Great Southern and Western Railway Company coat of arms
Three points may be recalled from my first post. First, in Auckland, Viscount Haldane LC for the Privy Council held that “[a]ny payment out of the Consolidated Fund made without Parliamentary authority is simply illegal and ultra vires, and may be recovered by the Government if it can, as here, be traced” ([1924] AC 318, 327). Second, in GSWR, Viscount Cave LC in the House of Lords said that, in Auckland, “… a payment made by the executive Government … without … an authorization, was held to be ultra vires and recoverable” ([1925] AC 754, 773 (emphasis added)). These are the statements of the second – restitution – limb of the principle. And, third, Lord Haldane LC’s reference to whether the unauthorised payment “can be traced” was not a reference to tracing in the equitable or proprietary sense, but instead simply required that the recipient of the unauthorised payment can be identified. A further point may be recalled from my second post: the cases often quote both limbs of the principle. Hence, many of the cases in my second post, and some of the cases in my third post, illustrate the authorisation limb of the principle in the context of statements which set out both limbs. I have mainly discussed the authorities which find authorisation in those posts; whilst in this post I will mainly concentrate on the authorities which find no authorisation and go on to consider the restitution limb of the Auckland/GSWR principle.
The leading recent English case on the restitution limb of the principle is probably Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70 (HL) (pdf), in which it was approved by Lord Goff. He held that that money paid by a citizen to a public authority in the form of taxes or other levies paid pursuant to an ultra vires demand by the authority is prima facie recoverable by the citizen as of right. One of the justifications for this conclusion was that it was the converse of the restitution limb of the Auckland/GSWR principle ([1993] AC 70, 177):
… it is well established that, if the Crown pays money out of the consolidated fund without authority, such money is ipso facto recoverable if it can be traced: see Auckland Harbour Board v The King [1924] AC 318. It is true that the claim in such a case can be distinguished as being proprietary in nature. But the comparison with the position of the citizen, on the law as it stands at present, is most unattractive.
First, Lord Goff’s principle of recovery of overpaid tax has been approved and followed in Ireland in O’Rourke v The Revenue Commissioners [1996] 2 IR 1 and Harris v Quigley [2006] 1 IR 165, [2006] 1 ILRM 401, [2005] IESC 79 (01 December 2005); and see also Re Article 26 and the Health (Amendment) (No 2) Bill 2004 [2005] 1 IR 105, 176-177, [2005] IESC 7 (16 February 2005) [66]-[72]. Second, his concession that Auckland “can be distinguished as being proprietary in nature” was unnecessary, given that it is clear that Lord Haldane LC’s reference to tracing was simply to the requirement that the recipient of the unauthorised payment can be identified.
The restitution limb of the Auckland/GSWR principle has subsequently been approved and followed in English courts. For example in Child Poverty Action Group v Secretary of State for Work and Pensions [2009] 3 All ER 633, [2009] EWHC 341 (Admin) (27 February 2009) [18] Michael Supperstone QC (sitting as Deputy High Court Judge) held that “the principle established in the case of Auckland Harbour Board v R [1924] AC 318 which provides that payments made by a government minister out of the Consolidated Fund without specific authority of Parliament are illegal and ultra vires and can be recovered by the government” and he – quite properly – made no reference to any requirement of proprietary tracing. He held that Auckland had no application on the facts, and that the regime for the recovery of overpaid social security benefits provided by section 71 of the Social Security Administration Act 1992 did not remove the Defendant’s power to claim repayment at common law of money paid by mistake. The Court of Appeal reversed this final conclusion ([2010] 1 WLR 1886, [2009] EWCA Civ 1058 (14 October 2009)) and found limits in the analogy Lord Goff drew in Woolwich between the claim of the crown to recover overpayments (here, overpaid benefits) and the claim of a taxpayer to recover overpaid tax ([31]-[33] (Lloyd LJ); [26] (Sedley LJ) and [37] (Wilson LJ) concurring). On appeal, the House of Lords unanimously affirmed that section 71 constituted a comprehensive scheme which excluded common law claims ([2011] 2 AC 15, [2010] UKSC 54 (08 December 2010)), and rejected the Court of Appeal’s attempt to limit Lord Goff’s analogy in Woolwich: to distinguish between overpayments to and by the state “is neither a logical nor a principled distinction” ([16] (Lord Brown)). However, Auckland featured neither in the Court of Appeal nor in the House of Lords. In Minister for Social, Community and Family Affairs v Scanlon [2001] 1 IR 64, [2001] 2 ILRM 342, [2001] IESC 1 (16 January 2001), the Irish Supreme Court held that the statutory powers of the Minister to recover overpaid social welfare payments applied retrospectively to permit the recovery of overpayments made before the statutory powers were introduced, but no reference was made to common law claims (and there is some suggestion that, prior to the introduction of the statutory powers, the State sought to recover overpayments only in cases of fraud: Mel Cousins “A Study of Social Welfare and Law: the Recovery of Overpayments” (1993) 3 Irish Journal of Sociology 109, 110-111 (pdf)).
