(iii) Law and Fact

It was a fundamental rule of English law for nearly 200 years that, where the claimant has made a mistake of law, a restitutionary claim could not usually be based on the mistake.^[1] It followed that only mistakes of fact would be sufficient to ground a restitutionary claim. This mistake of law bar^[2] was interpreted widely. The phrase covered both cases where the claimant was ignorant of what the state of the law was and cases where the claimant had a conscious but incorrect belief as to the state of the law.^[3] Mistakes of law related to all aspects of the law, including judicial decisions, the existence of statutory powers, the interpretation of statutes and the construction of covenants.^[4] In Bilbie v Lumley²³ Lord Ellenborough CJ justified the recognition of the mistake of law bar by reference to the principle that ‘[e]very man must be taken to be cognisant of the law; otherwise there is no saying to what extent the excuse of ignorance might not be carried. It would be urged in almost every case.’²⁴

This principle that ignorance of the law is no excuse, which also encompasses an incorrect conscious belief about the state of the law, is particularly important in the laws of tort and crime where defendants are not allowed to argue that they should be excused from liability because they were unaware of the law. But it does not follow that this principle should be interpreted to mean that a claimant’s mistake of law should bar a claim for restitution, for the policies of the criminal law and the law of tort are not necessarily applicable to the law of restitution. Within the context of the criminal law, for example, it is vitally important that defendants should not be allowed to rely on their ignorance of the criminal law to excuse their liability, for otherwise many criminals could not be convicted, the complexity of the criminal law being such that many defendants are unaware that their conduct may be criminal. But there is no equivalent problem within the law of restitution. This is because, where the claimant wishes to rely on mistake of law within the law of restitution, this is not in order to excuse his or her own liability, but rather to establish the defendant’s liability. Reference to the ignorance of law principle was consequently an unsatisfactory explanation of the mistake of law bar.

The distinction between mistakes of law and fact was notoriously difficult to draw, and this created much scope for manipulation of restitutionary claims to ensure that they were founded on a mistake of fact.^[5] The mistake of law bar was also subject to a number of exceptions. For example, the claimant could claim restitution by virtue of a mistake of law where the defendant had acted in bad faith, as would be the case where the defendant knew of the claimant’s mistake^[6] or had fraudulently induced the mistake.^[7] Even certain statutes made specific provision for restitution of money which had been paid as a result of a mistake of law.^[8] It followed that a principled justification for the mistake of law bar was lacking and the courts and Parliament undermined the operation of the bar by developing exceptions to it.

In 1998 in Kleinwort Benson Ltd v Lincoln CC^[9] the House of Lords abolished the mistake of law bar. It follows that the claimant is now able to obtain restitution of benefits transferred to the defendant on the ground of mistake regardless of whether the mistake was one of fact or of law. This brings English law into line with virtually every other Common Law country, where the bar has also been abolished.^[10]

The abolition of the mistake of law bar was correct simply because the receipt of an enrichment can be considered to be unjust regardless of whether the mistake is characterized as one of law or fact.^[11] This is simply because, when determining whether the claimant’s mistake should ground a restitutionary claim, the crucial question with which we are concerned is whether the claimant’s intention to transfer a benefit to the defendant can be considered to have been vitiated by the mistake. The claimant’s intention is just as likely to be vitiated where he or she made a mistake of law as where he or she made a mistake of fact. Further, before the mistake of law bar was abolished, the state of the law concerning that rule created great uncertainty on two counts. First, it was notoriously difficult to distinguish between mistakes of law and fact, and the consequent uncertainty created much scope for manipulation of the characterization of the mistake to secure what was considered to be a just result. Secondly, the mistake of law bar was riddled with exceptions, often of uncertain ambit, and there was no identifiable principle which could be considered to underlie all of the exceptions to the bar. This meant that the law was unnecessarily complex and that there were numerous ways of avoiding the rule, making those cases where it could not be avoided even more unjust.

• [1] See, in particular, Bilbie v Lumley (1802) 2 East 469, 102 ER 448; Brisbane v Dacres (1813) 5 Taunt 143,128 ER641; Rv Tower Hamlets London Borough Council, exp Chetnik Developments Ltd [1988] AC 858,876-7(Lord Bridge); and Friends’ Provident Life Office v Hillier Parker May and Rowden (a firm) [1997] QB 85, 97(Auld LJ).
• [2] See Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 367-75 (Lord Goff).
• [3] PH Winfield, ‘Mistake of Law’ (1943) 59 LQR 327. 22 Re Hatch [1919] 1 Ch 351.
• [4] 23 (1802) 2 East 469, 102 ER 448. 24 Ibid, 472, 449.
• [5] See, for example, Avon CC v Howlett [1983] 1 WLR 65. Note also the rule that mistakes as to privaterights could be characterized as mistakes of fact: Cooper v Phibbs (1867) LR 2 HL 149.
• [6] Ward and Co v Wallis [1900] 1 QB 675, 678. See also Friends’ Provident Life Office v Hillier Parker Mayand Rowden (a firm) [1997] QB 85, 98 (Auld LJ).
• [7] Henderson v Folkestone Waterworks Co (1885) TLR 329.
• [8] See, for example, s 33(1) of the Taxes Management Act 1970 which provides for the recovery of incometax inter alia which has been paid as the result of a mistake of law.
• [9] [1999] 2 AC 349. See further p 183, below.
• [10] The rule was abolished by the Supreme Court of Canada in Air Canada v British Columbia (1989) 59DLR (4d) 161; by the High Court of Australia in David Securities Pty Ltd v Commonwealth Bank of Australia(1992) 175 CLR 353; by the Appellate Division of the Supreme Court of the Supreme Court of South Africa inWillis Faber Enthoven (Pty) Ltd v Receiver of Revenue 1992 (4) SA 202(A); and by the Inner House of the CourtSession in Scotland in Morgan Guaranty Trust Co of New York v Lothian Regional Council 1995 SLT 299. Therule was also abolished in New Zealand by the Judicature Act 1908, s 94A, as inserted by the JudicatureAmendment Act 1958, s 2.
• [11] Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 407 (Lord Hope).