CEDH · CASELAW;JUDGMENTS;CHAMBER;ENG — 23 octobre 1997

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margin-bottom:0pt; font-size:12pt } .sD58304BF { width:53.3pt; text-indent:0pt; display:inline-block } .sF1D05512 { margin-top:0pt; margin-bottom:12pt; text-align:center; page-break-after:avoid; font-size:14pt } .sB365280B { width:4.14pt; text-indent:0pt; display:inline-block } .sF6A12959 { width:33%; height:1px; text-align:left } .s3133A7C8 { font-family:Arial; color:#0069d6 }       CASE OF THE NATIONAL & PROVINCIAL BUILDING SOCIETY, THE LEEDS PERMANENT BUILDING SOCIETY AND THE YORKSHIRE BUILDING SOCIETY v. THE UNITED KINGDOM   (117/1996/736/933-935)                       JUDGMENT   STRASBOURG     23 October1997       The present judgment is subject to editorial revision before its reproduction in final form in Reports of Judgments and Decisions 1997. These reports are obtainable from the publisher Carl Heymanns Verlag KG (Luxemburger Straße 449, D ‑ 50939 Köln), who will also arrange for their distribution in association with the agents for certain countries as listed overleaf.   List of Agents     Belgium : Etablissements Emile Bruylant (rue de la Régence 67,   B – 1000 Bruxelles)   Luxembourg: Librairie Promoculture (14, rue Duchscher   (place de Paris), B.P.   1142, L – 1011 Luxembourg-Gare)   The Netherlands: B.V. Juridische Boekhandel & Antiquariaat   A. Jongbloed & Zoon (Noordeinde 39, NL – 2514 GC ‘s-Gravenhage)     SUMMARY [1] Judgment delivered by a Chamber United Kingdom – applicants’ legal claims to restitution of monies paid under invalidated tax provisions extinguished under the effects of retrospective legislation (section   53 of Finance Act 1991 and section   64 of Finance (No. 2) Act 1992) i.   ARTICLE 1 OF PROTOCOL N o . 1 A.   Whether there was an unlawful expropriation of applicants’ assets Interest paid in gap period would inevitably have been taxed had voluntary arrangements between building societies and Inland Revenue continued to apply – it was held in applicants’ reserves waiting to be brought into account – in absence of transitional regulations applicants would have obtained a windfall in changeover to new tax regime – no support in domestic litigation for argument that interest subjected to double imposition – interest never in fact taxed – Parliament clearly intended interest to be taxed – cannot be maintained that it was misled in this respect – no unlawful expropriation of assets or double imposition of interest through operation of 1986   Regulations. B.   Whether there were “possessions” within meaning of Article 1 Court expresses no concluded view on whether any of applicants’ claims could properly be considered “possessions” – Leeds and National & Provincial had not secured a final and enforceable judgment in their favour when they initiated first set of restitution proceedings notwithstanding favourable outcome of Woolwich 1 litigation – judicial review proceedings and second set of restitution proceedings launched by all three applicants cannot be said to be sufficiently established – in particular, applicants cannot maintain that they had a legitimate expectation that Government would not seek Parliament’s consent to adopt retrospective legislation to validate impugned Treasury Orders. Nevertheless, Court prepared to proceed on assumption that applicants’ claims amounted to “possessions” and treat Article 1 as applicable given links between applicants’ arguments on this issue and substance of their claims to have been unjustifiably deprived of their “possessions”. C.   Whether there was an interference Not disputed – Court will examine whether interference justified on working assumption that applicants’ claims amounted to “possessions”. D.   Whether the interference was justified Reiteration of Court’s case-law on approach to interpretation of Article 1 – Court will apply rule in second paragraph of Article   1 to facts to determine whether impugned measures were a control of use of property in general interest to secure payment of taxes – most natural approach in circumstances. Obvious public-interest considerations at stake justifying Parliament’s adoption of section   53 of 1991 Act and section   64 of 1992 Act – section   53 sought to reassert Parliament’s original intention to tax interest paid in gap period – that intention thwarted by ruling in Woolwich 1 that 1986   Regulations void on technical grounds – Leeds and National & Provincial must be reasonably considered to have appreciated Parliament would adopt retrospective legislation to remedy technical defects in 1986   Regulations – section   64 designed to safeguard substantial sums of revenue placed at risk by applicants’ challenge to validity of Treasury Orders – cannot be maintained in circumstances that sections   53 and 64 upset balance between protection of applicants’ rights to restitution and public interest in securing payment of taxes due.   Conclusion : no violation (unanimously). ii.   article   1 of protocol n o .   