Dr Tariq Baloch Interest after Sempra

This paper discusses the availability of simple and compound interest on restitution awards in the light of the decision of the House of Lords in Sempra Metals v IRC [2007] UKHL 34, [2008] 1 AC 561 (18 July 2007).

Prof Elise Bant When can change of position be a defence to claims for restitution of unlawfully exacted tax?

This paper examines the application of the defence of change of position to claims against the Revenue for restitution of unlawfully exacted tax. As the recent litigation in FII v Inland Revenue [2010] EWCA Civ 103 (23 February 2010) attests, the financial implications of the grant or denial of the defence to the Revenue can be staggering. However, the legal issues involved are also of central significance, both to our understanding of the change of position defence and for the ongoing development of the broader law of unjust enrichment. Indeed, the demonstrated difficulties associated with determining the application of the defence in this context provide real support for the view that claims based upon Woolwich v IRC [1993] AC 70 (HL) fall outside the law of unjust enrichment.

This paper is now available for download from the Papers page.

Prof Catherine Barnard and Julian Ghosh QC Judicial techniques in relation to remedies for overpaid tax

The English courts take a rather peculiar approach to the question of remedies for domestic legislation which is incompatible with EU law. They approve partial disapplication of incompatible legislation, which is inconsistent with the case law of the Court of Justice of the Europrean Communities on the limits of sympathetic construction. This means in turn that the Crown is thrown onto a claim based on Case 199/82 Amministrazione delle Finanze dello Stato v San Giorgio [1983] ECR 3595, [1983] EUECJ R-199/82 (9 November 1983) when really it should only face a damages claim.

This paper is now available for download from the Papers page.

Monica Bhandari Tax, restitution and Hastings-Bass

In Re Hastings-Bass, deceased; Hastings v Inland Revenue [1974] EWCA Civ 13, [1975] Ch 25 (14 March 1974), the Court of Appeal upheld the validity of an exercise by trustees of the statutory power of advancement, on the basis that the court should not interfere where trustees are given a discretion as to some matter in which they acts in good faith, notwithstanding that their action does not have the full effect which they intended, unless it is clear that they would not have acted as they did either had they not taken into account considerations which they should not have taken into account, or had they not failed to take into account considerations which they ought to have taken into account. This paper will analyse the nature and extent of this principle, and consider whether there is any reason to treat ordinary taxpayers and trustees differently when it comes to recovering overpaid tax.

Prof Robert Chambers Canadian perspectives

This paper will consider the issue of Restitution from the Executive from the perspective of the decisions of the Supreme Court of Canada in Kingstreet Investments Ltd v New Brunswick [2007] 1 SCR 3, 2007 SCC 1 (CanLII) (11 January 2007) and Marcotte v Longueuil [2009] 3 SCR 65 (CanLII), 2009 SCC 43 (08 October 2009).

A handout for this paper is now available for download from the Papers page.

Niamh Cleary Property, proportionality and change of position

The constitutional imperative in favour of restitution of unlawfully exacted taxes must be balanced against a public policy limiting restitution in order to preserve the public purse. Although the English and Irish courts do not explicitly permit a fiscal chaos defence, there are clear indications that considerations based on the integrity of the public purse have informed the application of the defence of change of position. Where the change of position defence has been considered to be available to the State, the courts have applied the defence in a manner that both creates a de facto presumption of expenditure by the State and assumes that the enrichment has been wholly dissipated so that the defence operates in toto insofar as it applied to the State, rather than pro tanto, as it does to private litigants.

This paper proposes a reformulation of the change of position defence, insofar as it applies to the State, so as to take account proportionality principles, which are established in Irish and ECHR property rights property rights jurisprudence and have taken on increased significance in light of article 17 of the EU Charter of Fundamental Rights. This paper will use the proportionality principle to demonstrate that the defence of change of position, as currently afforded to the State, constitutes an unjustified interference with property rights and will argue that the incorporation of a proportionality requirement into the defence would best balance the individual’s right to property and the State’s interest in maintaining the security of public finances.

This paper is now available for download from the Papers page.

Dr Niamh Connolly Recovery of overpaid taxes in Ireland – from Murphy v AG to Harris v Quigley

Cases in the Irish Supreme Court on the recovery of overpaid taxes raise two main issues. The first concerns the cause of action. In Murphy v AG [1982] IR 241 (SC), income taxes were paid pursuant to an unconstitutional statutory provision, and the Supreme Court allowed their recovery on the basis of mistake of law and duress colore officii. Thereafter, several High Court cases followed Woolwich v IRC [1993] AC 70 (HL), and in Harris v Quigley [2005] IESC 79, [2006] 1 IR 165 (01 December 2005), the Supreme Court affirmed that the policy-based ground for restitution recognised in Woolwich also formed part of Irish law, though there has been some subsequent confusion as to how the Woolwich principle inter-operates with mistake and duress. The first part of this paper will therefore seek to disentangle these knots.

