Redland City Council v Kozic & Ors

[2023] HCATrans 121

[2023] HCATrans 121

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B17 of 2023

B e t w e e n -

REDLAND CITY COUNCIL

Appellant

and

JOHN MICHAEL KOZIK

First Respondent

SIMON JOHN AKERO

Second Respondent

SARAH AKERO

Third Respondent

NEIL ROBERT COLLIER

Fourth Respondent

GAGELER J
GORDON J
EDELMAN J
STEWARD J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 14 SEPTEMBER 2023, AT 10.00 AM

(Continued from 13/9/23)

Copyright in the High Court of Australia

____________________

GAGELER J:   Mr Gleeson.

MR GLEESON:   Thank you, your Honours.  Can I deal with three matters left over from the appeal in the notice of contention yesterday.  The first is we have sought to provide the Court with a note on the United States authorities, which the Court may have, together with the material referred to in the first paragraph, which is the extract from the Restatement (Third) of Restitution and Unjust Enrichment (2011).  It is sufficient in the Restatement to look at the proposition in bold in paragraph 19, together with comment (a.).

The effect of that is that at a broad level, the United States has reached a similar position to the United Kingdom, which is there is a prima facie right to recover taxes, fees, or government charges paid in excess of the true legal obligation.  The jurisprudential root is similar but not identical.  In the United Kingdom, Woolwich has drawn upon two traditional unjust factors:  failure of consideration, and compulsion to produce the single principle for wrongly levied taxes.  In the United States, cases from the same common law areas, which are mistake and compulsion, particularly an expanded concept of compulsion, together with the influence of statutory law, have produced the same principle.

GAGELER J:   Well, almost.  The defences are quite expansive, according to the Restatement.  I am not sure if this is a defence or not, but there is an expanded notion of voluntariness in making a payment, which is not very far from an expansive reading of David Securities.

MR GLEESON:   Well, that is possible, your Honour.  But at the prima facie right to restitution, where I currently am ‑ ‑ ‑

GAGELER J:   Yes.

MR GLEESON:   ‑ ‑ ‑ and as a general proposition, via similar but not identical jurisprudential roots ‑ ‑ ‑

GAGELER J:   Yes.

MR GLEESON:   ‑ ‑ ‑ the same result has been reached.  Then there is a question of the defences.

GAGELER J:   And illustration 17 is particularly interesting to me in this context – based on a Florida case, I think.

MR GLEESON:   Yes.  Yes, so then we are in the defences.  So, where we submit this appeal should ultimately decided is on either a broader or a narrower basis.  The narrower basis is that we have causative mistake agreed.  Your Honours proceed directly to the defences, and in rejecting the novel defence, your Honours take into account the constitutional principles we have identified.  That would be consistent with what Chief Justice Mason did in Royal Insurance 182 CLR 51 at page 69 that I referred to yesterday.

The slightly broader approach that we would urge on the Court is that while facts (a), (b), and (c) were proved in the present case as the unjust factor, only facts (a) and (b) needed to be proved.  Proof of the mistake was a surplusage when the law is correctly stated.  We would urge your Honours to do that, it is certainly part of the matter in federal jurisdiction; there is no difficulty in that sense.

There is an intensely practical reason why your Honours should do it, and it is twofold.  The first is that most cases of this kind will be brought in the lower courts, save, unless there is a group action.  It is important that this Court identify clearly what must and must not be proven, and if we are correct in terms of the unjust factor – if Bullen and Leake were being rewritten following this judgment, it would simply have as an illustration of money having been received, money paid as in for a tax, et cetera, not due in law.  That is what one would plead in the Local Court, and the particulars would be:  I received a rate notice, X; I paid it, Y; the special rate was not due in law.  That would state the complete cause of action.  There would be a question of if there was any defence.  That would follow if your Honours take the approach we urge.

The second, intensely practical reason is for those plaintiffs who cannot prove mistake – e.g., the Woolwich plaintiff – if the law remains as it is, they will either have to prove compulsion – perhaps in an expanded sense; compulsion through the statutory regime – or fail, or come back to this Court to run the point again we have been running.  We submit that it is appropriate for this Court to state the law now in a way which will resolve those questions.

GORDON J:   That is, address issues that are not raised on these facts.

MR GLEESON:   It is raised on these facts in the sense that I put (a) plus (b) plus (c).  In fact, I only needed (a) plus (b).

GORDON J:   Sorry, I meant – sorry, I was only dealing with that last point that you just made.  The second practical reason.

MR GLEESON:   Yes, yes.  But, applied to these facts, it is to say that these plaintiffs needed to prove less than they, in fact, proved, and that would be an appropriate exercise of the judicial power to say that that is the correct legal result in this case.  As to voluntary payment, in the Restatement that I have handed up, it is dealt with in comment (h.), on page 278.  The passage at the bottom of – the whole of comment (h.) is interesting because it says the assertion that it is a voluntary payment as a defence:

is much abused, but rarely with the mendacity of the decisions that deny restitution of taxes on the ground that payment was “voluntary.” –

The passage at the foot of comment (h.) ‑ ‑ ‑

EDELMAN J:   Mr Gleeson, which page is this?

