(iii) Causative Mistakes

The operating cause test of mistake will be satisfied whenever the claimant’s mistake caused him or her to transfer a benefit to the defendant. In Kelly v Solari,^[1] whilst Parke B recognized that a mistaken belief as to liability to pay the defendant would constitute a ground for restitution,⁷⁸ he did not suggest that this was the only type of mistake which would ground such claims.⁷⁹ The judgment of Rolfe B in the same case supports a very wide test for recovery, one which is not restricted to mistaken beliefs as to liability to transfer a benefit to the defendant. Rolfe B stated that: ‘wherever [money] is paid under a mistake of fact, and the party would not otherwise have paid it if the fact had been known to him, it cannot be otherwise than unconscientious to retain it’.^{[2] [3] [4]}

This requirement that the claimant would not have paid the defendant had he or she not been mistaken constitutes an implicit recognition that it is sufficient to show that the mistake had caused the claimant to pay the money.

The leading case which recognized and applied the causation test is Barclays Bank Ltd v WJ Simms, Son and Cooke (Southern) Ltd.⁸¹ In this case a customer of the claimant bank drew a cheque on its account with the claimant in favour of the defendant. The customer discovered subsequently that the defendant had just entered into receivership and telephoned the claimant requesting that it stop the cheque. The receiver presented the cheque to the claimant for payment. The paying official, forgetting about the existence of the stop order, paid the money to the receiver. The bank then sought to recover the money from the defendant and succeeded because the paying official’s mistake had been an operating cause of the payment, since, but for the fact that the official had forgotten about the stop order, the money would not have been paid to the defendant. Although restitution could have been awarded by reference to the liability principle, since the claimant had mistakenly believed that it was liable to pay the defendant, Robert Goff J considered that principle to be only an example of a wider principle by virtue of which it was sufficient that the mistake had caused the claimant to transfer a benefit to the defendant.

This test of operative causation was recognized by the House of Lords in Banque Financiere de la Cite v Parc (Battersea) Ltd.⁸² In this case the claimant had lent money to the debtor company, which was used to discharge a liability of the debtor to a third party. The claimant’s loan to the debtor was unsecured because the claimant had received a letter of postponement which stated that the debt owed by the debtor to the claimant would be paid off in priority to any debts which were owed by the debtor to any other company in the group. The defendant was another company in the same group which was also owed money by the debtor company, but the defendant’s debt was secured. This meant that the defendant’s debt had priority over that of the claimant, and this was important since the debtor had gone into liquidation. The question for the House of Lords concerned the effect of the letter of postponement on the relative priorities of the claims of the claimant and the defendant. It was held that, although the letter of postponement did not bind the defendant, if the claimant could establish that the defendant had been unjustly enriched, the claimant could be subrogated to the rights of the third party against the debtor and so obtain priority over the defendant.^[5] The court concluded that the defendant had been enriched at the claimant’s expense,⁸⁴ because the claimant’s money had been used to discharge part of the debt owed to the third party, so improving the chances of the defendant being repaid. It was then necessary to consider the ground of restitution. Whilst not all the members of the House of Lords considered this matter, those who did clearly considered the ground to be the claimant’s mistake in lending the money to the debtor in the belief that the letter of postponement was effective to give the claimant priority over the defendant. Clearly, the claimant’s mistake was not a mistake as to a liability, nor could it be considered to be a fundamental mistake. Rather, the mistake was simply an operating cause of the claimant lending the money to the debtor company. This was specifically acknowledged by Lord Hoffmann, who recognized that: ‘The [claimant] advanced [the money] upon the mistaken assumption that it was obtaining a postponement letter which would be effective to give it priority over any intra-group indebtedness. It would not otherwise have done so.’^[6]

Although the court did not specifically examine the different theories of the appropriate test for identifying which mistakes can ground restitutionary claims, the conclusion of the court is only consistent with the but for test of causation: but for its mistake the claimant would not have transferred the benefit to the defendant.

Further support for the operating cause test can be found in some of the judgments in the decision of the House of Lords in Kleinwort Benson Ltd v Lincoln CC.^[7] The most important judgment in this respect is that of Lord Hope, who stated that:

Subject to any defences that may arise from the circumstances, a claim for restitution of money paid under a mistake raises three questions. (1) Was there a mistake? (2) Did the mistake cause the payment? And (3) did the payee have a right to receive the sum which was paid to him?^{[8] [9]}

This is the clearest recognition in England at the highest level that it is sufficient that the claimant’s mistake simply caused the claimant to transfer a benefit to the defendant, even though the mistake did not relate to a beliefthat the claimant was liable to pay the defendant. The House of Lords in Deutsche Morgan Grenfell v IRC⁸⁸ confirmed that the appropriate test is one ofcausation, in a case where Lord Hope considered that the mistake related to whether the claimant could elect to delay payment of tax rather than whether there was a liability to pay tax, although, as he acknowledged, the mistake about the availability of the election meant that the claimant believed that there was a liability to pay tax immediately. Crucially, however, he recognized that there was ‘an unbroken causative link between the mistake and the payment’.^{[10] [11]}

The operation of the ‘but for’ test of causation has also been recognized by the Privy Council in Dextra Bank and Trust Co v Bank of Jamaica.⁹⁰ Fraudsters persuaded the claimant to draw a cheque for the defendant on the basis that the defendant wished to borrow the money and would enter into a loan agreement with the claimant. But the defendant was the victim of the same fraud and it believed that the claimant was selling US currency to it. The claimant sought restitution of the money on the ground of mistake. Two different mistakes were identified, but the claimant failed to establish both of them. The first mistake related to the claimant’s failure to enter into a loan agreement with the defendant. This was characterized as a misprediction as to a future event, rather than a mistake of existing fact, and so was not relevant.⁹¹ The second mistake related to the claimant’s belief that the defendant had previously agreed to take a loan. The Privy

Council recognized that this was a causative mistake, according to the but for test of causation, but considered it to be too remote from the payment of the money to the defendant on the facts. This is an important decision, both in its recognition of the causative mistake test and also the acknowledgement that a test of but for causation is limited by considerations of remoteness.

