Ipsofactoj.com: International Cases [2001] Part 2 Case 6 [CAEW]


COURT OF APPEAL, ENGLAND & WALES

Coram

Stringer

- vs -

Norwich City Council

LORD JUSTICE OTTON

LORD JUSTICE BUXTON

3 MAY 2000


Judgment

Buxton LJ

  1. This is an appeal, brought with the permission of the judge below, from a judgment of His Honour Judge Langan QC, delivered in the Norwich County Court in March 1999. It raises issues about the overpayment of housing benefits to a landlord and the recovery of those benefits by the local authority.

  2. The point in issue in this case is, however, a new one, so far as I am aware, in that it concerns the right to restitution on the part of the landlord of sums paid by him in repayment of overpaid benefits in circumstances where, it is assumed for the purposes of this case, that the local authority could not in fact have recovered those overpayments by way of action had it sought to sue in the county court.

  3. In order to explain how the matter arises, it is necessary to say something about the facts. Before I do so, I should explain, principally by way of footnote, that two further contentions were raised or sought to be raised in this court in respect of the factual circumstances, one of which was not pursued and the other of which we did not need to investigate. Those were as follows. Firstly, it was assumed in the court below that the sums that the local authority sought to recover from the landlord had not been paid to him correctly and he had not been entitled to them. Before us, Mr. Bean QC indicated that there might be arguments that contradicted that assumption, but he properly recognized that, for the purposes of this case, it was not open to him to raise those points since they depend upon factual arguments and investigations of the relationship between the landlord and the tenant that had not been undertaken in the court below. The second issue, which was the subject of a respondentís notice, was that it was conceded before the judge below that the correct procedure, which I will shortly indicate, for the recovery of overpaid housing benefit, had not been followed by the Council in this case. The respondentís notice invited us to re-open that question in the light of more recent authority, effectively arguing that, although the detailed procedure had not been followed, its necessary substance had been so followed. In the event, we did not find it necessary to investigate that issue, nor to consider further the judgments in this court in the case of Haringey Borough Council v Awaritefe (The Times Law Reports, 3rd June 1999) because we considered it possible and proper to determine the case on the basis that it was put before the judge, and on the basis upon which it was fought before him.

  4. With that preliminary clearing of the ground, I turn to the facts of the case. The Council paid housing benefit, which was the entitlement of Miss Bryan, a tenant of the landlord, Mr. Stringer, direct to him, as is often the practice. At a date that we need not concern ourselves with, Miss Bryan left the premises, and when this came to the Councilís attention, they sought repayment from Mr. Stringer, the landlord, of a sum of some £140 in housing benefit paid to him: it being the Councilís contention, and as I have already said accepted for the purpose of this appeal, that he had not been entitled to that payment because the tenant, whose benefit it was, had not been residing in his property. Mr. Stringer accepted liability for the sum of some £64 and paid that sum back to the Council. He calculated that sum on the basis of the date upon which it became known to him that Miss Bryan had left, it being his original contention in correspondence that, whilst he accepted that he should repay the housing benefit paid to him after the date when he knew or ought to have known that she had gone, it was not right that he should repay the balance of the sum in respect of the time at which he had no knowledge that Miss Bryan had in fact left. In circumstances that I shall have to deal with in more detail, the Council were dissatisfied with that arrangement and brought proceedings in the County Court to recover the balance of the sum of £140. Having thus been sued, the landlord took the view that he had been under no liability to repay the sum of £64 that he had already paid and counterclaimed for the reimbursement of that amount. It is that issue, that of the counterclaim, with which the judge below and this court were concerned.

  5. I must say something about the legal background to the case and the way in which the dispute arises. Part XIII of the Housing Benefit (General) Regulations 1987 provides that an overpayment, either to the landlord or to the tenant, shall be recoverable, and the recovery can be made either from the claimant or from the person to whom the payment was made, that being in this case the landlord. Part XI of those regulations makes provision for the determination of issues and questions, be they questions relating to the original entitlement or be they questions relating to reclaiming amounts already paid. Equally, these regulations apply indifferently to the Councilís dealings with the claimant as they do to the Councilís dealings with the claimantís landlord in circumstances where the payment has been made to the landlord. First of all, the local authority has to make a determination. By regulation 77(1) the authority has to notify in writing any person affected by a determination made by it under the regulations and any such notification shall include a statement as to the matters that are set out in Schedule 6 to the regulations. Schedule 6 is clearly important. It requires as part of the notification the matters set out in paragraphs 2 and 3 of the regulations, which I should read in full.

