========================================================================= Date: Sat, 22 Nov 2008 15:28:45 -0000 Reply-To: "Hedley, Steve" Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: "Hedley, Steve" Subject: Kirby speech MIME-Version: 1.0 Content-Type: multipart/alternative; boundary="----_=_NextPart_001_01C94CB7.01F2D2F1" This is a multi-part message in MIME format. ------_=_NextPart_001_01C94CB7.01F2D2F1 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable RDG members may be interested in the issues raised by Michael Kirby: = "Equity's Australian isolationism" . Text is here: = http://www.theaustralian.news.com.au/business/story/0,28124,24677002-1704= 4,00.html.=20 =20 Credit for alerting us to this goes to "Legal Eagle" (who is known to = many on this list by another name) - she has also got her blow in = quickest on the matters Kirby raises = (http://skepticlawyer.com.au/2008/11/kirby-j-takes-a-parting-shot-at-equi= ty-gurus-on-high-court/). And congrats on the new addition to the = family, too! =20 =20 =20 Steve Hedley UCC =3D=3D=3D=3D This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, . ------_=_NextPart_001_01C94CB7.01F2D2F1 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable =0A= =0A= =0A= =0A=

RDG members may be = interested in the issues raised by Michael Kirby: "Equity’s = Australian isolationism" . Text is here: http://www.theaustralian.news.com.au/business/story/0,= 28124,24677002-17044,00.html.

=0A=

Credit for alerting us to this goes to = "Legal Eagle" (who is known to many on this list by another name) - she = has also got her blow in quickest on the matters Kirby raises = (http://skepticlawyer.com.au/2008/11/kirby= -j-takes-a-parting-shot-at-equity-gurus-on-high-court/). And = congrats on the new addition to the family, too!

=0A=

Steve = Hedley

=0A=

UCC

=3D=3D=3D=3D

This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to <listserv@lists.mcgill.ca>. To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to <enrichment@lists.mcgill.ca>. The list is run by Lionel Smith of McGill University, <lionel.smith@mcgill.ca>.