Developments in some Commonwealth countries show that there is a growing recognition that causation is the most appropriate test for identifying those mistakes which will ground restitutionary claims. Significantly, in the decision of the High Court of Australia in David Securities Pty Ltd v Commonwealth Bank of Australia⁹² the test of fundamental mistake, which had previously been accepted as the appropriate test for determining which mistakes would ground restitutionary claims, was rejected in favour of a causation test. The court stressed that, where the mistake had caused the claimant to pay the defendant, the claimant’s intention will have been vitiated for purposes of the law of restitution and this was all that needed to be shown. In the decision of the New Zealand High Court in University of Canterbury v Attorney-General,⁹³ the claimant recovered a gift of shares which he had transferred to an educational trust in the mistaken belief that such a gift was necessary because the trust fund had been seriously depleted, when this was not in fact the case. It was held that the claimant could recover the shares because he would not have made the gift but for the mistake.⁹⁴

It follows from the recognition of the operative test of causation in England that those cases in which restitution was granted by reference to the alternative tests of liability mistake or fundamental mistake will still have been decided the same way. This is because it is inconceivable that cases where a benefit was transferred because the claimant believed that he or she was liable to transfer it, or because the claimant had made a fundamental mistake, could now be treated as cases where the mistaken belief was not an operating cause of the transfer. Some other cases cannot be explained by reference to liability mistake but can be explained by reference to a test of operating cause, even though the court did not articulate why the mistake constituted a ground of restitution. For example, in Greenwood v Bennett⁹⁵ the person who had repaired and improved a car, mistakenly believing that he owned it, succeeded in recovering the value of his services in an action where the true owner sought to recover the car, even though the repairer did not believe himself liable to make the repairs. The mistaken belief of the repairer that he owned the car might be characterized as a fundamental mistake as to the identity of the person who benefited from the work: the repairer thinking that it was himself when in fact it was the owner, but it is definitely a causative mistake, since, but for that mistake, the repairer would not have undertaken the repairs.⁹⁶

Some of the previous cases where restitution was denied because no liability mistake had been made would typically have been decided differently if a test of operating cause had been recognized. For example, in Aiken v Short⁹⁷ restitutionary relief was denied because the claimant had not made any mistake as to its liability to pay money to the defendant. Rather, the claimant had made the payment because it thought that it was discharging the defendant’s supposed interest in the claimant’s property, when in fact the defendant did not have such an interest. This mistake was an operating cause of the payment, since if the claimant had been aware at the time of the payment that the defendant did not have an interest in the property, it would not have made the payment. This was effectively recognized by Bramwell B who, whilst concluding that the claimant had acted voluntarily because it had not satisfied the mistaken liability test, recognized that the purchase of the defendant’s supposed interest in the property ‘turned out to be different to, and of less value than, what [the claimant] expected’.^[12] Consequently, if Aiken v Short was decided today, restitution would be granted, subject to argument about any defences which might be relied on by the defendant or whether there was a legal basis for the defendant’s receipt of the enrichment.^[13]

(1) Justifications for the Operating Cause Test

The ground of restitution for mistake has developed gradually from the core case of liability mistakes, where it is easy to conclude that the defendant was unjustly enriched, to the recognition of a general principle that it suffices that the mistake was an operating cause of the benefit being transferred. This development of the ground of mistake mirrors the development of the tort of negligence. In the same way that, before the leading case of Donoghue v Stevenson,¹⁰⁰ the tort of negligence arose in specific and limited categories, so too the ground of mistake was confined to specific categories of case where the nature of the mistake justified the award of restitutionary relief. The importance of the decision of the House of Lords in Donoghue v Stevenson was to extract a general principle from the disparate categories of negligence, and this general principle has been the touchstone against which all claims in negligence have been determined subsequently. If the analogy with the tort of negligence is a true one it means that the decision of Robert Goff J in Barclays Bank v Simms should be considered to be the Donoghue v Stevenson of restitution for mistake, for it was in that case that Robert Goff J extracted a general principle from the previous cases which would serve to determine when a mistake could constitute a ground of restitution. The only serious drawback with this analogy is that Donoghue v Stevenson was a decision of the House of Lords, whereas Barclays Bank v Simms was merely the decision of a trial judge, albeit one whose decisions are highly influential, but that decision has now been endorsed by the House of Lords in both Kleinwort Benson v Lincoln CC^{[14] [15]} and Deutsche Morgan Grenfell v IRC.¹⁰²

The recognition of the operating cause test of mistake can, however, be justified by reference to the principles which underlie the recognition of grounds of restitution.^[16] A ground of restitution serves to show that the benefit received by the defendant was unjustly received. This will be the case in the context of mistake where it is possible to conclude that the effect of the claimant’s mistake is to vitiate his or her intention to transfer the benefit to the defendant.¹⁰⁴ But this notion of vitiation of intention must be treated with caution, because vitiation of intention is a matter of degree and the effect of the different tests of mistake is that the claimant’s intention is vitiated to differing extents. So, for example, where the claimant makes a fundamental mistake as to the identity of the defendant it can be concluded that the mistake is so extreme that the claimant’s intention to transfer the benefit can be considered to have been utterly negated.¹ Where the claimant makes a mistake which is not even an operating cause of the benefit being transferred, so that even if the claimant had not made the mistake the benefit would still have been transferred, the intention to make the transfer clearly outweighs any element of vitiation or qualification of intention. In the middle are those mistakes which are causative of the transfer, where the mistake is not so severe that it can be regarded as negating any intention that the benefit be transferred to the defendant, but is sufficiently important to be able to conclude that the claimant’s intention to transfer the benefit was so affected by the mistake that it should be treated as vitiated in that, even though the claimant intended to transfer the benefit to the defendant, so that title passes, the effect of the mistake is such that the claimant cannot be considered to have intended to benefit the defendant in those circumstances. This distinction between complete negation and partial vitiation of intent is illustrated by Barclays Bank v Simms, since the mistake relating to the existence of the stop order did not negate the claimant’s intention completely, so title to the money did pass to the defendant, but the mistake was sufficiently serious that, had the claimant not been mistaken, the money would not have been paid. Consequently, it was possible to conclude that the claimant’s intention had been vitiated to some extent so that its claim founded on unjust enrichment was successful.

(2) Defining the Operating Cause Test

If the test of causation is adopted to determine when a mistake will ground a restitutionary claim it is then necessary to define causation for these purposes. There are two alternative tests which may be adopted.

The first test is the ‘but for’ test, by virtue of which the claimant’s mistake will only be considered to have caused the claimant to transfer a benefit to the defendant if the claimant can show that the benefit would not have been transferred but for the mistake.^{1 6} If the claimant would still have transferred the benefit even if he or she had not been mistaken, the mistake cannot be considered to have caused the benefit to be transferred.

