Judgment Call: 17 June 2013, in association with Westlaw UK, a Thomson Reuters’ product
17 June 2013
Novartis AG v Hospira UK Ltd. EWHC 886 (Pat). Lewison LJ; Kitchin LJ; Floyd LJ. 22 May 2013
The Court of Appeal restated the principles applying to the grant of an interim injunction pending appeal where the claimant had lost at first instance. Following the finding that two patents concerning the use of zoledronic acid for osteoporosis treatment were invalid, it was appropriate to grant the patentee an interim injunction restraining a manufacturer of generic drugs from launching its own zoledronic acid product pending the patentee’s appeal.
For the appellant Novartis
Three New Square’s Justin Turner QC; 8 New Square’s James Whyte; Bristows partner Brian Cordery
For the respondent Hospira
8 New Square’s Adrian Speck QC; Three New Square’s Tom Mitcheson; Taylor Wessing partner Nigel Stoate
Mohan v Mohan.  EWCA Civ 586. Thorpe LJ; Rafferty LJ; Kitchin LJ. 22 May 2013
A party could not strategically issue a general application for enforcement of a financial order in matrimonial proceedings in order to achieve disclosure and examination of the opposing party for use in subsequent proceedings against that party under the Debtors Act 1869. The court therefore excluded evidence given by a husband under a general application but allowed documents disclosed by him to be admitted in the 1869 Act proceedings.
For the appellant Svetlana Mohan
1 King’s Bench Walk’s Richard Harrison QC, 1 King’s Bench Walk’s Kate Ozwell; Hughes Fowler Carruthers director Renato Labi; Hughes Fowler Carruthers associate Kate Brett
Respondent Anu Mohan appeared in person
Advocate to the Court
Matrix Chambers’ Jonathan Glasson QC; Treasury Solicitor
Revenue and Customs Commissioners v Ben Nevis (Holdings) Ltd EWCA Civ 578. Jackson LJ; Lloyd Jones LJ; Floyd LJ. 23 May 2013
The United Kingdom-South Africa Double Taxation Convention 2002 art.25A permitted the collecting state to recover a tax debt arising before the coming into force of the Convention and the amending Protocol that added art.25A.
For the appellants Ben Nevis Holdings and Metlika Trading
Fountain Court Chambers’ Timothy Howe QC; Gray’s Inn Tax Chambers’ Philip Baker QC; Fountain Court Chambers’ Rupert Allen; Stephenson Harwoodpartner John Fordham; Stephenson Harwoodassociate Priya Grewel; Mourant Ozannes partner Christopher Edwards; Mourant Ozannes senior associate Abel Lyall
For the respondent Revenue and Customs Commissioners
Wilberforce Chambers’ James Ayliffe QC; Radcliffe Chambers’ Mark Fell; HMRC Solicitors Office
Tambrook Jersey Ltd, Re. EWCA Civ 576. Longmore LJ; McFarlane LJ; DavisLJ. 22 May 2013
Administration; Judicial co-operation
On a proper interpretation of the Insolvency Act 1986 s.426, the English High Court had power to appoint administrators in respect of a Jersey-registered company at the request of the Royal Court of Jersey. It was demonstrable that the Jersey court was involved in an “endeavour” to further the interests of the company and its creditors and to facilitate the most efficient collection and administration of its assets, with which the English court was being asked to assist.
For the appellant HSBC Bank
The respondent did not appear
Interflora Inc v Marks & Spencer Plc EWHC 1291 (Ch). Arnold J. 21 May 2013
A retailer had infringed a flower delivery network’s trade marks under Directive 89/104 art.5(1)(a)and Regulation 40/94 art.9(1)(a)by using variations of “Interflora” as keywords on the Google AdWords referencing service. Use of the signs had an adverse effect on the origin function of the trade marks because a significant proportion of the consumers who searched for those signs were led to believe, incorrectly, that the retailer’s flower delivery service was part of the competing network.