1 taken in conjunction with article   14 of the convention Applicants not in relevantly similar situation to that of Woolwich – latter alone bore costs and risks of litigation and had secured victories in House of Lords and Court of Appeal before Leeds and National & Provincial had issued writs to launch their restitution proceedings – even if applicants could be so considered there was reasonable and objective justification for excluding Woolwich from scope of section   53 – understandable that Parliament did not wish to interfere with House of Lords ruling in Woolwich 1 – cannot be maintained that section   64 discriminated between applicants and Woolwich – measure was of general application. Conclusion : no violation (eight votes to one). iii.   Article   6 § 1 of the convention Applicability Applicable – both sets of restitution proceedings were private-law actions irrespective of fiscal dimension – judicial review proceedings clearly related to outcome of second set of restitution proceedings and therefore decisive of private rights. Compliance Effects of sections   53 and 64 were to render applicants’ legal actions unwinnable – whether this result constituted an interference with applicants’ right of access to a court must be determined in light of all circumstances of case – Court must in particular subject to careful scrutiny justifications adduced by authorities in view of retrospective nature of impugned measures. Applicants clearly understood that Parliament intended to tax interest paid in gap period and can reasonably be considered to have anticipated that Treasury would react as it did to remedy technical defects in 1986   Regulations following Woolwich 1 ruling – Leeds and National & Provincial in effect tried to pre-empt adoption of remedial legislation by issuing writs in restitution immediately before official announcement that Parliament would be asked to approve retrospective measures – section   53 not in fact specifically targeted at Leeds’ and National & Provincial’s restitution actions even if its effect was to stifle these actions – obvious public-interest considerations justifying adoption of section   53 with retrospective effect, having regard to Parliament’s need and resolve to reassert its original intention. Furthermore, compelling public-interest reasons for rendering Treasury Orders immune from legal challenge mounted by all applicants in taking judicial review proceedings and contingent restitution proceedings – these proceedings were in effect an indirect assault on Parliament's original intention to tax interest paid in gap period – even if section   64 adopted by Parliament in knowledge of initiation by applicants of judicial review proceedings, applicants themselves must be considered to have appreciated that Parliament would intervene as it did. Conclusion : no violation (unanimously). iv.   article   6 § 1 of the convention taken in conjunction with article   14 Court’s reasons supporting its earlier conclusion of no violation of Article   1 of Protocol   No.   1 in conjunction with Article   14 of the Convention equally valid for a finding of no violation under this head. Conclusion : no violation (eight votes to one). court’s case law referred to 26.3.1992, Editions Périscope v. France; 9.12.1994, Stran Greek Refineries and Stratis Andreadis v. Greece; 23.2.1995, Gasus Dosier- und Fördertechnik GmbH v. the Netherlands; 20.11.1995, Pressos Compania Naviera S.A. and Others v. Belgium; 22.10.1996, Stubbings and Others v. the United Kingdom In the case of the National & Provincial Building Society, the Leeds Permanent Building Society and the Yorkshire Building Society v. the United Kingdom [2] , The European Court of Human Rights, sitting, in accordance with Article   43 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) and the relevant provisions of Rules   of Court A [3] , as a Chamber composed of the following judges:   Mr   R. Ryssdal , President ,   Mr   R. Macdonald ,   Mr   N. Valticos ,   Mrs   E. Palm ,   Mr   R. Pekkanen ,   Sir   J ohn Freeland ,   Mr   P. Jambrek ,   Mr   K . Jungwiert ,   Mr   E. Levits , and also of Mr   H. Petzold , Registrar , and Mr   P.J. Mahoney , Deputy Registrar , Having deliberated in private on 31   May and 27   September 1997, Delivers the following judgment, which was adopted on the last-mentioned date: PROCEDURE 1.     The case was referred to the Court by the European Commission of Human Rights (“the Commission”) and by the Government of the United Kingdom of Great Britain and Northern Ireland (“the Government”) on 16   September 1996 and 25   October 1996 respectively, within the three-month period laid down by Article   32 §   1 and Article   47 of the Convention. It originated in three applications (nos.   21319/93, 21449/93 and 21675/93) against the United Kingdom lodged with the Commission under Article   25 on 15   January 1993, 21   December 1992 and 11   January 1993 respectively by the National & Provincial Building Society (hereafter “the National & Provincial”), the Leeds Permanent Building Society (hereafter “the Leeds”) and the Yorkshire Building Society (hereafter “the Yorkshire”). The Commission’s request referred to Articles   44 and 48 and to the declaration whereby the United Kingdom recognised the compulsory jurisdiction of the Court (Article   46); the Government’s application referred to Article   48. The object of the request and of the application was to obtain a decision as to whether the facts of the case disclosed a breach by the respondent State of its obligations under Article   1 of Protocol No.   1 taken alone or in conjunction with Article   14 of the Convention and Article   6 §   1 of the Convention taken alone or in conjunction with Article   14. 