The second test is the ‘contributory cause’ test, by virtue of which it is sufficient for the claimant to establish that the mistake contributed to his or her decision to transfer the benefit to the defendant, but it is not necessary to show that, had the claimant not been mistaken, he or she would not have transferred the benefit to the defendant. This test of causation has been adopted where the transfer of the benefit was induced by a misrepresentation of the defendant¹⁰⁷ or was compelled by the defendant.¹⁰⁸

Where the claim is based on a mistake the appropriate test of causation is that of ‘but for’ cause. Any analogy with the test which is adopted where the defendant has induced the claimant’s mistake or has compelled the benefit to be transferred is a false one. For in those cases a less stringent test of causation is justified by virtue of the defendant’s conduct, which makes it easier to conclude that any enrichment received by the defendant was received in circumstances of injustice. But, where the claimant’s mistake an element of consent in the transfer’. But he goes on to recognize, at 65, that where there is a fundamental mistake ‘the element of non-consent bulks so large that it seems more reasonable to deny consent rather than to affirm it’.

• 106 This ‘but for’ test has alternatively been called the ‘necessary’ cause: S Arrowsmith, ‘Mistake and The Role of the “Submission to an Honest Claim”’ in AS Burrows (ed), Essays on the Law of Restitution (Oxford: Clarendon Press, 1991), 21.
• 107 Edgington v Fitzmaurice (1885) 25 Ch D 459. See p 197, below.
• 108 Barton v Armstrong [1976] AC 104. See Chapter 10.

occurred spontaneously, it is more difficult to establish that the defendant had been unjustly enriched. Consequently, restitution should only be awarded where the claimant would not have transferred the benefit had he or she not been mistaken. This analysis is supported by a number of cases. For example, in Kelly v Solari^[17] Parke B stressed that restitution should be awarded because ‘the money would not have been paid if it had been known to the payer that the fact was untrue’. Whereas in Holt v Markham^[18] one reason for the denial of restitution where the claimant had paid the defendant too much money was because the claimant would have paid the money anyway, even if it had known the true facts.

The operation of the ‘but for’ test of causation can, however, be intellectually complicated, as is well illustrated by the difficult case of Nurdin and Peacock plc v DB Ramsden and Co Ltd.^[19] The claimant in that case had overpaid rent following the misconstruction of a lease. It had suspected that it was not liable to pay all the money to the defendant under the lease, but it paid anyway because it believed that it would be able to recover the money if the defendant’s argument about the construction of the lease was incorrect. It was held that the relevant mistake was its belief that it could recover the money if it turned out that it was not liable to pay the defendant.^[20] But this is a highly artificial mistake since, logically, the existence of the mistake is dependent on the operation of the law of restitution itself. The argument proceeds as follows: the claimant paid money to the defendant suspecting correctly that it was not due, so there was no operative mistake. Since there were no other grounds of restitution available it followed that the restitutionary claim could not succeed. Because of this, the claimant’s belief that it could recover the money was incorrect as a matter of law and so the claimant had therefore made a mistake of law, which did ground a restitutionary claim. But why stop at this point? Because the consequence of this argument so far is that the claimant could recover the money, it surely follows that the claimant was not mistaken, but then the claimant would be mistaken, and so on. This is artificial and unacceptable. The preferable view is that the claimant was not mistaken because, if it suspected that it was not liable to the defendant but went on to pay the money, it had taken the risk that the money might not be due to the defendant and such voluntary payments cannot be recovered.^[21] If the claimant suspects that the money is not due the proper course is to resolve the dispute in the courts. By allowing the claim for restitution to succeed in this case the judge undermined the bar on restitution of voluntary payments,^[22] a bar which is of crucial importance to maintain the security of receipts.

(3) Voluntariness and Risk-Taking

If the claimant voluntarily transferred a benefit to the defendant it will not be possible to establish a restitutionary claim grounded on mistake.¹¹⁵ How voluntariness is defined for these purposes and why it should negate the claim have been matters of particular controversy. Three different states of mind need to be distinguished.

(a) Knowledge

The easiest case is where the claimant knows all of the facts. This automatically negates the mistake.^[23] This applies to mistakes of law as well.^[24]

(b) Suspicion

Where the claimant transfers a benefit to the defendant being suspicious of the circumstances but decides to take the risk that he or she is mistaken, the claimant may be considered to have acted voluntarily and so restitution will not be awarded.^[25] This is illustrated by Rowe v Vale of White Horse DC,^[26] where a council provided sewerage services deliberately without charge, because it was unclear whether it was able to demand payment for the provision of such services. It was held that the council could not bring a restitutionary claim founded on mistake, presumably because it had consciously taken the risk to continue to provide the service without charge until the legal position had been clarified.

Various reasons have been suggested as to why restitution should not be available where the claimant suspects that his or her belief might be mistaken. These were considered by the House of Lords in Deutsche Morgan Grenfell v IRC.^{[27] [28] [29]} Lord Brown^{121 *} said that suspicion negated mistake. So, for example, a claimant who paid tax suspecting that it might not be due because, for example, it was being challenged in the courts, would not have made a mistake. Other judges in Deutsche Morgan Grenfell considered that, whilst a suspicious claimant could still be considered to be mistaken, restitution might not be available, either because the effect of the claimant’s suspicions is that the mistake may not have caused the transfer to be made,^{1 2} because, for example, the claimant may have taken a calculated risk about the existence of a liability to pay money,^[30] or simply because somebody who has taken a risk as to the existence of a basis for the payment should be barred from obtaining restitution. The latter approach was advocated by Lord Hoffmann,^[31] who said:

Contestants in quiz shows may have doubts about the answer (‘it sounds like Haydn, but then it may be Mozart’) but if they then give the wrong answer, they have made a mistake. The real point is whether the person who made the payment took the risk that he might be wrong. If he did, then he cannot recover the money.

He considered that whether the claimant was a risk-taker would depend on ‘the objective circumstances surrounding the payment as they could reasonably have been known to both parties, including... the extent to which the law was known to be in doubt’.¹²⁵

Lord Hoffmann’s recognition of a risk-taking bar has been described as not reflecting the state of English law on mistake, but has been interpreted instead as a suggestion as to how the law might develop in the future.¹²⁶ A significant problem with Lord Hoffmann’s approach is his adoption of an objective approach to risk-taking, an approach which, as will be seen, is inconsistent with the long-standing rule that negligence, which is also assessed objectively, on the part of the claimant does not negate reliance on mistake as a ground of restitution.^{1 7} It is also unclear why the objective risk is assessed with reference to what both parties could reasonably have known, since this is surely inconsistent with the rationale of mistake as a ground of restitution. What we are trying to show is that the claimant’s intention to transfer a benefit to the defendant was vitiated by the mistake. Whilst considerations of what the reasonable person might have contemplated may be useful evidence of what the claimant contemplated, we are ultimately only concerned with the claimant’s thought process; so a subjective test of risk-taking is more appropriate. Consequently, the preferable view is that of Lord Hope: namely, that the claimant’s suspicion about the true circumstances negates a claim founded on mistake because it is not then possible to establish that the mistake caused the claimant to transfer the benefit to the defendant. So, for example, where the claimant suspected that he or she might not be liable to pay the defendant, but paid anyway, this suggests that the causative link between the mistake and the payment is broken, because the evidence suggests that the claimant was content to pay regardless of whether the money was due or not.¹²⁸

