R v Commissioners of Inland Revenue ex parte Woolwich Equitable Building Society
| Jurisdiction | England & Wales |
| Judgment Date | 12 July 1988 |
| Date | 12 July 1988 |
| Court | Queen's Bench Division |
Queen's Bench Division.
Mr. John Gardiner Q.C. and Mr. Nicholas Underhill (instructed by Clifford Chance) for the Woolwich Equitable Building Society.
Mr. Anthony Grabiner Q.C. and Mr. Alan Moses (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: Nolan J.
The following cases were referred to in the judgment:
BP Exploration Co. (Libya) Ltd. v. Hunt (No. 2) ELR[1983] 2 A.C. 352
Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd.ELR[1943] A.C. 32
Mason v. New South Wales UNK(1959) 102 C.L.R. 108
Moses v. Macferlan ENR(1760) 2 Burr. 1005
President of India v. La Pintada Compania Navigacion S.A.ELR[1985] A.C. 104
R. v. I.R. Commrs., ex parte Woolwich Equitable Building SocietyTAX[1987] BTC 503
Sebel Products Ltd. v. C. & E. Commrs. ELR[1949] 1 Ch. 409
Western United Investment Co. Ltd. v. I.R. Commrs. UNK[1958] 1 All E.R. 257
William Whitely Ltd. v. The King UNK(1909) 101 L.T. 741
Income tax - Interest on money paid under unauthorised demand for tax - Taxpayer 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 taxpayer entitled to interest from date of payment - Supreme Court Act 1981 section 35ASupreme Court Act 1981, sec. 35A.
This was an action by the Woolwich Equitable Building Society against the Inland Revenue claiming repayment with interest of the sum of approximately £57m paid by Woolwich under the Income Tax (Building Societies) Regulations 1986 (S.I. 1986 No. 482).
On 31 July 1987 Nolan J. gave a decision in judicial review proceedings, R. v. I.R. Commrs., ex parte Woolwich Equitable Building Society[1987] BTC 503. The effect of that decision was that the Income Tax (Building Societies) Regulations 1986 were ultra vires and void in so far as they purported to provide for the imposition of tax on dividends and interest paid by building societies on behalf of their depositors prior to 6 April 1986.
The Revenue had sought and obtained from Woolwich a total sum of £56,998,221 in reliance on the regulations while proceedings were on foot to challenge their validity. Woolwich paid the sum demanded, under protest, because it would be embarrassing and damaging to its reputation to be seen to be in confrontation with the Revenue; because if the decision had gone against it the interest payable on the unpaid amount would have exceeded the interest obtainable in the meantime; and because penalties for late payment would have been imposed.
After the decision in the judicial review proceedings in favour of Woolwich, the Revenue repaid the £56,998,221 with interest from the date of the decision.
Woolwich had issued a writ against the Revenue in anticipation of the outcome of the judicial review proceedings claiming repayment of the sum paid together with interest under the Supreme Court Act 1981 section 35ASupreme Court Act 1981, sec. 35A running from the date of payment.
Woolwich contended that, since the payments were made pursuant to demands which were unlawful, the Revenue had unjustly enriched themselves at the expense of Woolwich. Applying the principle of restitution, the sum was a debt repayable as money had and received to the Revenue's use. Alternatively the payments had been made under duress. By virtue of the Supreme Court Act 1981 section 35ASupreme Court Act 1981, sec. 35A, the court had power to award interest from the date on which a cause of action arose.
The Revenue accepted that the payments were not made under a mistake of law (in which case no right to repayment would arise) but contended that they were voluntary payments. Thus they were not repayable, and the repayment which the Revenue had in fact made was ex gratia, recognising that it would be unconscionable for them to retain the money after the decision of 31 July 1987.
Held, giving judgment for the Revenue:
1. A threat of legal proceedings for the recovery of the money and penalties did not amount to duress. The potential cost to Woolwich of refusing to pay in terms of damage to reputation and interest or penalty liabilities might have been commercially unacceptable but could not be regarded as involving duress on the part of the Revenue. (William Whitely Ltd. v. The King UNK(1909) 101 L.T. 741, followed; Mason v. New South Wales UNK(1959) 102 C.L.R. 108, distinguished.)
2. The principle of general restitution did not extend to those who had submitted to unauthorised demands for tax. However, where money was paid to the Revenue pending the outcome of a dispute which, to the knowledge of both parties would determine whether or not the Revenue were entitled to it, an agreement for the repayment of the money if and when the dispute was resolved in the taxpayer's favour must be implied if the statute itself did not produce that result. Here, the money was paid expressly without prejudice to the right of Woolwich to recover it if the judicial review proceedings succeeded, and the Revenue must be assumed to have accepted payment on terms that it would be repaid if the proceedings went against them. (Sebel Products Ltd. v. C. & E. Commrs. ELR[1949] 1 Ch. 409, followed.)