The second main issue in the Irish cases on the recovery of overpaid taxes concerns the defence of change of position. In Murphy, the defence was applied to defeat the great majority of potential claims arising out of the unconstitutional provisions, but subsequent cases have failed to understand the Supreme Court’s approach, and recent developments in the defence in the Woolwich context elsewhere in the common law world may help to clarify matters. The second part of this paper will therefore seek to sketch out how the defence should operate in this context.

This paper is now available for download from the Papers page.

Prof Simone Degeling Restitution of overpaid tax in Australia: the Woolwich principle

The particularly influential decision of the High Court of Australia in Mason v New South Wales [1959] HCA 5, (1959) 102 CLR 108 (27 February 1959) was relied upon in the Irish Supreme Court in Murphy v AG [1982] IR 241, in the Supreme Court of Canada in Air Canada v British Columbia [1989] 1 SCR 1161, 1989 CanLII 95 (SCC) (04 May 1989), and in the House of Lords in Woolwich v IRC [1993] AC 70 (HL). This paper will consider both the fate of Mason and the status of Woolwich-based policy-motivated claims in context of the decisions of the High Court of Australia, in particular Commissioner of State Revenue v Royal Insurance Australia Ltd [1994] HCA 61, (1994) 182 CLR 51 (7 December 1994). Whilst the primary focus of the paper is on the Australian caselaw, the decision of the New Zealand Court of Appeal and the Privy Council in Waikato Regional Airport Ltd v AG [2002] NZCA 61 (27 March 2002) and [2003] UKPC 50 (30 June 2003) will also be referred to.

This paper is now available for download from the Papers page.

Prof James Edelman Change of position: A defence of “unjust disenrichment”

In the law of unjust enrichment a defendant is enriched if she receives a desired or chosen benefit. The enrichment is measured by the reasonable (objective) value of the benefit received. In the last two decades the defence of change of position has evolved to a point of clarity in which it can be said that two preconditions for the defence of change of position are (1) that an event has occurred in relation to the defendant that would not otherwise have been desired or chosen by the defendant and (2) that the defendant’s wealth, objectively measured, has been reduced.

The first thesis of this paper is therefore that a precondition for the defence of change of position is the disenrichment of the defendant. The second thesis explains why a subsequent decrease in a defendant’s enrichment can reduce a defendant’s liability to make restitution but a subsequent increase in enrichment cannot increase a defendant’s liability.

This paper is now available for download from the Papers page.

Prof Nelson Enonchong Duress colore officii

In Woolwich v IRC [1993] AC 70 (HL), Lord Goff affirmed that payments demanded colore officii are recoverable. Although the other grounds for restitution discussed in that case have featured in the subsequent litigation, this case of action is still available, and its correct understanding is significant both for the analysis of the doctrine of duress and for overpayors of taxes.

Laura Farrell A critical look at Deutsche Morgan Grenfell v IRC

This paper is concerned with the clarification given in Deutsche Morgan Grenfell v IRC [2006] UKHL 49, [2007] 1 AC 558 (25 October 2006) to the grounds upon which an over-, or early-, paying taxpayer can have restitution. This paper shall take three parts.

The first section considers the claim in Deutsche Morgan and the confirmation by the House of Lords of the availability of a restitutionary remedy based on mistake of law (and so the benefit of Limitation Act 1980, s.32(1)(c)). Despite the authority of Deutsche Morgan it appears that claims brought in respect of a right based upon the principle in Case 199/82 Amministrazione delle Finanze dello Stato v San Giorgio [1983] ECR 3595, [1983] EUECJ R-199/82 (9 November 1983) can only arise at common law by virtue of the principle recognised in Woolwich v IRC [1993] AC 70 (HL). The precise basis of claim mattered in Deutsche Morgan because Deutsche Morgan Group (‘DMG’) needed to rely on Limitation Act 1980, s.32(1)(c). Similarly, the extended limitation period has a huge practical significance for claimants asserting a San Giorgio right, because if a claim in mistake of law is required to give effect to a taxpayer’s San Giorgio right, it appears that Finance Act 2004, s.320 and Finance Act 2007, s.107 are incompatible with Community law. The decision that a San Giorgio claim may not arise by mistake of law seems therefore difficult to justify in terms of the Community law principles of equivalence and effectiveness.

