(607)  ENGLISH LAW ‘TO ALIGN ITSELF MORE CLOSELY WITH SCOTTISH LAW’

Following its decision last week in the Tehrani case that the Court of Session had jurisdiction to review a tribunal decision made in England where it affected a person in Scotland (see No 604), the latest speeches of the House of Lords, published on 25 October 2006, contain the following from Lord Walker of Gestingthorpe:

 

158. Nevertheless I would add that my tentative inclination is to welcome any tendency of the English law of unjust enrichment to align itself more closely with Scottish law, and so to civilian roots. I see attractions in the suggestion made by Professor Birks in Unjust Enrichment (2nd edition, p.116, under the heading ‘The Pyramid: a Limited Reconciliation’):

 

A pyramid can be constructed in which, at the base, the particular unjust factors such as mistake, pressure and undue influence become reasons why, higher up, there is no basis for the defendant’s acquisition, which is then the master reason why, higher up still, the enrichment is unjust and must be surrendered.

 

I would be glad to see the law developing on those lines. The recognition of no basis as a single unifying principle would preserve what Lord Hope refers to as the purity of the principle on which unjust enrichment is founded, without in any way removing (as this case illustrates) the need for careful analysis of the content of particular unjust factors such as mistake.

 

The case is Deutsche Morgan Grenfell Group plc v Inland Revenue [2006] UKHL 49, and it can be read in full at http://www.publications.parliament.uk/pa/ld200506/ldjudgmt/jd061025/morgan-1.htm.  The issues in the case can be summarised as follows.  The claim was to recover money paid as tax which turned out not to have been due (as the result of a decision to that effect by the European Court of Justice).  DMG claimed restitution either under the rule in Woolwich Equitable Building Society v IRC [1993] AC 70 (undue tax payments must be repaid) or for mistake of law (Kleinwort Benson v Lincoln City Council [1999] 2 AC 349).  The IR said that DMG was out of time under applicable limitation rules.    DMG argued that, since it paid by mistake, it could rely on a special limitation-extension rule for mistaken payers (limitation does not run against a party that does not know of its mistake and could not with reasonable diligence have discovered it), whether it was claiming under Woolwich or Kleinwort Benson.  There were three major issues: (1) did the limitation-extension rule apply only where C relying on mistake as his ground of recovery (Kleinwort Benson), or is it available whatever ground of recovery is relied on, provided that mistake is present on the facts?; (2) are claimants restricted to Woolwich as their ground of recovery where it is available on facts, or should they be allowed also to rely on some alternative ground which is also available, e.g. mistake or duress?; (3) does English enrichment law require claimants to establish a positive ground for restitution, or does it require them only to establish an absence of legal ground for the transfer to the enriched person (here the IR).  The House of Lords holds for DMG, finding that there was a mistake in law and that the limitation-extension rule applies.

 

A Scottish court, properly advised, might have approached this case on the basis that the Inland Revenue’s retention of the payment lacked a legal basis and it therefore fell to be restored.  The discussion about mistake or error would not be necessary; the case is one of either condictio indebiti (tax not due) or, perhaps, condictio causa data causa non secuta or condictio causam ob finitam (payment made to discharge tax liability which did not do so, or which liability ceased to exist).  Under the Prescription and Limitation (Scotland) Act 1973 s 6 and Sch 1 para 1(b), the obligation to restore enrichment becomes enforceable, starting the prescriptive period of five years, when the enrichment occurs.  The period does not run during any period when the creditor was induced to refrain from making a relevant claim by its own error induced by the debtor’s words or conduct unless the creditor could have discovered the error with reasonable diligence.  The italicised words, which are not found in the English statute, might have been the big stumbling block to recovery by DMG in Scotland.  But it seems reasonably clear that the error stopping the prescription clock does not have to be part of the ground for recovery under the Scottish rules; and one imagines that the courts here will follow the House of Lords in not getting stuck on the issue of whether there is a mistake or merely a misprediction when a settled view of the law upon which transactions such as tax payments have been based is unseated by a subsequent judicial decision.