Monro v Revenue and Customs Commissioners

The Court of Appeal dismissed the taxpayer's appeal for recovery of tax paid under a mistake of law. The court held that section 33 of the Taxes Management Act 1970 creates a specific statutory regime for repayment of tax charged under an assessment and, where that regime applies, it displaces any parallel common law restitutionary remedy. In particular s 33(2A) excludes relief where the return was made in accordance with the practice generally prevailing at the time, and allowing a common law claim in such circumstances would defeat the statutory policy of protecting public finances.

The court also rejected a Convention attack under Article 1 of Protocol 1, holding that the statutory limitation reflects a rational legislative policy and falls within the State's margin of appreciation in tax matters.

Background and parties: The appellant, Mr Monro, former chief executive of Matalan plc, paid capital gains tax which he later established had been overpaid as a result of a mistake of law. He sought restitution of £846,000. The respondents were the Commissioners for HM Revenue & Customs. The proceedings came to this court on appeal from the Chancery Division (Sir Andrew Morritt) where the claim had been dismissed.

Nature of the claim: A restitutionary claim for repayment of tax paid pursuant to a mistake of law or as tax paid pursuant to an unlawful demand; alternatively relief under s 33 Taxes Management Act 1970.

Key factual points:

• Mr Monro was granted options in 1998 and sold 900,000 shares in 1999.
• His self-assessment returns followed the practice then prevailing, which led to an excessive assessment of capital gains tax.
• Following the Court of Appeal decision in Mansworth v Jelley the tax computation was shown to be wrong and Mr Monro sought to amend and to claim repayment.
• HMRC refused, relying on the statutory regime and the fact the return had been made in accordance with the prevailing practice.

Issues framed by the court:

1. Whether a common law restitutionary remedy (or a claim under Woolwich for unlawful demand) remains available where s 33 TMA 1970 applies or where relief is precluded by s 33(2A).
2. Whether the statutory scheme in s 33 should be interpreted as excluding common law claims by necessary implication.
3. Whether the statutory exclusion, as applied, violated Article 1 of Protocol 1 to the European Convention on Human Rights.

Court's reasoning: The court analysed the statutory text and scheme of s 33, emphasising that Parliament created a parallel, detailed regime for repayments of tax charged under assessments, with its own limitation period, appeal route and the specific exclusion in s 33(2A) for returns made in accordance with the practice generally prevailing. Applying the principles in the authorities (notably DMG, Woolwich and Marcic) the court concluded that where Parliament has enacted a statutory remedy that is inconsistent with the common law right (a cardinal feature of the statute), the common law right is displaced by necessary implication. Allowing a common law claim in circumstances fitting s 33(1) would nullify the protection intended by s 33(2A). On Convention issues the court held that the restriction falls within the legislature's margin of appreciation in tax matters and is a proportionate interference with property rights.

Disposition: The appeal was dismissed.

Appeal dismissed. The court held that s 33 of the Taxes Management Act 1970 constitutes a specific statutory regime for repayment of tax charged under an assessment and, where s 33(1) applies, it displaces a parallel common law restitutionary remedy; s 33(2A) therefore precluded relief on these facts. The court also held there was no violation of Article 1 of Protocol 1 ECHR because the statutory limitation reflects a legitimate and proportionate fiscal policy.

Appeal from the High Court of Justice (Chancery Division), Sir Andrew Morritt [2007] EWHC 114 (Ch) to the Court of Appeal [2008] EWCA Civ 306.