------_=_NextPart_001_01C94CB7.01F2D2F1-- ========================================================================= Date: Thu, 27 Nov 2008 12:18:56 +0000 Reply-To: "Mitchell, Charles" Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: "Mitchell, Charles" MIME-Version: 1.0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable List members will find much to interest them in Henderson J's judgment in T= est Claimants in the FII Group Litigation v HMRC [2008] EWHC 2893 (Ch). Amo= ng other things he holds that the change of position defence should be avai= lable to the Revenue in respect of money paid as tax which was not due, a f= inding which could make a difference to HMRC of between =A32 billion and = =A35 billion: a nice illustration of Bill Cornish's comment that a C of P /= fiscal chaos defence 'seems to contain the imperative that, if governments= are to exceed their taxing powers, this should be done on the grandest sca= le' (W R Cornish, '"Colour of Office": Restitutionary Redress against Publi= c authority' [1987] J of Mal and comp Law 41, 52). Bearing out Monica Chowd= ry's various articles on this subject, the judge also holds that HMRC are p= recluded from relying upon the curtailed limitation period for mistake- base= d claims introduced by section 320 of the Finance Act 2004, and retrospecti= vely extended by section 107 of the Finance Act 2007, because in breach of = Community law these sections purported to curtail the limitation period app= licable to mistake claims without providing any transitional arrangements. = The sums at stake, and the controversial nature of some of Henderson J's fi= ndings, guarantee that this case is destined for the HL. Happy reading! CM Professor Charles Mitchell School of Law King's College London Strand London WC2R 2LS tel: 020 7848 2290 fax: 020 7848 2465 =3D=3D=3D=3D This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, . ========================================================================= Date: Thu, 27 Nov 2008 18:41:54 +0000 Reply-To: Eoin O'Dell Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Eoin O'Dell Subject: Re: Taxes and Change of Position In-Reply-To: <20081127131219.0E2D7684D@mailscan1.ncs.mcgill.ca> MIME-Version: 1.0 Content-Type: text/plain; charset="ISO-8859-1" Content-Transfer-Encoding: quoted-printable Dear all, Thanks, Charles, for the reference to Henderson J's judgment in Test Clai= mants in the FII Group Litigation v HMRC [2008] EWHC 2893 (Ch). The application= of the defence of change of position on the facts is very interesting, in pa= rt because, in the immortal words, "there is an Irish case" where the Suprem= e Court did the same thing. In Murphy v AG [1982] IR 241, the Supreme Court held that provisions of t= he Income Tax Act by which married couples paid more tax than unmarried coup= les contravened the constitutional obligation on the State "to guard with spe= cial care the institution of marriage" (Article 41.3). Henchy J (Griffin and P= arke JJ concurring) held that, in these circumstances, the plaintiffs and thos= e in similar circumstances had claims in restitution to recover their overpaid taxes, and that the State could nevertheless rely on the defence of chang= e of position against most of those claims. (O'Higgins CJ held that this strik= ing down should be prospective only, but the other four members of the Suprem= e Court rejected this approach. The fifth judge, Kenny J, held that the plaintiffs had a claim in restitution, but did not consider whether the S= tate could rely on the defence of change of position). I've always wondered about this, for at least two reasons. First, Henchy = J took an extremely generous understanding of when the State's receipt is in goo= d faith: in his view, it was only after each individual taxpayer objected t= hat the State's receipt of that taxpayer's tax was not in good faith. And sec= ond, he took the view that the mere fact of the State's expenditure (that is, expenditure in the ordinary course of the affairs of State) was a suffici= ent change of position. These two factors combined to defeat the vast majorit= y of possible claims. For those who are interested, I reproduce the relevant extracts from his judgment at the end of this email. By way of comparison= or contrast, it doesn't seem to me to that Henderson J spent much time on th= e question of whether or how the Revenue's receipt could be said to be in g= ood faith. Rather, it seems that his focus was on whether expenditure could b= e said to be causally related to receipt, with an acknowledgement that expenditu= re in the ordinary course is insufficient ([322] and [343]). In the event, his = view of the necessary causal link between the receipt and expenditure was just= as generous as Henchy J's views of the other elements of the defence: "[344] ... As a matter of causation, no precise link can be demonstrated = between particular receipts and particular items of government expenditure, but c= ommon sense again suggests that planned government expenditure would not have t= aken place at the level which it did but for the availability of the tax recei= pts which were taken into account in fixing departmental budgets. If all conc= erned, both the government and the taxpayers, proceeded on the footing that the = tax was validly levied, I ask myself what is wrong with the argument that it woul= d now be inequitable to require the Revenue to make restitution for the tax whi= ch was paid by mistake, because the money in question has long ago been spent in= the public interest, and everybody assumed in good faith that it had been val= idly levied? I confess that, once the question is stated in these terms, the a= nswer to it seems to me to be obvious. It would in my judgment be inequitable t= o require repayment in such circumstances, ..." And he ultimately concluded that in respect of those claims in which it c= ould be pleaded, the defence of change of position would likely be successsful [4= 45]. But it seems to me that Henchy J in Murphy and Henderson J in FII both af= ford to the State the benefit of extraordinarly generous views of the defence = of change of position. As a lawyer, that