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(D) SETTLEMENT

Restitution will not be awarded where the payment was made pursuant to a contractual settlement.[1] The Law Commission has recommended[2] that restitution should also be denied where the relevant payment was made in response to litigation which had been commenced by the public authority, but not where the litigation was merely threatened.

Such a defence of compromise is consistent with the general bar to restitutionary claims at common law founded on the claimant’s voluntary submission to an honest claim.[3]

(E) CHANGE IN A SETTLED VIEW OF THE LAW

Where the claim to restitution is founded on a mistake of law the Law Commission[2] has recommended that restitution should be denied where the payment was made in accordance with a settled view of the law that the money was due and that view was subsequently changed by a decision of a court or tribunal.[5] This defence was not recommended to be applicable where the claim for restitution is founded on Woolwich since, in such circumstances, the rationale for restitution is based on the impropriety of the public authority retaining funds without statutory authority. The very fact of the change in a settled view of the law will confirm such impropriety.

In Deutsche Morgan Grenfell Group plc v IRC[6] [7] [8] the House of Lords rejected any defence that the money was paid when there was a settled view as to the state of the law, and it was correct to do so. Even if the money was paid on the basis of a settled view of the law which is later proved to be mistaken, restitution should follow simply because it is subsequently acknowledged that the money was not due to the public authority. The argument of constitutional impropriety in the public authority retaining money which was not due to it should prevail over that founded on the disruption to public finances arising from a mistake as to a settled view of the law.

(F) DISRUPTION OF PUBLIC FINANCES

Lord Goff in Woolwich doubted the advisability of imposing special limits upon recovery in the case of ultra vires levies to deal with the problem that a right of recovery might lead to serious disruption of public finances.1 8 The Law Commission,1 9 whilst acknowledging that protection of public finances was a legitimate policy aim,[9] rejected a general defence of serious disruption to public finances on the ground that such a defence was too uncertain.

  • [1] Woolwich Equitable Building Society v IRC [1993] AC 70; Test Claimants in the FII Group Litigation vHMRC [2012] UKSC 19, [2012] AC 337, [79] (Lord Walker).
  • [2] Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments (Law Com No 227,1994).
  • [3] See p 149, above.
  • [4] Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments (Law Com No 227,1994).
  • [5] Support for such a defence can be found in the judgment of Lord Goff in Kleinwort Benson Ltdv LincolnCC [1999] 2 AC 349, 382.
  • [6] [2006] UKHL 49, [2007] 1 AC 559, [18] (Lord Hoffmann), [145] (Lord Walker).
  • [7] Woolwich Equitable Building Society v IRC [1993] AC 70, 175-6.
  • [8] Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments (Law Com No 227,
  • [9] 1994). 180 Ibid, paras 10.5-10.8.
 
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