Morgan Guaranty Trust Company of New York v Lothian Regional Council
| Jurisdiction | Scotland |
| Judgment Date | 01 December 1995 |
| Date | 01 December 1995 |
| Court | Court of Session |
Inner House of the Court of Session
Before the Lord President (Lord Hope), Lord Mayfield, Lord Kirkwood, Lord Cullen and Lord Clyde
Scots law - enrichment - error of law rule - payment recoverable subject to equity
The decisions of the courts from 1830 onwards which had held that money paid under error of law could not be recovered had been wrongly decided. In such circumstances, the money was recoverable unless the recipient could show that it would be inequitable for him to have to repay it.
The Inner House of the Court of Session, sitting as a court of five judges, so held, allowing a reclaiming motion against an interlocutor of the Lord Ordinary (The Times November 30, 1993) dismissing an action brought by the Morgan Guaranty Trust Company of New York against Lothian Regional Council, granting decree de plano for the sum of £368,104.52, and remitting to the Lord Ordinary the question of interest.
Mr William Nimmo-Smith, QC and Mr Eric Robertson for the pursuers and reclaimers; Mr Neil Davidson, QC and Mr Alastair Clive for the defenders and respondents.
THE LORD PRESIDENT said that the parties had entered into a `swap' agreement, under which the pursuers had made net payments to the defenders of £368,104.52.
Mr Davidson was content for present purposes to accept that the agreement had been ultra vires of the defenders, because of section 69(1) of the Local Government (Scotland) Act 1973. The payments had been made in implement of a supposed obligation under a contract which had been discovered not to exist, and the recipients of the payment had been enriched because the payment was of money to which they had not been entitled.
The condictio indebiti was available for the recovery of money paid or property transferred under an obligation which was void but was erroneously thought to be valid. But in Glasgow Corporation v Lord AdvocateSC (1959 SC 209) it had been held that the condictio indebiti did not apply to a case of error of law in the interpretation of a public statute: see Taylor v Wilson's TrusteesSC (1975 SC 146).
The question therefore was whether the fact that the pursuers' error was an error of law sufficient to defeat their claim. That had been the subject of discussion among jurists for centuries.
At various stages in the history of the debate first one side and then the other appeared to be winning the argument. Interventions by judges had not always been helpful.
The discussion had been greatly assisted in recent years by the work of academic lawyers. Lord Goff of Chieveley had already paid tribute inWoolwich Building Society v Inland RevenueELR ((1993) AC 70, 166) to the work of Professor Peter Birks.In Willis Faber Enthoven (Pty) Ltd v...
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