3—The Scope of the Public Law Reason for Restitution

3

The Scope of the Public Law
Reason for Restitution

The Scope of the Public Law Reason for Restitution: Eight Key Questions

HAVING ESTABLISHED THAT THE reason for restitution in Woolwich is simply the existence of a public law ultra vires event,1 it becomes possible to answer some questions about its scope and application in future cases. In particular, there are eight questions left open after the Woolwich decision, all of which can now be answered. The first five of these questions are relatively procedural:

Need There Have Been a Demand for the Public Law Reason for Restitution to Operate?

As the Law Commission points out, Lord Goff’s reasons for the new restitutionary right first established in Woolwich do not focus on the particular requirements of a demand or a tax ‘but on the manifest injustice of allowing moneys unlawfully extracted from the subject by a public authority to be retained by it’.2 Academic discussion of this question unanimously supports this answer³ as does the understanding of the public law reason for restitution outlined here. There would be no reason to limit recovery in such an arbitrary manner and no justification for doing so: recovery will be available under the principle first established in Woolwich whenever there has been an ultra vires event to which public law will respond. It is true that in Boake Allen Ltd v Revenue and Customs Commissioners⁴ the Court of Appeal, as Henderson J put it in Test Claimants in the FII Group Litigation v The Commissioners for Her Majesty’s Revenue and Customs,5 did ‘adopt a narrow approach’ to the ‘ Woolwich principle’ and gave no encouragement to attempts to broaden the concept of a ‘demand’,⁶ but neither did it contradict the position proposed here. The issue of ‘demands’ received the greatest attention from Lord Justice Mummery in Boake Allen and even he did not deny that the ‘Woolwich principle’ could apply where a taxpayer had paid in accordance with the terms of a statute rather than a specific ‘demand’. He merely held that on the facts of the case, even if there had been a ‘demand’, it had been lawful.⁷ Similarly, although Henderson J stated that ‘a Woolwich claim must involve, at least in some sense, the making of a demand by the Revenue’⁸ (emphasis added) of a kind which would not be required in a claim based on mistake, it is again difficult to read much into this, given first that his only authority for so holding was Boake Allen, second, the weakness of the terms in which this view was expressed (‘at least in some sense’) and third, the lack of reasoning to support a stronger view.

Need There Have Been a Protest for the Public Law Reason for Restitution to Operate?

Again, the answer is ‘no’. Academic discussion of this question unanimously concludes that a protest should not be necessary for the unjust factor to operate9 and on the basis of the argument outlined here this is correct. Not only does it not fit with the reasoning in Woolwich itself, the requirement of a protest would again be an arbitrary and normatively irrelevant hurdle for claimants to cross, since the claimants need not necessarily have recognised the public law event before paying the money. Although he was discussing the requirement in a different context,¹⁰ support for these arguments comes from Bastarache J, giving the judgment of the Supreme Court of Canada, in Kingstreet Investments Ltd v New Brunswick (Finance).11 He held that there should be no burden on the taxpayer to prove that they were paying under protest, because ‘the right of the party to obtain restitution for taxes paid under ultra vires legislation does not depend on the behaviour of each party but on the objective consideration of whether the tax was exacted without proper legal authority’.¹² Further, he was concerned about ‘horizontal equity’ between claimants if only those who had protested were able to recover the unlawful tax.¹³ He did hold that courts should insist on compulsion in fact, which protest would be neither necessary nor sufficient to establish, but it is clear from the rest of his judgment,¹⁴ that this can only have meant that the taxpayer must not have waived its right to restitution, rather than that Bastarache J was insisting on a cause of action based on duress.

To What Extent is the Public Law Reason for Restitution
Overridden by Statute?