Judgment for claimants
For the claimant Interflora
11 South Square’s Michael Silverleaf QC; Three New Square’s Simon Malynicz; Pinsent Masons partner Iain Connor
For the defendant M&S
Landlord and tenant
Marks and Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd. EWHC 1279 (Ch). Morgan J. 16 May 2013
Where a commercial tenant exercised a break clause to determine its lease before the end of the natural term, it was not normally entitled to a refund of sums paid in advance and relating to a period after the break date unless there was an express right in the lease. The court found that the circumstances of the instant case required there to be an implied term in favour of such repayment in order to give business efficacy to the lease.
Judgment for claimant
For the claimant Marks and Spencer
Falcon Chambers’ Guy Fetherstonhaugh QC; S J Berwin
For the defendants BNP Paribas Securities Services Trust
Falcon Chambers’ Kirk Reynolds QC; Allen & Overy
Vestergaard Frandsen S/A (MVF3 APS) v Bestnet Europe Ltd.  UKSC 31. Lord Neuberger JSC; Lord Clarke JSC; Lord Sumption JSC; Lord Reed JSC; Lord Carnwath JSC. 22 May 2013
A former employee was not liable for breach of confidence related to the misuse of confidential information as she had not had actual or objective knowledge of the confidential information in question either during her employment or afterwards. To hold her liable would be inconsistent with legal principle and with maintaining the balance between effectively protecting intellectual property rights and not unreasonably inhibiting competition in the market place.
For the appellants Vestergaard Frandsen
8 New Square’s Mark Platts-Mills QC; 8 New Square’s Tom Moody-Stuart; Field Fisher Waterhousepartner Nick Rose
For the respondents Bestnet Europe and others
Hogarth Chambers’ Alastair Wilson QC; 8 New Square’s George Hamer; McGuire Woods partner Michael Tackley
Featured case: Tax
Marks & Spencer Plc v Revenue and Customs Commissioners.  UKUT 213 (TCC);  S.T.C. 2470;  Eu. L.R. 10;  B.T.C. 1559;  S.T.I. 2115. Lord Neuberger JSC; Lord Hope JSC(deputypresident); Lord Mance JSC; Lord Reed, JSC; Lord Carnwath JSC.22 May 2013
Entitlement to cross-border relief in respect of the losses of non-resident subsidiaries was to be examined on the basis of the circumstances existing at the date of the claim for relief.
The appellant commissioners appealed against decisions of the First-tier Tribunal relating to the availability of group relief for the losses of non-resident subsidiaries and to the quantification of such group relief. The respondent (M) was a trading company and a leading retailer in the UK. It was also a holding company for a number of UK and overseas subsidiary companies. It was incorporated and registered in England and Wales, and resident in the UK for tax purposes. Included in its overseas subsidiaries during the relevant period were German and Belgian subsidiaries which carried on retail businesses in those countries. Those subsidiaries were loss-making before they ceased trading in 2001.
M claimed group relief for the losses of those companies. The matter was referred to the European Court of Justice (ECJ) which held that the fact that under UK legislation group relief was not available in respect of losses incurred by a subsidiary resident in another member state constituted a restriction on the freedom of establishment; that restriction pursued a legitimate objective but went beyond what was necessary where the legislation prevented the deduction of losses where the non-resident subsidiary had exhausted the possibilities available in its state of residence of having the losses taken into account for the accounting period concerned and for previous accounting periods and where there were no possibilities for those losses to be taken into account in its state of residence for future periods.
The case returned to the First-tier Tribunal to apply the ‘no possibilities test’ set out by the ECJ, after the Court of Appeal (CoA) had held that the relevant time as at which M had to demonstrate that the conditions of the test were satisfied in relation to the losses of the relevant subsidiaries was the time or times when M made the claim or claims for group relief. M had made successive group relief claims to take account of the ECJ judgment and subsequent UK litigation and also the action taken to liquidate and dissolve the foreign subsidiaries. Different legislative provisions applied for the years up to and including 1999 which were subject to the ‘pay and file’ system and for the subsequent years subject to self-assessment.