Whichever of the three approaches is adopted, however, it is clear that a claim grounded on mistake will be defeated where the claimant’s suspicions about the facts or law mean that the claimant is a risk-taker. The key question then is to determine what degree of suspicion the claimant must have before it can be concluded that the claimant’s mistake did not cause him or her to transfer the enrichment to the defendant. While some suspicion will not prevent recovery, the greater the suspicion the less likely it is that recovery will be ordered. In Marine Trade SA v Pioneer Freight Futures Co Ltd¹²⁹ Flaux J recognized that a claimant who has doubts as to the liability to pay can still be considered to be mistaken, but only if the claimant concluded that it was more likely than not that he or she was liable to pay. If the payer thought it was more likely than not that he or she was not liable to pay, but paid nonetheless, the claimant should not be considered to be mistaken, or, preferably, that the mistake did not cause the payment to be made. In other words, the test is one of probabilities rather than possibilities. In BP Oil International Ltd v Target Shipping Ltd¹³⁰ Andrew Smith J recognized that, even if the claimant did consider that he or she was probably liable to pay in circumstances where there was no such liability, it does not necessarily follow that the claimant was mistaken, because the claimant may have consciously decided to take the risk that he or she was mistaken. So conscious risk-taking may still operate to bar a claim grounded on mistake, which is consistent with the fundamental principle of the law of restitution that volunteers should not obtain restitutionary relief.¹³¹ It was further recognized in that case that a mistake made by the claimant’s agent or employee will be attributed to the claimant. But, in such circumstances, the state of mind of an employee may defeat the mistake claim if the employee was responsible for the transaction, knew or suspected that the money was not due, and did not object or prevent the transaction.

The question of risk-taking was significant to the restitutionary claim in Deutsche Morgan Grenfell itself. The claimant taxpayer, who was not resident in England, had ⁷

• 7 See p 179, below.
• 128 Deutsche Morgan Grenfell v IRC [2006] UKHL 49, [2007] 1 AC 558, [70] (Lord Hope).
• 129 [2009] EWHC 2656 (Comm), [2010] 1 Lloyd’s Rep 631. See also BP Oil International Ltd v Target Shipping Ltd [2012] EWHC 1590 (Comm), [2012] 2 Lloyd’s Rep 245, [232] (Andrew Smith J).
• 130 BP Oil International Ltd v Target Shipping Ltd [2012] EWHC 1590 (Comm), [2012] 2 Lloyd’s

Rep 245, [233]. ¹³¹ See p 36, above.

paid tax prematurely, since it had not been able to elect to delay payment. In 2001 the European Court of Justice had found the denial of this election to delay payment constituted breach of EU law because the election would have been available had the claimant been resident in England. The claimant then sought restitution on the ground of mistake of law. One of the issues in the case was whether the claimant could be considered to be mistaken in paying the tax when it was known that the denial of the election to defer payment of tax was being challenged before the courts. But this knowledge was not considered to negate the restitution claim, because the ability to elect to defer payment of the tax was denied to the claimant by statute, so that the claimant was not considered to have any doubt as to its tax liability at the time; the claimant simply did not consider that it could defer payment of the tax.^[32] Ultimately, this appears to turn on a finding of fact that the claimant had no doubts as to its liability to pay. Lord Hoffmann did, however, accept that, if the claimant had adopted a more sophisticated approach to the law, it might have had doubts about the liability to pay it if considered that the litigation before the European Court of Justice had a good chance of succeeding such that it could be considered to have taken the risk that the money might not need to be paid at that point, but this was not established on the facts.^[33]

(c) Carelessness

Where the claimant has made a mistake which would not have been made by a reasonable person, such carelessness will not bar the claimant from establishing that the mistake caused him or her to transfer the benefit to the defendant.^[34] In Kelly v Solari^[35] Parke B said that recovery was possible ‘however careless the party paying may have been in omitting to use due diligence to inquire into the fact’. So, for example, if the claimant would have avoided making a mistake by making some basic inquiries about whether there was a liability to pay the defendant, which a reasonable person would have made, this will not automatically defeat the restitutionary claim.

In Brennan v Bolt Burdon^[36] it was held that, if a party ought to have known that an issue was about to be reconsidered on appeal, this would not constitute a mistake of law. This comes very close to saying that negligence on the part of the claimant will prevent reliance on the ground of mistake, but it is inconsistent with the subsequent decision of the House of Lords in Deutsche Morgan Grenfell v IRC¹³⁷ where it was recognized that even an awareness that a liability was subject to legal challenge would not necessarily defeat the mistake. Consequently there is no reason to distinguish between mistakes of fact and law when determining the role of carelessness in making the mistake.

The rejection of carelessness to defeat the mistake claim is, however, controversial and unsatisfactory. Bearing in mind that we are concerned with imposing restitutionary liability on the defendant by virtue of a mistake spontaneously made by the claimant, and not induced by the defendant, is it right that the claim should succeed if the claimant could easily have avoided the mistake by making some basic inquiries? In assessing the fairness of the result, it is important to have regard to the defences available to the defendant. A significant consequence of adopting a wide test of mistake is that this needs to be counter-balanced by extensive defences available to the defendant, the most significant of which is the defence of change of position.^[37] That defence is available where the defendant’s position has changed following receipt of the enrichment as a result of which it is not just to make restitution. The defence will not be available where the defendant changed his or her position in bad faith, which has been interpreted as including dishonesty, a failure to act in a commercially acceptable way, sharp practice falling short of outright dishonesty,^[38] and wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make.^[39] The defence will, however, still be available where the defendant changed his or her position negligently or care- lessly.^[40] For reasons of symmetry between the requirements for the claim and the requirements of defences, if carelessness does not defeat the defence of change of position, it should follow that it should not negate the mistake, save if a good reason for the difference between the claim and the defence can be identified, and it is not obvious what such reason would be. Since, however, change of position will be barred where the defendant wilfully failed to make reasonable inquiries, it should follow that the mistake claim should not be established where the claimant wilfully and recklessly failed to make the inquiries which a reasonable person would have made. This can be characterized as recklessness, to distinguish it from carelessness. So, where the claimant transferred the benefit recklessly, rather than carelessly, this should bar the mistake claim. The difficulty then is to find a way to distinguish between recklessness and carelessness. In respect of the defence of change of position^[41] recklessness is defined as where the defendant failed to make inquiries which it would have been reasonable to make in the light of the defendant’s belief or suspicion about the facts. This is an objective test, but one which is assessed with reference to the defendant’s state of mind at the time of acting. Carelessness, however, does not have regard to the defendant’s belief or suspicions about the facts, but is simply concerned with what the reasonable person would have done. It is by drawing this distinction between recklessness and carelessness that it might be possible to reconcile Lord Hoffmann’s assertion in Deutsche Morgan Grenfell¹⁴³ that the bar of risk-taking should be assessed objectively with the orthodox rejection of carelessness barring mistake. It is also consistent with Lord Walker’s observation in Pitt v Holt¹⁴⁴ that a claimant who is careless can obtain restitution, but not a claimant who deliberately ran the risk that he or she was mistaken or who ‘must be taken to have run the risk’. This objective notion of risktaking can be distinguished from carelessness if recklessness is assessed with reference to the defendant’s mental state.