Although there are several statutory provisions for the recovery of overpayments of tax, none applied to the Woolwich case. The most likely seemed to be section 33 of the Taxes Management Act 1970 (TMA), which provides for the recovery of such sums of overpaid income tax, corporation tax, capital gains tax, or petroleum revenue tax as is ‘reasonable and just’. However, it did not apply to Woolwich, first because it was doubted whether the section applied to the composite rate tax at issue in Woolwich and second, and more importantly, because no valid ‘assessment’ had been, or could have been made, as required by section 33, since there was no lawful basis whatever for the demand of ultra vires tax. Finally, even if there could have been a valid assessment, section 33 would not have applied in this case because it would not have been excessive ‘by reason of some error or mistake in a return,’ as required by section 33. Naturally any common law cause of action such as that first recognised in Woolwich can in principle be overridden where a statute expressly excludes it, and it appears from the Woolwich case itself that the common law right will be narrow and limited to situations where the statute does not cover the case expressly or by necessary implication.15

It is, however, worth noting that the application of statutory principles rather than the common law, or vice versa, is left largely to chance, as is clear from the facts of Woolwich itself. Similarly left to chance is the question of which statutory provisions apply in any particular context. It cannot even be said that the application of the statutes, however haphazard, is at least the application of consistent principles. On the contrary, there is a great deal of inconsistency between the statutory provisions and between the approaches of the common law and Parliament.16

The relationship between the common law right in Woolwich on the one hand and the statutory rights to recovery on the other was considered by the Law Commission. It recommended that in respect of ultra vires receipts and payments by public authorities there should be a ‘series of specific amendments to the recovery provisions for overpaid tax in the taxation legislation to reflect the emergence of the Woolwich principle’.¹⁷ In particular, they recommended:

[A] repeal of TMA 1970 s 33, and replacement by a right on the part of all taxpayers charged to tax, whether under an assessment or otherwise, to recover tax paid but not due irrespective of the presence or absence of any mistake on the part of the taxpayer.¹⁸

Obviously, such a reform would remove the application of the common law right to the Woolwich situation itself, as explained above.¹⁹ Apart from these specific alterations to the statutory provisions, the Commission had a choice between three possible responses to Woolwich. The first possibility was to recommend a general statutory right to recovery of ultra vires or mistaken²⁰ payments to public bodies. This was rejected, in particular, because of the uncertainties surrounding the term ‘public body’.²¹ The second option was to devise a list of public bodies to whom such a statutory provision would apply. This too was rejected as being too arbitrary, and capable of producing injustice.²² The Commission thus chose the third option, and recommended that ‘development of the right to restitution of ultra vires receipts by public authorities should, save for the specific recommendations . . . made in [the] Report, [concerning the specific statutory provisions, as listed above] be left to the common law’.²³ This was desirable, they argued, because ‘the potential variety of claims which may arise make this an ideal area for the common law to operate in as it can, in this field, provide the flexibility which would be lacking in a statutory provision’.²⁴ They also agreed with Beatson that ‘it is likely that there will be very few cases which fall within the residual right, and that those will turn on their particular facts’.25 However, as will be discussed further in this chapter and the next, there has, since Woolwich, been a series of cases dealing particularly with the incompatibility of national tax rules with EC law which has given rise to a variety of different common law claims. As a response to this, Section 100 and Schedule 52 of the Finance Act 2009 contain provisions for amending S 33 TMA 1970 so that all claims for overpaid corporation, capital gains and income tax will, from 1 April 2010, be available only via a new Schedule 1AB to the TMA, to the complete exclusion of the common law. Nevertheless, it is worth noting first that the courts will be likely to have to deal with a surge of claims brought before the new rules take effect, and second that the application of any given statute is subject always to its compatibility with EU law.²⁶

What Exactly Does the Claimant Recover?