    2.

    Every notice of determination shall include a statement as to the right of any person affected by that determination to request a written statement under regulation 77(4) (requests for statement of reasons) and the manner and time in which to do so.

    3.

    Every notice of determination shall include a statement as to the right of any person affected by that determination to make written representations in accordance with regulation 79(2) and the manner and time in which to do so.

  6. Paragraph 14 goes on to deal specifically with overpayment payment and includes various matters that must be included in the notice of determination, which shall include:

    .... a statement as to -

    (a)

    the fact that there is a recoverable overpayment;

    (b)

    the reason why there is a recoverable overpayment;

    (c)

    the amount of the recoverable overpayment; and

    (d)

    how the amount of the recoverable overpayment was calculated; and

    (e)

    the benefit weeks to which the recoverable overpayment relates in each benefit period ...

    (f)

    where recovery of the recoverable overpayment is to be made by deduction from a rent allowance or rebate, as the case may be, that fact and the amount of the deduction.

  7. As I have said, these detailed provisions for notification apply to the case of the landlord as much as to the case of the tenant. That was held, if it was not obvious already, by this court in Warwick District Council v Freeman (1994) 27 HLR 616, 621. Whether, if the matter were reconsidered, Parliament would think that it was necessary to have the same degree of protection for a landlord, who is a person who might be thought able to a certain extent to look after his own interests, as for a claimant for housing benefit, who is a person who falls into a category of society normally vulnerable and subject to difficulties, is perhaps a question of some interest. It is, however, a question for policy makers and certainly not a question for this court. We proceed, as did this court in Warwick District Council v Freeman, on the basis that Mr. Stringer was entitled to the benefit of all the notification procedures that I have just set out.

  8. In dealing with this case there was extremely unfortunate delay on the part of the Council, for which no explanation has been given and which cannot have made the case any easier either for the landlord or for the judge in dealing with it. As I have already said, at some date in 1993 Miss Bryan had left the premises owned by Mr. Stringer that she was occupying as a tenant. This came to the notice of the Housing Department of the Council when Miss Bryan applied for housing benefit at a different address. They wrote to the landlord on 14th October 1993 pointing out that there had been an overpayment and indicating that he might be required to repay it. That letter in fact gave the wrong reason why benefit was no longer open to Miss Bryan, the letter having said that she was no longer eligible for benefit at all, rather than that she was not eligible for benefit at the address originally stated. However, that may not matter because it was Mr Stringerís case that he never received that letter. According to him, he did not hear any more about it until the Council returned to the issue some two years later, in November 1995. They then sent an invoice seeking the sum of £140 in respect of overpayment, the invoice having a number of matters inscribed on its back. The invoice stated:

    Overpayment of housing benefit re: Miss Bryan [address given] who vacated... period 27.9.93-31.10.93 35 days at £124.40 pcm.

  9. On the back of the invoice various terms were set out, they being mainly directed to payment arrangements, but they also said this:

    If you would like a more detailed breakdown of how the recoverable overpayment was worked out please ask the Private Sector Benefits Section, Housing Department at City Hall.

    HOW DO I APPEAL?  If you do not agree with this decision you have the right of appeal. You should put your reasons in writing within 6 weeks of the date of this invoice. We will look at this again and write back to you. If you still disagree you have the right to put your case to a review board of councillors.

  10. As I have said already, Mr. Stringerís response to that was in due course to pay the sum of £64 but to resist the payment of the rest of the amount.