3. The money was held by the Revenue under an implied agreement as a deposit on account of tax which might be held to have been due. Woolwich only became entitled to reclaim the money, and would only have wished to do so, when there was no longer a risk of having to pay interest or penalties or of damage to its reputation. A cause of action arose and the money fell to be repaid as a debt at the date of the judgment in the judicial review proceedings and interest ran from that date but not before.
Nolan J.: This action was begun by a writ issued by the plaintiffs ("Woolwich") against the defendants ("the Revenue") on 15 July 1987. It was brought in anticipation of a decision which I gave on 31 July 1987 in judicial review proceedings entitled R. v. I.R. Commrs., ex parte Woolwich Equitable Building Society TAX[1987] BTC 503. The effect of my decision was that the Income Tax (Building Societies) Regulations 1986 were ultra vires and void in so far as they purported to provide for the imposition of tax on dividends and interest paid by building societies prior to 6 April 1986.
Before I gave my decision, the Revenue had already sought and obtained from Woolwich a total sum of £56,998,221 in reliance upon the regulations which I declared to be ultra vires and void. That total sum had been paid as to £42,426,421 on 16 June 1986, as to £2,856,821 on 15 September 1986, and as to £11,714,969 on 16 March 1987. By its action in the present case, Woolwich claimed the repayment of the total sum together with interest under Supreme Court Act 1981 section 35Asec. 35A of the Supreme Court Act 1981 on each of the three instalments by which it had been paid, running in each case from the date of payment. After I had given my decision in the judicial review proceedings, negotiations took place between the parties which resulted in the repayment to Woolwich of the sum of £56,998,221, with interest from the date of the decision, but not from any earlier date. Thus the substantial issue in the present case is whether or not Woolwich is entitled to interest on the three instalments running from the dates upon which they were respectively paid to 31 July 1987.
Both the payments and the repayment of the principal sum were made without prejudice to the rights and liabilities of the parties as ultimately to be established. My decision of 31 July 1987 is under appeal to the Court of Appeal where it will no doubt be joined by my decision in the present case, but the present case has been argued on the basis that my decision of 31 July 1987 was right.
The claim was originally pleaded on the simple ground that the payments were made pursuant to demands which were unlawful, and that in the premises the Revenue were liable to repay them together with interest under Supreme Court Act 1981 section 35Asec. 35A of the Supreme Court Act 1981. The broad basis of the claim, as argued by Mr. Gardiner for Woolwich, was that the Revenue had unjustly enriched themselves at the expense of Woolwich. He referred me to the speech of Lord Wright in Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. ELR[1943] A.C. 32 at p. 61 where his Lordship said:
It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generally different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution.
Lord Wright (at p. 62) quoted remarks of LordMansfield C.J. in the case of Moses v. MacferlanENR(1760) 2 Burr. 1005 at p. 1012 where Lord Mansfielddescribed the action for money had and received in these terms:
"It lies," he said, "for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition (express, or implied); or extortion; or oppression; or an undue advantage taken of the plaintiff's situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money." Lord Mansfield prefaced this pronouncement (at p. 1008) by observations which are to be noted. "If the defendant be under an...
To continue reading
Request your trial
-
Joint (Inspector of Taxes) v Bracken Developments Ltd
... ... Henderson (instructed by the Solicitor of Inland Revenue) for the Crown ... Jonathan Peacock ... R v IR Commrs, ex parte Woolwich Equitable Building SocietyTAX [1989] BTC ... against a decision of the general commissioners for New Forest West that a close company was not ... , ex parte Woolwich Equitable Building Society TAX [1989] BTC 211 (CA) held that a "sum ... ...
-
R v Commissioners of Inland Revenue ex parte Woolwich Equitable Building Society
...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 (......
-
Reilly and Hewstone v Secretary of State for Work and Pensions
...denied that there was any such gap and contended that regulation 11 gave rise to double taxation. In its judgment in ( Woolwich 1 [1990] 1 WLR 1400), handed down on 23 October 1990, the majority in the House of Lords did not accept that the Regulations gave rise to double taxation, but the ......
-
R (on the application Hudson Contract Services Ltd) v Secetary of State for Business, Innovation and Skills
... ... 29 The basic building blocks of the 1982 Act were very like those in ... by the House of Lords in Regina v Inland Revenue Commissioners, ex parte Woolwich e Building Society [1990] 1 WLR 1400 ... That case also concerned a ... out that the CIS operates as a fair and equitable tax collection policy because it includes ... ...