This question does not wholly belong with the other seven questions considered here, because the answer to it comes not just from an inherent understanding of the public law reason for restitution, but also from the decisions in two key cases. Nevertheless, it is convenient to deal with it here as part of the process of defining the operation of the public law reason for restitution. In Sempra Metals v HMRC27 the claimants argued that they should be entitled to compound, as opposed to simple, interest on their claim. A majority of the House of Lords agreed, Lord Hope, Lord Nicholls and Lord Scott holding that compound interest would be available at common law,²⁸ thereby departing from the decision of the House of Lords in Westdeutsche.²⁹ Lord Hope justified this change on the basis that Westdeutsche was not relevant, because it had dealt with the question of whether compound interest could be awarded in equity, and furthermore because Westdeutsche did not deal with situations where interest was itself the principal sum, as was the case in Sempra.³⁰ Similarly, Lord Nicholls pointed out that the unavailability of compound interest at common law had been conceded rather than argued in Westdeutsche, so that it was open to the House of Lords in Sempra to re-examine that basic point of law.31 The minority Lord Walker and Lord Mance preferred to regard compound interest as being available, if at all, through equity, on the basis that this would allow for the exercise of discretion in awarding it.³² However, their Lordships gave no indication of the circumstances in which this equitable discretion should or should not be exercised, and indeed Lord Walker did not envisage it differing at all from the common law approach in terms of practical outcome.³³ If it is accepted that compound interest should be available because, as Lord Nicholls and Lord Walker put it, otherwise ‘the unravelling would be partial only’,³⁴ it is difficult to see why compound interest, and thus full unravelling, should not be available as a matter of common law right, and so the conclusion of the majority is thus preferable to that of the minority.

However, having established the availability of compound interest in principle, it then became necessary to work out how this would be calculated in practice, and again this matter produced a 3:2 split.³⁵ A majority of their Lordships assumed that use of money for a period of time would constitute an enrichment which must be returned via compound interest, rather than requiring the claimant to prove this enrichment specifically. Lord Hope’s judgment is the strongest in this direction, holding that:

Once the claimant has shown that prima facie he is entitled to a restitutionary remedy, direct knowledge of the extent of the benefit, if any, that has been received can be assumed to lie with the recipient. It is open to the recipient to demonstrate that there was no actual enrichment when the money fell into his hands notwithstanding the opportunity to turn it to account . . . It seems to me that . . . the assumption that the revenue derived some benefit from the receipt of the money prematurely has not been displaced, and that this justifies resort to a conventional rate of interest as the measure of that benefit.³⁶

However, Lord Nicholls and Lord Walker also held that the Revenue could prima facie be supposed (as the agreed ‘conventional basis’ recognised) to have taken full advantage of receipt of the money. It could thus be regarded as having been enriched by the amount that it would have cost to borrow the amount in question for the relevant period,³⁷ subject to the defendant proving otherwise.³⁸ In other words, according to the majority, the presumption would be that the defendant had been enriched by the use of money over time, and it would then be up to the defendant to disprove this, for example by demonstrating that it had, as Lord Mance put it (in dissent), put the money in a non-interest bearing current account or even under the bed.39

In the minority, on the other hand, Lord Scott was not prepared to accept the premise:

that the possession of mistakenly paid money—and accordingly the ability to use it if minded to do so—is sufficient to justify not simply a restitutionary remedy for recovery of the money, but a remedy also for recovery of the wholly conceptual benefit of an ability to use the money. Why should a restitutionary remedy be concerned with a benefit that is no more than conceptual?⁴⁰

Lord Mance’s dissent from the majority turned on a difference in perception concerning the roles of subjective devaluation and/or change of position. For him, ‘the basic test of recovery looks to actual benefit’ with the change of position defence being ‘a separate matter, arising after any actual benefit has been ascertained’⁴¹. And ‘far from operating as a control on or qualification of some objective or hypothetical measure of recovery’, for Lord Mance ‘the principle of “subjective devaluation” makes actual or “incontrovertible” benefit the very test of and precondition to recovery’.⁴² Ultimately, however, as he himself noted, ‘in a fully investigated context’ the approaches of the majority and minority should in any event ‘assimilate . . . in the end result’,⁴³ and given the inherently enriching nature of money and the ease with which defendants can prove that they were not enriched as compared with the ability of claimants to prove enrichment, it is submitted that again the approach of the majority is to be preferred.

