Weil and Rabinowitz score £1.2bn victory for Littlewoods against HMRC

One Essex Court’s Laurence Rabinowitz QC and Weil Gotshal & Manges have defeated HM Revenue & Customs in a billion-pound litigation for retail giant Littlewoods.

In a ruling handed down on Friday (28 March) Mr Justice Henderson held that the catalogue and home shopping group’s claims, worth in excess of £1.2bn “succeed in full”.

Weil Gotshal partner Jamie Maples instructed Rabinowitz to lead the case against HMRC. The revenue instructed 11KBW’s Jonathan Swift QC to lead the defence.

The judgment is believed to be one of the largest money judgments ever handed down by the English courts, and is among the most significant tax-related decisions of the modern era.

The case related to VAT payments paid by Littlewoods over a 31-year period between 1973 and 2004. The overpaid VAT was repaid by HMRC between 2005 and 2008, together with simple interest.

Littlewoods, however, contended that the interest payments were insufficient and issued a claim for the difference between the statutory interest and compound interest, to reflect the actual cost of government borrowing.

The trial began before Mr Justice Vos in 2010 but was interrupted so that a reference could be sent to the Court of Justice, which ruled in 2012. Following Vos J’s elevation to the Court of Appeal (CoA), the resumed trial was heard by Henderson J in October and November 2013.

Henderson J held that the claimants were entitled to claim on the basis of their mistakes in making the original payments, with the consequence that the claims were not subject to any effective time limitation.

In a judgment that exceeds 160 pages Henderson J also considered a number of other important questions of EU law, of restitution and of tax law, as well as points concerning estoppel and abuse of process.

Eversheds head of indirect taxes Giles Salmond commented that the ruling would have implications for other entities looking to recover sums from HMRC.

He said: “This is an important victory for taxpayers, but it is very likely that HMRC will seek permission to appeal to the Court of Appeal. In the meantime, relevant taxpayers will be entitled to rely on the judgment to get the enhanced interest payments, but they will have to repay the money if HMRC ultimately succeeds.”

The legal line-up:

For the claimant, Littlewoods Retail & Ors

One Essex Court’s Laurence Rabinowitz QC leading Steven Elliott, Maximilian Schlote of the same set and Michael Jones of Gray’s Inn Tax Chambers instructed by Weil, Gotshal & Manges partner Jamie Maples, assisted by tax counsel Oliver Walker, dispute resolution associates Christopher Marks and Timothy Goldfarb and legal executive Christine Howard

For the defendant, HMRC

11KBW’s Jonathan Swift QC leading Monckton Chambers’ Andrew Macnab and Peter Mantle and Gray’s Inn Tax Chambers’ Imran Afzal instructed by the General Counsel and Solicitor to HMRC