Morgan Guaranty v Lothian RC [1994] ScotCS CSIH_3 (01 December 1994)

Morgan Guaranty v Lothian RC [1994] ScotCS CSIH_3 (01 December 1994)

Payments made under a contract that is void ab initio due to being ultra vires a local authority are recoverable by the payer under the condictio indebiti, even if the payment was made under a mistake of law. The error of law rule does not form part of Scots law and is overruled. The pursuer is entitled to repetition of the sum paid, subject to equitable considerations, which were not established by the defender in this case.

Citation
[1994] ScotCS CSIH_3
Parties
Pursuer: Morgan Guaranty Trust Company of New York; Defender: Lothian Regional Council
Jurisdiction
Scotland
Judgment Date
01 December 1994
Procedural Posture
Civil Appeal / Inner House, Court of Session (reclaiming Motion)
Outcome
Appeal allowed; interlocutor of the Lord Ordinary recalled; decree granted for the sum sued for; issue of interest remitted to Outer House for further consideration.
Legal Topics
Ultra Vires Contracts, Unjust Enrichment, Condictio Indebiti, Mistake of Law, Repetition of Payments, Public Authority Powers
Contract Law Public Law Restitution Local Government Law Ultra Vires Contracts Unjust Enrichment Condictio Indebiti Mistake of Law +2 more

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Parties

Morgan Guaranty Trust Company of New York

Pursuer

Lothian Regional Council

Defender

Procedural Posture

Civil Appeal / Inner House, Court of Session (reclaiming Motion)

Legal Issues

  1. 1 Whether payments made under a void (ultra vires) contract are recoverable by the payer from a local authority under Scots law
  2. 2 Whether the condictio indebiti is available where the payment was made under a mistake of law, not just fact
  3. 3 Whether the error of law rule (excluding recovery for mistake of law) forms part of Scots law

Ratio Decidendi

Payments made under a contract that is void ab initio due to being ultra vires a local authority are recoverable by the payer under the condictio indebiti, even if the payment was made under a mistake of law. The error of law rule does not form part of Scots law and is overruled. The pursuer is entitled to repetition of the sum paid, subject to equitable considerations, which were not established by the defender in this case.

Court Disposition

Appeal allowed; interlocutor of the Lord Ordinary recalled; decree granted for the sum sued for; issue of interest remitted to Outer House for further consideration.

Orders

  • Recall of the Lord Ordinary's interlocutor dismissing the action
  • Decree de plano for the pursuers for £368,104.52