2.     In response to the enquiry made in accordance with Rule   33 §   3 (d) of Rules   of Court A, the applicants stated that they wished to take part in the proceedings and designated the lawyers who would represent them (Rule   30). 3.     The Chamber to be constituted included ex officio Sir   John Freeland, the elected judge of British nationality (Article   43 of the Convention), and Mr   R. Ryssdal, the President of the Court (Rule   21 §   4 (b)). On 17   September 1996, in the presence of the Registrar, the President drew by lot the names of the other seven members, namely Mr   F. Gölcüklü, Mr   R.   Macdonald, Mr   C. Russo, Mr   N. Valticos, Mr   R. Pekkanen, Mr   P.   Jambrek and Mr   E. Levits (Article   43 in fine of the Convention and Rule   21 §   5). Mr   Gölcüklü and Mr Russo were later prevented from taking part in the consideration of the case and were replaced by Mrs   E.   Palm and Mr K. Jungwiert respectively. 4.     As President of the Chamber (Rule   21 §   6), Mr   Ryssdal, acting through the Registrar, consulted the Agent of the Government, the applicants’ lawyers and the Delegate of the Commission on the organisation of the proceedings (Rules   37 §   1 and 38). Pursuant to the order made in consequence, the Registrar received the Government’s and the applicants’ memorials on 31   January 1997. On 10   March 1997 the Commission produced a number of documents from the file on the proceedings before it, as requested by the Registrar on the President’s instructions. 5.     In accordance with the President’s decision, the hearing took place in public in the Human Rights Building, Strasbourg, on 28   May 1997. The Court had held a preparatory meeting beforehand.   There appeared before the Court: (a)    for the Government Mr   M.R. Eaton , Deputy Legal Adviser,       Foreign and Commonwealth Office,   Agent , Mr   S. Richards , Mr   D. Anderson ,   Counsel , Mr   W.J. Durrans , Inland Revenue, Mr   P.H. Linford , Inland Revenue,   Advisers ; (b)    for the Commission Mrs   J. Liddy ,   Delegate ; (c)     for the applicants Lord Lester of Herne Hill QC, Mr   J. Gardiner QC, Mr   P. Duffy QC, Mr   J. Peacock , Ms   M. Carss-Frisk ,   Counsel , Mr   H. Ross , Solicitor, Clifford Chance       (for the Leeds), Mr   N. Jordan , Solicitor, Clifford Chance       (for the Leeds), Ms   S. Garrett , Solicitor, Addleshaw Booth & Co       (for the Yorkshire), Ms   F. Ferguson , Solicitor, Slaughter and May       (for the National & Provincial),   Solicitors .   The Court heard addresses by Mrs   L iddy, Mr   G ardiner, Lord   L ester of H erne H ill and Mr   R ichards. AS TO THE FACTS I.   general background 6.     The applicants were at all relevant times building societies within the meaning of the Building Societies Act 1986. Building societies operate under the status of “mutual societies” under English law as opposed to the status enjoyed by companies under company law. A building society’s members are made up of its investors who deposit savings with it and receive a rate of interest or a dividend in return, and its borrowers who are charged interest on their loans. By and large, loans are taken out by borrowers to buy private residential property. A.   The income-tax liability of investors 7.     Investors with a building society are liable to pay income tax in respect of the interest earned on their deposits. The income tax owed to the Inland Revenue for the purposes of the fiscal year running from 6   April of one year to 5   April of the following year was in practice calculated or measured with reference to a period of equal length preceding the actual fiscal year. The so-called “measurement principle” required that the period measured be always equal in length to the period taxed. The taxpayer was not in fact taxed on the income of the preceding year but assessed to tax on the income received in the current year, the amount of the current year’s income being artificially computed by reference to the income of the previous year. Accordingly, in normal circumstances, individual investors with building societies would be obliged to declare in their tax returns for the fiscal year in question the amount of interest or dividends earned on their deposits in a preceding reference period of equal length to the fiscal year, and the Inland Revenue would have to make individual assessments to tax on the strength of the information supplied by the investor. B.     The voluntary arrangements for discharging investors’ tax liability 8.     