The question of compound interest was subsequently revisited by Henderson J in F J Chalke⁴⁴. The facts of this case differed from those in Sempra because in Chalke the tax itself had been invalid, so the claim had originally been for a principal sum plus interest, whereas in Sempra the interest was itself the principal sum. However, even in Chalke the Revenue had already repaid the unlawful tax with interest, so that the only remaining claim was for this to be ‘upgraded’ to compound interest.⁴⁵ Henderson J held that this distinction between the cases made no difference:

no sensible distinction can be drawn in relation to interest between cases where tax is levied prematurely (as in Hoechst [and thus Sempra]) and cases where the tax itself has to be repaid. In each case, the claimant should receive by way of ‘interest’ a sum which represents the loss of use of the money, or (perhaps more accurately) the benefit of the use of the money to the member state, over the relevant period. If anything, common sense suggests that this right should be stronger in cases where the tax itself has to be repaid than in cases where the tax was merely levied prematurely . . . the measure of such loss of use or benefit, in the context of a restitutionary claim brought in an English court, should normally be compound, not simple, interest.46

Certainly this seems consistent with the reasoning of the House of Lords in Sempra that compound interest should be awarded because only this would truly represent ‘the time value’ of the money,⁴⁷ although it does mean that one of Lord Hope’s grounds for distinguishing Sempra from Westdeutsche can no longer be used.⁴⁸

In addition, although the House of Lords in Sempra had been unanimous that an English court has jurisdiction under domestic law to award compound interest,⁴⁹ Henderson J held (obiter) that

if the guiding principle of Community law is that the member state should not profit from the imposition of the unlawful charge, compound interest would seem to be required as a matter of Community law, because it is only in that way that full effect can be given to the guiding principle.

This also meant that the entitlement to compound interest would ‘trump’ any national rules concerning interest.⁵⁰ However, it did not mean that the claimants in Chalke could recover compound interest. The problem was that the mistakes which had caused Chalke to make the overpayment of tax in the first place had been discovered at the end of June 1997 at the latest, and thus the extended limitation period under s 32(1)(c) Limitation Act 1980 had expired by no later than the end of June 2003, so that Chalke’s claims for compound interest were time-barred.⁵¹ It is true that the claimants did not discover that they could also have claimed compound interest until the decision of the House of Lords in Sempra in July 2007, but this mistake that they were entitled to simple interest only was not an operative mistake for the purposes of the present claims. The only operative mistakes were their ‘liability mistakes’; that is, their mistake that they had been liable to pay the tax in the first place.52 Their claim to ‘upgrade’ from simple to compound interest could not be regarded as free-standing. On the contrary, the claim was simply ‘for the one element which remains unsatisfied of [their] restitutionary claim arising from the overpayments’.⁵³ Nothing about this rule would infringe the EU requirements to provide an equivalent and effective remedy for breach of EU law,⁵⁴ and nor was there any hope for the claimants that they could recover via an action for state liability in damages, since Henderson J held that the breaches in question were not sufficiently serious and were in any event also time-barred.⁵⁵

In policy terms, if the purpose of the Limitation Acts is to encourage litigants to bring claims as promptly as possible then it is worth noting that the claimants in Chalke could not have brought their claims for compound interest any sooner than the decision of the House of Lords in Sempra. It is also worth observing, in answer to Henderson J’s statement that ‘it is no part of the function of the law of limitation to provide that time should start to run afresh whenever a development in the law brings the possibility of making a new type of claim into the foreground’, that this was precisely the function of the law of limitation in the decision of the House of Lords in Kleinwort Benson v Lincoln⁵⁶. Finally, it is also the case that as a result of Henderson J’s decision in Chalke the claimants were to some extent worse off than if they had been claiming interest as the principal sum, despite Henderson J’s concerns that such a disparity should not be created.⁵⁷