The difference between carelessness and recklessness is subtle and will require careful analysis of the facts of the case. It is not, however, easy to differentiate between carelessness and recklessness in the context of a mistake. Where, for example, the claimant pays money to the defendant believing that she is liable to do so, having forgotten that she had already paid the defendant last week, this might be characterized as careless, if the reasonable person would have checked before paying, but not reckless if the claimant was unaware of any facts which, had he or she been aware of them, would have resulted in the reasonable person investigating whether the liability had already been discharged.

Indeed, this is similar to what happened in Kelly v Solari,^[42] where money was paid in the belief that there was a liability to do so, but the liability had lapsed, and the claimant’s failure to check this did not bar the claim. If, however, the claimant makes a gift to a charity and then discovers that the charity spends 75 per cent of donations on administration, the claimant might seek restitution on the ground that he would not have made the gift had he known what was spent on administration. Such a claimant may not even be able to establish on the facts that he had been mistaken, since this might be characterized as ignorance rather than an incorrect tacit assumption.^[43] Even if the claimant can be considered to be mistaken, is this is a situation where he should be considered to be merely careless in failing to investigate what the charity spends on administration, or is he reckless? Certainly the claimant is not aware of any particular facts which would make the reasonable person investigate further. Consequently, distinguishing between carelessness and recklessness in the light of what the claimant believed or suspected seems to be unworkable. Perhaps the appropriate distinction to be drawn is between incorrect conscious beliefs and incorrect tacit assumptions. If the claimant, for example, consciously believes that she is liable to pay the defendant, this might be considered to be careless but not reckless, so restitution for mistake would be available. If, however, the claimant had made a tacit assumption about the facts which turn out to be incorrect, restitution might be denied if the reasonable person would have investigated further and would have discovered that the assumption was incorrect, as a result of which the claimant could be considered to have acted recklessly. This distinction would at least preserve Kelly v Solari and would mean that the donor to the charity would not be able to obtain restitution for failing to make investigations which were easy to make. Although there is no authority in support of relating recklessness to tacit assumptions rather than incorrect beliefs, it does at least reflect the rule that carelessness does not bar a claim in mistake, and also produces an appropriate result, by providing a mechanism for restricting claims for restitution grounded on incorrect tacit assumptions. It does not follow that a claim for mistake can never be grounded on incorrect tacit assumptions, since restitution would still be awarded if the reasonable person would not have investigated the circumstances before transferring the benefit to the defendant. But, if the reasonable person would have investigated further and would have discovered the truth, restitution should be denied on the ground that the claimant had been reckless.

(4) Mistaken Gifts

Following the recognition of the operative test for causation it should make no difference whether the claimant mistakenly believes that he or she is liable to transfer an enrichment to the defendant or the mistake relates to a gift made to the defendant. In both cases, as long as it can be shown that, but for the mistake, the enrichment would not have been transferred, restitution should follow because the claimant’s intention to transfer the benefit can be treated as vitiated. This is what happened in New Zealand in University of Canterbury v Attorney-General,¹⁴⁷ where the claimant recovered a gift of shares he had made to a trust because he would not have made the gift but for his mistake that the trust fund was depleted.¹

But restitution of mistaken gifts raises difficult issues of policy and principle which do not arise where the mistake is as to liability. The key issue of policy is whether it should be sufficient to recover a mistaken gift, simply with reference to the but for test of causation, or whether a stricter test should be adopted. There is a significant difference between cases where the claimant mistakenly believed he or she was liable to transfer the enrichment and cases where the claimant voluntarily made a gift, arising from the fact that a gift provides a basis for the transfer of the enrichment. Restitution can only follow once the gift has been set aside.^{1 9} The key question, therefore, is whether a mere operative mistake should be sufficient to set aside the gift or whether a stricter test of mistake should be adopted. Where the gift is made by deed, it is clear that a stricter test of mistake must be satisfied before the deed can be rescinded in Equity, namely that the mistake must be serious rather than simply operative.^{149 [44] [45] But should this stricter test also be applicable where the gift has been made without a deed, so the equitable jurisdiction to rescind for mistake is not engaged?}

In Deutsche Morgan Grenfell v IRC^[46] Lord Scott considered, obiter, that something more than a causative mistake must be established before a gift can be recovered, such as where the gift was made as a result of a misrepresentation by the donee. Tang^{[47] [48] [49]} justifies a stricter test of mistake being adopted to recover a gift by reference to the need to protect what he calls ‘the moral economy’. Following the decision of the Supreme Court in Pitt v Holt, where the serious mistake test is adopted to rescind in Equity a gift transferred by deed, it has been assumed without analysis that this test applies to recover gifts even if the subject matter of the gift was not transferred by deed.^{153 *} In Pitt v Holt itself, however, Lord Walker was reluctant to commit to there being generally a narrower test of mistake for restitution of gifts. He referred to a variety of hypothetical problem suggested by Burrows,^{1 4} such as:

C gives money to D, the Friends of the Earth, not knowing that they are opposed to an

additional runway at Heathrow, which C supports.

Burrows suggests that restitution might not be awarded in such a case because the necessary element of seriousness of mistake would not be satisfied. Lord Walker was not so sure, however, and stated that it was not possible to give more than a tentative answer to such a hypothetical problem because there are insufficient facts to determine whether leaving the mistaken disposition uncorrected would be unjust.^[50] But the tenor of Lord Walker’s analysis, whilst not explicitly endorsing the application of the serious mistake test to restitution of gifts at Common Law, is at least consistent with such an approach, albeit that that this will require careful consideration of the facts to determine whether restitution would be appropriate.

