AXA Insurance v HMRC: Supreme Court clarifies when group litigation test case rulings can be overridden

The Supreme Court has dismissed an appeal by two insurance companies seeking to rely on a twenty-year-old test case ruling that has since been shown to be legally incorrect, providing the first detailed guidance on when courts may depart from the normally binding effect of group litigation order decisions.

In AXA Insurance UK PLC and another v Commissioners of Inland Revenue and another [2026] UKSC 24, Lady Rose and Lord Richards, giving the leading judgement with which Lord Hodge and Lord Hamblen agreed, held that the Court of Appeal had been right to exercise its discretion under CPR rule 19.23(1)(a) to prevent AXA and Guardian Royal Exchange Assurance from benefiting from a 2013 ruling in the long-running Prudential test case, once that ruling's legal basis had been definitively rejected by the Supreme Court in subsequent litigation. Lord Leggatt delivered a separate concurring judgement, agreeing with the outcome but urging that such departures remain genuinely rare.

The case forms part of the sprawling CFC and Dividend Group Litigation, in which companies claim repayment of tax paid under UK provisions later found incompatible with EU law. AXA's claim, originally issued in 2003, was one of roughly sixty sets of proceedings grouped together, with the Prudential companies chosen as test claimants to resolve common issues while the rest, including AXA's, were stayed. In 2013, Mr Justice Henderson ruled in the Prudential test case that claimants were entitled to compound interest on tax collected prematurely, a ruling AXA and its co-appellant sought to rely on when their own claims finally came to be heard following the lifting of their stay in 2021. By then, however, the Supreme Court had ruled in the Prudential case itself, and again in related FII litigation, that no such common law entitlement to compound interest ever existed, and that claimants must instead rely on a narrower statutory remedy introduced in 2019.

Under the group litigation rules, a judgement on a common issue determined in a test case ordinarily binds all other claims on the group register "unless the court orders otherwise." The central question was how far that discretion extends where the legal basis of the earlier ruling has since been overturned. The majority held that the power should be exercised only in exceptional circumstances, generally requiring that the earlier decision has been conclusively shown wrong by later authority, not merely doubted, and that disapplying it will not trigger costly further litigation or relitigation of legal arguments already settled. Drawing an analogy with the law of issue estoppel and the House of Lords' decision in Arnold v National Westminster Bank, the justices found both conditions satisfied here: the correct legal position was now settled beyond argument, and requiring HMRC to pay tens of millions of pounds on a legal basis known to be wrong would produce a serious injustice outweighing the ordinary value of consistency between test claimants and followers.

The court rejected AXA's separate argument concerning the limitation period for its claims, finding that the Prudential test case had never actually determined when time began running under section 32(1)(c) of the Limitation Act 1980, meaning current law, following the Supreme Court's 2020 ruling in the FII litigation overturning earlier authority on that point, applies without any need to depart from a prior binding decision.

In his concurring judgement, Lord Leggatt cautioned that treating a subsequent change in the law as sufficient, on its own, to justify overriding a group litigation ruling would undermine the finality the procedure exists to protect, and that the discretion should be confined to cases, like this one, where maintaining the earlier ruling would also produce clear internal inconsistency with other, unchallenged parts of the same claim.