Restitution Discussion Group Archives
| Sender: |
Eoin O' Dell |
| Date: |
Mon, 20 May 1996 21:51:28 +0100 (BST) |
| Re: |
Restitution and "passing on" |
The
defence of "passing on" is getting a very bad press. Air
Canada, we are told, doesn't fly; the High Court of Australia has,
it seems, come out against it. Now the Court of Appeal is beginning to get
in on the act. In today's London Times comes a report of Kleinwort Benson
Ltd v Birmingham City Council, a case in which the defence was not
allowed to a local authority in ultra vires receipt of a loan for swaps.
(A summary of the Times summary follows).
I don't understand the utter rejection of the defence.
If we focus on Air
Canada, we find that La Forest says first that there is a defence
of passing on, and second, that the fiscal chaos which would otherwise
happen makes the defence desirable on the facts. In the equivalent Irish
case of Murphy v AG [1982] IR 241 (unjustly ignored except by
Prof Birks), Henchy J held that taxes paid pursuant to an unconstitutional
taxing statute were exacted colore offici, and that the plaintiffs had
a prima facie cause of action (partially) met on the facts (in respect
of most potential defendants) by the defence of change of position, and
after he had discussed the defence, he too seemed to refer to
the fiscal chaos which made a defence desirable on the facts. In other
words, fiscal chaos, if valid, is a policy which makes a defence desirable
when the government is a defendant, it is not peculiarly attached to the
defence of passing on. Having separated out the issues of passing on and fiscal
chaos, and putting to one side the issue of fiscal chaos, it is possible
to address the issue simply of the desirability of the defence of passing
on; and in principle I incline to the view that it is desirable: if A
demands that B pay A, and B having paid, increases his costs to C, then
the enrichment in A's hands is at C's expense not B's. We can say that
B has passed on his loss, and thus that B is not the proper plaintiff,
C is. If that is all that the defence of passing on asserts, then it seems
to me sound in principle. Why should it change matters that there is only
one B and many Cs ? C (or all of them) should sue A, and if that is felt
improbable, then consider the number of class action suits that there
have been.
Anyway, what do colleagues think of the above ?
Eoin O'Dell.
And, now: the case which is the excuse for this rant:
Kleinwort Benson Ltd v Birmingham City Council (The Times,
20 May 20 1996; Court of Appeal 9 May 1996)
The defence of passing on or windfall gain was not available
to a local authority which had entered into interest-rate swap contract
with a bank and sought to counter a claim for restitution based on unjust
enrichment by asserting that the bank had or might have hedged the contract
so as to suffer no loss.
The Court of Appeal (Lord Justice Evans, Lord Justice
Saville and Lord Justice Morritt) so held when dismissing an appeal by
Birmingham City Council against a decision of Mr Justice Gatehouse on
December 9, 1994 refusing leave to amend its points of defence and counterclaim
and entering final judgment for the plaintiff, Kleinwort Benson Ltd, for
£166,479.65 with interest of £184,597.59.
LORD JUSTICE EVANS said the council's obligation was
to refund or repay the amount it had received and which it was unjust
it should keep. It was inconsistent with the principle of repayment to
give the concept of loss in this type of case a wider meaning equivalent
to "overall losses on the transaction".
EOIN O'DELL Trinity College ph (+ 353 - 1) 608 1178 (All opinions are personal; no legal responsibility whatsoever
is accepted.)
Barrister, Lecturer in Law
Dublin 2
Ireland
fax (+ 353 - 1) 677 0449
Live Long and Prosper !!
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