hardly seems an accurate application of the terms of th= e defence. Worse, as a taxpayer, that hardly seems fair to me. What do others think? Eoin. Quoting "Mitchell, Charles" : > List members will find much to interest them in Henderson J's judgment = in > Test Claimants in the FII Group Litigation v HMRC [2008] EWHC 2893 (Ch)= . > Among other things he holds that the change of position defence should = be > available to the Revenue in respect of money paid as tax which was not = due, a > finding which could make a difference to HMRC of between =A32 billion a= nd =A35 > billion: a nice illustration of Bill Cornish's comment that a C of P / = fiscal > chaos defence 'seems to contain the imperative that, if governments are= to > exceed their taxing powers, this should be done on the grandest scale' = (W R > Cornish, '"Colour of Office": Restitutionary Redress against Public > authority' [1987] J of Mal and comp Law 41, 52). Bearing out Monica Cho= wdry's > various articles on this subject, the judge also holds that HMRC are > precluded from relying upon the curtailed limitation period for mistake= -based > claims introduced by section 320 of the Finance Act 2004, and retrospec= tively > extended by section 107 of the Finance Act 2007, because in breach of > Community law these sections purported to curtail the limitation period > applicable to mistake claims without providing any transitional arrange= ments. > The sums at stake, and the controversial nature of some of Henderson J'= s > findings, guarantee that this case is destined for the HL. Happy readin= g! CM > > Professor Charles Mitchell > School of Law > King's College London > Strand > London WC2R 2LS > > tel: 020 7848 2290 > fax: 020 7848 2465 > > > =3D=3D=3D=3D > > This message was delivered through the Restitution Discussion Group, > an international internet LISTSERV devoted to all aspects of the law > of unjust enrichment. To subscribe, send "subscribe enrichment" in > the body of a message to . To unsubscribe, > send "signoff enrichment" to the same address. To make a posting to > all group members, send to . The list is > run by Lionel Smith of McGill University, . > > =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Dr Eoin O'Dell main: +353-1-896 1125 Fellow & Senior Lecturer direct: +353-1-896 1178 Director of Research mobile: +353-87-2021120 School of Law main fax: +353-1-677 0449 Trinity College blog: http://www.cearta.ie Dublin 2 web: http://www.eoinodell.com Ireland odelle@tcd.ie \ eoin.odell@tcd.ie ------------------------------------------------------------------------ All opinions are personal: no legal responsibility is accepted for this email or attachments, which may be confidential or privileged or subject to a Freedom of Information request: if you have received this in error, let me know and delete it. Please think 'green' before printing. Thanks. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Murphy v AG [1982] IR 247, 318 (Henchy J): "In my judgment, the plaintiffs' right to recover the sums by which they = claim the State was unjustly enriched, by the collection of the taxes that have= now been held to have been unconstitutionally imposed, begins for the year 19= 78-9, that is, the first year for which they effectively objected to the flow o= f those taxes into the central fund. Up to that year the State was entitled= , in the absence of any claim of unconstitutionality, to act on the assumption= that the taxes in question were validly imposed, that they were properly transmissible to the central fund, and that from there they were liable t= o be expended, according to the will of Parliament, for the multiplicity of pu= rposes for which drawings are made on the central fund of the State. Equally, ev= ery taxpayer whose income tax was deducted from his earnings throughout a particular tax year, no matter how grudgingly or unwillingly he allowed t= he deductions to be made from his weekly or monthly income, could not avoid = having imputed to him the knowledge that the tax he was paying was liable to be immediately spent by the State. As time went by, his right to complain of= the State's unjust enrichment ran the risk of being extinguished by laches on= his part. As Snell's Principles of Equity (27th ed., p. 35) puts it: "Laches essentially consists of a substantial lapse of time coupled with the exis= tence of circumstances which make it inequitable to enforce the claim." What is= a "substantial lapse of time" must depend on the circumstances of the parti= cular case. I would consider that a taxpayer who allowed his PAYE tax [319] contribut= ions to be deducted from his earnings, every week or every month, for the whole o= f a tax year, without bringing proceedings to assert the unconstitutionality of s= uch deductions, should (in the absence of exceptional and excusing circumstan= ces) be held barred from recovering the sums unwarrantedly collected during th= at tax year. The circumstance that tax payments are liable to be quickly absorbe= d into the financial system of the State, and not to be amenable to extraction a= nd repayment without considerable disruption and unfairness, has led United = States authorities to treat such payments as being so unique in character that repayments have been legislatively held to be barred by laches of periods= as short as thirty days: see Field on The Recovery of Illegal and Unconstitu= tional Taxes, 45 Harvard Law Review 501, at p. 519. For my part, I consider that= , in the absence of special circumstances (which have not been shown to exist = in this case), payment of PAYE taxes during the whole of a tax year, without instituting proceedings to have the taxes invalidated on the ground of unconstitutionality, should be held to defeat a claim made later to recov= er the taxes paid during that year. It is one of the first principles of the law of restitution on the ground= of unjust enrichment that the defendant should not be compelled to make restitution, or at least full restitution when, after receiving the money= in good faith, his circumstances have so changed that it would be inequitabl= e to compel him to make full restitution. The American