However, notwithstanding these arguments, ultimately it is difficult to see how Henderson J could have concluded otherwise. As he points out, there is a need for certainty in public expenditure,⁵⁸ and this would be severely undermined by allowing claimants effectively to reopen actions previously thought to have been closed. If the claimants here had been entitled to receive compound interest, it would be difficult to argue that a tort claimant should not equally be entitled to reopen a claim should a subsequent House of Lords decision open a new head of damages. If claimants who recover simple interest as a principal sum are also denied the ability to ‘upgrade’ this to compound interest more than six years later, the potential disparity between such claims and those in which the interest is only ancillary to a principal sum disappears. The conclusion must therefore be that while compound interest is available as a matter of both domestic and perhaps EU law, this only applies when the claim for the principal sum is not time-barred.

Finally, to return to the point from which we started, it was noted above that this question does not fit perfectly with the other seven questions considered in this section, because the answer to it comes to a large extent from the decisions in Sempra and F J Chalke rather than being derived from a proper understanding of the nature of the public law reason for restitution itself. Nevertheless, that understanding does now allow us to move beyond the decisions in Sempra and Chalke to argue that while in both those cases the court was concerned with claims based on the unjust factor of mistake, the reasoning employed there ought to apply equally to claims based on the public law reason for restitution. Nothing in this suggestion contradicts the decided cases because it is clear that nothing turned on the particular reason for restitution in either Sempra or Chalke.59 Indeed, as Lord Scott pointed out, the mistake that had been made ‘and on which the restitutionary claim is based was the mistake of the payer, Sempra in the instant case’,⁶⁰ and Lord Nicholls regarded mutual mistake as being more likely to give rise to a situation in which the recipient might make no actual use of the money, not less.⁶¹ As a matter of principle it is surely even more important that full ‘unravelling’ should take place when the reason for restitution is the existence of an ultra vires act, particularly if Henderson J is right that, in some instances, this is required as a matter of EU law. There is therefore no reason to suppose that compound interest should not be available for claims based on the public law reason for restitution, and every reason to suppose that it should.

Is it Always Necessary to Bring Two Separate Cases, One Action for Judicial Review and One Private Law Claim?

The inefficiency, cost and clumsiness of the ‘bifurcation’ of the claims in Woolwich was much criticised,62 and in British Steel plc v Customs and Excise Commissioners⁶³ it was finally established that both issues could be decided in the same case. Although this decision was welcome it did of course mean that a choice had to be made between the two procedures. In the event, the private procedure was chosen for two reasons. First, at the time of the claim in British Steel it was not possible to obtain the response of restitution through the public law procedure,⁶⁴ and second, the decision in O’Reilly v Mackman65 meant that although in principle procedural exclusivity would operate in favour of the public law procedure, an exception to this would exist where ‘private rights’ were at stake.⁶⁶ It therefore made sense to use the cause of action in unjust enrichment to bring the case outside the public law procedure so that restitution could be granted.

However, since the reforms to the procedural rules and the decision in Clark,⁶⁷ one case suggests that the authority of British Steel might no longer be so straightforwardly applied. In Jones v Powys Local Health Board⁶⁸ an elderly man had paid for his care and accommodation in a nursing home for the six years prior to his death. Following his death, his son requested a retrospective review of his father’s care and nursing needs and it was found that in the eight weeks prior to his death his father would have been entitled to the care without paying for it. However, the son argued that the defendant’s review panel should in fact have conducted a multi-disciplinary assessment of his father’s needs at the time of his admission to the nursing home, and that had the defendant done so it would have discovered that his father was entitled to free care throughout the whole six year period. The son thus sought restitution of the whole amount. However, Plender J held that it was an abuse of process to try to bring this claim outside the procedure for judicial review.⁶⁹ His reasoning was that it was necessary to ascertain whether the son was in substance asserting an entitlement to a subsisting right in private law, which incidentally involved the examination of a public law issue, or whether the primary focus or dominant issue was to challenge a public law act or decision. Since on the facts of the case it was clear that the claimant could not succeed without establishing that the review panel had erred in assessing his father’s needs, the complaints made of the review panel were central, explicit and suitable for determination by judicial review. By proceeding through the private law procedure the claimant had therefore deprived the defendant of both the stringent time limit and the requirement of permission applicable to applications for judicial review.⁷⁰