MR GLEESON:   Page 278.  The passage at the bottom of comment (h.), citing the Carpenter Contractors decision, we would embrace:

People pay taxes because of civic obligation and a keen awareness of the potential penalties –

if they do not. That is why to draw on the compulsion stream as part of the statement of the unifying principle is sound in law. It is why I referred your Honours, yesterday, to Part 13 of the Local Government Regulation that we separately handed up, which says, if you do not pay your rates, the Council can sell up your home.

Your Honours, there are only two other matters from yesterday.  The first was a short point that there were various questions yesterday about the overall plan, in fact, including at pages 65 and 66 from your Honour Justice Gageler and your Honour Justice Gordon.  There is an agreed fact between the parties which your Honours should separately now have, the effect of which is the plans themselves were never in evidence.

So, it was agreed that such plans did not include the time and the cost as required by the regulation, and there was otherwise no attempt by the appellant at trial to prove, from the content of the otherwise invalid plan, anything about the benefit.  And so, when I put to your Honour Justice Gageler, in answer to the question about whether there was a statutory instrument or document tying the levy or the resolution to the statutory language by identifying the benefit and I said, there was not, that is what the plan should have done.  The plan did not do that and there was no attempt made to, in any way, rely upon the content of the plan as proof of the benefit.

Your Honours, the final matter was at page 18.  Your Honour Justice Gageler asked Mr Horton whether his case could be summarised in three propositions, and he said yes, and added a fourth.  Could I just give our bullet‑point answers to that four‑step case which draws together what I have submitted yesterday.  Was the money paid for the identified statutory purpose of benefitting the respondents?  Answer:  no.  The money was paid for the purpose of discharging a claimed tax liability.  That is so, both subjectively and objectively.  There was no request, acquiescence, or acceptance of any benefit, nor could there be any opportunity to reject it.  And the conditions under which it might become a statutorily identified benefit – being a valid plan – were never met.

The second question was:  was the money as paid, in fact, used for that purpose?  And the answer is there is no evidence, in a positive causal sense, of how the receipt of the money influenced the performance of the work and when, particularly given the work was obliged anyway under statute.  The third question was:  are the respondents benefited by a greater amount than the money they had to pay?  And the answer is that involving the Court in the assessment of value of the consideration is an exercise that should not be entertained; Roxborough, paragraphs 105 to 106 of Justice Gummow.  In any event, factually, the benefit as asserted was the avoidance of a diminution in value.  On the counterfactual, the works were not done, and the counterfactual was contrary to the admissions that the Council was obliged to do the work, which would avoid the diminution.

And, if it matters, the fourth question is “good faith”.  There was no pleading of good faith, no finding of good faith, and, in any event, this moves the analysis away from the perspective of the payer as required by David Securities, or the objective perspective of the state of affairs which was the basis for the payment.  So, for those reasons we would invite the Court to dismiss the appeal; to the extent necessary, uphold the notice of contention.

Unless your Honours have questions, I propose to invite Mr Hochroth to deal with the cross‑appeal.

GAGELER J:   Mr Gleeson, Justice Gordon does have some factual questions.

MR GLEESON:   Yes.

GORDON J:   Yesterday, at transcript page 69, between lines 3020 and 3025, you took us to the fact that the councils had paid or contributed $1 million of a $3 million total cost in the context of the Aquatic Paradise works.  Are we right to read that, in that sense, 34 per cent of the cost of the works was contributed by the councils, doing the math sums in the pleadings?  I am looking at the respondents’ book of further materials, page 15.

MR GLEESON:   The answer is, yes, your Honour.

GORDON J:   And then, just to complete that, on page 20, in relation to the Sovereign Waters works, on my calculations, the councils contributed 22 per cent of the overall cost of the works.

MR GLEESON:   Yes, that would be right.

GORDON J:   And then, on page 25, in relation to the Raby Bay works, it was 74 per cent contribution.

MR GLEESON:   Yes, that is right.

GORDON J:   Thank you.

EDELMAN J:   Mr Gleeson, just one more question before you sit down.  Your submission that on the broader approach, a simple way of pleading a case like this would be simply to say a rates notice was issued and the money was paid and it was not due.  In a slightly less simple scenario, which may or may not apply to some of the group members, where there was, perhaps, dispute or negotiation about the rates, would not a mistake of law be necessary to negative any voluntariness or compromise‑type defence?

MR GLEESON:   Well, that is possible, your Honour.  We are not excluding that you have the simple ground of restitution, and you keep mistake, and people who wish to plead and prove mistake and succeed may, by doing so, have anticipated and negatived a possible voluntariness defence.  But ‑ ‑ ‑

GAGELER J:   It suggests that it is better to address that kind of question where the facts raise it.

