R v Commissioners of Inland Revenue ex parte Woolwich Equitable Building Society
| Jurisdiction | England & Wales |
| Judgment Date | 22 May 1991 |
| Date | 22 May 1991 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Glidewell, Ralph Gibson and Butler-Sloss L JJ.
Mr John Gardiner QC, Mr Nicholas Underhill and Mr Jonathan Peacock (instructed by Clifford Chance) for the Woolwich.
Mr Anthony Grabiner QC and Mr Alan Moses QC (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgments:
A-G v Wilts United Dairies Ltd (1921) 27 TLR 884
Air Canada v British Columbia (1989) 59 DLR 4th 161
Amministrazione delle Finanze delle Stato v San Giorgio SpA (Case 199/82) UNK[1985] 2 CMLR 658
Atchison Topeka & Santa Fe Railroad Co v O'Connor (1911) 223 US 280
Auckland Harbour Board v The King ELR[1924] AC 318
B & S Contracts and Design Ltd v Victor Green Publications LtdICR[1984] ICR 419
BP Exploration Co (Libya) Ltd v Hunt (No.2) ELR[1983] 2 AC 352
Barton v Armstrong ELR[1976] AC 104
Bilbie v Lumley ENRENR(1802) 2 East 469; 102 ER 448
Blackpool and Fleetwood Tramroad Co v Bispham with Norbreck UDCELR[1910] 1 KB 592
Brocklebank (T & J) Ltd v The King ELR[1924] 1 KB 647
Brown v McKinally ENRENR(1795) 1 Esp 278; 170 ER 356
Buckingham v Francis UNK[1986] 2 All ER 738
Bourgoin SA v Ministry of Agriculture ELR[1986] QB 716
Campbell v Hall ENRENR(1774) 1 Cowp 204; 98 ER 1045
Chase Manhattan Bank NA v Israeli-British Bank (London) LtdELR[1981] Ch 1025
DPP (NI) v Lynch ELR[1975] AC 653
Dew v Parsons ENRENR(1819) 2 B & Ald 562; 170 ER 356
Fairbanks v Snow (1887) 13 NE Reporter 596
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour LtdELR[1943] AC 32
Glasgow Corporation v Lord Advocate SC1959 SC 203
Hamlet v Richardson ENRENR(1833) 9 Bing 644; 131 ER 756
Hooper v Mayor of Exeter (1887) 56 LJQB 457
Hydro Electric Commission of Nepean v Ontario Hydro (1982) 132 DLR 3rd 193
IR Commrs v National Federation of Self-Employed and Small Businesses Ltd ELR[1982] AC 617
IR Commrs v Nuttall TAX[1990] BTC 107
Irving v Wilson UNKENR(1791) 4 Term Rep 485; 100 ER 1132
Kiriri Cotton Co Ltd v Ranchhoddas Keshavji Dewani ELR[1960] AC 192
James, ex parte ELR[1874] LR 9 Ch App 609
Maskell v Horner ELR[1915] 3 KB 106
Mason v New South Wales UNK(1959) 102 CLR 108
Maxwell v Griswold (1850) 10 How 242
Morgan v Palmer ENRENR(1824) 2 B & C 728; 107 ER 554
Moses v Macferlan ENRENR(1760) 2 Burr 1005; 97 ER 676
Muinski v Dodds UNK(1985) 62 ALR 429
National Pari-Mutuel Association Ltd v The King (1930) 47 TLR 110
O'Sullivan & Anor v Management Agency and Music Ltd & OrsELR[1985] QB 428
Paal Wilson & Co AS v Partenreederei Hannah BlumenthalELR[1983] 1 AC 854
President of India v La Pintada Compania Navegacion SA, (The La Pintada) UNKELR[1983] 1 Lloyds Rep 37 (QBD); [1985] AC 104 (HL)
Queens of the River Steamship Co Ltd v Thames Conservators(1899) 15 TLR 474
R v Chief Constable of Merseyside Police, ex parte CalveleyELR[1986] QB 424
R v IR Commrs, ex parte MFK Underwriting Agencies Ltd & OrsWLRTAX[1990] 1 WLR 1545; [1989] BTC 561
R v IR Commrs, ex parte Preston ELRTAX[1985] AC 835; [1985] BTC 208
R v IR Commrs, ex parte Woolwich Equitable Building SocietyTAXTAXTAX[1987] BTC 503; [1989] BTC 211 (CA); [1990] BTC 490 (HL)
R v Tower Hamlets LBC, ex parte Chetnik Developments Ltd ELR[1988] AC 858
Robertson v Frank Bros (1889) 132 US 17
Sargood Bros v The Commonwealth UNK(1910) 11 CLR 258
Sebel Products Ltd v C & E Commrs ELR[1949] Ch 409
Sharp Bros & Knight v Chant ELR[1917] 1 KB 771
Sharpe, re, (a bankrupt) WLR[1980] 1 WLR 219
Simmonds, ex parte ELR(1885) 16 QBD 308
Slater v Mayor of Burnley (1888) 59 LTNS 636
Somes v British Empire Shipping Co (1860) 8 HL Cas 338
South of Scotland Electricity Board v British Oxygen Co LtdWLR[1959] 1 WLR 587
Steele v Williams ENR(1853) 8 Ex 625; 155 ER 1052
Twyford v Manchester Corporation ELR[1946] Ch 236
Tyler, re, ELR[1907] 1 KB 865
Universe Tankships Inc of Monrovia v International Transport Workers Federation ELR[1983] 1 AC 366
William Whiteley Ltd v The King (1909) 101 LT 741
Income tax - Interest - Money paid under unauthorised demand for tax - Building society paid sum demanded under regulations pending outcome of judicial review proceedings - Regulations held to be ultra vires - Revenue repaid sum with interest from date of judgment - Whether building society entitled to interest from date when sum paid -Supreme Court Act 1981 section 35ASupreme Court Act 1981, sec. 35A.