As was noted in chapter one, even before the decision in Clark⁷¹ brought the substantive public/private divide to the fore, litigation over the procedural public/private divide has always served as a proxy for it. It is not therefore difficult to see how use of the private procedure for claims based on the ‘ Woolwich unjust factor’ has led to a substantive assumption that this reason for restitution is no different from any other private law ground such as mistake or failure of consideration. Similarly, it is not difficult to see why, when trying to establish the procedure applicable to such hybrid claims, the court in British Steel⁷² felt able to classify it (for pragmatic reasons) as a claim in private law, while Plender J in Jones v Powys73 felt the necessity to classify it as suitable for determination by judicial review, just as on the more substantive level the Supreme Court of Canada in Kingstreet Investments⁷⁴ wished to classify the cause of action as arising wholly in public law while, as will be seen further in chapter four, the House of Lords has tended to take a wholly private view of such claims.⁷⁵ However, it should now be clear that, far from having vanished, the existence of a public law ultra vires event remains absolutely at the heart of claims such as those in Woolwich because it provides the very reason for restitution even when such claims are brought through the private procedure. This is especially so given that choice of the private procedure in British Steel was in any case largely a matter of chance based on essentially pragmatic reasoning. Conversely, it should be apparent that while the validity of the review panel’s decision in Jones v Powys was indeed central and suitable for determination by judicial review, this did not alter the fact that if the claimant son was to receive any money overpaid by his father, this would constitute an action for restitution to reverse an unjust enrichment.⁷⁶

Inevitably, in order to avoid the ‘bifurcation’ of claims so criticised following the Woolwich decision⁷⁷ one procedure must be chosen over the other. In order to avoid unnecessary litigation, and for the sake of uniformity and certainty, it seems desirable that the same procedure should be used in all cases. It is therefore unfortunate that to some extent the decision in Jones v Powys may now have reduced this certainty and uniformity by reopening the choice made in British Steel. The really key point, however, is that whichever procedure is chosen, that procedure should no longer be allowed to hide the substance of the claim, so that in future both the relevant unjust enrichment and public law ultra vires events should be recognised as being central to the claim. Giving sufficient attention to each of these two aspects of the claim regardless of the particular procedure chosen is therefore ultimately more important than the choice of procedure itself. Inevitably, since the choice between the two procedures is, at least in the abstract, 50:50, good arguments can obviously be made for adopting each of them. Whichever procedure is chosen, from it will tend to flow the expertise necessary for addressing one of the two relevant events, and it will always remain important to ensure that the expertise from the procedure not chosen is not lost as a result. Thus, were Jones v Powys to be followed across the board it would be crucial that the administrative courts should not lose sight of the existence of an unjust enrichment event and the wealth of authority so far established on the different elements of such a claim. Conversely, were British Steel to be followed, it would be crucial for the civil courts to remember that there is a wealth of authority on the nature and operation of judicial review which should be borne in mind when considering the reason for restitution.