The second section seeks to separate out four issues within the unjust factor of mistake as it operated in Deutsche Morgan. Firstly, the differences of opinion as to the precise characterisation of the mistake made by DMG. Secondly, the potential clarification given by the House of Lords on the appropriate test for determining what type of mistake will ground relief in restitution. Thirdly, the extent to which a state of doubt can be compatible with a mistake. Finally, the rule against mistakes of law the particular difficulty relating to the identification of a mistake of law which arises where the claimant transfers a benefit to the defendant with the belief that he or she was obliged by operation of law to so transfer, but the law is subsequently changed or clarified.

The third section looks briefly at the competing ways of stating the reason why the enrichment at the expense of the claimant is unjust, noting as does the House of Lords in Deutsche Morgan, the choice between the unjust factors and absence of basis approach. Partliculary, Birks’ pyramid is discussed in the context of Lord Walker’s comments in Deutsche Morgan.

A handout for this paper is now available for download from the Papers page.

Dr Birke Häcker Public law restitutionary claims: the German perspective

This paper will raise and discuss in comparative perspective public law restitutionary claims in England and Germany both by and against the Executive. It looks in particular at (1) the origin and foundation of public law restitutionary claims, (2) how exactly they are established, (3) the availability of interest, and (4) the change of position defence.

Prof Steve Hedley Tax, rights and the stability of unjust enrichment

Claims for restitution of overpaid tax provide an excellent context in which to consider some important elements unjust enrichment. The first part of this paper considers attempts to explain restitutionary claims in terms of rights, and addresses in particular the question whether Weinrib’s Aristotelian corrective justice version of rights is compatible with public law approaches to rights as instantiations of the principle of legality. The second part of this paper notes that the motor of the development of unjust enrichment in the courts has been the public law cases (tax cases, such as Woolwich v IRC [1993] AC 70 (HL); and swaps cases, such as Kleinwort Benson Ltd v Lincoln City Council [1998] UKHL 38, [1999] 2 AC 349 (29 October 1998)), and looks at the implications of that for the concept of unjust enrichment in a case-law system.

James Lee Defences to claims for restitution of overpaid tax

The possibility of defences being available to the Crown in a claim for restitution of overpaid tax was recognised but left open in the seminal case of Woolwich v IRC [1993] AC 70, 136. In the light of recent decisions of the English Court of Appeal, including FII v Inland Revenue [2010] EWCA Civ 103 (23 February 2010) and FJ Chalke Ltd v Revenue & Customs [2010] EWCA Civ 313 (25 March 2010) this paper will explore the principles applicable to such defences, not only in the context of the issues that actually arose in those cases, but also from the perspective of defences more generally. Leaving particular examination of change of position to companion papers, the availability of defences such as passing on and policy-based defences (such as “fiscal chaos”) will be considered to determine whether there is, or should be, anything special about the armoury of defences in the context of claims to recover overpaid tax.

This paper is now available for download from the Papers page.

Prof Charles Mitchell The recovery of ultra vires payments by public bodies

Public bodies such as central government departments and local authorities are artificial persons whose capacity to act is delimited by statute. They are also subject to constraints when handling public funds, which they may apply only to purposes that have been duly authorised by democratic process. In practice, however, public bodies often make payments that infringe these rules and are accordingly ultra vires. They make errors of fact or law which lead them to miscalculate the amount of social security benefit or tax credit or tax repayment owed to a recipient; they act beyond their powers by spending money on purposes which have not been sanctioned by Parliament, or which are prohibited by European law; and they pay money under contracts which they have no legal capacity to enter. In cases of the first kind public bodies generally have a statutory right of recovery. In these and all the other cases, they may also have a claim at common law: following Auckland Harbour Board v R [1924] AC 318 (PC), unauthorised payments of public funds are recoverable as of right, by virtue of their ultra vires nature; claims may also lie on the grounds of mistake or failure of consideration.

This paper is now available for download from the Papers page.

Dr Eoin O’Dell The San Giorgio principle: invalid taxes, unjust enrichment and EU law

In Woolwich v IRC [1993] AC 70,178 one of the reasons which Lord Goff gave in favour of the right to restituiton of overpaid tax was that the ECJ in Case 199/82 Amministrazione delle Finanze dello Stato v San Giorgio [1983] ECR 3595, [1983] EUECJ R-199/82 (9 November 1983) established that a person who pays charges levied by a member state contrary to the rules of Community law is entitled to repayment of the charge. Moreover, the San Giorgio line of authority has a significant impact on many of the subsequent overpaid tax cases, in the UK as well as at european level.