This was an appeal by the taxpayer ("the Woolwich") from a judgment of Nolan J ([1988] BTC 347) in an action by the Woolwich claiming interest from the date of payment of sums amounting to approximately £57m in response to a demand under the Income Tax (Building Societies) Regulations 1986 which were subsequently declared to be in part ultra vires and void.
The Woolwich challenged the validity of the regulations from the start and commenced proceedings for judicial review when it paid the first amount due under them. The Woolwich, considering that under the circumstances it had no choice but to comply with the demands, paid the money without prejudice to the right to recover it if the regulations should be found to be invalid.
In the judicial review proceedings Nolan J declared the regulations to be ultra vires and void in part (see R v IR Commrs, ex parte Woolwich Equitable Building Society TAX[1987] BTC 503,eventually affirmed by the House of Lords: see [1990] BTC 490). The Revenue repaid the £57m but refused to pay interest calculated from the date of payment until the date of Nolan J's judgment.
In a separate action the Woolwich claimed interest under the Supreme Court Act 1981, Supreme Court Act 1981 section 35Asec. 35A in respect of the period between the date of payment of the money and the date of Nolan J's judgment in the judicial review proceedings. That claim could succeed only if a cause of action arose for the recovery of a debt accruing when the money was paid. The Woolwich contended that a cause of action had arisen at the time of payment because the money, to which the Revenue was never entitled, was immediately repayable.
Nolan J held, following Sebel Products Ltd v C & E CommrsELR[1949] 1 Ch 409, that the repayment was made pursuant to an implied contract between the Woolwich and the Revenue that the money would be repaid if it was subsequently held to have been unlawfully demanded but no term as to the payment of interest could be read into such a contract. The judge rejected the Woolwich's argument that as a matter of principle a subject who made a payment in response to an unlawful demand for tax acquired a right to its repayment forthwith as money had and received. He also rejected an argument that the Woolwich had a right to restitution on the basis of duress because the Woolwich had no choice but to pay.
The judge found that there was no general principle of restitution where payment was made in response to an unlawful demand for tax.
The Woolwich appealed against Nolan J's decision relying primarily on the existence of a general right to restitution for tax paid on an unlawful demand.
Alternatively, the Woolwich contended that the payments which were not made voluntarily were made under duress. The principle that a payment was made under duress if an official demanded money for perfoming a duty which he was obliged to perform without payment, or demanded more money than the amount authorised, extended to cases such as the present where payment was made for commercial reasons response to an unauthorised demand. Here, if the Woolwich had not paid, the interest payable if the judicial review proceedings had not succeeded would have been much more than the Woolwich could have earned in the meantime.
The Woolwich accepted that if a payment was made in order to settle the matter and close the transaction it was not made under duress but the fact that proceedings had been commenced immediately showed that the payment was not made with that end in mind.
The Revenue contended that there was no general principle of restitution in relation to unauthorised tax demands. The payment by the Woolwich was made voluntarily and not under duress and was repaid by the Revenue either by virtue of an implied agreement which did not include the payment of interest, or alternatively it was an ex gratia payment made in accordance with their powers to settle disputes and make compromises.
Held, allowing the Woolwich's appeal (Ralph Gibson LJ dissenting):
1. There was a general right to repayment of money paid without consideration, a happened in the case of the Woolwich, where one party was unjustly enriched at the expense of the other and natural justice required restitution. (Moses v Macferlan ENR(1760) 2 Burr 1005 at p. 1012 per Lord Mansfield and Fibrosa Spolka Akcyjna v Fairbairr Lawson Combe Barbour Ltd ELR[1943] AC 32 at p. 61 per Lord Wright followed.)
2. A general right to restitution underlay the principle that if a government body or officer made a demand for payment of a tax or duty which there was no legal power to require, and payment was made in response to the demand, there was a presumption that the payer was entitled to immediate restitution. (Campbell v Hall (1774) 1 Coop 204; Steele v Williams (1853) 8 Ex 625; Hooper v Mayor of Exeter (1887) 56 LJQB 457; Mason v New South Wales per Dixon CJ and Kitto J UNK(1959) 102 CLR 108 at pp. 117, 125; and R v Tower Hamlets LBC, ex parte Chetnik Developments Ltd ELR[1988] AC 858 followed.)
3. The general right to repayment was subject to two limitations. If a person voluntarily paid money which he was not in law bound to pay in order to close the transaction and bring an end to litigation, he could not then recover the money. Money paid under a mistake of law could not generally be recovered. (Maskell v Horner ELR[1915] 3 KB 106; Mason v New South Wales per Windeyer J at pp. 142-143; and National Pari-Mutuel Association v R (1930) 47 TLR 110 approved.)
4. Neither of...
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