Restatement of Restitut= ion (=A7142) states the general rule thus:=97 "The right of a person to resti= tution from another because of a benefit received is terminated or diminished if= , after the receipt of the benefit, circumstances have so changed that it w= ould be inequitable to require the other to make full restitution." A New Zealand statute (cited in Goff and Jones's The Law of Restitution, = 2nd ed., p. 546) puts the matter perhaps more clearly when it states that pay= ments made under a mistake may not be recoverable "if the person from whom the = relief is sought receives the payment in good faith and has so altered his posit= ion in reliance on the validity of the payment that in the opinion of the Court, having regard to all possible implications in respect of other persons, i= t is inequitable to grant relief, or to grant relief in full, as the case may = be." Applying that general principle (which is widely supported by judicial authorities ranging from Lord Mansfield to Lord Denning) to the present c= ase, it is beyond question that the State in its executive capacity received t= he moneys in question in good faith, in reliance on the presumption that the= [320] now-condemned sections were favoured with constitutionality. In every tax= year from the enactment of the Income Tax Act, 1967, until the institution of = these proceedings in March, 1978, the State justifiably altered its position by spending the taxes thus collected and by arranging its fiscal and taxatio= n policies and programmes accordingly. At the end of each tax year up to and including the tax year 1977-78, tho= se charged by the State with auditing, controlling or planning the finances = of the State were, in the absence of any formulated proceedings or any other sou= nd reason for doubting the validity of the taxes in question, entitled to cl= ose their books for that year in the justified assurance that, if any of the = taxes that had been collected, allocated, spent or been made the basis of proje= ctions for future taxation or fiscal policy, were to become at some future date judicially faulted for having been unconstitutionally exacted, restitutio= n of those taxes would not be ordered. For a variety of reasons it would be inequitable, if not impractical, to = expect restitution. Each tax year involves a different group of taxpayers, if on= ly because of the deaths of some taxpayers and the accession of new persons = to the lists of taxpayers. Restitution could be effected only by means of a spec= ial statutory provision, which would involve the imposition of fresh taxation= to meet what would become an unquantifiable number of claims with the passag= e of time. The primary purpose of an order of restitution is to restore the st= atus quo, in so far as the repayment of money can do so. But when, as happened= here, the State was led to believe, by the protracted absence of a claim to the contrary, that it was legally and constitutionally proper to spend the mo= ney thus collected, the position had become so altered, the logistics of repa= ration so weighted and distorted by factors such as inflation and interest, the = prima facie right of the taxpayers to be recouped so devalued by the fact that,= as members of the community, and more particularly as married couples, they = had benefited from the taxes thus collected, that it would be inequitable, un= just and unreal to expect the State to make full restitution. Whether the taxpayer's action be framed as a common-law action in quasi-c= ontract for money had and received, or as an equitable claim for restitution of m= oney by which the State was unjustly enriched, there is ample authority for the conclusion that the radical change of circumstances of the kind I have indicated would be sufficient to defeat, at least in part, the taxpayers' claim: see Jones's Change of Circumstances in Quasi-Contract, (1957) 73 L= .Q.R. 48. [321] In this case, whether the claim be treated as one in quasi-cont= ract or as one in equity, I would consider the enforceable cause of action to = have arisen at the beginning of the tax year 1978-9. ... [324] Since my opinio= n is that ss. 192 to 198 (inclusive) of the Income Tax Act, 1967, were invalid= from the date of their enactment, I would hold, on the evidence as it stands, = that moneys collected for income tax on an income based on an aggregation of t= he income of the plaintiffs is not recoverable by them for any period prior = to the tax year 1978-9, which was the tax year in respect of which the constitutionality of those sections was first effectively impugned. The p= eriod to be covered by any necessary accounts and inquiries, therefore, would a= ppear to be the tax years 1978-9 and 1979-80. The evidence given in the High Court did not disclose that a claim had be= en formulated on behalf of any other taxpayers impugning the sections in que= stion or seeking the recovery of any taxes collected under them. If that be the= true position, it would seem that, in the events that have happened and for th= e reasons given in this judgment, no taxpayers other than the plaintiffs wo= uld have the standing necessary to maintain a claim that the State should rei= mburse them for any taxes collected under the condemned sections." =3D=3D=3D=3D This message was delivered through the Restitution Discussion Group, an international internet LISTSERV devoted to all aspects of the law of unjust enrichment. To subscribe, send "subscribe enrichment" in the body of a message to . To unsubscribe, send "signoff enrichment" to the same address. To make a posting to all group members, send to . The list is run by Lionel Smith of McGill University, . ========================================================================= Date: Thu, 27 Nov 2008 22:12:37 +0100 Reply-To: Gerhard Dannemann Sender: Enrichment - Restitution & Unjust Enrichment Legal Issues From: Gerhard Dannemann Subject: Re: Taxes and Change of Position In-Reply-To: <20081127184444.17E16914A@mailscan1.ncs.mcgill.ca> MIME-Version: 1.0 Content-Type: text/html; charset=ISO-8859-1 Content-Transfer-Encoding: 7bit Very interesting, many thanks to both Charles and Eoin.

