that Section 52 interest should accrue from an earlier date.
  12. There is, therefore, a possible overlap between Section 52 and interest that accrues under s85(3)(b) of the Finance Act 2019 as both of those provisions can apply to govern the rate at which interest accrues post judgment.
  13. By s86(3)(b) of FA 2019, a person who has obtained an order under Section 85 in respect of a "relevant remedy" is not entitled to any other relevant remedy in respect of a "relevant payment". That provision is clearly intended to provide that Section 85 interest is, in appropriate cases, the only remedy that is to be awarded. However, s86(3)(b) does not deal with the overlap between Section 85 and Section 52 in this case because of the definition of "relevant remedy" in s86(4) which refers to a "remedy for the loss of use of the amount of the relevant payment during the period mentioned in section 85(3)(a)…" (my emphasis). In this case, there is no possibility of Section 52 interest accruing for that period; rather, if Section 52 interest accrues it will be in respect of part of the period mentioned in s85(3)(b).
  14. The parties had slightly different answers as to how the potential overlap should be addressed. However, both were agreed that (i) Evonik should not obtain interest under both Section 85 and Section 52 for any period and (ii) once I determine the date from which Section 52 interest is to accrue, interest will accrue at that rate only and will displace any interest that might otherwise have accrued under s85(3)(b) of FA 2019. I do not think I need to address the slightly different routes by which the parties arrived at that answer.
  15. The discretion and the principles that I should apply when exercising it

  16. As I have mentioned, Section 52 simply operates to alter the rate applicable under s17 of the Judgments Act in connection with various tax claims.
  17. Section 52 does not alter the principles applicable under the Judgments Act and CPR and accordingly, my discretion to determine the date from which post-judgment interest is to accrue is to be found outside Section 52. In summary:
  18. a. Section 17 of the Judgments Act provides for interest on a judgment debt to accrue at 8 per cent from such time as may be prescribed by rules of court.
    b. CPR 40.8 provides that interest at the Judgments Act rate is to begin to run from the date of judgment, but the court is given power to order otherwise. CPR 40.8(2) expressly envisages that the court can order that Judgments Act interest is to accrue from a date before judgment is given.
    c. Section 52 provides for a rate different from the 8 per cent rate to apply to tax judgment debts such as Evonik's.
  19. It is, therefore, common ground that I have discretion to order that the Section 52 rate should start to accrue before judgment, with the parties' disagreement being as to how I should exercise my discretion in this case.
  20. Parameters for the exercise of the discretion were set out in the judgment of Christopher Clarke J (as he then was) in Fattal v Walbrook Trustees (Jersey) Limited [2009] EWHC 1674 (Ch) at [25] to [26]. In summary:
  21. a. I need a good reason to provide for interest to start to accrue before judgment, but there is no need for the circumstances to be labelled as exceptional before I exercise discretion in that way.
    b. The most important consideration is that my exercise of discretion should reflect what justice requires having regard to the purpose for which interest is awarded on debts, damages and costs.
  22. That approach was followed in Involnert Management Inc v Aprilgrange Limited [2015] EWHC 2834 (Comm). That was a case involving an order for costs to be paid following an assessment. Such an order was held, on previous authority, to create a judgment debt as at the date it was made. The starting position, therefore, was that the costs awarded would attract interest at the Judgments Act rate from the moment the order was pronounced, even though the actual assessment of costs would not have started, still less been completed, at that time and the paying party would have little idea as to how much was due.
  23. Leggatt J (as he then was) concluded that this starting position would not produce a just outcome. Instead, he ordered that Judgments Act interest should not start to accrue until three months after the date of the order because by then the paying party would have some indication as to the amount that was likely to be payable.
  24. HMRC distil from this case what they refer to as the "Involnert principle", namely that interest should only run from a date upon which the paying party could reasonably be expected to make a payment. I do not consider that Involnert lays down any such general principle. I consider HMRC's submission to be extrapolating a general principle from a fact-specific exercise of discretion in that case.
  25. Nor do I derive any such general principle from DuPont Nutrition Biosciences ApS v Novozymes A/S [2013] EWHC 483 (Pat). That was a case where, even though judgment was not given until a later date, it was clear at an earlier date what the nature of the judgment would be because the Technical Board of Appeal of the European Patents Office had revoked a patent. In those circumstances, Floyd J (as he then was) concluded that justice required Judgments Act interest on costs to apply from the earlier date.
  26. I do not derive from that case a principle that one can only make such an order if it is clear at an earlier date what was due to be paid. I consider the question simply remains one as to what justice requires in the particular case.
  27. Therefore, I do not derive any general principle from the authorities that were cited to me beyond that arising from Fattal that I have summarised above. However, I do accept a more limited proposition. It is relevant to consider, when I am determining what justice requires, whether HMRC agreed a judgment sum earlier, and whether they agreed to Section 52 interest accruing from any particular date, and what the nature of any such agreement was.
  28. What does justice require in this case?