In practice, however, there are three reasons why the private law procedure should probably be chosen. First, we do not have complete carte blanche to make the decision anew. Jones v Powys is a relatively isolated decision, whereas it has been assumed since British Steel that all such claims can be brought via the private law procedure. Second, it should be noted that claims against public bodies in tort (even torts specific to public bodies, such as state liability in damages or misfeasance in public office) are also brought through the private law procedure rather than as applications for judicial review.78 Third, there may well be instances in which only one entity needs to challenge the validity of the initial payment, but many entities subsequently wish to recover the money they have paid on that basis. Since none of these subsequent claims would need to revisit the question of validity, it would seem more natural for such subsequent claims to be heard through the private law procedure, even though the existence of the ultra vires event would of course remain relevant as one of the two relevant events at the heart of the claim and as the reason for restitution, as proposed here. If this were to happen, then private law would already have to make the necessary adjustments to accommodate the public law aspects of the claim, as it has been argued here that it should. It therefore seems more consistent and indeed more efficient to allow all the claimants to use the same, private, procedure, adjusted to take into account the relevant public law concerns, rather than making the first claimant use the public procedure while all subsequent claimants can use the (adjusted) private one. For the considerations of uniformity and certainty noted above, and for simplicity, therefore, it seems sensible to remain with the private law procedure for all such claims, and it will be argued in chapter five that they should, in any event, have their own time limit.⁷⁹

In addition to these five questions concerning the practical operation of the Woolwich unjust factor, knowledge of its true nature also gives the answer to three other questions concerning its substantive scope.

Over What Subject Matter does the Public Law Reason for
Restitution Extend?

It is clear that uncertainty surrounding the precise limits of the ‘Woolwich principle’ presents a significant source of concern to judges who have considered applying it in other cases. In Deutsche Morgan Grenfell v IRC,80 for example, Lord Hope and Lord Walker both referred to the lack of precision in the expression ‘taxes and other similar charges’ from the Woolwich ratio.⁸¹ This uncertainty arises because, as the Law Commission notes,82 the majority of the Court of Appeal in Woolwich held that the key was in the ‘public law’ nature of the demand. Glidewell LJ included licence fees and similar imposts as well as tax and customs duties,⁸³ while Butler-Sloss LJ, agreeing with Glidewell LJ, referred to ‘tax, duty, licence fee, or other payment on behalf of central and local government’.⁸⁴ The House of Lords, however, appeared to suggest a narrower application for the principle. Lord Goff’s formulation appears to exclude licence and other fees,⁸⁵ Lord Slynn only referred to tax, and Lord Browne-Wilkinson talked of ‘money paid by way of tax or other impost’⁸⁶. But the Law Commission’s conclusion is that there is no positive indication that they intended a narrower scope for the principle and nothing turned on this in the case itself.⁸⁷ Furthermore, having considered Lord Goff’s reasoning, the Law Commission concluded:

We do not think that the Woolwich right is limited to payments of tax or to Governmental or quasi-Governmental exactions, or to payments made in accordance with a demand. We believe that the crucial element is that the payment is collected by any person or body which is operating outside its statutory authority, that is, it is acting ultra vires. The requirement of ultra vires is not in our view confined to the excess of statutory power but also extends to procedural abuses, abuse of power and error of law on the part of the charging authority.⁸⁸

Now that we know that the unjust factor or reason for restitution is in fact provided by an event in public law it is clear that the Law Commission is right. Whenever money has been obtained in an ultra vires manner, as defined by public law, it should in principle be recoverable using the public law reason for restitution and there is no further need to be concerned with the specific definition of any such payment as a tax or licence fee etc.⁸⁹ A proper understanding of the reason for restitution, then, provides a much clearer and simpler definition of the scope of the principle than any that was available when the case was viewed in a wholly private law light.

What Sort of Invalidity Triggers this Reason for Restitution?

There is doubt as to whether that ultra vires quality must stem from the invalidity of subordinate legislation, or may also be due to error of law, abuse of discretion, or possibly procedural unfairness. This doubt arises because Lord Goff and Lord Slynn expressly reserved judgment on this question. However, the misconstruction of a relevant statute or regulation is an error of law and any administrative decision based on such a misconstruction is likely to be ultra vires and may, therefore, fit into the basic formulation.90

Some further guidance came from the case of British Steel,⁹¹ which established that misinterpretation of a valid statute was included in the Woolwich