The German position is different - public authorities cannot rely on change of position for enrichments they have received under public law. The Federal Administrative Court said this in BVerwG 17.09.1970, BVerwGE 36, 108, confirmed i.a. in BVerwG 27.12.1989, 2 B 84/89, where the headnote states: "Public authorities are bound by the rule of law. Their interest must be to undo a shift of assets which has occurred without legal ground, and to restore the situation of lawfulness. This excludes any reliance on change of position." (Die öffentliche Hand ist dem Grundsatz der Gesetzmäßigkeit der Verwaltung verpflichtet, ihr Interesse muß deshalb darauf gerichtet sein, eine ohne Rechtsgrund eingetretene Vermögensverschiebung zu beseitigen und den rechtmäßigen Zustand wiederherzustellen. Das schließt eine Berufung auf den Wegfall der Bereicherung aus.)

I find it particularly interesting that this argument is essentially the same which the House of Lords used in Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70 for establishing that overcharged taxpayers may always recover without having to resort to any particular unjust factor.

Can we hear from any other jurisdictions?

Gerhard

Eoin O'Dell wrote:

Dear all, 

 

Thanks, Charles, for the reference to Henderson J's judgment in Test 

Claimants 

in the FII Group Litigation v HMRC [2008] EWHC 2893 (Ch). The application 

of 

the defence of change of position on the facts is very interesting, in part 

because, in the immortal words, "there is an Irish case" where the Supreme 

Court did the same thing. 

 

In Murphy v AG [1982] IR 241, the Supreme Court held that provisions of the 

Income Tax Act by which married couples paid more tax than unmarried 

couples 

contravened the constitutional obligation on the State "to guard with 

special 

care the institution of marriage" (Article 41.3). Henchy J (Griffin and 

Parke 

JJ concurring) held that, in these circumstances, the plaintiffs and those 

in 

similar circumstances had claims in restitution to recover their overpaid 

taxes, and that the State could nevertheless rely on the defence of change 

of 

position against most of those claims. (O'Higgins CJ held that this 

striking 

down should be prospective only, but the other four members of the Supreme 

Court rejected this approach. The fifth judge, Kenny J, held that the 

plaintiffs had a claim in restitution, but did not consider whether the 

State 

could rely on the defence of change of position). 

 

I've always wondered about this, for at least two reasons. First, Henchy J 

took 

an extremely generous understanding of when the State's receipt is in good 

faith: in his view, it was only after each individual taxpayer objected 

that 

the State's receipt of that taxpayer's tax was not in good faith. And 

second, 

he took the view that the mere fact of the State's expenditure (that is, 

expenditure in the ordinary course of the affairs of State) was a 

sufficient 

change of position. These two factors combined to defeat the vast majority 

of 

possible claims. For those who are interested, I reproduce the relevant 

extracts from his judgment at the end of this email. By way of comparison 

or 

contrast, it doesn't seem to me to that Henderson J spent much time on the 

question of whether or how the Revenue's receipt could be said to be in 

good 

faith. Rather, it seems that his focus was on whether expenditure could be 

said 

to be causally related to receipt, with an acknowledgement that expenditure 

in 

the ordinary course is insufficient ([322] and [343]). In the event, his 

view 

of the necessary causal link between the receipt and expenditure was just 

as 

generous as Henchy J's views of the other elements of the defence: 