  11. The case and counterclaim originally proceeded in the small claims jurisdiction before the District Judge, who found that there had been what he described as a "wholesale failure" by the Council to follow the procedure required by the regulations. Like the judge below, I do not consider it necessary to go through the respects in which the invitations and warnings set out on the back of the invoice did not comply with the detailed terms of Part V1 of the Housing Benefit Regulations because that is not in issue now in this appeal, any more than it was before the judge. The District Judge concluded that the claim by the Council for recovery must fail because it had not been preceded by the necessary documentation. As to the counterclaim, the District Judge said that the burden of establishing the counterclaim rested on the landlord. The Council was not in that respect relying on the statutory procedure, but saying that the landlord had waived any right to complain by voluntarily paying up. He therefore dismissed the counterclaim.

  12. The argument arising from the counterclaim was put before the judge, as it was put before us, in simple terms. Mr. Bean, on behalf of the landlord, argued that the payment by the landlord fell within the category of restitution recognized for the first time in the case of the Woolwich Building Society v Inland Revenue Commissioners [1993] AC 70. There, it will be recalled that the majority of the House of Lords, in a leading speech by Lord Goff, recognized the proposition which is set out at page 177F, 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.

  13. Mr. Bean argues that that principle applies to this case. There has been a demand by the local authority in the form of the invoice, and subsequently in the form of invitations in correspondence, to pay voluntarily, which was, if not ultra vires, at least incorrect and such as the local authority could not rely on if they pursued Mr. Stringer. It was therefore a case that fell firmly within that principle recognized in Woolwich. It was unfair, apart from anything else, that Mr. Stringer, who had paid up voluntarily, should be in a worse position than himself or any other citizen who had not paid in response to the demand: granted that the demand could not be enforced by the local authority.

  14. The riposte by the Council, which to some extent was accepted by the judge below, was really equally simple. Miss Henderson, who appeared before the judge, put to him that Mr. Stringer had never been entitled to housing benefit at all in respect of the period in question. This was not, therefore, a case where a demand or tax had been levied on the citizen. Rather, it was a case where the citizen had been made a payment by the local authority to which he was not entitled and which the local authority was precluded from recovering from him, not because of any issue of justice or of entitlement, but because a particular procedure had not been followed. In those circumstances, it could not be said that the local authority had been unjustly enriched by Mr. Stringerís payment and he therefore could not recover that payment from them. Those arguments appealed to the judge.

  15. In order to assess the nature of this case, it is necessary to say a few words about the general law of restitution and of unjust enrichment. The local authority in its skeleton before this court strongly emphasised the many statements to be found in the authorities that the overarching principle that binds together the whole of the law of restitution is the concept of unjust enrichment. I do not need to cite numerous general statements that have been made to that effect. It is also clear that that concept is very much in the minds of the authors of Goff and Jones on The Law of Restitution, 5th Edition, who, at a number of places in their opening chapters, emphasize the force of the concept of unjust enrichment. That said, however, it is important to recognize that the fact that the whole of the law of restitution is or may be expressable in terms of the concept of "unjust enrichment" does not mean that a court is free, in any given case, simply to apply its own notion of the justice of the case without regard to the nature of the recovery that is sought to be made. That is particularly important in this case. There was perhaps some inclination in the Councilís skeleton [I emphasize strongly that we did not have the benefit of hearing Mr. Arden expound this point] to suggest that we should look simply, as it were, at the justice of this case, without considering or without it being necessary to consider the conceptual structure that lay behind the Woolwich decision. Whether or not I am right in thinking that that was the respondentsí argument, it is undoubtedly the case that we do have to consider the conceptual basis of Woolwich in order to decide whether it should apply here; and that is what the judge did.

  16. In response to a question by the court, Mr. Bean said that the Woolwich principle could be expressed as widely as this: that any payment by a citizen in response to a demand by a public authority for payment, which the public authority could not in fact recover by action, gave the citizen a right to recover what he had paid. In my judgement, that states the Woolwich principle far too widely. In order to understand the basis of the Woolwich principle, which is the only principle of restitution that can be applicable to the present case, it is necessary to look carefully at what, in particular, Lord Goff said of it in that case. At pages 172 and 173 of the report, Lord Goff clearly recognized that the principle, as formulated by him and as applied in that case, was a new one; and was also, within the law of restitution, sui generis, in that it formulated a new head of recovery different from both cases of compulsion and cases of payment colore officii that had previously been recognized. That principle was as Lord Goff stated it at page 171:

    .... the subject who makes a payment in response to an unlawful demand of tax acquires forthwith a prima facie right in restitution to the repayment of the money.

