Sempra Metals Ltd v Inland Revenue Commissioners and Another: HL 18 Jul 2007

The parties agreed that damages were payable in an action for restitution, but the sum depended upon to a calculation of interest. They disputed whether such interest should be calculated on a simple or compound basis. The company sought compound interest on three different bases: (i) damages for breach of statutory duty, (ii) restitution of money paid pursuant to an unlawful demand and (iii) restitution of money paid under a mistake of law.
Held: Compound interest was appliccable where money was to be repaid by way of restitution. It was to be computed on the conventional basis applicable to government borrowing, on all their successful claims for repayment of unlawfully levied tax.
Lord Nicholls said that: ‘a benefit is not always worth its market value to a particular defendant’, and ‘when it is not it may be unjust to treat the defendant as having received a benefit possessing the value it has to others’ and . . ‘We live in a world where interest payments for the use of money are calculated on a compound basis. Money is not available commercially on simple interest terms.’
Lord Hope said: ‘Simple interest is an artificial construct which has no relation to the way money is obtained or turned to account in the real world. It is an imperfect way of measuring the time value of what was received prematurely.’
Lord Hope of Craighead, Lord Nicholls of Birkenhead, Lord Scott of Foscote, Lord Walker of Gestingthorpe, Lord Mance
[2007] UKHL 34, [2007] 3 WLR 354, Times 25-Jul-2007, [2008] 1 AC 561, [2008] Eu LR 1, [2007] 4 All ER 657, [2007] STC 1559, [2007] BTC 509, [2008] Bus LR 49, [2007] All ER (D) 294, 151 Sol Jo 985
England and Wales
At First InstanceSempra Metals Ltd (formerly Metallgesellshaft Ltd) v Inland Revenue Commissioners and another ChD 16-Jun-2004
The claimants were due to have substantial sums repaid after it had been found that the system of making premature reclaims of advance corporation tax had been was discriminatory under European Law.
Held: The sums payable were to carry . .
Appeal fromSempra Metals Ltd v Inland Revenue and Another CA 12-Apr-2005
The court was asked whether it was contrary to Community law – specifically, the provisions then contained in article 52 of the EC Treaty (now renumbered as article 43) – for the domestic tax law in the United Kingdom to differentiate, in the . .
CitedPage v Newman 1829
Under common law ‘the long-established rule that interest is not due on money secured by a written instrument, unless it appears on the face of the instrument that interest was intended to be paid, or unless it be implied from the usage of trade, as . .
CitedHadley v Baxendale Exc 23-Feb-1854
Contract Damages; What follows the Breach Naturaly
The plaintiffs had sent a part of their milling machinery for repair. The defendants contracted to carry it, but delayed in breach of contract. The plaintiffs claimed damages for the earnings lost through the delay. The defendants appealed, saying . .
CitedCarmichael v Caledonian Railway Co HL 1870
Interest can be demanded only in virtue of a contract express or implied ‘or by virtue of the principal sum of money having been wrongfully withheld, and not paid on the day when it ought to have been paid.’ Interest was due when money was . .
CitedLondon, Chatham and Dover Railway Co v South Eastern Railway Co HL 1893
The Lord Chancellor was considering the position of a creditor whose debtor refused to exchange accounts as agreed, thus preventing the creditor from quantifying the debt.
Held: The House declined to alter the rule in Page -v- Newman.
CitedWestdeutsche Landesbank Girozentrale v Islington London Borough Council HL 22-May-1996
Simple interest only on rate swap damages
The bank had paid money to the local authority under a contract which turned out to be ultra vires and void. The question was whether, in addition to ordering the repayment of the money to the bank on unjust enrichment principles, the court could . .
CitedTrans Trust SPRL v Danubian Trading Co Ltd CA 1952
Lord Justice Denning said: ‘It was also said that the damages were the result of the impecuniosity of the sellers and that it was a rule of law that such damages are too remote. I do not think there is any such rule. In the case of a breach of . .
CitedPresident of India v La Pintada Compagnia Navigacia SA (‘La Pintada’) HL 1985
The house decided against altering the rule in Page -v- Newman. ‘The common law does not award general damages for delay in payment of a debt beyond the date when it is contractually due’ The power given to the court under s 35A is discretionary. It . .
CitedMoses v Macferlan KBD 1760
An action for money had and received will only lie where it is inequitable for the defendant to retain the money. The defendant in an action for money had and received ‘can be liable no further than the money he has received’. . .
CitedFruhling v Schroeder 1835
An action for money had and received can recover only the original sum. . .
CitedHungerfords v Walker 1989
To allow a claimant to recover special, but not general, damages for loss of the use of money is widely seen as illogical. In Hungerfords v Walker (1989) 171 CLR 125, 142 Mason CJ said that it subverted the second limb in Hadley v Baxendale from its . .
CitedRodger v Comptior d’Escompte de Paris 1871
Where restitution followed the reversal on appeal of a previously satisfied judgment, common law interest was awarded. . .
CitedBoake Allen Ltd and others v HM Revenue and Customs CA 31-Jan-2006
The claimant companies had paid corporation tax under rules which had later been found to be discriminatory. They now sought repayment by virtue of double taxation agreements with the countries in which the parent companies were based.
Held: . .
CitedMetallgesellschaft Ltd and Others v Inland Revenue Commissioners and Another Hoechst Ag and Another v Same ECJ 8-Mar-2001
The British law which meant that non-resident parent companies of British based businesses were not able to recover interest on payments of advance corporation tax, was discriminatory against other European based companies. Accordingly the law was . .
CitedF G Minter v Welsh Health Technical Services Organisation CA 1980
Where a claim is for a debt incurred by a building contractor to raise the necessary capital which has interest charges as one of its constituents, the loss suffered as a result of the late payment of money was recoverable. . .
CitedLipkin Gorman (a Firm) v Karpnale Ltd HL 6-Jun-1991
The plaintiff firm of solicitors sought to recover money which had been stolen from them by a partner, and then gambled away with the defendant. He had purchased their gaming chips, and the plaintiff argued that these, being gambling debts, were . .
CitedDeutsche Morgan Grenfell Group Plc v Inland Revenue and Another HL 25-Oct-2006
The tax payer had overpaid Advance Corporation Tax under an error of law. It sought repayment. The revenue contended that the claim was time barred.
Held: The claim was in restitution, and the limitation period began to run from the date when . .
CitedMargrie Holdings Ltd v City of Edinburgh District Council IHCS 1994
When asking whether a claim for damages could properly include an additional element to recover additional costs of an impecunious pursuer, the proper approach, consistent with the modern authorities, was to ask whether the loss was or was not . .
CitedKleinwort Benson Ltd v Lincoln City Council etc HL 29-Jul-1998
Right of Recovery of Money Paid under Mistake
Kleinwort Benson had made payments to a local authority under swap agreements which were thought to be legally enforceable when made. Subsequently, a decision of the House of Lords, (Hazell v. Hammersmith and Fulham) established that such swap . .
CitedCredit Lyonnais v George Stevenson and Co Ltd 1901
Lord Kyllachy explained the relationship between a claim and a defence in the law of unjustified enrichment: ‘The money in question was paid in error under a mistake of fact. It was therefore reclaimable, unless (the pursuer’s remedy being . .

