He told the BBC: "It's definitely a massive problem, definitely on a national scale, and we're talking about councils making tens of millions of pounds.
"From a legal point of view, the term is unjust enrichment. And if the council unjustly enriches itself, it's got to pay the money back."
Nick Lester from London Councils, which represents authorities in the capital, argued that handing the cash back was not necessarily in the public interest.
He said: "Where there's only a technical error, a small issue, where no-one was genuinely misled, the council can take the view, is it really a good use of public money to repay the penalty?
"Is that really what they should be doing?"
Appeals against penalty charge notices are heard by the Traffic Penalty Tribunal.
Caroline Sheppard, Chief Parking Adjudicator for the tribunal in England and Wales, said motorists should appeal if they believe they have been wrongly fined.
But she said that many motorists would not want to take the risk of taking their case to tribunal because it would mean losing their 50% discount - and that the onus was on local authorities to put things right.
"Adjudicators would expect them to stop enforcing in that area until such a time as they put it right - councils ought to be able to correct these things very swiftly," she added.
Figures show that last year 60% of all appeals outside London were successful: 32% were not contested by councils and 28% were won by motorists. In London in the year to March 2007, 68% of appeals were successful.
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