 

"[344] ... As a matter of causation, no precise link can be demonstrated 

between 

particular receipts and particular items of government expenditure, but 

common 

sense again suggests that planned government expenditure would not have 

taken 

place at the level which it did but for the availability of the tax 

receipts 

which were taken into account in fixing departmental budgets. If all 

concerned, 

both the government and the taxpayers, proceeded on the footing that the 

tax was 

validly levied, I ask myself what is wrong with the argument that it would 

now 

be inequitable to require the Revenue to make restitution for the tax which 

was 

paid by mistake, because the money in question has long ago been spent in 

the 

public interest, and everybody assumed in good faith that it had been 

validly 

levied? I confess that, once the question is stated in these terms, the 

answer 

to it seems to me to be obvious. It would in my judgment be inequitable to 

require repayment in such circumstances, ..." 

 

And he ultimately concluded that in respect of those claims in which it 

could be 

pleaded, the defence of change of position would likely be successsful 

[445]. 

But it seems to me that Henchy J in Murphy and Henderson J in FII both 

afford 

to the State the benefit of extraordinarly generous views of the defence of 

change of position. 

 

As a lawyer, that hardly seems an accurate application of the terms of the 

defence. Worse, as a taxpayer, that hardly seems fair to me. 

 

What do others think? 

 

Eoin. 

 

 

Quoting "Mitchell, Charles" <charles.mitchell@KCL.AC.UK>

:

List members will find much to interest them in Henderson 

J's judgment in 

Test Claimants in the FII Group Litigation v HMRC [2008] EWHC 2893 (Ch). 

Among other things he holds that the change of position defence should be 

available to the Revenue in respect of money paid as tax which was not due, 

a 

finding which could make a difference to HMRC of between £2 billion 

and £5 

billion: a nice illustration of Bill Cornish's comment that a C of P / 

fiscal 

chaos defence 'seems to contain the imperative that, if governments are to 

exceed their taxing powers, this should be done on the grandest scale' (W R 

Cornish, '"Colour of Office": Restitutionary Redress against Public 

authority' [1987] J of Mal and comp Law 41, 52). Bearing out Monica 

Chowdry's 

various articles on this subject, the judge also holds that HMRC are 

precluded from relying upon the curtailed limitation period for mistake-

based 

claims introduced by section 320 of the Finance Act 2004, and 

retrospectively 

extended by section 107 of the Finance Act 2007, because in breach of 

Community law these sections purported to curtail the limitation period 

applicable to mistake claims without providing any transitional 

arrangements. 

The sums at stake, and the controversial nature of some of Henderson J's 

findings, guarantee that this case is destined for the HL. Happy reading! 

CM 

 

Professor Charles Mitchell 

School of Law 

King's College London 

Strand 

London WC2R 2LS 

 

tel: 020 7848 2290 

fax: 020 7848 2465 

 

 

==== 

 

This message was delivered through the Restitution Discussion Group, 

 an international internet LISTSERV devoted to all aspects of the law 

 of unjust enrichment. To subscribe, send "subscribe enrichment" in 

 the body of a message to <listserv@lists.mcgill.ca>

. To unsubscribe, 

 send "signoff enrichment" to the same address. To make a posting to 

 all group members, send to <enrichment@lists.mcgill.ca>

. The list is 

 run by Lionel Smith of McGill University, <lionel.smith@mcgill.ca>.

 

 

 ======================================================================= 

Dr Eoin O'Dell                                     main: +353-1-896 1125 

Fellow & Senior Lecturer                         direct: +353-1-896 

1178 

Director of Research                             mobile: +353-87-2021120 

School of Law                                  main fax: +353-1-677 0449 

Trinity College                               blog: http://www.cearta.ie 

Dublin 2                                   web: http://www.eoinodell.com 

Ireland                                odelle@tcd.ie \ eoin.odell@tcd.ie 

------------------------------------------------------------------------ 

All opinions are personal:  no legal responsibility is accepted for this 

email or attachments, which may be confidential or privileged or subject 

to a Freedom of Information request: if you have received this in error, 

let me know and delete it. Please think 'green' before printing. Thanks. 