    Background

  29. Initially, there were some difficulties in the parties agreeing an order to give effect to the Supreme Court's judgment in Test Claimants in the FII Group Litigation v HMRC [2021] UKSC 31 (FII SC3). The Supreme Court's order was not available in February or March 2024, when the parties were trying to agree an order in the proceedings as remitted to the High Court.
  30. In March 2024, HMRC persuaded me not to make an order for judgment in the remitted High Court proceedings on the basis that the Supreme Court's order was not yet available. Instead, I made an order requiring the parties to use best endeavours to agree figures between themselves by a particular deadline.
  31. By 15 April 2024, having made a series of consent orders extending the deadline for agreement, I made an order by consent that somewhat forced the issue. That order provided that the best endeavours needed to continue until 10 May 2024, but if the parties could not agree by then, there would need to be a further case management hearing. The parties set about complying with that order, and trying to agree an amount by 10 May 2024.
  32. On 30 April 2024, HMRC sent an email articulating their position that as at 10 May 2024, HMRC would owe £16,939,660.44. However, that never became an agreed figure as at 30 April 2024 and the 10 May 2024 deadline came and went without any agreement being reached.
  33. The same email set out HMRC's calculation of interest. Those calculations proceeded on the basis that Section 85 and Section 35A interest would be calculated up to 10 May 2024. However, I do not consider that this email set out any express agreement on the commencement date for Section 52 interest. In particular, HMRC did not state that Section 52 interest would in all events accrue from 10 May 2024. Indeed, an early paragraph of the email noted that HMRC considered that "for the purposes of calculating the judgment sum, the correct date to use is the date that the High Court makes its order for judgment". In my judgment, HMRC performed their calculation as at 10 May 2024 because that was the date on which the best endeavours obligation expired and so was a convenient date to choose.
  34. HMRC's email of 30 April 2024 contemplated that the order giving judgment might be a few days after 10 May 2024 (so that the parties could have sight of the Supreme Court's order in FII SC3 before agreeing figures) and that in that case further small amendments could be made. HMRC's email did not address the possibility of the order being made several months after 10 May 2024 because that possibility was simply not contemplated at the time.
  35. Since there had been no agreement by the 10 May deadline, a further case management hearing was listed to take place on 18 June 2024. The Supreme Court's order in FII SC3 meanwhile became available on 13 May 2024.
  36. In advance of the hearing listed for 18 June 2024, the parties exchanged calculations and draft orders. That process did not result in agreement either, because at that point there was a sticking point as to how some £6.4 million paid under the summary judgment whose quantum was affected by FII SC3 should be allocated. That had a clear impact on what was due. If the £6.4 million was allocated to the principal amount of the judgment debt, one effect on interest would follow. If it was allocated against accruing interest, another result would follow. The correct approach to the allocation of that £6.4 million was on the agenda for the case management hearing on 18 June 2024.
  37. A draft order prepared by HMRC on 17 June 2024, the day before the CMC, envisaged that Section 52 interest would be payable from 10 May 2024.
  38. In a significant email sent on that date, HMRC agreed that if the taxpayer's approach was correct, then the principal amount owing would be some £18.572 million with daily post-judgment interest of some £3,689. By contrast, if HMRC's approach was correct, HMRC averred that the principal amount owing would be £16.94 million, very slightly more than the figure set out in their email of 30 April 2024, with £3,364.87 of interest accruing daily. It is common ground that HMRC's interest calculations as set out in this email proceeded on the basis that Section 52 interest would accrue from 10 May 2024.
  39. Very soon after this email was sent, perhaps two hours later, Evonik intimated that it wished to withdraw a concession that it had previously made and seek a higher overall amount of judgment debt than was implicit in either its or HMRC's calculations performed on 17 June 2024. This attempt to withdraw the concession proved controversial and ultimately in the December 2024 Judgment, I refused Evonik permission to withdraw its concession.
  40. Evonik characterises the email exchange on 17 June as an agreement that Section 52 interest was to accrue from 10 May 2024. Evonik does not go so far as to say this agreement was legally binding, but it characterises it as an agreement nonetheless. In my judgment, that characterisation goes too far and reads HMRC's email out of context and without due regard to what happened later.
  41. As at 17 June 2024, HMRC were seeking to narrow issues for the case management hearing the next day. When they prepared their email, they were not aware that Evonik would very soon afterwards seek to withdraw an admission and seek to re-open the common understanding of the amount of debt owed to Evonik that had formed the basis of discussions between HMRC and Evonik.
  42. Although HMRC's calculations did assume that Section 52 interest would accrue from 10 May 2024, I do not consider their email of 17 June 2024 to demonstrate an agreement that, come what may, HMRC accepted that Section 52 interest would be calculated from 10 May 2024.
  43. Nor do I consider that HMRC's email set out an agreement that, come what may, the amount owing to Evonik as at 10 May 2024 would be at least £16.94 million. That can be seen from the way the debate unfolded when Evonik intimated that it wished to withdraw its admission. HMRC sought to re-open the previously agreed position on Section 35A interest. If HMRC had been permitted to do so, the amount they owed to Evonik could have been lower than £16.94 million as at 10 May 2024.
  44. I regard HMRC's email of 17 June 2024 as part of a sensible cooperation between the parties in the hope that an order could be agreed following the next day's hearing. If nothing more had happened, and the case management hearing the next day had resolved what HMRC understood to be the only substantive issue in dispute (namely whether the £6.4m referred to in paragraph 28 above was allocated to principal or interest), HMRC would in all likelihood not have objected to interest being calculated from 10 May 2024. They would also no doubt have been content with the amount due being calculated by reference to the competing figures set out in paragraph 31 depending on whose case on the allocation of £6.4m prevailed.
  45. However, just a few hours after HMRC sent their email, Evonik explained that it wished to withdraw a concession previously made. Any acceptance by HMRC of Section 52 interest accruing from 10 May 2024, and any agreement as to the amount Evonik was due, did not survive Evonik's attempt to withdraw its concession. In my judgment, Evonik has overstated the extent of the agreement that was expressed in HMRC's email of 17 June 2024.
  46. That is emphasised by the parties' conduct after 17 June 2024. Certainly Evonik's calculations after that date continued to reference Section 52 interest accruing from 10 May. However, HMRC's did not. Evonik characterise this as being because HMRC "clammed up" and declined to engage with Evonik's calculations after 17 June 2024. I do not agree with that characterisation. There was a certain hiatus which meant that when I handed down judgment on how the £6.4m should be apportioned (on 1 August 2024), Evonik and HMRC still had no agreed figures that could form the basis of an order. However, I handed down judgment over the summer period and I do not accept the allegation that HMRC "clammed up". In any event, whether or not HMRC were slower than they could have been to respond to Evonik's figures, I do not consider that they indicated any acceptance of Section 52 interest accruing from 10 May 2024 in the new environment in which Evonik was seeking to withdraw its concession.
  47. The next significant matter was the hearing of Evonik's application to withdraw its concession which was listed on 14 November 2024. It is true that, as part of the debate at that hearing, HMRC did not mention that if Evonik was allowed to withdraw its admission, Section 52 interest might have to be recalculated, but I regard that as a point of relatively little significance. By that stage, HMRC could reasonably form the view that previous orders and discussions that envisaged Section 52 interest accruing from 10 May had been overtaken by events. Moreover, a significant focus of the argument at the November hearing was on the construction of established value orders. Much less was said about Evonik's application to withdraw its admission.
  48. It is also relevant to note that HMRC indicated at the hearing on 14 November 2024 that, if Evonik was permitted to withdraw its admission, HMRC would seek to revisit the rate at which Section 35A interest is awarded.
  49. After I handed down the December 2024 Judgment, Evonik applied for permission to appeal, both from me and from the Court of Appeal. I refused permission to appeal, and ultimately the Court of Appeal refused permission on 17 February 2025. In parallel, on 31 January 2025, Evonik applied for today's hearing.
  50. The proper exercise of discretion in this case

