Lloyd's Maritime and Commercial Law Quarterly
STRIKING THE BALANCE IN THE LAW OF RESTITUTION
Graham Virgo*
The Law Commission report entitled “Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments” recommends both the statutory abrogation of the rule barring restitution where the action is founded on mistake of law and the amendment of certain statutory provisions for the recovery of overpaid taxes. This article critically analyses the recommendations of the Law Commission. While for the most part welcoming these recommendations, it is argued that there remains an urgent need to review the law of restitution for mistake generally and, increasingly, to consider the role of restitution insofar as it applies to public authorities.
A lot can happen in three years, particularly in the law of restitution. Between July 1991, when the Law Commission published its Consultation Paper entitled Restitution of Payments Made Under a Mistake of Law,1 and November 1994 when it published its final report, Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments,2 there had been a number of important developments affecting restitution for mistakes of law and particularly restitution of payments made to public authorities which were not lawfully due. In its Consultation Paper the Law Commission had provisionally recommended abolition of the rule barring restitution where the action was founded on mistake of law and the creation of a general right to recover payments made to public authorities which were not due by virtue of a breach of public law.3 The developments subsequent to these proposals were three-fold. First, and most importantly, the House of Lords in Woolwich Equitable Building Soc. v. l.R.C. (No. 2)
4 recognized a right to recover money paid to a public authority in the form of taxes or other levies paid pursuant to an ultra vires demand made by the authority.5 Secondly, a number of judges in Woolwich expressed doubt as to the continuing validity of the mistake of law bar.6 In addition, the
* Fellow of Downing College, Cambridge.
1. L.C.C.P. No. 120 (1991).
2. Law Com. No. 227 (Cm. 2731) (1994). See Beatson, “Mistakes of Law and Ultra Vires Public Authority Receipts: The Law Commission Report” [1995] Restitution Law Review (forthcoming) and Flynn, ‘“No Taxation Without Restitution, ‘—The Law Commission’s Proposals on Recovery of Overpaid Taxes” [1995] B.T.R. 15.
3. L.C.C.P. No. 120, para. 5.2.
4. [1993] A.C. 70. For commentary see E. McKendrick, “Restitution of Unlawfully Demanded Taxes” [1993] LMCLQ 88; J. Beatson, “Restitution of Taxes, Levies and Other Imposts: Defining the Extent of the Woolwich Principle” (1993) 109 L.Q.R. 401; G. Virgo, “The Law of Taxation is Not an Island—Overpaid Taxes and the Law of Restitution” [1993] B.T.R. 442.
5. [1993] A.C. 70, 177, per Lord Goff, who also suggested that the principle could be extended to where the unlawfulness of the demand arose for a reason other than ultra vires, e.g., misconstruction of a statute by the public authority.
6. [1993] A.C. 70, 177 (Lord Goff), 192 (Lord Jauncey), 199 (Lord Slynn).
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