In Charles Terence Estates Ltd v Cornwall Council [2011] EWHC 2542 (QB) (07 October 2011), Cranston J held that various leases, under which predecessor Councils of the defendant had leased properties from the plaintiff CTE, were ultra vires the Councils, and were thus void. He continued: “[t]he leases being of no effect, Cornwall Council has a restitutionary claim against CTE for repayment of the rents it has paid: Auckland Harbour Board v R [1924] AC 318″. The Court of Appeal ([2013] 1 WLR 466, [2012] EWCA Civ 1439 (13 November 2012)) held that the leases were valid, and did not need to reach the Auckland point.
The restitution limb of the Auckland/GSWR principle has also been approved and followed in Canada. For example, in R v Toronto Terminals Railway Co [1948] Can LR Exch 563, O’Connor J held that Crown overpayments on leases were not authorised by Parliament, and were thus recoverable; the submission of counsel for the Crown “in this respect is, in my opinion, sound and the principle laid down in Auckland Harbour Board v The King, which he cites in support of his contention is applicable”. Again, in BVD v R [1955] SCR 787, 1955 CanLII 67 (3 October 1955) the Supreme Court of Canada confirmed that the Crown was entitled to recover overpaid import subsidies (though without reference to Auckland). In Dominion Bridge Company v Saskatchewan Government Telephones 1963 CanLII 371 (SK QB) (13 May 1963) [27] Friesen DCJ referred to both BVD and Auckland together, and followed them. In Social Services Appeal Board v Butler 1996 CanLII 6607 (NL SCTD) (29 March 1996) Barry J approved and followed Auckland and Toronto Terminals, and held that overpaid social assistance overpayments could be recovered by the government.
For the sake of completeness, I should note that the line of cases leading to the decision of the Supreme Court of Canada in R v Criminal Lawyers’ Association of Ontario [2013] 3 SCR 3, 2013 SCC 43 (CanLII) (1 August 2013), many of the provincial judgments on the authorisation limb of the Auckland/GSWR principle discussed in my second post also approve the restitution limb (see, eg, Canada (Attorney General) v Yukon (Territorial Court) (otherwise R v Savard) 1996 CanLII 3294 (YK CA) (10 April 1996) [104] (Rowles JA, Ryan JA concurring); [10], [19] (Wood JA, dissenting); British Columbia (Minister of Forests) v Adam Lake Band 2001 BCCA 647 (CanLII) (5 November 2001) [35] (Newbury JA; Prowse and Donald JJA concurring); R v Cai 2002 ABCA 299 (CanLII) (12 December 2002) [93] (McClung, Côté and McFadyen JJA); Lang v British Columbia (Superintendent of Motor Vehicles) 2005 BCCA 244 (CanLII) (25 April 2005) [41] (Donald JA; Newbury and Low JJA concurring); R v Russel 2011 ONCA 303 (CanLII) [47] (Rosenberg, Goudge and Armstrong JJA); see also Cape Breton v Nova Scotia 2008 NSSC 111 (CanLII) [49] (Murphy J)).