Cited by:
CitedPenwith District Council v VP Developments Ltd TCC 2-Nov-2007
The council sought to appeal against an interim arbitration award.
Held: Leave to appeal was refused. The application was wholly unjustified. This was an appeal on the facts dressed up as an appeal on law. . .
CitedSomerville v Scottish Ministers HL 24-Oct-2007
The claimants complained of their segregation while in prison. Several preliminary questions were to be decided: whether damages might be payable for breach of a Convention Right; wheher the act of a prison governor was the act of the executive; . .
CitedDevenish Nutrition Ltd and others v Sanofi-Aventis SA (France) and others ChD 19-Oct-2007
The claimant sought damages for the losses it had suffered as a result of price fixing by the defendant companies in the vitamin market. The European Commission had already fined the defendant for its involvement.
Held: In an action for breach . .
CitedStar Energy Weald Basin Ltd and Another v Bocardo Sa SC 28-Jul-2010
The defendant had obtained a licence to extract oil from its land. In order to do so it had to drill out and deep under the Bocardo’s land. No damage at all was caused to B’s land at or near the surface. B claimed in trespass for damages. It now . .
CitedBenedetti v Sawiris and Others SC 17-Jul-2013
The claimant appealed against reduction of the sum awarded on his claim for a quantum meruit after helping to facilitate a very substantial business deal for the defendants.
Held: The correct approach to the amount to be paid by way of a . .
CitedAspect Contracts (Asbetos) Ltd v Higgins Construction Plc SC 17-Jun-2015
Aspect had claimed the return of funds paid by it to the appellant Higgins under an adjudication award in a construction contract disute. The claimant had been asked to prpare asbestos surveys and reports on maisonettes which Higgins was to acquire . .
CitedPST Energy 7 Shipping Llc and Another v OW Bunker Malta Ltd and Another SC 11-May-2016
Parties had entered into a bunker supply contract which contained a retention of title clause in favour of the supplier. It purported to allow the buyer to use the goods before title came to be passed.
Held: The owner’s appeal failed. It did . .
CitedLittlewoods Ltd and Others v Commissioners for Her Majesty’s Revenue and Customs SC 1-Nov-2017
The appellants had overpaid under a mistake of law very substantial sums in VAT over several years. The excess had been repaid, but with simple interest and not compound interest, which the now claimed (together with other taxpayers amounting to 17 . .
Overruled in PartPrudential Assurance Company Ltd v Revenue and Customs SC 25-Jul-2018
PAC sought to recover excess advance corporation tax paid under a UK system contrary to EU law. It was now agreed that some was repayable but now the quantum. Five issues separated the parties.
Issue I: does EU law require the tax credit to be . .

Lists of cited by and citing cases may be incomplete.
Updated: 10 August 2021; Ref: scu.259904