However, in view of the very large number of building society investors, many of whom had only modest savings and were thus only liable to small amounts of income tax, or to no tax at all, it had for many years up to and including the fiscal year 1985/86 been the practice for the Inland Revenue to make voluntary arrangements with building societies for the payment by each society of a single annual composite amount. The effect of this payment by a building society was to discharge its investors’ liability to income tax at the basic rate on the interest which they earned. These arrangements, which were for very many years operated on a non-statutory basis, were at the relevant time given statutory recognition under section   343 (1) of the Income and Corporation Taxes Act 1970 – “the 1970 Act”. 9.     The composite-rate payment under the voluntary arrangements was   calculated for each fiscal year by reference to the global amount of   interest paid by the society to its investors. However, in order to reflect   the fact that   some of the investors would not have been liable to tax   at all   given the modest amounts of their savings (see paragraph   8 above) a reduced rate of tax was applied. For this reason the annual payments made under this scheme were known as “reduced-rate tax” or “composite-rate tax”, or “CRT”. 10.     The amount paid to investors by way of interest on their investments took account of the fact that their liability to income tax was discharged by the building society via the payment of CRT to the Inland Revenue. Investors thus received their interest net of tax. C.   Setting the rate of CRT and the revenue-neutrality principle 11.     In accordance with the “revenue-neutrality” principle, set out in section   26 of the Finance Act   1984, the CRT payment reflected only the amount which would have been paid by the investors themselves had they been obliged to declare and pay tax on the interest they earned through their deposits. 12.     To achieve this, the Treasury, following negotiations with the Building Societies Associations, set each year, by statutory instrument, the CRT rate. In doing so, it was required to aim at a result whereby the same amount of tax was collected at source from building societies for the fiscal year in question as would have been collected from the individual depositors had they been taxed directly on the interest they received over a preceding reference period (see paragraphs   7 above and 13 below). D.   The prior-period system and the accounting-year period 13.     Until 1985/86, a “prior-period” system applied in respect of CRT. The amount of CRT to be paid by each building society for each fiscal year (see paragraph   12 above) was calculated by reference to the interest which it paid to its investors not during the actual year being taxed, but during the society’s own twelve months’ accounting period ending within that fiscal year. The tax was in every case paid on or around 1   January of the year of assessment. As noted above (see paragraph   8 above), the legal effect of this payment representing income tax was to discharge investors’ basic-rate liability on the interest earned in the year being taxed. 14.     There was no legal requirement to have a harmonised accounting period. Different time frames were used by different building societies, but in all cases the time frames represented a period equal in length to the fiscal year, having regard to the requirements of the measurement principle (see paragraph   7 above). The following accounting periods were operated by each of the applicant societies: –   the Leeds: 1   October to 30   September; –   the National & Provincial: 1   January to 31   December; –   the Yorkshire: 1   January to 31   December. Thus, on or around 1   January 1986, the three applicant societies paid to the Inland Revenue, to discharge their investors’ liability to income tax at the basic rate for the fiscal year 6   April 1985–5   April 1986, sums measured by reference to the interest paid to their investors in their accounting periods ended 30   September 1985 (the Leeds) and 31 December 1985 (the National   & Provincial and the Yorkshire). Under the effect of the voluntary arrangements (see paragraph   8 above), these payments completely discharged the income-tax liability of their investors in respect of the interest paid to them by the respective societies for the fiscal year 6   April 1985–5   April 1986. On that basis each of the applicant companies paid the following amounts by way of CRT to the Inland Revenue: –   the Leeds: 144,500,000 pounds sterling (GBP), a sum measured by reference to the interest paid to its investors in its accounting period ended 30   September   1985; ­   the National & Provincial: GBP   125,926,662, a sum measured by reference to the interest paid to its investors in its accounting period ended 31   December 1985; –   the Yorkshire: GBP   34,001,214, a sum measured by reference to the interest paid to its investors in its accounting period ended 31   December   1985. E.     The aim and effect of the new legislation: section   40 of the Finance Act   1985 15.     With a view to putting the taxation of the interest paid by building societies to investors on a similar footing to the scheme which had been introduced for banks by the Finance Act   1984, the Government proposed the introduction of a mandatory regime for the collection of tax on investors’ interest and the payment of the tax quarterly on the last days of February, May, August and November instead of annually in January. In his budget statement on 19 March 1985 announcing the introduction of the new scheme, the Chancellor of the Exchequer declared that it would not produce any additional revenue. The proposal was adopted by Parliament in the form of section   40 of the Finance Act   1985. 