  51. Evonik's argument that I should exercise discretion so as to order Section 52 interest to start to accrue from 10 May 2024 is based on the following two propositions:
  52. a. First, by analogy with DuPont Nutrition Biosciences ApS v Novozymes A/S, HMRC had admitted quantum and so could and should have paid by 10 May 2024.
    b. Second, and relatedly, Evonik argues that it is right to hold HMRC to their agreement on quantum as to the date from which Section 52 interest would accrue. They argue that it would otherwise be inequitable and contrary to what justice requires, given that Evonik was held to its own admission in the December 2024 Judgment.
  53. I regard that as an arguable way of looking at matters. It has given me pause for thought, but on balance I do not accept Evonik's submissions.
  54. As I have explained, I consider that Evonik was overstating the extent of the agreement that was reached in April and June 2024 as to the date from which Section 52 interest should accrue.
  55. Perhaps for about two hours on 17 June 2024, the parties were in arithmetic agreement as to what might happen depending on who was successful in the debate as to the proper allocation of £6.4m. However:
  56. a. No actual agreement resulted (since the parties were at odds over the proper allocation of the £6.4m).
    b. Such agreement as there was as to the outcome in the scenarios in contemplation on 17 June 2024 was rapidly overtaken by Evonik's attempt to withdraw its concession.

