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Freshfields Risk & Compliance

| 4 minutes read

Limitation: when does the clock start on date of knowledge? A case note on BAT Industries Plc & Ors v Inland Revenue & Anor [2024] EWHC 195 (Ch)

At a Glance 

The High Court has handed down its judgment in BAT Industries Plc & Ors v Inland Revenue & Anor [2024] EWHC 195 (Ch), which addresses important issues on the topic of limitation and a claimant’s constructive knowledge of a claim.  

The Court was required to ascertain the date on which the Claimants could, with reasonable diligence, have discovered that they had made a tax overpayment (and therefore had a claim). In this case, the Court found that the relevant date was the date of a landmark CJEU judgment on the applicable tax law provision.   

Background and Case History 

The Claimants are members of a litigation group (referred to as FII GLO). They had paid tax to HMRC under a mistake of law. While there is various historic caselaw linked to the relevant tax provisions under which the payments were made, the CJEU ruling in Verkooijen on 6 June 2000 confirmed that such payments were made under a mistake of law. 

As a general principle, the limitation period for a claim in unjust enrichment is six years from the date of accrual of the cause of action. That general rule, however, is varied by S.32(1)(c) of the Limitation Act, which provides two alternative triggers for the commencement of the limitation period: (1) the date of actual knowledge of a mistake, and (2) the date of constructive knowledge of a mistake.

S.32(1)(c) states, “ the period of limitation shall not begin to run until the plaintiff has discovered the ... mistake ... or could with reasonable diligence have discovered it...”

In Test Claimants in the FII Group Litigation v Revenue and Customs Commissioners [2020] UKSC 47, the Supreme Court held that s32(1)(c) of the Limitation Act does apply to the Claimants' claims for restitution of sums paid under a mistake of law. In principle therefore, the mistaken tax payments were recoverable from HMRC by the Claimants. The Supreme Court identified various factors which were relevant in ascertaining the date of constructive knowledge and remitted the case back to the High Court. 

Therefore, the question for the High Court was whether certain claims had been brought within the limitation period. In other words, at what time a claimant in the FII GLO, with reasonable diligence, could have discovered [i.e. have constructive knowledge of] their mistake


HMRC argued that the relevant date of constructive knowledge was 11 July 1996, i.e. 6 years and one day before the first claim was made by the litigation group. 

The Claimants argued that the relevant date of constructive knowledge was no earlier than the date of the Verkooijen judgment, i.e. the landmark CJEU judgment handed down on 6 June 2000.   

The High Court Judgment 

The High Court cited the following guiding principles:

  • The question is whether the mistake “could ” with reasonable diligence have been discovered rather than whether it "should" have been. 
  • That question involves an enquiry as to when, having exercised reasonable diligence, the Claimants would:
  • have had sufficient confidence to justify embarking on the preliminaries to issue proceedings; and 
  • have discovered they had a “worthwhile ” claim. 
  • The “reasonable diligence” standard is objective, and the Claimants were to be judged by the hypothetical standards of a “well-advised multi-national group in the UK.”
  • Claimants are required to show that they could not have discovered their mistake earlier than the date they put forward without taking exceptional measures that they could not reasonably have been expected to take. 

Given a well-advised multi-national group would reasonably be expected to appoint an appropriately qualified advisor, the Court also considered when an advisor would have known / advised that the payments were a mistake. On considering detailed expert evidence, its conclusion was that the Verkooijen judgment on 6 June 2000 was the date of constructive discovery. Before 6 June 2000, there was an “absence of any written material [from practitioners or academics] containing a clear challenge to the consensus [that the payments were due under law].” 


While this judgment will be of particular interest in the tax field, it sets an important precedent regarding a court’s assessment of constructive knowledge more generally. It demonstrates the wide range of arguable dates on which a claimant might be found to have constructive knowledge of their claim.  

Constructive knowledge is not only a trigger for the start of the limitation period in cases of fraud, concealment or mistake (under S.32 of the Limitation Act), but also for negligence claims (under S.14A). Read-across may therefore apply in a negligence context. 

Although the claimants were successful in this case, the judgment highlights the importance of claimants adopting a conservative approach to limitation assessments. It is important that claimants keep abreast of caselaw developments and monitor their rights and obligations closely. Defendants should also be alive to the risk of claim rights surviving long after six years from their inception. 

Every case will turn on its own facts. As the Supreme Court cautioned, the dates of relevant judicial decisions will not always be determinative, and constructive knowledge may come about earlier. In some cases where deadlines are tight, there may be benefits to bringing a protective claim while merits are under more detailed consideration. 

Other Risks for Defendants 

Like BAT Industries, the Claimant was also successful in last year’s Supreme Court judgment, Canada Square Operations Ltd v Potter [2023] UKSC 41. Section 32(1)(b) of the Limitation Act provides that the limitation period does not begin until a claimant discovers a fact relevant to their cause of action which has been “deliberately concealed” by the defendant. The Canada Square judgment held that deliberate concealment is not limited to hiding the relevant fact, but also failing to disclose it. 

Similarly, last year’s Smith and another v Royal Bank of Scotland [2023] UKSC 34 judgment held that commencement of a limitation period begins at the expiry of an unfair relationship under the Consumer Credit Act 1974. The limitation period does not begin to run at the moment that the relationship becomes unfair. 

Each of the Canada Square, Smith and BAT Industries judgments serve as warnings to financial institutions that they may be at risk of facing a range of claims several years after the expiry of the usual six-year limitation period. 



tax disputes, uk, litigation, tax disputes, financial services