Similarly, the restitution limb of the Auckland/GSWR principle has also been approved and followed in Australia. For example, in New South Wales v Commonwealth (No 1) (1932) 46 CLR 155, [1932] HCA 7 (21 April 1932) Evatt J cited Aukland for both limbs of the principle. Again, in New South Wales v Bardolph (1934) 52 CLR 455, [1934] HCA 74 (30 November 1934), which mostly concerns the authorisation limb of the principle, Evatt J (in a judgment unanimously expressly affirmed by the full High Court) observed that Auckland “shows that payments made from the Consolidated Revenue Fund in the absence of a ‘sufficient’ parliamentary authority may be recovered back by the Government if they can be traced”. Other High Court of Australia cases on the authorisation limb of the Auckland/GSWR principle discussed in my previous post also approve the restitution limb (see, eg, British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30, [2003] HCA 47 (2 September 2003) [82] (McHugh, Gummow and Hayne JJ); Combet v Commonwealth (2005) 224 CLR 494, [2005] HCA 61 (21 October 2005) [235]-[236] (Kirby J); Pape v Commissioner of Taxation (2009) 238 CLR 1, [2009] HCA 23 (7 July 2009) [59] (French CJ)).
Below the level of the High Court, the restitution limb of the Auckland/GSWR principle was again approved in Commonwealth v Thomson (1962) 1 CCR (Vic) 37, and it was applied in Commonwealth v Burns [1971] VR 825, [1971] VicRp 100 (25 May 1971). The defendant had received 5 additional years of pension payments from the the plaintiff’s Repatriation Department, and the plaintiff’s restitution claim was successful. Newton J found that the payments to the defendant were made “without statutory or other lawful authority” and “were also made by reason of a mistake on the part of … the Repatriation Department” (emphasis added) and he held:
The payments made to Mrs Burns were made out of Consolidated Revenue: see … s81 and s83 of the Commonwealth of Australia Constitution. … the authorities establish that money paid out of Consolidated Revenue without statutory or other lawful authority is recoverable by the Crown from the recipient, … And, in my opinion, the position is a fortiori where, as here, the payments are the result of a mistake. I consider that the principle, which I have just stated, is a special overriding principle applicable to public moneys in the sense of moneys of the Crown forming part of Consolidated Revenue; the principle is of wider scope than the principles relating to the recovery as between subject and subject of moneys paid under a mistake of fact … The principle is, in my view, based on public policy. …
[He quoted Auckland Harbour Board v R [1924] AC 318, 326, 327 (Viscount Haldane LC), and continued]: By the words “if it can, as here, be traced” Viscount Haldane was, in my opinion, not referring to tracing in the equitable or proprietary sense, but to tracing the identity of the recipient of the money. … The principle set out in the passage which I have cited from Viscount Haldane’s judgment in the Auckland Harbour Board Case has never since been questioned, so far as I have discovered. On the contrary it has been referred to in later cases without disapproval and has on occasion been applied. [He referred, inter alia, to Toronto Terminals, Thomson and Bardolph; and he noted that in GSWR, there is “no reference to ‘tracing’.”] … in my opinion, the true position is that the application of the [Auckland/GSWR] principle is confirmed by s81, s82 and s83 of the Commonwealth of Australia Constitution: see too s53, s54 and s56; and Attorney-General for Victoria v Commonwealth (1945) 71 CLR 237, [1945] HCA 30 (19 November 1945).
Burns is clear authority in favour of the application of the restitution limb of the Auckland/GSWR principle to a claim for the recovery of an overpaid pension, and it has been approved on this basis in respect of other social welfare payments Formosa v Secretary to the Department of Social Security [1988] FCA 291 (17 August 1988) and Roberts v Repatriation Commission [1992] FCA 642 (23 December 1992)). In Canada, Barry J in Butler 1996 CanLII 6607 (NL SCTD) (above) reached the same conclusion. This supports the position taken by Michael Supperstone QC at at first instance in Child Poverty Action Group ([2009] EWHC 341 (Admin) (27 February 2009) [18] as to the existence of the common law claim, and it undermines the contrary assumption made at Irish law.
Finally, in Burns, Newton J held that the existence of a possible statutory basis for recovery of overpaid benefits did not preclude the common law claim based on the restitution limb of the Auckland/GSWR principle (contrast the Child Poverty Action Group and Scanlan cases above)). As to his reference to “tracing” as meaning simply “identification”, the authorities to similar effect are set out in my first post in this series. As to his reference to sections 81 and 83 of the Australian Constitution, the reasoning in the Victoria is prosaic, and Latham CJ’s reference to those sections is pretty cursory; but, as we have seen in my third post in this series, the High Court of Australia has subsequently developed a very sophisticated understanding of the application of those sections in the context of the Auckland/GSWR principle. Burns has been assimilated into this understanding: in their joint judgment in British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30, [2003] HCA 47 (2 September 2003) [81]-[83] McHugh, Gummow and Hayne JJ approved both Auckland and Burns.
