Woolwich Equitable Building Society v Inland Revenue Commissioners (2): HL 20 Jul 1992

The society had set out to assert that regulations were unlawful in creating a double taxation. It paid money on account of the tax demanded. It won and recovered the sums paid, but the revenue refused to pay any interest accrued on the sums paid. The Society sought to challenge the decision by judicial review.
Held: At common law taxes exacted ultra vires were recoverable as of right, without the need to invoke a mistake of law by the payer. ‘The justice underlying Woolwich’s submission is, I consider, plain to see. Take the present case. The revenue has made an unlawful demand for tax. The taxpayer is convinced that the demand is unlawful, and has to decide what to do. It is faced with the revenue, armed with the coercive power of the state, including what is in practice a power to charge interest which is penal in its effect. In addition, being a reputable society which alone among many building societies is challenging the lawfulness of the demand, it understandably fears damage to its reputation if it does not pay. So it decides to pay first, asserting that it will challenge the lawfulness of the demand in litigation. Now, Woolwich having won that litigation, the revenue asserts that it was never under any obligation to repay the money, and that it in fact repaid it only as a matter of grace. There being no applicable statute to regulate the position, the revenue has to maintain this position at common law. Stated in this stark form, the revenue’s position appears to me, as a matter of common justice, to be unsustainable; and the injustice is rendered worse by the fact that it involves, as Nolan J. pointed out [1989] 1 W.L.R. 137, 140, the revenue having the benefit of a massive interest-free loan as the fruit of its unlawful action. I turn then from the particular to the general. Take any tax or duty paid by the citizen pursuant to an unlawful demand. Common justice seems to require that tax be repaid, unless special circumstances or some principle of policy require otherwise; prima facie, the taxpayer should be entitled to repayment as of right.’ and ‘the retention by the state of taxes unlawfully exacted is particularly obnoxious, because it is one of the most fundamental principles of our law – enshrined in a famous constitutional document, the Bill of Rights 1688 – that taxes should not be levied without the authority of Parliament; and full effect can only be given to that principle if the return of taxes exacted under an unlawful demand can be enforced as a matter of right. The second is that, when the revenue makes a demand for tax, that demand is implicitly backed by the coercive powers of the state and may well entail (as in the present case) unpleasant economic and social consequences if the taxpayer does not pay. In any event, it seems strange to penalise the good citizen, whose natural instinct is to trust the revenue and pay taxes when they are demanded of him.’
Lord Slynn observed: ‘I do not consider that the fact that Parliament has legislated extensively in this area means that no principle of recovery at common law can or should at this stage of the development of the law be found to exist. If the principle does exist that tax paid on a demand from the Crown when the tax was the subject of an ultra vires demand can be recovered as money had and received then, in my view, it is for the courts to declare it. In so doing they do not usurp the legislative function. I regard the proper approach as the converse. If the legislature finds that limitations on the common law principle are needed for reasons of policy or good administration then they can be adopted by legislation . .’
Lord Goff considered whether, by changing the common law judges would be overstepping the boundary which separates legitimate development of the law from judicial legislation said: ‘I feel bound however to say that, although I am well aware of the existence of the boundary, I am never quite sure where to find it. Its position seems to vary from case to case. Indeed, if it were to be as firmly and clearly drawn as some of our mentors would wish, I cannot help feeling that a number of leading cases in your Lordships’ House would never have been decided the way they were.’
HL The English law of restitution has set its face against the development of any general principle, such as is known to civil law systems, of a condictio indebiti, an action for the recovery of money on the ground that it was not due. Lord Goff of Chieveley said: ‘To the simple call of justice, there are a number of possible objections. The first is to be found in the structure of our law of restitution, as it developed during the 19th and early 20th centuries. That law might have developed so as to recognise a condictio indebiti – an action for the recovery of money on the ground that it was not due. But it did not do so. Instead, as we have seen, there developed common law actions for the recovery of money paid under a mistake of fact, and under certain forms of compulsion.’

Lord Goff of Chieveley, Lord Browne-Wilkinson, Lord Slynn of Hadley; Lord Keith of Kinkel and Lord Jauncey of Tullichettle dissenting
[1993] AC 70, [1992] 3 All ER 737, (1992) 3 WLR 366, [1992] UKHL TC – 65 – 265, (1993) 5 Admin LR 265, [1992] STC 657
Taxes Management Act 1970 33, Bill of Rights 1688, Income Tax (Building Societies) Regulations 1986
England and Wales
See AlsoRegina v Inland Revenue Commissioners, Ex parte Woolwich Equitable Building Society HL 25-Oct-1990
The society challenged the validity of transitional provisions in the 1986 regulations on the ground that they were ultra vires. The House considered the specific presumption against double taxation, and also a power in general terms to make . .
CitedBilbie v Lumley and Others 28-Jun-1802
Contract Not Set Aside for Mistake as to Law
An underwriter paid a claim under a policy which he was entitled in law to repudiate for non-disclosure. Although he knew the relevant facts, he was not aware of their legal significance. He claimed back the money he had paid.
Held: A contract . .
CitedMaskell v Horner CA 1915
Money paid as a result of actual or threatened seizure of a person’s goods, is recoverable where there has been an error, even if it was one of law. . .

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Lists of cited by and citing cases may be incomplete.

Taxes Management, Constitutional

Leading Case

Updated: 31 October 2021; Ref: scu.223218