Supreme Court narrows issue estoppel doctrine in Skatteforvaltningen v MCML ruling

The Supreme Court has allowed an appeal by the Danish Customs and Tax Administration (SKAT) against MCML Ltd, formerly ED&F Man Capital Markets Ltd, ruling that a 2022 fraud claim was wrongly struck out on the basis of issue estoppel by the Court of Appeal.

Handing down judgement on 1 July 2026, Lord Sales and Lord Doherty, with whom Lord Lloyd-Jones, Lady Rose and Lady Simler agreed, held that the doctrine of issue estoppel had been applied too broadly by the courts below, reinstating SKAT's claim against MCML in respect of 286 disputed tax vouchers.

The litigation forms part of the long-running "cum-ex" style dividend withholding tax dispute, in which SKAT alleges it was defrauded of sums following fraudulent applications for refunds of Danish withholding tax. In 2018, SKAT brought proceedings against 114 defendants, including MCML, alleging negligent misrepresentation in connection with 420 tax vouchers. That claim was struck out by Andrew Baker J in 2021 on the ground that it amounted to indirect enforcement of a foreign revenue law, contrary to the Revenue Rule, a principle of English conflicts of law barring courts from enforcing foreign tax claims.

Subsequent appeals distinguished between defendants accused of fraud and those, including MCML, accused only of negligence. The Court of Appeal and Supreme Court later held, in separate proceedings, that claims involving fraud fell outside the Revenue Rule because they sought to recover sums obtained by deception rather than unpaid tax.

In 2022, SKAT issued fresh proceedings against MCML, this time alleging that the same tax vouchers, along with five additional ones, had been fraudulently rather than negligently prepared. MCML argued that this claim was barred by issue estoppel arising from the 2021 judgement. The Commercial Court disagreed, but a majority of the Court of Appeal (Newey and Popplewell LJJ) held that SKAT was estopped from bringing the claim, finding that Andrew Baker J's reasoning had effectively determined that all such private law claims fell within the Revenue Rule, regardless of whether the underlying conduct was negligent or fraudulent. Nugee LJ dissented in part, taking a narrower view tied to the specific vouchers before the original court.

The Supreme Court sided with SKAT, holding that an issue estoppel can only arise from matters that were necessary and fundamental to the earlier decision, not from the wider legal reasoning that led to it. Because the 2018 proceedings concerned only negligent misrepresentation, the question of whether fraudulent misrepresentation fell within the Revenue Rule was never actually decided and could not now bind SKAT.

The court drew heavily on established authority, including New Brunswick Railway Co v British and French Trust Corporation and Blair v Curran, to reaffirm that the scope of an issue estoppel must not be enlarged by inference from a judge's reasoning, however persuasive that reasoning might otherwise be. It distinguished Watt v Ahsan, relied upon by MCML, as a case in which the estopped issue had been the direct legal foundation of both claims rather than a broader proposition extracted from the judgement's supporting reasoning.

Given the resolution of the appeal on this ground, the court found it unnecessary to determine whether a pure point of law could ever found an issue estoppel, or to consider SKAT's alternative reliance on the "special circumstances" exception established in Arnold v National Westminster Bank plc.

The claim will now proceed to trial in the Commercial Court.