(B) THE DEFENCE OF PASSING ON
If the correspondence principle is recognized it might be considered to follow that, where the claimant has paid money to the defendant but the claimant has passed this loss on to a third party, for example by increasing the purchase price of goods, the reduction in the claimant’s loss should operate to reduce the defendant’s liability to make restitution. However, English law does not generally recognize a defence of passing on,69 although in Marks and Spencer plc v Commissioners of Customs and Excise70 Lord Walker of Westingthorpe recognized that it is a possible defence to any restitutionary claim. This was, however, obiter and anyway questionable because his Lordship cited Roxborough v Rothmans of Pall Mall Australia Ltd71 in support of this conclusion, even though that decision expressly rejected the passing on defence in Australia.
The rejection of the passing on defence might be considered to undermine the correspondence principle, since it suggests that the law of unjust enrichment is not concerned with the loss suffered by the claimant. But the rejection of the passing on defence is not necessarily incompatible with the correspondence principle, since the rejection of the defence simply means that the law of unjust enrichment is not concerned with whether the claimant’s loss continues after the defendant has been enriched, but simply whether the [1] [2] [3] [4]
claimant suffered an initial loss which corresponds with the defendant’s gain at the time when the unjust enrichment claim crystallized.[5] In other words, it is only necessary to show that the defendant’s gain is causatively linked to a loss suffered by the claimant. The fact that the claimant’s loss is subsequently reduced or dissipated does not affect whether the defendant’s gain can be considered to have been obtained at the claimant’s expense, because reduction or removal of the loss suffered by the claimant after the defendant has been enriched is not causatively linked to the defendant’s enrichment.[6] It arises from a distinct transaction, a novus actus interveniens, between the claimant and a third party, and is not directly linked to the defendant’s receipt of the enrichment.[7]
- [1] See p 66, above.
- [2] Littlewoods Retail Ltd v HMRC [2010] EWHC 1071 (Ch), [2010] STC 2072, [145]-[147] (Vos J). See alsoSempra Metals Ltd v IRC [2007] UKHL 34, [2008] 1 AC 561, [31] (Lord Hope).
- [3] Kleinwort Benson Ltd v Birmingham CC [1997] QB 380. Australia has also rejected the passing ondefence: Roxborough v Rothmans of Pall Mall Australia Ltd (2002) 76 ALJR 203; as has Canada: KingstreetInvestments Ltd v New Brunswick (Finance) [2007] 1 SCR 3. See Chapter 26. The passing on defence is,however, recognized in EU law where the claimant seeks to recover taxes paid in breach of EU law. See p 411,below.
- [4] [2005] UKHL 53, [2005] STC 1254, [25]. 71 (2002) 76 ALJR 203.
- [5] See also the defence of change of position which is concerned with changes in the defendant’s positionfollowing receipt of the enrichment. See Chapter 25.
- [6] Or it may simply be described as too remote. See M McInnes, ‘At the Plaintiff’s Expense—QuantifyingRestitutionary Relief ’ (1998) 57 CLJ 472, 479.
- [7] Other reasons have been given for not recognizing the defence of passing on, notably that it is virtuallyimpossible to show that the transaction with a third party will have involved the passing on of a loss from theclaimant to the third party. See Amministrazione delle Finanze dello Stato v SpA San Giorgio [1983] ECR 3595,3629. See also R Stevens, ‘Three Enrichment Issues’ in AS Burrows and Lord Rodger of Earlsferry (eds),Mapping the Law (Oxford: Oxford University Press, 2006), 53; Rush, The Defence of Passing On.