16.     Section   40 amended section   343 of the 1970   Act (see paragraph   8 above) by inserting a new sub-section   (1A) which had the effect of bringing to an end the long-standing voluntary arrangements as from 6   April 1986. It also empowered the Inland Revenue Commissioners to make regulations introducing a new system of accounting for the fiscal year 1986/87 and for subsequent years. Under the Income Tax (Building Society) Regulations 1986 (“the 1986 Regulations”), which came into force on 6   April 1986, tax was to be calculated on a quarterly basis on the actual interest paid during the actual year of assessment, as opposed to a prior period. F.     The problem of the “gap period” 17.     However the ending of the voluntary arrangements exposed a gap (“the gap period”) between the end of the applicant societies’ accounting periods in 1985/86 (see paragraph   14 above) and the start of the first quarter under the new regime. In the case of the Leeds the gap period was from 1   October 1985 to 5   April 1986, and in the case of the National & Provincial and the Yorkshire it was from 1   January 1986 to 5   April 1986. In order to ensure that each payment of interest formed the basis of an assessment to tax, transitional regulations were introduced which deemed payments falling into the “gap period” to have been made in a later accounting period, with the result that they formed the basis for an assessment to tax under the new “actual-year” arrangements. In the view of the Government the legislative intention was to ensure that the same amount of tax was collected as would have been collected if the previous arrangements had continued and that the building societies did not receive an undeserved windfall in respect of the gap period. 18.     Against this background, Regulation 11 (read in conjunction with Regulation 3) of the 1986 Regulations purported to require building societies to account for tax relating to payments of interest to their investors in their respective gap periods. Regulation 11 (4) provided for tax to be charged on interest paid in the gap period at 1985/86 rates, i.e. 25.25%, the basic rate of income tax being 30% for that year. II.     Particular circumstances of the case 19.     Each of the applicant societies took the view that the transitional regulations ran counter to the Government’s declared intention that the new regime introduced by the Finance Act   1985 should not produce any additional revenue (see paragraph   15 above), which view was reaffirmed during the parliamentary debates on section   40 of that Act. They considered that the effect of Regulations 3 and 11 was to impose tax again on interest they had paid in 1985/86, a fiscal year for which liability on their investors’ interest had already been discharged (see paragraph   14 above). For the applicants this had the result that, for twenty-four months’ interest paid to its investors in the two fiscal years 1986/87 and 1987/88, a society like the Leeds, with a 30   September year-end, was required to pay tax on thirty months’ interest. For the National & Provincial and the Yorkshire, each would have to pay tax on twenty-seven months’ interest for the twenty-four month period covered by the fiscal years 1986/87 and 1987/88. In the view of the applicant societies these consequences ran counter to the measurement principle according to which the measurement period forming the basis of assessment to tax can never exceed the length of the fiscal year (see paragraph   7 above). Each of the three applicant societies did in fact pay the tax claimed to be due under the transitional provisions of the Regulations as follows:   – the National & Provincial: GBP 15,873,945;   – the Leeds: GBP 56,973,690;   – the Yorkshire: GBP 8,902,620. 20.     The Government point out that the payments were made “without formal protest”. However, the applicants assert that they made clear from the outset that they disputed the lawfulness of the tax and that they associated themselves with the proceedings initiated by the Woolwich Equitable Building Society (“the Woolwich”) to challenge the lawfulness of the transitional provisions in Regulation   11. For its part the Leeds issued a press release when the Regulations were still at the draft stage, drawing attention to, inter alia , their complaint that the Regulations would have the objectionable effect of subjecting building societies to double taxation. The affidavit sworn by the Executive Vice-Chairman of the Woolwich referred to the Leeds’ support for its decision to initiate legal proceedings against the transitional arrangements. Both the National & Provincial and the Yorkshire made requests for the repayment of the amounts they had paid to the Inland Revenue. A.   The Woolwich 1 proceedings for judicial review 21.     