 ======================================================================= 

 

 

Murphy v AG [1982] IR 247, 318 (Henchy J): 

 

"In my judgment, the plaintiffs' right to recover the sums by which they 

claim 

the State was unjustly enriched, by the collection of the taxes that have 

now 

been held to have been unconstitutionally imposed, begins for the year 

1978-9, 

that is, the first year for which they effectively objected to the flow of 

those taxes into the central fund. Up to that year the State was entitled, 

in 

the absence of any claim of unconstitutionality, to act on the assumption 

that 

the taxes in question were validly imposed, that they were properly 

transmissible to the central fund, and that from there they were liable to 

be 

expended, according to the will of Parliament, for the multiplicity of 

purposes 

for which drawings are made on the central fund of the State. Equally, 

every 

taxpayer whose income tax was deducted from his earnings throughout a 

particular tax year, no matter how grudgingly or unwillingly he allowed the 

deductions to be made from his weekly or monthly income, could not avoid 

having 

imputed to him the knowledge that the tax he was paying was liable to be 

immediately spent by the State. As time went by, his right to complain of 

the 

State's unjust enrichment ran the risk of being extinguished by laches on 

his 

part. As Snell's Principles of Equity (27th ed., p. 35) puts it: "Laches 

essentially consists of a substantial lapse of time coupled with the 

existence 

of circumstances which make it inequitable to enforce the claim." What is a 

"substantial lapse of time" must depend on the circumstances of the 

particular 

case. 

 

I would consider that a taxpayer who allowed his PAYE tax [319] 

contributions to 

be deducted from his earnings, every week or every month, for the whole of 

a tax 

year, without bringing proceedings to assert the unconstitutionality of 

such 

deductions, should (in the absence of exceptional and excusing 

circumstances) 

be held barred from recovering the sums unwarrantedly collected during that 

tax 

year. The circumstance that tax payments are liable to be quickly absorbed 

into 

the financial system of the State, and not to be amenable to extraction and 

repayment without considerable disruption and unfairness, has led United 

States 

authorities to treat such payments as being so unique in character that 

repayments have been legislatively held to be barred by laches of periods 

as 

short as thirty days: see Field on The Recovery of Illegal and 

Unconstitutional 

Taxes, 45 Harvard Law Review 501, at p. 519. For my part, I consider that, 

in 

the absence of special circumstances (which have not been shown to exist in 

this case), payment of PAYE taxes during the whole of a tax year, without 

instituting proceedings to have the taxes invalidated on the ground of 

unconstitutionality, should be held to defeat a claim made later to recover 

the 

taxes paid during that year. 

 

It is one of the first principles of the law of restitution on the ground 

of 

unjust enrichment that the defendant should not be compelled to make 

restitution, or at least full restitution when, after receiving the money 

in 

good faith, his circumstances have so changed that it would be inequitable 

to 

compel him to make full restitution. The American Restatement of 

Restitution 

(§142) states the general rule thus:— "The right of a person to 

restitution 

from another because of a benefit received is terminated or diminished if, 

after the receipt of the benefit, circumstances have so changed that it 

would 

be inequitable to require the other to make full restitution." 

 

A New Zealand statute (cited in Goff and Jones's The Law of Restitution, 

2nd 

ed., p. 546) puts the matter perhaps more clearly when it states that 

payments 

made under a mistake may not be recoverable "if the person from whom the 

relief 

is sought receives the payment in good faith and has so altered his 

position in 

reliance on the validity of the payment that in the opinion of the Court, 

having regard to all possible implications in respect of other persons, it 

is 

inequitable to grant relief, or to grant relief in full, as the case may 

be." 

 

Applying that general principle (which is widely supported by judicial 

authorities ranging from Lord Mansfield to Lord Denning) to the present 

case, 

it is beyond question that the State in its executive capacity received the 

moneys in question in good faith, in reliance on the presumption that the 

[320] 

now-condemned sections were favoured with constitutionality. In every tax 

year 

from the enactment of the Income Tax Act, 1967, until the institution of 

these 

proceedings in March, 1978, the State justifiably altered its position by 

spending the taxes thus collected and by arranging its fiscal and taxation 

policies and programmes accordingly. 