  17. That statement was specific to the facts of the case and, in my judgement, it would be wrong to think that Lord Goff was speaking solely of demands for the payment of tax and of nothing more when he formulated the principle. None the less, it is important to see what aspects of the taxation regime led Lord Goff to that conclusion and what aspects of that regime he thought to be important in founding a right of restitution. At page 172, in addressing objections that he thought might otherwise be raised to the extension of the law in that case, he said that there were two answers to those who opposed this particular extension of the law of restitution:

    The first is that the retention by the state of taxes unlawfully exacted is particularly obnoxious.

    Reference was then made to the Bill of Rights:

    The second is that, when the revenue makes a demand for tax, that demand is implicitly backed by coercive powers of the state ....

  18. That latter consideration was reinforced by a quotation from the judgment of Holmes J in Atchison, Topeka & Santa Fe Railway v OíConnor, 223 U.S. 285, where the lack of balance between the taxing powers of the state and the citizenís power to resist is particularly emphasised.

  19. Those considerations are a pointer towards the sort of case to which the Woolwich principle ought properly to extend. The other important pointer is that Lord Goff emphasised in a number of places that the justification for the extension of the law of restitution to this was effectively one of simple justice. Such quotations can be found, for instance, at page 168 of the report in Woolwich, where Lord Goff relied as a guide on what he described as "the principle of justice" to be found in the judgment of Martin B in Steele v Williams 8 Ex 825, and also at page 172, where Lord Goff said:

    Common justice seems to require that tax be repaid, unless special circumstances or some principle of policy requires otherwise; prima facie, the taxpayer should be entitled to repayment as of right.

  20. Although I have ventured to warn against the direct application of the concept of injustice in determining the ambit of the law of restitution, there is no doubt at all that, within the category with which we are concerned, that is to say the "Woolwich" category, the justice of recovery is an important consideration; so is the nature of the demand that is made by the state.

  21. Looking at those two guidelines, it seems to me clear that the case with which we are concerned here is not a case that comes anywhere near to fulfilling the requirements for recovery that are envisaged in the Woolwich case. First of all, although it is true that a demand was made, it was not a demand backed by coercive power of the sort that Lord Goff had in mind. It did not put the citizen at the disadvantage with the state that a demand for tax puts him: because (as one might think possibly Mr. Stringer was aware, and would have been aware if he had taken advice) the defect in the notice meant that the Council could not in fact enforce the recovery of the money. Putting it simply, it asked for its money back, a very different situation from a demand for tax which one is bound to fulfil on pain of penalty. Secondly, I am bound to say that I find it wholly artificial to equiparate this case, where the reality is that the Council was saying:

    You have received public money to which you were not entitled. Would you please return it?

    with a case where a public authority is demanding a citizenís own money from him under powers that it does not have. Looking at what simple justice requires here, it seems to me quite wrong to say that simple justice requires Mr. Stringer to get his payment back. True it is, as Mr. Bean stressed, that by making that payment in the events that occurred and in the legal position that occurred, he put himself in a worse position than he would have been in if he had simply resisted. But that in itself is not a reason for granting him restitution of the sum that he in fact paid. There are many circumstances in the law of restitution where, if the person paying had held on to his money, no one could have got it off him; but it does not follow from that that the specific remedy of restitution, which is for the recovery in specific circumstances of a sum paid by a person, should be available generally. In my view, that is a strong consideration to bear in mind here, that Mr. Stringer, had he held on to his money, would in effect have received a windfall. It is to his credit, of course, that he co-operated to the extent that he did. But it does not follow from that that he is thereby later on entitled to restitution of the sum that he paid.

  22. Looking as best one can at the nature and ambit of the Woolwich principle, and without seeking in any way to give a definitive view, which I would not presume to do, on how far that principle extends, I am none the less entirely clear that, however far the principle does extend, it does not extend to this case. The judge put it as clearly as it could be at page 15 of the judgment:

    To allow the restitutionary claim would in my judgment be to take one step beyond the limits of the decision in Woolwich.