Burns was approved and followed in Attorney-General v Gray [1977] 1 NSWLR 406, 410-412, in which salary overpaid by the State was recovered on the basis of the restitution limb of the Auckland/GSWR principle. Both Burns and Gray were approved in Director-General of Social Services v Jeanette Shirley Hales [1983] FCA 81 (5 May 1983). And both Auckland and Burns were approved in Commonwealth v Crothall Hospital Services (Aust) Ltd [1981] FCA 117 (17 August 1981) where the Federal Court (Ellicott J, Blackburn and Deane JJ concurring) held that the appellant agreed to vary the price payable for the services and so provided lawful authority for the payment out of consolidated revenue of the moneys in question.
In Sandvik Australia Pty Ltd v Commonwealth of Australia and Collector of Customs [1989] FCA 374 (19 September 1989) French J approved Auckland and Burns and held that the principle in that case was “supported by sections 81 to 83 of the Constitution ([45]-[46]); and he concluded that invalid refunds of import duty were recoverable by the Commonwealth (followed in Stretton v Agfa-Gevaert Ltd [1999] VSC 70 (15 March 1999) [30] (Byrne J); affd MSAS Cargo International Pty Ltd & Anor v Agfa-Gevaert Ltd [2000] VSCA 197 (23 October 2000) [28] (Brooking JA, Charles and Batt JJA concurring); with French J’s view of sections 81-83 in Sandvik, compare his more elaborate view of these sections as French CJ in Pape v Commissioner of Taxation (2009) 238 CLR 1, [2009] HCA 23 (7 July 2009) [8]-[9], [53]-[113], [136]; Williams v Commonwealth (No 1) (2012) 248 CLR 156, [2012] HCA 23 (20 June 2012) [2], [29], [39]; and see also Williams v Commonwealth (No 2) [2014] HCA 23 (19 June 2014)).
Finally, in Commonwealth of Australia v Davis Samuel Pty Ltd and Ors (No 7) [2013] ACTSC 146 (1 August 2013) Refshauge J approved the restitution limb of the Auckland principle ([1728]-[1731], referring inter alia to Crothall); he adopted the strong and unqualified support for it articulated by Kirby J ([1754], referring to Combet [2005] HCA 61 (21 October 2005) [235]-[236]); and he concluded that the principle remained valid. ([1753], referring to British American Tobacco [2003] HCA 47 (2 September 2003) [81]-[83] (McHugh, Gummow and Hayne JJ)). He found that payments by the Commonwealth amounting to Aus$8.725million were void; and, relying on Auckland, he held that they were recoverable by the Commonwealth from the persons to whom they were paid.
The conclusion is inescapable that the restitution limb of the Auckland/GSWR principle is well-established throughout the common law world, so that unauthorised payments by the State are recoverable. On that basis, if overpayments by the State to farmers under EU schemes are unauthorised, then they are prima facie recoverable. It is to this question that this series of posts is directed. This is the fourth post in the series. In my first post, I established the Auckland/GSWR principle. In my second post, I discussed the common law authorities on the first – authorisation – limb of the principle; and, in my third post, I discussed the constitutional authorities on that limb. In this post, I discussed the second – restitution – limb of the principle, which provides that the State may recover unauthorised payments. The constitutionalisation of the authorisation limb not only strengthens the policy underlying the restitution claim in the second limb, it also raises the question under the second limb of whether unauthorised State payments not only can, but must, be recovered, and, if so, whether this precludes the operation of ordinary restitution defences. I will discuss these issues in my next post in this series. Penultimately, overpayments to Irish farmers are not the only context in which these restitution issues have recently been in the news. Similar overpayments to Gardaí (Irish police officers) give rise to similar issues which will be considered in an additional footnote post; and an interesting example of State overpayments has recently arisen in South Africa, which I will discuss it in my sixth and final post in this series. Finally, in an addendum, I will – eventually – consider whether Irish law might draw other conclusions from the Australian constitutional experience.
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