 

At the end of each tax year up to and including the tax year 1977-78, those 

charged by the State with auditing, controlling or planning the finances of 

the 

State were, in the absence of any formulated proceedings or any other sound 

reason for doubting the validity of the taxes in question, entitled to 

close 

their books for that year in the justified assurance that, if any of the 

taxes 

that had been collected, allocated, spent or been made the basis of 

projections 

for future taxation or fiscal policy, were to become at some future date 

judicially faulted for having been unconstitutionally exacted, restitution 

of 

those taxes would not be ordered. 

 

For a variety of reasons it would be inequitable, if not impractical, to 

expect 

restitution. Each tax year involves a different group of taxpayers, if only 

because of the deaths of some taxpayers and the accession of new persons to 

the 

lists of taxpayers. Restitution could be effected only by means of a 

special 

statutory provision, which would involve the imposition of fresh taxation 

to 

meet what would become an unquantifiable number of claims with the passage 

of 

time. The primary purpose of an order of restitution is to restore the 

status 

quo, in so far as the repayment of money can do so. But when, as happened 

here, 

the State was led to believe, by the protracted absence of a claim to the 

contrary, that it was legally and constitutionally proper to spend the 

money 

thus collected, the position had become so altered, the logistics of 

reparation 

so weighted and distorted by factors such as inflation and interest, the 

prima 

facie right of the taxpayers to be recouped so devalued by the fact that, 

as 

members of the community, and more particularly as married couples, they 

had 

benefited from the taxes thus collected, that it would be inequitable, 

unjust 

and unreal to expect the State to make full restitution. 

 

Whether the taxpayer's action be framed as a common-law action in quasi-

contract 

for money had and received, or as an equitable claim for restitution of 

money by 

which the State was unjustly enriched, there is ample authority for the 

conclusion that the radical change of circumstances of the kind I have 

indicated would be sufficient to defeat, at least in part, the taxpayers' 

claim: see Jones's Change of Circumstances in Quasi-Contract, (1957) 73 

L.Q.R. 

48. [321] In this case, whether the claim be treated as one in quasi-

contract 

or as one in equity, I would consider the enforceable cause of action to 

have 

arisen at the beginning of the tax year 1978-9. ... [324] Since my opinion 

is 

that ss. 192 to 198 (inclusive) of the Income Tax Act, 1967, were invalid 

from 

the date of their enactment, I would hold, on the evidence as it stands, 

that 

moneys collected for income tax on an income based on an aggregation of the 

income of the plaintiffs is not recoverable by them for any period prior to 

the 

tax year 1978-9, which was the tax year in respect of which the 

constitutionality of those sections was first effectively impugned. The 

period 

to be covered by any necessary accounts and inquiries, therefore, would 

appear 

to be the tax years 1978-9 and 1979-80. 

 

The evidence given in the High Court did not disclose that a claim had been 

formulated on behalf of any other taxpayers impugning the sections in 

question 

or seeking the recovery of any taxes collected under them. If that be the 

true 

position, it would seem that, in the events that have happened and for the 

reasons given in this judgment, no taxpayers other than the plaintiffs 

would 

have the standing necessary to maintain a claim that the State should 

reimburse 

them for any taxes collected under the condemned sections." 

 

==== 

 

This message was delivered through the Restitution Discussion Group, 

 an international internet LISTSERV devoted to all aspects of the law 

 of unjust enrichment. To subscribe, send "subscribe enrichment" in 

 the body of a message to <listserv@lists.mcgill.ca>

. To unsubscribe, 

 send "signoff enrichment" to the same address. To make a posting to 

 all group members, send to <enrichment@lists.mcgill.ca>

. The list is 

 run by Lionel Smith of McGill University, <lionel.smith@mcgill.ca>.

-- 

Prof. Dr. Gerhard Dannemann 

Centre for British Studies 

Humboldt-Universität zu Berlin 

Mohrenstr. 60 

10117 Berlin 

Tel. +49 30 2093 99048 

Fax  +49 30 2093 99055 

http://www2.hu-berlin.de/gbz

====