On 18   June 1986 the Woolwich commenced judicial review proceedings seeking a declaration that Regulation 11 was unlawful as being outside the scope of the enabling legislation. It was further alleged that the transitional arrangements transgressed the fundamental principles of constitutional and taxation law and that the machinery adopted by the 1986 Regulations in order to implement the change in the system resulted in a double charge to tax over the gap period. B.     The legislative response to the launch of the Woolwich 1 proceedings: section   47 of the Finance Act 1986 22.     On 4   July 1986 the Government introduced in Parliament a measure intended to validate retrospectively the impugned Regulations and to give effect to what they claimed to be the original intention of Parliament when adopting them (see paragraphs   15 and 17 above). The responsible Government minister informed Parliament that the Regulations did not affect the amount of tax collected, only the timing of payment and reiterated that they would not bring extra tax to the Inland Revenue. On 25   July 1986 the Finance Act 1986 (“the 1986 Act”) received the Royal Assent. Section   47 of the Act retrospectively amended section   343 (1A) of the 1970   Act (see paragraph   16 above) with the purpose of authorising the Inland Revenue Commissioners to make regulations requiring the taxation in the year 1986/87 and subsequent years of assessments of sums paid to investors in the gap period and not previously brought into account. C.   The Woolwich 2 proceedings for restitution 23.     On 15   July 1987 the Woolwich issued a writ against the Inland Revenue claiming repayment of the sums paid by way of tax under the transitional provisions of the Regulations, as well as interest from the date of payment. D.   The decision of the High Court in the Woolwich 1 proceedings 24.     On 31   July 1987 Nolan J granted the application in Woolwich   1 (see paragraph   21 above) and made a declaration that Regulation 11 was void in its entirety and that the remaining Regulations were void in so far as they purported to apply to payments made to investors prior to 6   April 1986. He held that: (a)   there was nothing in the enabling legislation to indicate that Parliament intended to authorise a departure from the principle that income tax should only be levied on the income of one year; (b)   the power to make regulations conferred by section   343 (1A) was to be exercised solely with respect to 1986/87 and later years and nothing in the section   authorised the Revenue to go back on the arrangements with the building societies and impose further tax on interest paid to their members during the gap period; (c)   the fact that Regulation   11 (4) provided for tax to be charged at 1985/86 rates (which were higher than the 1986/87 rates) was itself a clear indication that the Regulations went beyond the powers conferred by section   343 (1A); (d)   the position was not affected by the amendment in section   47 (1) of the 1986 Act which, whatever its intention, still left the power conferred by section   343 (1A) as a power exercisable only with respect to 1986/87 and subsequent years. 25.     The Inland Revenue appealed against the decision. They conceded that Regulation   11 (4) was invalid but contended that this partial invalidity did not invalidate the rest of the Regulation. 26.     Towards the end of 1987, the Inland Revenue repaid to the Woolwich the sum of GBP   57,000,000 with interest from 31   July 1987 (the date of the order of Nolan J) but refused to pay interest from any earlier date. Thus, the remaining issue in the Woolwich 2 proceedings (see paragraph   23 above) came to be whether or not Woolwich had grounds for claiming interest on the payments made by them up to 31   July 1987. E.     The decision of the High Court in the Woolwich 2 proceedings 27.     On 12   July 1988 Nolan J dismissed the Woolwich 2 action, holding that the Woolwich was not entitled to recover the sums in issue under any general principle of restitution or as having been paid under duress. He took the view that the sums had been paid under an implied agreement that they would be repaid if and when the dispute about the validity of the 1986 Regulations was resolved in favour of the Woolwich. Thus, the Woolwich had no cause of action to recover the money until the date of his order of 31   July 1987. The Woolwich appealed against the decision and order. F.     The decision of the Court of Appeal in the Woolwich 1 proceedings 28.     On 12   April 1989 the Court of Appeal allowed the appeal of the Inland Revenue in the Woolwich   1 proceedings (see paragraph   25 above). The court held that: (a)   as a matter of ordinary construction, the words of section   47 of the 1986 Act were clear and enabled the Revenue to take account of, and to charge to tax, interest paid by the societies in the gap period; and (b)   subject to the invalidity of Regulation   11 (4), which was conceded by the Revenue, Regulation   11 was valid. G.   The decision of the House of Lords in the Woolwich   1 proceedings 29.     