It appears, therefore, that we are moving inexorably towards the recognition of a distinct and narrower test for restitution of gifts transferred by mistake, whereby it is not sufficient that but for the mistake the transfer would not have been made; it must also be a ‘serious’ mistake. This might be justified by virtue of the need to protect the security of the donee’s receipt where the claimant has voluntarily transferred the benefit without thinking that he or she was under a liability to do so. But that is not a convincing reason for a distinct test of mistake for gifts. Narrower tests of mistake are adopted to set aside a contract for mistake^[51] or to rescind a deed.¹⁵⁷ This can be justified on the ground that it should be more difficult to regard the claimant’s intention to enter into such legal transactions as vitiated, because they are significant legal instruments which should only be set aside where the mistake is particularly potent. But the same reason does not necessarily apply where the claimant has simply made a gift without using a deed. Consequently, the preferable view is that to recover a gift transferred by mistake it should be sufficient to establish that the mistake was an operative cause of the transfer. Transfer by gift should not be treated in the same way as transfer by contract or by deed. In particular, the test for rescission of a voluntary transfer made by deed involves application of the equitable jurisdiction,^[52] whereas restitution of gifts not made by deed involves the operation of the Common Law test of there being an operative mistake.

(5) Identifying Mistakes of Law

Even though the effect of the decision of the House of Lords in Kleinwort Benson Ltd v Lincoln CC^[53] should be that there is no longer any need to distinguish between mistakes of law and mistakes of fact for the purposes of identifying a ground of restitution, it is still necessary to draw such a distinction since peculiar considerations need to be borne in mind when determining whether the claimant transferred a benefit as the result of a mistake of law.

Where the claimant relies on a mistake of law to establish the claim it is sufficient that the mistake was an operative cause but for which the transfer of the enrichment would not have been made,^{1 0} but the operation of this test creates difficulties where the claimant correctly believed that he or she was liable to transfer the benefit to the defendant but the law subsequently changes. Can this change in the law operate retrospectively to create a mistake of law? This will depend on the circumstances in which the law was changed.

As the result of a long-standing principle, known as the principle of declaratory judicial law-making, when a judge’s decision effects a change in the law this is deemed to operate retrospectively, because of a fiction that judges do not purport to change the law but simply declare the law to be what it has always been. Whether the effect of this fiction is sufficient artificially to create a mistake of law was the central issue in the decision of the House of Lords in Kleinwort Benson Ltdv Lincoln CC. The claimant bank in that case had paid money to the defendant local authority pursuant to an interest rate swap transaction which had been made in the 1980s. In 1990 the House of Lords held that such transactions were ultra vires the local authorities and so were void. The claimant sought restitution of the money which it had paid to the defendant and, because of the law relating to limitation periods,¹⁶¹ the claimant needed to base its claim on mistake. Although the claimant’s mistake was one of law, this did not automatically defeat the claim because the House of Lords unanimously abolished the mistake of law bar. But it was still necessary for the claimant to establish that it had paid the defendant as a result of a mistake. The crucial questions for the House of Lords to decide were whether the claimant could be considered to have been mistaken and what was the effect of the principle of declaratory law-making on the identification of a mistake to ground a restitutionary claim. The court identified three different scenarios which required consideration.

• (a) The court overrules an earlier decision. Where the claimant relies on a judicial decision to transfer a benefit and that decision is subsequently overruled,^[54] the majority held that this was sufficient to establish a mistake of law. This is because of the principle of declaratory judicial law-making. Since the consequence of that principle is that the change in the law operates retrospectively, it can be assumed that the claimant was caused to transfer a benefit to the defendant as a result of a mistake which was deemed to have been operating at the time the payment was made.^[55] The courts do, however, sometimes recognize that their decisions can have prospective effect only.^{[56] [57]} This was recognized by the House of Lords in Re Spectrum Plus Ltd,¹⁶⁵ but only exceptionally where a decision would have gravely unfair and disruptive consequences for past transactions and events.^[58] The possibility of prospective overruling is clearly significant for restitutionary claims since, if the law is only changed prospectively, it will not be possible to construct a retrospective mistake.
• (b) The court clarifies existing practice. On the facts of Kleinwort Benson itself the courts had not overruled an earlier decision. There was no decision which stated that interest rate swap transactions made with local authorities were valid. Rather, practitioners had assumed that such transactions were probably valid. Consequently, when the House of Lords decided in 1990 that such transactions were void, the court was not changing the law; it was simply determining the law. The House of Lords in Kleinwort Benson held, however, that this was a distinction without a difference. Since the claimant had assumed that the transaction was valid, the effect of the decision of the House in 1990 was to falsify this assumption and this was sufficient to create a mistake for the purposes of the restitutionary claim.
• (c) Statutory changes of the law. Where a statute changes the law this usually operates only prospectively, so it cannot be used to create a mistake.^[59] Exceptionally a statute may change the law retrospectively, but it might make specific provision for whether restitutionary claims are available as a result of the change of the law. If no such provision is made, is it possible to recognize a mistake? Lord Goff held in Kleinwort Benson¹⁶⁸ that it was not possible to identify a mistake in such circumstances, but this is very difficult to justify because it is inconsistent with the court’s approach to judicial changes in the law.

Lords Browne-Wilkinson and Lloyd in Kleinwort Benson rejected the decision of the majority that the claimant had paid the money to the defendant as a result of a mistake of law. The conclusion of the minority seems preferable for two main reasons. First, a significant consequence of the decision of the majority is that defendants may be liable to make restitution to the claimant by reason of mistake of law many years after the claimant had paid money to the defendant. This is because the limitation period for mistakes will only begin to run from the period when the claimant discovered the mistake or ought reasonably to have discovered it.^[60] So, for example, if the claimant paid ?10,000 to the defendant in 1930 because, as the law stood at the time, he was liable to do so, if the law was subsequently changed by a decision of the Court of Appeal in 2015, it follows that the claimant had made a mistake of law in 1930. But the claimant will be able to sue the defendant for repayment of the money, plus interest, since the limitation period will not have started to run until 2015 when the claimant discovered the mistake.^[61] Such a result is patently unacceptable because it undermines the security of transactions. The only restriction on restitution in such circumstances derives from the potential application of the defence of change of position, but since that defence is defined restrictively because the change of position must be extraordinary, in the sense that but for the receipt of the enrichment the defendant’s position would not have changed,^[62] its influence in curtailing restitutionary claims many years after a benefit has been transferred is likely to be minimal if only because of the inevitable difficulties of proving a relevant change of position. It follows that there is an urgent need for statutory reform to ensure that the security of transactions are not undermined unnecessarily. This statutory intervention should take the form of an appropriately drawn limitation statute.^{[63] [64]}