  23. I entirely agree. For those reasons I would therefore dismiss this appeal. I fear that what I have said is both longer and manifestly less elegant and clear than the judgment of the judge below, to which I would pay a tribute.

    Otton LJ

  24. I agree. At the heart of Mr. Bean QCís submissions is the proposition that the sums paid by the landlord to the Council were pursuant to an unlawful demand by the Council and that the landlord is entitled to restitution of those sums paid. It is not in dispute that the notification was defective. It is assumed, for the purposes of this appeal, that the defects were sufficient to vitiate the notification and render the demand unenforceable, either in proceedings or by retention from other housing benefit. However, in my judgment, this situation does not make the demand an ultra vires demand for payment which, if complied with, gives rise to an immediate right to restitution pursuant to the decision of the House of Lords in Woolwich Building Society v Inland Revenue Commissioners, to which my Lord has referred.

  25. In British Steel v Customs & Excise Commissioners [1997] 2 All ER 366, this court, presided over by the Vice Chancellor, held that, where an unlawful demand for tax was made by the state, the taxpayer was prima facie entitled, on making payment pursuant to that demand, to a common law restitutionary right to repayment unless that common law right had been removed by the empowering legislation in question or other legislation. At page 376C the Vice Chancellor said:

    An unlawful demand for duty must, in a sense, always be an ultra vires demand. Whether the demand is based on ultra vires regulations, or on a mistaken view of the legal effect of valid regulations, or on a mistaken view of the facts of the case, it will, as it seems to me, be bound to be a demand outside the taxing power conferred by the empowering legislation. If, for any of these reasons, a demand for tax is an unlawful demand, it seems to me to follow from the speeches of the majority in the Woolwich case that the taxpayer would, prima facie, become entitled, on making payment pursuant to the unlawful demand, to a common law restitutionary right to repayment. The empowering legislation in question, or other legislation, might remove the taxpayerís common law right to repayment. That would depend on the construction of the Act or Acts in question.

    In the present case, if the demands for excise duty were unlawful, the payer would, in my judgment, have a prima facie common law right to repayment.

  26. Here, there was a statutory power to make a demand, even though the formal requirements of the demand had not been complied with. It would have been open to the Council to go through the process correctly and within the time limits, and a second regular demand would have been a valid demand, not an ultra vires demand. On neither occasion could it be said that the demand was coercive. The tenant and the landlord had rights within the statutory framework to challenge the obligation to repay and the amount demanded. Moreover, there was no entitlement to housing benefit after the tenant had vacated the premises. The fact that she had not given 28 days notice, or that the landlord did not know of her departure and therefore could not re-let, may have allowed the landlord some relief from some of the overpayment. This consideration apart, neither the landlord nor the tenant could have claimed benefit if it had been withheld. As the judge put it at page 14 of his judgment:

    Had the council failed to pay, neither the landlord nor Miss Bryan could have called for payment with any prospect of success.

    Later, he said this:

    Put another way, non-compliance with the statutory procedure which, as the District Judge rightly held, is a bar to the claim by the Council, does not provide a foundation for the landlordís restitutionary counterclaim.

  27. I would agree with that succinct statement of principle and I too would dismiss the appeal.


Cases

Haringey Borough Council v Awaritefe (The Times Law Reports, 3rd June 1999); Warwick District Council v Freeman (1994) 27 HLR 616; Woolwich Building Society v Inland Revenue Commissioners [1993] AC 70; Atchison, Topeka & Santa Fe Railway v OíConnor, 223 U.S. 285; Steele v Williams 8 Ex 825; British Steel v Customs & Excise Commissioners [1997] 2 All ER 366

Legislations

Housing Benefit (General) Regulations 1987, Reg.77(1), Sch.6 par 2 & 3

Authors and other references

Goff and Jones on The Law of Restitution, 5th Edition

Representations

Mr. D. Bean Q.C. for Appellant / Defendant (instructed by Messrs Nash & Co., Plymouth).

Mr. A. Arden Q.C. and Miss J. Henderson for Respondent / Claimant (instructed by Norwich City Council).


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