The first part of this article will consider the direct impact of the San Giorgio line of authority. It is at least threefold. First, it is an important element of EU jurisprudence relating to domestic remedies for infringements of EU law. Second, in the context of restituiton claims for invalid taxes, it prescribes additional criteria for domestic law. Third, it is an important example of the principle against unjust enrichment at EU law, which mandates the return of all benefits transferred contrary to EU law, such as unlawful state aids and anti-competitive payments, as well as invalidly exacted taxes.

The second part of this article will consider the indirect impact of the San Giorgio line of authority. In particular, both San Giorgio and Woolwich reflect the constitutional policy that there ought to be no taxation without parliamentary justification. San Giorgio gives very wide effect to that policy as a matter of EU law, and the kind of analogical reasoning relied upon by Lord Goff in Woolwich might suggest that a similar ambit should be afforded to purely domestic claims. If such policy considerations mean that domestic law aligns with EU law, then much of the complexity in this area will simply fall away.

Dr Anne Sanders Absence of Problems? A German lawyer’s critical perspective on an absence of basis analysis of Woolwich

The speech of Lord Browne-Wilkinson in Woolwich v IRC [1993] AC 70 (HL) has been cited as an example of the approach to unjust enrichment taken by Prof Peter Birks in Unjust Enrichment (2nd ed, Oxford University Press, 2005) that the duty to make restitution arises when there is no basis for the enrichment. This absense of basis approach has been discussed (though not adopted) in the context of overpaid taxes in Deutsche Morgan Grenfell v IRC [2006] UKHL 49, [2007] 1 AC 558 (25 October 2006), but it is a general approach with which the common law struggles, in particular in the context of claims to recover overpaid taxes. However, many common law discussions of the German approach to absence of basis misunderstand it. Indeed, if it were properly understood, the common law ought not to be so keen on it.

This paper is now available for download from the Papers page.

Maximilian Schlote San
 Giorgio
 and
 the 
domestic
 law
 of 
restitution
 – 
A 
relationship
 revisited

Overpaid tax cases often originate in European Union law. The Test Claimants In the Franked Investment Group Litigation v Commissioners of the Inland Revenue [2010] EWCA Civ 103 (23 February 2010), FJ Chalke Ltd v Revenue & Customs [2010] EWCA Civ 313 (25 March 2010) and Littlewoods Retail Ltd HM Revenue and Customs [2010] EWHC 1071 (Ch) (19 May 2010) raise interesting points regarding the relationship between EU and domestic law. Until the decision in FII, the position was relatively clear in that the only requirement was that the domestic courts provide the Claimant with an effective remedy under domestic law. Either the tax should be repaid to the taxpayer or the taxpayer should be compensated for his losses. The choice, which reflects the choice between the principle of EU laid down by the Court of Justice in Case 199/82 Amministrazione delle Finanze dello Stato v San Giorgio [1983] ECR 3595, [1983] EUECJ R-199/82 (9 November 1983) and the principle of state liability, was for the national court. Similarly, the principle of national procedural autonomy dictated that the scope and rules of the taxpayer’s remedy were a question of domestic law. English courts usually exercised this choice by classifying the taxpayer’s claim as an action in unjust enrichment so that he could claim for the benefit that had accrued to the Revenue due to the undue payment of tax.

FII significantly altered this relationship. The Court of Justice held that in respect of those cases falling within the San Giorgio principle the national court does not have jurisdiction to classify the action as one in state liability. To do so might deprive the taxpayer of an effective remedy in circumstances where the breach of EU law by the Member State might not have been sufficiently serious to warrant state liability.

This decision has important practical consequences for overpaid tax cases. First, the Court of Justice has taken a much greater role in defining the cause of action that is required to provide an effective remedy in a San Giorgio case. In doing so, it has laid down some very restrictive remoteness tests that were adopted by the domestic courts with insufficient critical analysis. Secondly, the courts in the FII litigation referred at various points to the Claimant’s right to be compensated for his consequential losses under the San Giorgio principle. This focus on the Claimant’s losses in a restitutionary remedy is wholly inappropriate. Thirdly, FII may lay down a Community right to interest, a point that arose in Chalke and Littlewoods.

Motivated by the need to find an effective remedy for the Claimants’ San Giorgio claim, the Court of Appeal in FII also made important changes to the domestic law of unjust enrichment. In doing so, the CA clarified the justification for and the scope of the principle in Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70 (HL). The recovery of overpaid taxes follows directly from the invalidity of the underlying tax legislation. It follows that Woolwich raises interesting points relating to the overlap of administrative and private law. This can be seen clearly in relation to time limits and defences.