Secondly, the decision of the majority in treating all judicial decisions as sufficient to construct a mistake of law confuses the distinction between mistakes and mispredictions and undermines a key principle concerning mistake as a ground of restitution, namely that the mistake is to be determined at the time the benefit was transferred to the defendant.^{1 3} By applying the principle of declaratory judicial law-making the House of Lords has condoned the artificial manufacture of a mistake at the time of transfer when the claimant was not mistaken.^[65] The flaw in the opinion of the majority is that they underestimate the crucial feature of mistake as a ground of restitution, namely that it is concerned with the claimant’s state of mind at the time the benefit was transferred to the defendant,^[66] at least where a judicial decision changes the law rather than declares the law for the first time. So, for example, where the claimant pays money to the defendant following a judicial decision recognizing a liability to do so and that decision is subsequently overruled, it is a fiction to say that the claimant was mistaken. For, when the money was paid to the defendant, there was a liability to do so such that the claimant cannot be considered to be mistaken. Whilst the law changed subsequently, and is considered to have retrospective effect, this cannot falsify history. The claimant believed there was a liability to pay and, at that time, there was such a liability, so that he or she should not be considered to have made a mistake as to the state of the existing law. Rather, he or she had made a misprediction as to what might happen in the future.^[67]

The claimant should be considered to bear the risk that the law might change in the future and so should not be allowed to obtain restitution on the ground of mistake.

The analysis is different, however, where, as on the facts of Kleinwort Benson itself, no case had previously decided whether or not there was a liability to pay the defendant, but the claimant believed that there was such a liability and a case subsequently decided that the liability did not exist. In this scenario, rather than the subsequent decision of the court operating retrospectively to falsify history, the later decision of the court simply establishes what the state of the law actually was at the time when the benefit was transferred. It is consequently legitimate to conclude that the claimant was indeed mistaken as to the state of the law at the time the transfer was made. But then the award of restitution will depend on whether it is appropriate to treat the claimant as a risk-taker as regards the state of the law. Certainly, if the claimant suspects that it is more probable than not that the law will be shown to be that there was no liability to pay, the claim should not succeed.^[68]

The effect of the literal application of the principle of declaratory judicial law-making means that it is possible to construct a mistake of law artificially, because the declaratory principle means that, when the claimant transferred a benefit to the defendant, the claimant’s belief as to the validity of the payment was incorrect.^[69] Alternatively, since we know that judges do not just declare the law but actually change it, and because the ground of mistake is concerned with the claimant’s thought process at the time of the payment, the declaratory theory is a fiction which should not be used to construct a mistake,^[70] at least where the judges change rather than declare the law. This distinction was not, however, recognized by the majority in Kleinwort Benson. In Deutsche Morgan Grenfell v IRC Lord Hoffmann specifically characterized mistake of law as a ‘deemed mistake’,^[71] which is the preferable way of analysing it now. It is clear, however, that the state of English law is that, regardless of whether the claimant wrongly believes that the law requires him or her to transfer a benefit because the law is silent on the point and it is subsequently established that there is no liability, or because the law recognizes a liability and it is subsequently changed, a mistake of law can be established.

