#6865 - Fii Test Claimants V. Commissioners For Hmrc - Restitution of Unjust Enrichment BCL

FII Test Claimants v. Commissioners for HMRC

The Defence of Change of position is available to the Revenue

In the first place, I can see no reason in principle why the defence of change of position should not be available to the Revenue, or indeed to any other category of defendant. No hint of any such limitation is to be found in any of the cases which were drawn to my attention, while there is, on the contrary, widespread recognition that a broadly based defence is needed in order to prevent injustice precisely because of the width and simplicity of the basic principle of unjust enrichment itself. As Lord Goff said at the end of his discussion of the subject in Lipkin Gorman, the availability of the defence will enable a more generous approach to be taken to the recognition of the right to restitution.

Wrongdoing by the Revenue

On the question of what is meant by denial of the defence “to a wrongdoer”, I have already indicated my view that what Lord Goff had principally in mind are cases where the cause of action relied upon by the claimant involves wrongdoing (in the sense of some recognised legal wrong) on the part of the defendant. On this approach, a defendant to a claim for restitution on the ground of mistake, whether of fact or law, is not a wrongdoer, because the cause of action does not depend on establishing any wrongdoing by him. It is, quite simply, not a fault-based claim at all.

I find some encouragement for thinking that this was the focus of Lord Goff's attention in the fact that he must have regarded the club's conversion of the banker's draft, which was clearly a tort and therefore a legal wrong, as irrelevant to the club's change of position defence to the restitutionary claim against it in mistake. The club was, to that limited extent, a wrongdoer, but not in a way that impinged on the separate mistake-based claim against it. The defence was therefore available.

If that approach is applied to the present case, it suggests to me that the Revenue should not be entitled to rely on change of position as a defence to a Woolwich claim, because such a claim is founded on the unlawful levying of tax and therefore on the commission of a legal wrong, but that the defence should in principle be available to the Revenue when restitution is sought of overpaid tax on the basis of mistake. The critical distinction is that the unlawfulness of the tax forms no part of the cause of action in mistake. It is therefore irrelevant, just as the club's conversion of the banker's draft was irrelevant in Lipkin Gorman.

In particular, I do not consider that the Revenue should be regarded as wrongdoers, in the context of the mistake claims, merely because the mistake related to the lawfulness of the tax which was paid, and because it was the Revenue who had been responsible for the unlawful exaction of the tax. That is merely another way of saying that the unlawfulness which lies at the heart of a Woolwich claim should, as it were, infect the mistake claims too. I can only say that I see neither logic nor justice in such an extension.

Did the Revenue Change its Position?

To state the obvious, taxation is not imposed for its own sake, but in order to fund government expenditure. It is one of the two main ways in which public expenditure is funded, the other being public sector borrowing. One would expect government spending decisions, at a policy level, to be reached at least in part on the basis of the tax revenues which it has received in the past, and which it expects to receive in the future. Even if tax revenues are not spent immediately, common sense suggests that they will be used up over a fairly short period, and that it is probably safe to assume that tax receipts which predated the claims in the present case by more than six years, and therefore fell outside the scope of a Woolwich claim with its six year limitation period, will have been exhausted well before the commencement of the action. As a matter of causation, no...