This paper is now available for download from the Papers page.

Dr Duncan Sheehan Mistaken overpayments of tax

In general the Executive is as subject to private law claims as the rest of us and therefore mistaken overpayments of tax should be treated no differently to mistaken overpayments of grocery bills. This paper aims to bear that out both in the way the cause of action is constructed and towards the end by arguing briefly that there should be no special defences open to the Executive when faced with a mistake claim in unjust enrichment. The main difficulties, as with payments between private parties, will occur in the context of payments by mistake of law.

The paper first sets out to demonstrate that there is an area where a common law mistake claim will need to be available to satisfy EU requirements for an effective remedy under the principle in Case 199/82 Amministrazione delle Finanze dello Stato v San Giorgio [1983] ECR 3595, [1983] EUECJ R-199/82 (9 November 1983) and that even where mistake claims are concurrent with claims under Woolwich v IRC [1993] AC 70 (HL), that there is no reason to exclude a claim for mistake. It examines the reach of the claim in the light of the House of Lords decision in Deutsche Morgan Grenfell v IRC [2006] UKHL 49, [2007] 1 AC 558 (25 October 2006) and also looks at the interaction of the differing causes of action for mistake including the discretionary claim under section 33 of the Taxes Management Act 1970 (pdf). The mistake of law bar was formally removed from English law by Kleinwort Benson v Lincoln City Council [1998] UKHL 38, [1999] 2 AC 349 (29 October 1998), but remains in a sort of “half-living” existence in Irish law, and the paper examines whether that leaves a gap in Irish law.

The paper goes on to examine the settled understanding of the law defence. Sometimes this is seen as a substantive defence and sometimes as a statement that the payor did not in fact make a mistake. Although this was rejected in Kleinwort Benson v Lincoln City Council as a general defence, the House left the door ajar to its introduction in the context of mistaken tax payments, and section 33(2A) Taxes Management Act 1970 provides for a similar prevailing practice defence. The defence is, however, unclear in its operation and in the tax context it may run against the EU principle of effectiveness. The paper concludes with a brief look at fiscal chaos and change of position and suggests that only to the extent these are defences open to private parties should they be open to the Executive.

This paper is now available for download from the Papers page.

William Swadling Change of position as unjust disenrichment – A reply to Prof Edelman

This reply will consider the extent to which the approach to the defence of change of position advanced by Prof Edelman successfully explains the decided cases, especially in the context of the recent Court of Appeal decisions dealing with restitution of overpaid taxes.

A handout for this paper is now available for download from the Papers page.

Dr Charlie Webb Reasons for restitution: Reassessing Woolwich

It is no exaggeration to say that Woolwich v IRC [1993] AC 70 (HL) is the seminal case in this field of law, and its impact is the focus of this paper. In particular, it will critically examine the policy-motivated ground for restitution associated with the speech of Lord Goff in that case, linking more broadly to the issue of the (dis)unity of the concept “unjust enrichment”. Many of the themes addressed here will be developed in subsequent contributions.

This paper is now available for download from the Papers page.

Dr Rebecca Williams Unjust enrichment and public bodies: a hybrid approach

Various factors justifying recovery have been, as the House of Lords put it, “in play” in Woolwich v IRC [1993] AC 70 (HL) and its progeny. Although these factors have so far been viewed through “private law spectacles” (Burrows), in fact they become more easily explicable when seen from a public law perspective. It is no coincidence, then, that the House of Lords has taken a purely private approach in Deutsche Morgan Grenfell v IRC [2006] UKHL 49, [2007] 1 AC 558 (25 October 2006), whereas the Supreme Court of Canada has come down on the public law side of the line in Kingstreet Investments Ltd v New Brunswick [2007] 1 SCR 3, 2007 SCC 1 (CanLII) (11 January 2007); this is simply evidence that both perspectives are equally relevant.

Expounding on the themes developed in her just-published book, Williams argues that taking an approach which is a hybrid of both private and public law allows us (i) to answer a lot of the questions left open after Woolwich, (ii) to group together cases where the public body is the claimant (eg, Auckland Harbour Board v R [1924] AC 318 (PC)), (iii) to conceive of a hierarchy of reasons for restitution which allows the law more direct access to the ultra vires issues; and (iv) to tailor particular defences, specifically time limits, to the causes of action.

On this view, details of the reasoning Deutsche Morgan Grenfell are misconceived, but conversely, some limited support for the position can be derived from the decision of the Court of Appeal in FII v Inland Revenue [2010] EWCA Civ 103 (23 February 2010).

A handout for this paper is now available for download from the Papers page.