Case alert - Vodafone v Ofcom: Restitution for unlawfully set charges
In Vodafone Ltd v Office of Communications  EWCA Civ 183,  2 WLR 1108 the Court of Appeal in England upheld the High Court's restitutionary order of £218 million (plus interest), following the quashing of 2015 regulations that set new fees for spectrum licences. It rejected an argument that the court could assess what charges would have been set had Ofcom acted lawfully (a "counterfactual" approach). Rather, in a Woolwich restitution claim, recovery occurs as of right. The appropriate measure is the difference between the sums actually charged and the sums the authority was entitled to recover in accordance with the (then-existing) statutory power. Thus the mobile network operators (MNOs) were entitled to a refund of all charges in excess of the level set by the previous 2011 regulations.
This outcome differs from what occurred in the New Zealand case Waikato Regional Airport Ltd v Attorney General  3 NZLR 1 (PC). In Waikato, the court was prepared to determine the amount of an appropriate lawful charge. The English Court of Appeal said that Waikato (at , ,  and ) supported the argument that the appropriate measure of restitution was the difference between the sums actually charged and the sums the authority was entitled to recover in accordance with the (then-existing) statutory power. Waikato did not involve hypothesising the existence of a different law. The Court of Appeal in Ofcom also rejected the characterisation of Waikato that administrative steps had been hypothesised in a counterfactual .
This case is significant because the same approach might potentially apply in New Zealand where the facts are distinguishable from Waikato. This might arise, for example, where a legislative instrument is required to impose a new charge.
The Court of Appeal considered Ofcom's arguments were all permutations of saying that a counterfactual should be applied, which can assume not only administrative steps but also legislative steps.
The Court of Appeal's answer was that the courts have not ever hypothesised any counterfactual steps at all in a Woolwich case. Where monies are levied without the authority of Parliament, recovery occurs as of right . In evaluating the quantum of enrichment, it is, however, open to the court to identify the sum that is in excess of what could lawfully have been charged under the existing legislation . Hypothesising new and unenacted legislation would be uncharted speculation and would undermine the Woolwich principle itself .
The Court of Appeal disagreed with the High Court adopting a counterfactual approach at all (with a bright line distinction between hypothesising administrative steps and hypothesising primary or secondary legislation) .
Unjust enrichment framework
The Court of Appeal briefly touched on the usual framework for assessing claims of unjust enrichment :
1) Enrichment - has the defendant been enriched?: It was obvious that, on the basis of the Woolwich principle, Ofcom had been enriched by the payment of the ALFs in so far as they exceeded the amounts payable under the 2011 Regulations.
2) Expense - was the enrichment at the claimant's expense?: Correspondingly, the MNOs suffered a loss through providing that benefit.
3) Unjust - was the enrichment unjust?: The factor that made the enrichment unjust was, as stated in Woolwich  AC 70, that money paid by a citizen to a public authority in the form of levies paid pursuant to an ultra vires demand by the authority is prima facie recoverable by the citizen as of right. It is a fundamental principle of law that monies should not be levied without the authority of Parliament, and full effect can only be given to that principle if the return of taxes exacted under an unlawful demand can be enforced as a matter of right.
To the extent that this decision is applicable to equivalent circumstances, this may have significant fiscal implications for public authorities. Litigation can take many years to achieve finality. If a charge-setting decision made through a legislative instrument is ultimately found to be invalid, it may be impossible to retain the incremental charges that ought to have been imposed for those intervening years (depending on whether the previous regime is deemed to have remained in place instead). Validation could only be obtained through legislation of the type discussed in Mangawhai Ratepayers and Residents Association Inc v Kaipara District Council  2 NZLR 437 (CA).