On 25   October 1990 the House of Lords allowed the appeal of the Woolwich in the Woolwich   1 proceedings. The House of Lords, Lord   Lowry dissenting, declared the transitional provisions in the 1986 Regulations to be ultra vires on the grounds that Regulation   11 (4), as the Inland Revenue had previously conceded, and Regulation   3, so far as it related to the period after February and before 6   April 1986, were ultra vires the empowering statute. The House of Lords considered that Regulation   11   (4) could not be severed from the rest of Regulation   11 and that the transitional provisions in the 1986 Regulations were therefore void in their entirety. 30.     Lord Oliver, delivering the judgment of the majority, concluded: “... I confess that I find the conclusion irresistible that Parliament intended by these words [section   47 of the 1986 Act] to enable the Revenue to take account of and to charge to tax sums which, rightly or wrongly, it regarded as otherwise representing windfalls in the hands of building societies. One has only to look at the circumstances. The Regulations of 1986 had been made and had been objected to. They were made the subject of a direct challenge in legal proceedings, the evidence in support of which clearly adumbrated the arguments advanced before the judge and the Court of Appeal. The notion that Parliament should go to the trouble of enacting an expressly retrospective amendment in order to provide, unnecessarily, for the use of these sums as a measurement of tax liability – a matter never remotely in issue – is simply fanciful ... ... I am bound to say that I think it unfortunate that the Revenue, through Parliament, should have chosen by secondary rather than primary legislation to take what was, on ordinary principles, the very unusual course of seeking to tax more than one year’s income in a single year of assessment, but section   47 of the Finance Act 1986 is, on any analysis, a very unusual provision and I have, in the end, found myself irresistibly driven to the conclusion that this was what Parliament intended should occur. It may be – I do not know – that the legislature did not appreciate fully that the effect of the arrangements made in 1985 was to discharge all liability for tax on interest paid in the year of assessment 1985/86, including tax on interest paid after the end of a society’s accounting year, and that, accordingly, to tax those sums again in a subsequent year was, in a sense, to tax them twice. But even making that assumption it amounts to no more than saying that the legislature should not have intended to do that which it plainly set out to do. I would, for my part, therefore, reject the Woolwich’s principal argument.” This ruling declaring Regulation 11 (4) void on technical grounds meant that no mechanism existed to achieve what the Government claimed to be Parliament’s initial intention that interest payments made during the gap period should be assessed for tax. This led the Government to introduce new legislative provisions. A draft press release was circulated as early as 7   March 1991 for the approval of the Chancellor of the Exchequer. The draft indicated that the Chancellor in his budget-day speech on 19   March 1991 would introduce legislation to validate retrospectively the Regulations which had been struck down in the Woolwich   1 case (see paragraph   33 below). H.   The Leeds   1 and National & Provincial   1 proceedings for restitution 31.     Following the House of Lords’ decision in the Woolwich   1 proceedings, and after having made several requests for repayment, the Leeds commenced proceedings on 15   March 1991 against the Inland Revenue for the restitution of the sum of GBP   56,973,690 paid pursuant to the 1986 Regulations which had been declared void in the Woolwich   1 proceedings. 32.     On 17   March 1991 the National & Provincial, which had also sought but was refused repayment, commenced proceedings against the Inland Revenue for the restitution of the sum of GBP   15,873,945 paid pursuant to the void Regulations. I.     The legislative response to the Woolwich   1 decision: the enactment of section   53 of the Finance Act 1991 33.     On 19   March 1991, in his budget statement, the Chancellor of the Exchequer announced the introduction of legislation to remedy “the technical defects in the Regulations”. This legislation became section   53 of the Finance Act 1991 (“the 1991 Act”), which entered into force on 25   July   1991. Section   53 provided, inter alia : “Section   343 (1A) of the [1970 Act] ... shall be deemed to have conferred powers to make all the provisions in fact contained in [the 1986 Regulations].” 34.     The provision had retrospective effect, save that by subsection   (4) it had no effect “in relation to a building society which commenced proceedings to challenge the validity of the Regulations before 18   July   1986”. The Woolwich was the only building society which satisfied this condition. 35.     In a letter dated 21   March 1991 the Director-General of the Building Societies Associations informed the Financial Secretary to the Treasury that the decision of the Government “[did] not come as any great surprise, although it will still be very disappointing to the societies concerned”. In fact, the concrete effect of the measure was to stifle the Leeds &