Restitution Discussion Group Archives
| Sender: |
John Murphy |
| Date: |
Mon, 20 May 1996 08:34:09 +1000 |
| Re: |
Restitution and "passing on" |
The defence of "passing on" is getting
a very bad press. Air
Canada, we are told, doesn't fly; the High Court of Australia
has, it seems, come out against it. Now the Court of Appeal is beginning
to get in on the act. In today's London Times comes a report of Kleinwort
Benson Ltd v Birmingham City Council, a case in which the defence
was not allowed to a local authority in ultra vires receipt of a loan
for swaps. (A summary of the Times summary follows). I don't understand the utter rejection
of the defence. If we focus on Air
Canada, we find that La Forest says first that there is a defence
of passing on, and second, that the fiscal chaos which would otherwise
happen makes the defence desirable on the facts. In the equivalent Irish
case of Murphy v AG [1982] IR 241 (unjustly ignored except
by Prof Birks), Henchy J held that taxes paid pursuant to an unconstitutional
taxing statute were exacted colore officii, and that the plaintiffs
had a prima facie cause of action (partially) met on the facts (in respect
of most potential defendants) by the defence of change of position,
and after he had discussed the defence, he too seemed to refer
to the fiscal chaos which made a defence desirable on the facts. In
other words, fiscal chaos, if valid, is a policy which makes a defence
desirable when the government is a defendant, it is not peculiarly attached
to the defence of passing on. Having separated out the issues of
passing on and fiscal chaos, and putting to one side the issue of fiscal
chaos, it is possible to address the issue simply of the desirability
of the defence of passing on; and in principle I incline to the view
that it is desirable: if A demands that B pay A, and B having paid,
increases his costs to C, then the enrichment in A's hands is at C's
expense not B's. We can say that B has passed on his loss, and thus
that B is not the proper plaintiff, C is. If that is all that the defence
of passing on asserts, then it seems to me sound in principle. Why should
it change matters that there is only one B and many Cs? C (or all of
them) should sue A, and if that is felt improbable, then consider the
number of class action suits that there have been. Anyway, what do colleagues think of the above ? Eoin O'Dell. As a matter of principle, I never place any credence
in Governments (or their defence lawyers) claiming the sky will fall in
if they lose. It hasn't yet! It seems to me that if B demands payment
from A and A thereby increases his charges to C (however many C's there
are), then B should still repay A. The Cs may or may not be ultimately
recompensed by the reverse process of A passing on the "saving". The point
is that B ought not be unjustly enriched - period. This is particularly so in the case of governments. An
order for restitution might focus attention on the sloppy behaviour of
those responsible and might lead to their smartening themselves up - to
put it crudely. A might have a windfall. So what? A gets a "windfall"
in most cases where an account is ordered. The real point, as far as I
am concerned is that the defaulting party ought not be allowed keep its
ill-gotten gains (which it does, regardless of the existence of C) unless
it is made to disgorge them.
This argument has particular cogency, in my view, in the
case of public authorities because they are in the position of trustees
- holding their positions, powers and property in trust for the public
and every member of it.
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