    47. Nor do I agree that HMRC could or should have paid substantially earlier. They could not have paid on 10 May 2024 as there was no agreement then. There was no agreement on 17 June 2024 as to the amount due (because of the outstanding debate on how the £6.4m should be allocated). Between 17 June 2024 and 18 December 2024, there was no certainty as to the amount HMRC would have to pay since (i) the dispute as to the proper allocation of the £6.4m was at large until I gave judgment on 1 August 2024 dealing with that issue (and indeed that matter is still at large because there is to be an appeal to the Court of Appeal on this issue), (ii) if Evonik was permitted to withdraw its concession HMRC would have to pay more than it was expecting and (iii) if Evonik was permitted to withdraw its concession, HMRC had intimated that they were considering revisiting their own position on the correct rate of interest that should be awarded under Section 35A. Between 18 December 2024 and 17 February 2025, the lack of certainty continued since Evonik was seeking permission to appeal against the December 2024 Judgment.

  57. Evonik argues that, because it has been held to its concession following the December 2024 Judgment, fairness dictates that HMRC should be held to their agreement to Section 52 interest accruing from 10 May 2024. I consider that analogy to be flawed. Evonik needed permission under CPR 14.5 to withdraw its concession. Evonik does not argue that HMRC needs permission to withdraw any concession in the case before me now. Similarly, there is no suggestion that HMRC are doing anything else that the law holds legally objectionable, such as breaking a contract. Indeed, as I have explained, I do not consider that any acceptance by HMRC of a 10 May 2024 start date for Section 52 interest survived Evonik's attempt to withdraw its concession.
  58. In reality, the debate today has been about who should bear the consequences of Evonik's decision to withdraw its own concession, which has significantly deferred the date of final determination of its claim. I do not see anything obviously unjust with the proposition that Evonik, as instigator of that process, should have to bear the consequences of it.
  59. I do not consider that this conclusion is altered by the fact that some other orders in the GLO have backdated the date from which Section 52 interest accrues. Mr Bremner KC referred me to orders in BP, Richemont, Akzo Nobel and Rexam cases. I consider those to have taken place in different circumstances.
  60. It is an important part of agreeing orders that the parties exchange proposals and agree matters to the extent that they can. I am quite prepared to accept that the "backdating" of Section 52 interest in those orders occurred because the parties performed calculations as at an earlier date and then were content for that earlier date to be the start date for Section 52 interest even though the orders were actually sealed later. However, I see no suggestion that the agreement of the figures in those cases was followed by any subsequent withdrawal, or attempted withdrawal, of concessions, and therefore I do not consider them to represent true comparables.
  61. Finally, HMRC suggested, by reference to [24] of Leggatt J's judgment in Involnert, that if I were to backdate Section 52 interest to 10 May 2024, I would be creating an undesirable precedent. I am not sure I agree with that statement. Any decision I make as to the date from which Section 52 interest accrues necessarily has to take into account considerations of justice in this particular case and I do not consider it would set a precedent applicable to other cases.
  62. My conclusion on the case in front of me is that the appropriate exercise of discretion is not to order that Section 52 interest should accrue from 10 May 2024.
  63. After I announced that decision, Evonik asked me for a ruling on when Section 52 interest should accrue from. I had not necessarily expected that, since I had thought that I was simply adjudicating between Evonik's submissions in favour of a 10 May 2024 start date and HMRC's submissions that the default position should apply and Section 52 interest should accrue from the date of the final order. However, I was persuaded that, even though I had rejected Evonik's submissions in support of a 10 May 2024 start date, I still needed to exercise discretion to decide the date from which Section 52 interest does accrue.
  64. After hearing further submissions from the parties, I concluded that Section 52 interest should start to accrue from 17 February 2025, the date on which Newey LJ refused permission to appeal against my judgment of 18 December 2025. From 17 February 2025, HMRC would have known precisely the methodology that would govern the amount they had to pay. From that date, the situation became analogous with that in DuPont Nutrition Biosciences ApS v Novozymes A/S.
  65. I did not consider that to be unjust to HMRC. On 17 June 2024 HMRC were not resisting Evonik's position that Section 52 interest should accrue from 10 May 2024, just over a month previously. That position was overtaken by events, but if I order that Section 52 interest accrues from 17 February 2025, HMRC will be in a not dissimilar position and Section 52 interest will accrue from around a month before the date of the final order.


BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: https://www.bailii.org/ew/cases/EWHC/Ch/2025/939.html