PASSING ON AND MITIGATION OF LOSS
Whereas the defences of estoppel, transfer by an agent to his or her principal and change of position are influenced by changes in the circumstances of the defendant, usually after he or she has received a benefit, the question which needs to be considered in this chapter is whether there are, and if not whether there should be, any defences in English law which operate by reference to changes in the circumstances of the claimant after the defendant’s receipt of the benefit. There are two possible defences which, if they are recognized, would operate in this way, namely passing on and mitigation of loss.
(A) THE GENERAL PRINCIPLE
If the defence of passing on is recognized in English law it applies where the claimant has suffered loss by virtue of transferring a benefit to the defendant and the claimant has passed this loss on to a third party. It is in respect of restitutionary claims founded on the reversal of the defendant’s unjust enrichment that the case for a defence of passing on is clearest. To establish such a claim the claimant must show that the defendant has been enriched at the claimant’s expense. But, if the claimant has recouped his or her loss following the transfer of a benefit to the defendant by passing that loss on to a third party, the defendant’s enrichment appears to have been at the expense of that third party and not the claimant. If the defendant made restitution in full to the claimant in such circumstances this would mean that the claimant becomes enriched at the expense of the third party by the receipt of a windfall gain. This can be illustrated by the following example. The defendant public authority demands the payment of a statutory duty from the claimant. The claimant pays this money to the defendant and then recoups it from its customers by increasing the price of its goods. The claimant later discovers that the defendant had no authority to demand the duty and so the claimant seeks restitution from the defendant. Since the claimant has not suffered any loss, because the initial loss was passed on to the customers, the defendant’s enrichment does not appear to have been at the claimant’s expense, but is instead at the expense of the customers, since they have ultimately borne the burden of the defendant’s unauthorized demand.
In Chapter 5 the correspondence principle was recognized, whereby the defendant is only required to make restitution to the claimant to the extent that the defendant’s gain corresponds with the claimant’s loss. This would appear to follow from the recognition of the principle of corrective justice as the fundamental principle which underpins unjust enrichment.            The key question, however, when determining whether passing on should be recognized as a defence is whether the law of restitution is only concerned with correcting the injustice as between the claimant and the defendant or whether other consequences external to their relationship should be taken into account.
-  M Rush, The Defence of Passing On (Oxford; Hart Publishing, 2006). See also FD Rose, ‘Passing On’ in
-  PBH Birks (ed), Laundering and Tracing (Oxford: Clarendon Press, 1995), ch 10 and M McInnes ‘Passing Onin the Law of Restitution: A Reconsideration’ (1997) 19 Sydney LR 179. 2 See p 116, above.
-  See p 4, above. 4 (1989) 59 DLR (4th) 161, 193-4 (La Forest J). 5  ECR 3595.
-  6 Ibid, 3636 (Mancini AG).
-  7 Case C-398/09 Lady and Kid v Skatteministeriet  STC 854,  and .
-  8  UKHL 53, . 9 (2002) 76 ALJR 203.
-  10 Value Added Tax Act 1994, s 80(3). See GJ Virgo, ‘Restitution of Overpaid VAT’  BTR 582. See
-  also Finance Act 1989, s 29(3) which contains a similar defence in respect of the recovery of overpaid car tax.
-  11 This was recognized by Evans LJ in Kleinwort Benson Ltd v Birmingham CC  QB 380, 389. See also
-  Customs and Excise Commissioners v McMaster Stores (Scotland) Ltd  STC 846; Baines and Ernst Ltd v
-  Commissioners of Customs and Excise  UKVAT V18769. See p 407, above.
-  12 Mason v New South Wales (1959) 102 CLR 108; Commissioner of State Revenue v Royal InsuranceAustralia Ltd (1994) 126 ALR 1; Roxborough v Rothmans ofPall Mall Australia Ltd (2002) 76 ALJR 203.
-  13 Kingstreet Investments Ltd v New Brunswick (Finance)  1 SCR 3.
-  14  AC 70, 178.