HL Deb 30 June 1949 vol 163 cc744-6WA
LORD MESTON

asked His Majesty's Government to consider amending the law so as to provide that money paid under a mistake of law may be recovered.

THE LORD CHANCELLOR (VISCOUNT JOWITT)

I understand that the noble Lord was prompted to ask this Question by the action of a Government Department and the decision of the High Court in the recent case ofSebel Products Limited v. Commissioners of Customs and Excise. In the first place I should like to say that there seems to have been considerable misapprehension—not shared I feel sure by the noble Lord—regarding the effect of the decision in this case. The actual decision was that the payment made to the Crown was not made under a mistake of law.

As the noble Lord is aware, a dispute arose between Sebel Products Limited and the Commissioners of Customs and Excise as to whether the products of the plaintiff company were liable to purchase tax. The Company took proceedings in order to obtain the ruling of the Court on this question and, pending the Court's decision, the company paid to the Commissioners of Customs and Excise the sum which was due if its products were held to be liable to purchase tax. Meanwhile purchase tax was being collected by the company from traders selling the articles and from the company's customers in the case of direct sales. The learned Judge held that the articles in question were not subject to purchase tax, whereupon the Commissioners decided to retain the money paid to them by the company on the ground that it was paid under a mistake of law. The real reason for the Commissioners' refusal was, I am told, that they thought that because in many cases the purchasers of the articles could not be traced, a part at any rate of the monies repaid to the company would be retained by it as a windfall.

The plaintiff company reopened the proceedings and the learned Judge ordered the Commissioners to repay the money paid to them by the company, ruling that the money was paid by the company and accepted by the Commissioners under an implied agreement that it would be refunded if the Court decided that the article concerned was not liable to tax. As a second ground for his decision the learned Judge relied on the argument that, since the money had been paid to the Commissioners pending the ruling of the Court on what the law was, there was no question of its having been paid under a mistake of law.

In the course of his decision the learned Judge expressed the opinion obiter that he saw no reason why, in appropriate cases, a Department should not rely on the defence that money had been paid to them under a mistake of law, since by the Crown Proceedings Act. 1947, they are placed in the same position as the ordinary subjects of the Crown. But he felt—and this he regarded as important—that the defence should be used only with great discretion, first because of the special position in which Departments stand as emanations of the Crown which is the source and fountain of justice, and secondly because they should set the highest possible example to the taxpayer, who might otherwise find what he might regard as a legitimate excuse for withholding, wherever possible, tax due to the Revenue Authorities.

The actual decision in the Sebel case, therefore, provides no reason for the abolition of the long-established rule that money paid under a mistake of law is not recoverable. Moreover, there would seem to be no evidence that the rule results in hardship or that it is generally undesirable. I would not be prepared, in any event, to give my considered opinion on the merits or otherwise of the rule, which affects the community much more than the Crown, without first having its practical working investigated by a Committee or a Royal Commission, but at present I know of nothing which would justify such an investigation being put in hand.

Regarding the question whether or not it is desirable for Government Departments to rely upon this defence, it does not seem to me to be possible to lay down any general rules which would hold good in all cases in which the possibility of such a defence may arise. The Treasury has nevertheless decided to send a circular letter to all Government Departments referring them to the obiter dicta of the learned Judge in the Sebel case and stressing the desirability of exercising great discretion in relying upon the defence. The Government have, moreover, taken steps to ensure that there is a consistency of policy amongst all Departments on the mater.

House adjourned at two minutes before eleven o'clock.