Jazztel Plc v Revenue And Customs

A restitutionary claim for money paid under a mistake requires proof that the claimant was mistaken when the enrichment was conferred and that the mistake caused the enrichment. A mistake may coexist with doubt, provided the doubt does not overwhelm the mistaken belief. A distinction must be drawn between a mistake concerning the present or past and a misprediction concerning the future.

A limitation provision which retrospectively removes an accrued Community-law restitutionary right must be disapplied to the extent necessary to preserve the effectiveness of that right. This includes hidden retrospectivity, where the right expires before the claimant can discover the mistake. The court may declare the provision ineffective for accrued rights, but should not legislate a detailed transitional scheme.

Jazztel claimed restitution from HMRC for 23 payments of stamp duty reserve tax made between 2000 and 2009. The tax had subsequently been found incompatible with Community law. Jazztel alleged that the payments were made under a mistake and sought recovery outside the ordinary six-year limitation period.

HMRC relied on section 320 of the Finance Act 2004, which excluded the extended limitation period for mistakes of law in taxation matters. HMRC also maintained a possible change of position defence, pending appellate developments. The principal issues were whether the payments were made under a causative mistake, whether section 320 was effective against the claims, and what factual findings should be made concerning change of position.

1. Payment under mistake. The claimant established a prima facie restitutionary claim. It proved that the payments had been made, that HMRC had been enriched at its expense, and that the payments were made under a mistake concerning the lawfulness and practical payment obligation for SDRT. The ordinary test is whether the claimant was mistaken when the enrichment was conferred and whether, but for the mistake, the enrichment would not have been conferred.
2. A mistake is distinct from a misprediction. A mistake concerns the present or the past, whereas a misprediction concerns a future state of affairs. A claimant may also be mistaken while appreciating that there is an argument to the contrary. The court held that doubt could coexist with mistake while remaining below the 50 per cent threshold. Jazztel’s reservations about the legality of SDRT did not overwhelm its predominant belief that the tax was due.
3. Section 320. Section 320 of the Finance Act 2004 was retrospectively effective from 8 September 2003, although enacted later. Its effect was both expressly retrospective and hiddenly retrospective, because accrued rights could become time-barred before the taxpayer discovered the mistake.
4. Applying Marks & Spencer plc v Customs and Excise Commissioners, Case C-62/00, Grundig Italiana SpA v Ministerio Delle Finanze, Case C-255/00, and Fleming (trading as Bodycraft) v Revenue and Customs Commissioners, [2008] UKHL 2, the court held that section 320 infringed Community law because it provided no adequate transitional protection. Section 320 was therefore disapplied for claims accruing on or before 8 September 2003 which depended on section 32(1)(c) of the Limitation Act 1980.
5. Payments 1 to 9 and 23 were recoverable, subject to the unresolved change of position issue. Payments 10 to 22 were time-barred. The court made factual findings on change of position but made no determination of law; that issue was reserved, with the parties to draw an appropriate order providing for repayment if HMRC later established the defence.