AXA Insurance UK PLC and another v Commissioners of Inland Revenue and another [2026] UKSC 24

AXA and GREA, follower claimants in a group litigation order concerning unlawful UK taxation of foreign dividends, sought to rely on the Prudential test case decision. The Supreme Court dismissed their appeal, holding the court could 'order otherwise' under CPR r 19.23(1)(a) where subsequent authority had shown the test case wrong in law.

Facts

The appellants, AXA Insurance UK plc (AXAIUK) and Guardian Royal Exchange Assurance plc (GREA), were claimants whose proceedings were included on the group register for the Controlled Foreign Companies and Dividend Group Litigation Order (the CFC and Dividend GLO), made in July 2003. Their claims concerned UK tax provisions later held to be incompatible with EU law in their treatment of dividends received from non-UK companies. The claims of the Prudential group were selected as a test case, and were finally disposed of by the Supreme Court in July 2018.

AXAIUK claims restitution of corporation tax paid on dividends from non-UK portfolio holdings, going back to 1995. GREA claims interest for the ‘prematurity period’ in respect of unlawfully levied advance corporation tax (ACT) which had been utilised against lawful mainstream corporation tax (MCT) before proceedings began.

Following the disposal of Prudential, the law developed substantially. In Prudential SC [2018] and FII SC 3 [2021], the Supreme Court held that there was no common law restitutionary claim for interest in respect of the prematurity period (contrary to Sempra Metals). In FII SC 2 [2020], the Supreme Court overruled DMG on the trigger date for section 32(1)(c) of the Limitation Act 1980, holding that time runs from when a claimant could reasonably have known it had a worthwhile claim, not the date of authoritative judicial ruling.

Issues

Two principal issues arose:

• The Set Off Issue: Whether the court should exercise its discretion under CPR r 19.23(1)(a) to ‘order otherwise’, so that the Prudential HC decision recognising a restitutionary claim for interest during the prematurity period would not bind GREA’s follower claim, given subsequent authority establishing that decision was wrong in law.
• The Limitation Issue: Whether the start date of the limitation period under section 32(1)(c) had been decided as a GLO issue in Prudential HC so as to bind AXAIUK’s follower claim, or whether the current test in FII SC 2 applied.

Arguments

Appellants

The appellants argued that CPR r 19.23(1)(a) should be narrowly construed. Mr Bremner KC contended that the ‘orders otherwise’ discretion was essentially confined to circumstances identified at or shortly after the test case was designated, such as where a test case proved unsuitable or its ruling was overbroad. It should not be used merely because later authority showed the test case wrong. They argued that the Court of Appeal’s approach undermined the GLO regime, that fairness required consistency between test and follower claimants, and that follower claimants had contributed to Prudential’s costs.

Respondents

The Revenue argued that the Set Off Issue had indeed been decided in Prudential HC but that the discretion should be exercised because subsequent Supreme Court authority had established the decision was wrong in law. On the Limitation Issue, they contended that no determination of the section 32(1)(c) start date had been made in Prudential HC as a GLO issue.

Judgment

The nature of the discretion (Lady Rose and Lord Richards)

The court rejected the narrow interpretation of CPR r 19.23(1)(a). The rule confers a discretion capable of being exercised after a test case has been determined. The exercise of the discretion must balance two key considerations: the integrity of the GLO regime and the finality of test case decisions on the one hand, against a party’s right to have their case decided in accordance with a correct understanding of the law on the other.

Drawing an imperfect analogy with the exception to issue estoppel recognised in Arnold v National Westminster Bank plc [1991] 2 AC 93 and Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, the court held that the discretion arises only in exceptional circumstances. The challenger must clearly establish that the legal basis of the test case judgment has been shown to be wrong; mere doubt or better arguments will not suffice. Relevant factors include whether making the order would entail further lengthy litigation, whether there was any unfairness to follower claimants, and whether a party had manipulated proceedings tactically.

Set Off Issue

The court held that this was an appropriate case in which to order otherwise. The extraordinary developments in the law since Prudential HC had definitively established that both the recognition of a common law restitutionary cause of action for the prematurity period and the assumption that EU law required compound interest were wrong. Ordering otherwise would not lead to further re-litigation of the substantive issue, as the law was settled. There was no relevant unfairness or procedural manipulation.

Limitation Issue

The court held, upholding the Court of Appeal, that Henderson J in Prudential HC had not determined the section 32(1)(c) start date as a GLO issue. The only reference to a date was 14 July 1998, specific to PHL’s position, and the wider question was not argued in detail or determined. Accordingly, AXAIUK’s limitation issue would be decided in accordance with the law as established by FII SC 2.

Concurring judgment of Lord Leggatt

Lord Leggatt agreed with the outcome but emphasised that in cases where a court has finally decided a GLO issue of law in a test claim, it will necessarily be rare that a subsequent development in the law will justify ordering otherwise. Doing so risks undermining the twin purposes of the GLO regime: efficiency and consistency. He considered that the analogy with the Arnold exception to issue estoppel was not persuasive, as in group litigation all claims have already arisen and proceed in parallel. His reasons for concurring were that, on the unusual facts, no re-litigation of the issue would be required (the law being settled by higher authority) and that maintaining the Prudential HC judgment on category (a) would produce a palpably irrational outcome inconsistent with GREA’s treatment under categories (b) and (c).

Implications

This judgment provides authoritative guidance on the operation of CPR r 19.23(1)(a) in group litigation. Its key principles are:

• The ‘orders otherwise’ discretion is not limited to the point at which a test case is designated but may be exercised even after the test case has been disposed of.
• The discretion is not to be exercised widely; in cases where a party seeks to disapply the binding effect of a test judgment on the ground that later authority has shown it wrong, exceptional circumstances are required.
• The court must balance the integrity of the GLO regime and finality of litigation against a party’s right to have its case decided on a correct legal footing.
• The doctrine of issue estoppel and its recognised exceptions provide a useful, though imperfect, guide.
• The party seeking to displace the binding effect must clearly establish that the legal basis of the test judgment is now known to be wrong; dicta casting doubt or the availability of better arguments will not suffice.
• Relevant factors in exercising the discretion include whether disapplication will entail further litigation, whether there is prejudice to follower claimants from delay or reliance, and whether tactical manipulation has occurred.

The decision matters to all parties engaged in group litigation, particularly in long-running litigation of a complex or evolving character (such as tax litigation raising EU law issues). It confirms that the GLO regime is a robust mechanism for achieving finality and consistency, but that in rare and exceptional cases the court retains the ability to prevent injustice where the underlying law has been definitively shown to have changed. Lord Leggatt’s concurrence signals a particularly cautious judicial approach, emphasising that the starting point is that all claims in a group should stand or fall together.

Verdict: Appeals dismissed on both the Set Off Issue and the Limitation Issue. The Court of Appeal was correct to order otherwise under CPR r 19.23(1)(a) so that the decision in Prudential HC on the Set Off Issue does not bind GREA’s claim, and correct to hold that the section 32(1)(c) start date had not been determined as a GLO issue in Prudential HC and must therefore be decided in accordance with the current law under FII SC 2.

Source: AXA Insurance UK PLC and another v Commissioners of Inland Revenue and another [2026] UKSC 24