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THE DISCOVERABILITY OF MISTAKES OF LAW

Lloyd's Maritime and Commercial Law Quarterly

THE DISCOVERABILITY OF MISTAKES OF LAW Samuel Beswick * The “mistake of law” category of unjust enrichment might be a more obscure cause of action were it not for s.32(1)(c) of the Limitation Act 1980. That provision postpones the limitation period in cases of “mistake”. Recent landmark judgments have interpreted s.32(1)(c) to extend time for bringing actions in mistake of law until there has been an authoritative judicial pronouncement on the point of law in issue. This understanding of discoverability is arbitrary, jurisprudentially strained and internally inconsistent. It gives rise to serious problems in doctrine and policy. The courts should revisit their jurisprudence and consider the more coherent understandings of the discoverability principle that others have previously advanced. I. INTRODUCTION The past two decades have seen a swell in restitutionary actions grounded in mistake of law. What drives these actions is the favourable limitation position afforded by the principle of discoverability. 1 Section 32(1)(c) of the Limitation Act 1980 (“LA”) provides that where an action is for relief from the consequences of a mistake, the period of limitation does not begin to run “until the plaintiff has discovered the … mistake … or could with reasonable diligence have discovered it”. A mistake of law arises when a claimant transfers a benefit to another under an erroneous belief that the law requires it. Since the House of Lords’ landmark decision in Kleinwort Benson Ltd v Lincoln City Council , 2 English courts have held that mistakes of law are discoverable, and time under LA, s.32(1)(c) begins to run, once there has been an authoritative judicial pronouncement on the point of law in issue. 3 This understanding expands the timeframe for litigation that * Frank Knox Memorial Fellow, Harvard Law School. Thank you to John Goldberg, Rebecca Williams, Vicki Jackson, Duncan Sheehan, Charles Mitchell, Aruna Nair, Michael Douglas, Kristian Jensen, Jennifer Allison, Steffi Sunny, the anonymous peer-reviewer, participants of the Restitution section at the Society of Legal Scholars Conference in September 2018 and to HLS colleagues at a response paper workshop in August 2018 and a colloquium in October 2018. 1. C Mitchell, P Mitchell & S Watterson, Goff & Jones on the Law of Unjust Enrichment , 9th edn (Sweet & Maxwell, London, 2016), [33.33]; A Burrows, The Law of Restitution , 3rd edn (OUP, Oxford, 2011), 231. See Sempra Metals Ltd v IRC [2007] UKHL 34; [2008] 1 AC 561, [101] (Lord Nicholls of Birkenhead) (hereafter “ Sempra Metals (HL)”); Prudential Assurance Co Ltd v HMRC [2018] UKSC 39; [2018] 3 WLR 652; [2018] STC 1657, [51] (hereafter “ Prudential Assurance (SC)”). 2. [1998] UKHL 38; [1998] Lloyd’s Rep Bank 387; [1999] 2 AC 349 (hereafter “ Kleinwort Benson (HL)”). See L Smith, “Restitution for Mistake of Law” [1999] RLR 148, 156. 3. Test Claimants in the FII Group Litigation v HMRC [2016] EWCA Civ 1180; [2017] STC 696, [372] (hereafter “ FII Test Claimants (CA II)”), citing Deutsche Morgan Grenfell Group Plc v IRC [2006] UKHL 49; [2007] 1 AC 558 (hereafter “ DMG (HL)”). See M Canny, Limitation of Actions in England and Wales (Bloomsbury, West Sussex, 2013), [7.22]; S Elliott, B Häcker & C Mitchell (eds), Restitution of Overpaid Tax (Hart, Oxford, 2013), 4; Law Commission of England and Wales, Limitation of Actions (LC 270, 2001), [4.78]. The discoverability of mistakes of law 113

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