Monro v HM Revenue & Customs

Where Parliament has created a special tax-repayment regime, a common-law restitutionary claim is displaced by necessary implication if the statutory scheme contains a restriction which expresses a cardinal legislative policy and a parallel claim would defeat it. A claim within Taxes Management Act 1970, section 33(1), cannot avoid section 33(2A) by relying on mistake of law or by characterising the payment as made under an unlawful demand. The prevailing-practice restriction rationally protects fiscal finality and public finances. It is compatible with Convention property rights.

Mr Monro overpaid capital gains tax after selling shares acquired under an employment option. His return reflected the practice then generally prevailing. The calculation was subsequently held erroneous in Mansworth v Jelley [2003] STC 53.

HMRC refused his claim for repayment under section 33 of the Taxes Management Act 1970. Although the claim fell within section 33(1), relief was barred by section 33(2A) because the return followed prevailing practice. The Chancellor dismissed Mr Monro’s restitutionary claim: [2007] EWHC 114 (Ch).

Mr Monro appealed, contending that section 33 did not exclude his common-law claims for money paid under a mistake of law or pursuant to an unlawful demand. He also relied on Article 1 of the First Protocol and Article 14 of the Convention.

1. Appeal dismissed unanimously. Lady Justice Arden held, with whom Lord Justice Longmore and Lord Justice Mummery agreed, that the Chancellor was correct.

2. Whether a statutory remedy displaces a common-law remedy is a question of construction. A parallel common-law remedy is excluded by necessary implication where the statutory remedy contains a restriction which gives effect to a cardinal statutory policy and the common-law remedy would defeat that restriction. The court applied the approach in Johnson v Unisys Ltd [2001] UKHL 13 and Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2006] UKHL 49.

3. Section 33 of the Taxes Management Act 1970 governed Mr Monro’s claim. It created a self-contained scheme for repayment claims arising from an error or mistake in a return. The claim fell within section 33(1). HMRC’s duty under section 33(2) was, however, subject to section 33(2A), which precluded relief where the error reflected generally prevailing practice.

4. Section 33(2A) protects public finances against repayment claims generated by later legal developments after tax has been collected and spent. Permitting a common-law claim in the same circumstances would nullify that policy. The words “under this section” did not make the statutory scheme non-exclusive. The same conclusion applied to a claim recast under the Woolwich Equitable Building Society v Inland Revenue Commissioners principle.

5. The restriction was compatible with Article 1 of the First Protocol. Taxation legislation, including arrangements for repaying overpaid tax, attracts a wide margin of discretion. The distinction between domestic claims and claims protected by the EU principle of effectiveness was also justified for Article 14 purposes. Accordingly, section 3 of the Human Rights Act 1998 did not require a Convention-compatible construction different from the ordinary construction.

• Court of Appeal (Civil Division) — dismissed Mr Monro’s appeal and upheld the exclusion of his common-law restitutionary claim by section 33 of the Taxes Management Act 1970: [2008] EWCA Civ 306.
• High Court (Chancery Division) — Sir Andrew Morritt, Chancellor, dismissed the claim because section 33(2A) barred statutory relief and a parallel common-law remedy was inconsistent with the statutory scheme: [2007] EWHC 114 (Ch).