• [1] [1980] 1 QB 677, 687.
• [2] Kelly v Solari (1841) 9 M and W 54, 152 ER 24. See also Kleinwort, Sons and Co v Dunlop Rubber Co(1907) 97 LT 263, 264 (Lord Loreburn LC); Kerrison v Glyn, Mills, Currie and Co (1911) 81 LJ KB 465, 470(Lord Atkinson) and 471 (Lord Shaw of Dunfermline); R E Jones Ltd v Waring and Gillow Ltd [1926] AC 670,679-80 (Viscount Cave LC). None of these judges specified that the claimant must have mistakenly believedthat he or she was under a liability to pay the defendant.
• [3] [1980] QB 677. See also Saronic Shipping Co Ltd v Huron Liberian Co [1979] 1 Lloyd’s Rep 341, 362-6(Mocatta J), affirmed by the Court of Appeal without reference to mistake: [1980] 2 Lloyd’s Rep 26.
• [4] [1999] 1 AC 221. 83 See p 638, below, for analysis of the remedy of subrogation.
• [5] 84 See p 106, above.
• [6] Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221, 234. See also Lord Steyn, 227.
• [7] [1999] 2 AC 349, 358 (Lord Browne-Wilkinson), 371 (Lord Goff), 399 (Lord Hoffmann).
• [8] Ibid, 407.
• [9] [2006] UKHL 49, [2007] 1 AC 558, [60] (Lord Hope), [143] (Lord Walker). See also Lord Scott, ibid, [84],albeit dissenting on the facts. See also Sempra Metals Ltd v IRC [2007] UKHL 34, [2008] 1 AC 561 and Pitt vHolt [2013] UKSC 26, [2013] 2 AC 108.
• [10] Deutsche Morgan Grenfell v IRC [2006] UKHL 49, [2007] 1 AC 558, [62]. Lords Hoffmann and Walkerconsidered that the mistake did relate to the liability to pay tax: ibid, [32] and [143].
• [11] [2002] 1 All ER (Comm) 193. 91 See p 162, above.
• [12] Ibid, 215; 1182. 2 See p 189, below. 6 [1932] AC 562. 3 [1999] 2 AC 349.
• [13] 102 [2006] UKHL 49, [2007] 1 AC 558, [60] (Lord Hope). 5 See p 121, above.
• [14] 700-1.
• [15] 105 But see G Williams, ‘Mistake in the Law of Theft’ (1977) 36 CLJ 62, 64, where he asserts that the notion
• [16] that a fundamental mistake negatives the claimant’s consent ‘is in varying degrees a legal fiction: there is always
• [17] (1814) 9 M and W 54, 58; 152 ER 24, 26. 2 [1923] 1 KB 504. 3 [1999] 1 WLR 1249.
• [18] 112 Cf Cobbold v Bakewell Management Ltd [2003] EWHC 2289 (Ch), where the claimants paid money to
• [19] the defendant in the expectation that they would be able to recover it if an appeal pending before the House of
• [20] Lords was decided in their favour. This was held not to be an operative mistake because the claimants had paidthe money voluntarily with their eyes open as to the uncertainty of whether the House of Lords would havedecided in their favour: ibid, [19] (Rimer J). In other words, the claimants were risk-takers.
• [21] See p 177, below. 6 See p 149, above.
• [22] 115 Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 401 (Lord Hoffmann).
• [23] BrisbanevDacres (1813) 5 Taunt 143, 159-60; 128 ER641, 647-8 (Gibbs J).
• [24] Brennan v Bolt Burdon [2004] EWCA Civ 1017, [2005] QB 303.
• [25] Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 410 (Lord Hope).
• [26] [2003] EWHC 388 (Admin), [2003] 1 Lloyd’s Rep 418. In Brennan v Bolt Burdon [2004] EWCA Civ1017, [2005] QB 303 it was held that a state of doubt concerning the interpretation of the law would notconstitute a mistake of law. See also Cobbold v Bakewell Management Ltd [2003] EWHC 2289 (Ch), [19](Rimer J).
• [27] [2006] UKHL 49, [2007] 1 AC 558. 121 Ibid, [162]. 122 Ibid, [65] (Lord Hope).
• [28] 123 Ibid, [175] (LordBrown). 124 Ibid, [27]. 125 Ibid, [28].
• [29] 126 BP Oil International Ltd v Target Shipping Ltd [2012] EWHC 1590 (Comm), [2012] 2 Lloyd’s Rep 245,
• [30] [245] (Andrew Smith J). Lord Hoffmann’s judgment was, however, commended by Lord Walker in Pitt v Holt
• [31] [2013] UKSC 26, [2013] 2 AC 108, [114].
• [32] Deutsche Morgan Grenfell v IRC [2006] UKHL 49, [2007] 1 AC 558, [30] (Lord Hoffmann), [61] (LordHope).
• [33] Although Lord Brown considered that it was established: ibid, [172].
• [34] Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221, 235 (Lord Hoffmann); Pitt v Holt[2013] UKSC 26, [2013] 2 AC 108, [114] (Lord Walker). See also Kelly v Solari (1841) 9 M and W 54, 152 ER24; Weld-Blundell v Synott [1940] 2 KB 107; Turvey v Dentons (1923) Ltd [1953] 1 QB 218, 224 (Pilcher J);Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105.
• [35] (1841) 9 M and W 54, 59; 152 ER 24, 26. 136 [2004] EWCA Civ 1017, [2005] QB 303.
• [36] 137 [2006] UKHL 49, [2007] 1 AC 558.
• [37] See Chapter25.
• [38] Niru Battery Manufacturing Co v Milestone Trading Ltd [2002] EWHC 1425 (Comm), [2002] 2 All ER(Comm) 705, 741. This was endorsed in the Court of Appeal: [2003] EWCA 1446 (Civ); Abou-Rahmah vAbacha [2006] EWCA Civ 1492, [2007] 1 All ER (Comm) 827.
• [39] Papamichael v National Westminster Bank [2003] Lloyd’s Rep 341, 369 (Judge Chambers QC).
• [40] Maersk Air Ltd v Expeditors International (UK) Ltd [2003] 1 Lloyd’s Rep 491, 499.
• [41] See p 692, below. 143 See p 177, above. 144 [2013] UKSC 26, [2013] 2 AC 108, [114].
• [42] (1841) 9 M and W 54, 152 ER 24. See p 165, above. 2 See p 159, above.
• [43] 147 [1995] 1 NZLR 78. 148 Ibid, 81 (Williamson J).
• [44] See Chapter 7. 150 Pitt v Holt [2013] UKSC 26, [2013] 2 AC 108. See p 201, below.
• [45] 151 [2006] UKHL 49, [2007] 1 AC 558, [87].
• [46] 152 HW Tang, ‘Restitution for Mistaken Gifts’ (2004) 20 JCL 1.
• [47] 153 Pagel v Farman [2013] EWHC 2210 (Comm); Spaul v Spaul [2014] EWCA Civ 679, [52] (Rimer LJ).
• [48] 154 AS Burrows, A Restatement oftheEnglish Law ofUnjustEnrichment (Oxford: Hart Publishing, 2012), 9,
• [49] article 10(4)(a).
• [50] Pitt v Holt [2013] UKSC 26, [2013] 2 AC 108, [126]. 156 See p 193, below.
• [51] 157 See p 200, below.
• [52] Emphasized by the fact that it is an element of this test that the defendant’s retention of the gift must beconsidered to be unconscionable. See p 201, below.
• [53] [1999] 2 AC 349. 3 Deutsche Morgan Grenfell v IRC [2006] UKHL 49, [2007] 1 AC 558.
• [54] This would also cover the case where the claimant pays money to the defendant as a result of a judgmentagainst the claimant and that judgment is later overturned on appeal.
• [55] The application of that theory to create a mistake of law was criticized in Brennan v Bolt Burdon [2004]EWCA Civ 1017, [2005] QB 303, [49] (Bodey J), [63] (Sedley LJ).
• [56] See, for example, the decision of the House of Lords in Royal Bank of Scotland plc v Etridge (No 2) [2002]2 AC 773 which only applied to future transactions. See p 267, below.
• [57] [2005] UKHL 41, [2005] 2 AC 680. 166 Ibid, [40] (Lord Nicholls).
• [58] 167 Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 381 (Lord Goff).
• [59] 168 Ibid. Cf Lord Hoffmann, ibid, 400.
• [60] Limitation Act 1980, s 32(1)(c). See p 737, below.
• [61] It is unlikely that it will be considered that the claimant could reasonably have discovered the mistakebefore the decision of the court which changed the law. See Test Claimants in the FII Group Litigation v HMRC[2014] EWHC 4302 (Ch), [465] (Henderson J). See further p 408, below.
• [62] See Chapter 25.
• [63] As recommended by the Law Commission Report, Limitation of Actions (Law Com No 270, 2001),examined in Chapter 29.
• [64] Baker v Courage and Co [1910] 1 KB 56.
• [65] This declaratory principle of law-making has been described as a ‘fairy tale in which no one anylonger believes’: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 358 (Lord Browne-Wilkinson) citingLord Reid’s article, ‘The Judge as Law Maker’ (1972-1973) 12 JSPTL (NS) 22. See also Lord Lloyd: [1999]2 AC 349, 394.
• [66] See, in particular, Lord Hoffmann: Kleinwort Benson Ltd v Lincoln CC [1999] 2 AC 349, 398.
• [67] Ibid, 360 (Lord Browne-Wilkinson), 394 (Lord Lloyd).
• [68] See p 176, above.
• [69] J Finnis, ‘The Fairy Tale’s Moral’ (1999) 115 LQR 170; D Sheehan, ‘What is a Mistake?’, 560; RJ Sutton,‘Mistake: Symbol, Metaphor and Unfolding’ [2002] RLR 9; AS Burrows, ‘The English Law of Restitution:A Ten-Year Review’ in JW Neyers, M McInnes, and SGA Pitel (eds), Understanding Unjust Enrichment(Oxford: Hart Publishing, 2004), 17.
• [70] PBH Birks, ‘Mistakes of Law’ [2000] CLP 205.
• [71] Deutsche Morgan Grenfell v IRC [2006] UKHL 49, [2007] 1 AC 558, [23].