(1) The no possibilities test did not have to be satisfied in relation to the whole of the subsidiary’s loss for the relevant accounting period but applied to each euro of loss separately. In the context of applying the no possibilities test on a euro-by-euro basis, the ECJ judgment had to be applied in the real world. The CoA had recognised that in drawing the distinction between a real possibility and a possibility which was fanciful.
(2) The UK self-assessment legislation in the Income and Corporation Taxes Act 1988 s.402 and s.403 and the Finance Act 1998 Sch.18 para.68 and para.69 had to be remoulded to apply to Community law claims since in the case of a foreign surrendering company the ascertainment of the amount available for surrender was not a mechanical process derived from a tax return, and applying the no possibilities test involved an element of judgment and as time passed the test might become satisfied when previously it was not. The appropriate remoulding was to disapply para.69 altogether but leaving the requirements of para.68 to have full force. On that basis a claimant company seeking group relief in respect of the losses of a foreign group company could make successive claims, provided that all those claims were made within the time limit for claims specified by para.74.
In relation to the self-assessment years it followed that all the claims sequentially made by M were valid and should be given effect to. If it transpired that at the time a claim was made there were no losses which satisfied the no possibilities test, such a claim had no effect, but did not result in a later claim being invalid.
Applying the no possibilities test to the losses for any year as they stood at the time of the group relief claim had to take account of what happened in the period from the end of the year until the time of the claim if losses were in fact utilised during that period so as to determine the extent, if any, to which the losses of a particular year were treated as utilised.
The tribunal applied a first-in, first-out method of utilising losses and that was both reasonable and pragmatic. The conclusion in respect of the self-assessment years was that the successive claims were valid and at the time of the final claims there was no real possibility that the losses could be utilised and so M could claim them by way of group relief.
(3) In relation to the pay and file claims, only the first group relief claims in respect of the German subsidiary’s losses for 1998 and 1999 were within the relevant time limit. The First-tier Tribunal was wrong to hold that the time limits should be set aside to allow M to make a claim after it became aware that such a claim, to be effective, had to satisfy the no possibilities test.
That was an extension of the application of the principle of effectiveness not justified by the ECJ jurisprudence. In any event, for the pay and file years, the no possibilities test was not satisfied until the commencement of the liquidations of the subsidiaries in 2006, by which time it was too late for M to make group relief claims under the domestic time limits. The commissioners’ appeal was to that extent allowed.
(4) The method adopted by the tribunal (Method E) was the correct method for quantifying the amount of losses for each year which could be claimed by M by way of group relief in accordance with the judgment of the ECJ. The commissioners’ appeal on quantification was dismissed.
For the appellant/respondent Marks & Spencer
Pump Court Tax Chambers’ David Milne QC
Gray’s Inn Tax Chambers Nicola Shaw QC
Hage Aaronson partner Simon Whitehead
For the respondent/appellant HMRC
Pump Court Tax Chambers’ David Ewart QC
Brick Court’s Sarah Ford instructed directly
Commentary: Jake Landman
Marks & Spencer argued that UK loss relief rules breach EU law by denying companies the right to relieve losses made by overseas subsidiaries against UK profits.
In 2006 the Court of Justice of the European Union (CJEU) concluded there would be a breach of the freedom of establishment if there was no possibility of the surrendering overseas subsidiaries using the losses in their own state. The Supreme Court had to consider the time in which “no possibility” must be judged.
HMRC argued that at the end of the accounting period the losses arose there must be no possibility of use in that period, in previous periods or in future periods.
M&S argued it is only necessary to show there is no possibility during the accounting period.
In M&S’ case the taxpayer group has flexibility – it can commence liquidation of the overseas subsidiary so there is no possibility of using the losses when relief is claimed.
The Supreme Court found in favour of M&S – not surprising, as on 21 February the CJEU confirmed in A Oy C-123/11 that circumstances which satisfy ‘no possibility’ can be brought about by the taxpayer.
Future hearings will consider:
i) whether earlier claims that do not satisfy the test preclude later claims which do; and
ii) the applicable time limit.
The UK group relief rules will need to comply with the outcome, and more flexibility for groups to relieve losses cross-border seems inevitable.
Jake Landman, associate, Pinsent Masons