MR GLEESON:   Well, my submission is that these facts raise it, provided one applies Occam’s razor, because we have a rate – special rate issued.  We have a finding it is invalid under a plan, and we have a series of people who paid the rate.  The only defence we have raised is not voluntariness, the only defence we have raised is the novel defence that even though you did not ask for it, and even though you could not accept it, and even though it was conferred upon you in breach of the statutory requirements, you got value.  Now, that is the issue that is joined before your Honours.

GAGELER J:   That is one we are perfectly prepared to address.

MR GLEESON:   On that set of facts, on a correct view of the law, the fact that they also proved mistake was wholly unnecessary to their success.  That is all we ask the Court to declare.

JAGOT J:   Could I just one ask question as well?  Do special rates just go into the general fund, or do they go into the trust fund?  It does not matter if you do not know – it can be found, but ‑ ‑ ‑

MR GLEESON:   We will check that, your Honour.  We were attempting to see the extent to which the local government treasury mirrors the concept of the consolidated fund that one would find at State or federal level.

JAGOT J:   Yes, I noticed they seem to be regulated by a statutory authorities Act, which may – but it is not possible for me to tell from the Regulations where the special rates end up – I suspect they end up in the general fund, not the trust fund, but that is – I cannot quite tell.

MR GLEESON:   Your Honour, we will check that during the day, and provide an answer if we can.

JAGOT J:   Thank you.

MR GLEESON:   Thank you, Mr Hochroth.

MR HOCHROTH:   Your Honours, we seek special leave to cross‑appeal on the ground specified in our notice of cross‑appeal, which is at the core appeal book, tab 9, page 73.  We do not contend that the cross‑appeal raises any point of general principle of public importance, and so we seek special leave because we say the interest of the administration of justice ‑ ‑ ‑

GAGELER J:   You should address the merits.

MR HOCHROTH:   Yes, I will.  Thank you, your Honour.  Can I ask the Court then to take up the Local Government Act, the current reprint.  Your Honours have already been taken to section 92(3), which is the power to levy special rates and charges amongst the other types of rates and charges – sorry, section 92(3) describes what special rates and charges are.  The power to levy is in section 94(1)(b)(i):

May levy –

(i)special rates and charges –

And then section 94(2) provides that:

A local government must decide, by resolution at the local government’s budget meeting for a financial year, what rates and charges are to be levied for that financial year.

So, the mode of determination of what is to be levied for the financial year to come is to be done by resolution at the budget meeting.  That is the statutory hook.  There are then the Regulations, which your Honours have seen before but I will just point out some additional features of them.  I will follow my learned friend’s practice of using the 5 December 2014 version of the Local Government Regulation 2012.  I think we are all agreed that once one identifies the amendments that were made as and from 5 December 2014, the 2012 Regulation is otherwise identical in substance to what was contained in the 2010 Regulation.

So, section 94(2), your Honours have been taken to – the resolution to levy, which is required by the Statute if rates are to be levied.  The resolution to levy the special rates or charges must identify the rateable land and the overall plan.  The Court has been taken through the balance of section 94, and I will not do it again.

There are then a number of sections providing for what happens if special rates and charges either should not have been levied or have not been spent.  Your Honours will see at section 96, if an overall plan is implemented – so this, by definition, means one has an overall plan – but the special rates and charges have not been spent, then the government:

must, as soon as practical, pay the unspent special rates or charges to the current owners of the land on which the special rates or charges were levied –

So, they do not go back to the person who paid them, they go to the current owners.  And here we have the very specific statement that all that goes back is what is unspent.  Similarly, section 97:

if –

(a)a local government decides to cancel an overall plan before it is carried out –

and some of the special rates or charges have not been spent, there is a similar requirement to:

pay the unspent special rates or charges to the current owners of the land on which the special rates or charges were levied.

Then the section which is of interest is section 98:

if a rate notice includes special rates or charges that were levied on land to which the special rates or charges do not apply or should not have been levied.

The words “or should not have been levied” being what was added to this section in 2014.  We see that there is a dual operation here, in subsection (2):

The rate notice is not invalid, but the local government must, as soon as practicable, return the special rates or charges to the person who paid the special rates or charges.

So, the obligation to return now is conferred upon the person who paid as opposed to the current owner of the land – bearing in mind that it is conceivable – and indeed, the current case illustrates that one might not realise the defect until some later point in time.  Now, we rely primarily on the words:

on land to which the special rates or charges do not apply –

in subsection 98(1).  Our submission is that where there is a resolution to levy special rates or charges which is passed invalidly and is thus of no legal effect, a rates notice which includes those special rates or charges is aptly described as including special rates or charges that were levied on land to which the special rates or charges do not apply.  The special rates or charges do not apply to the land because the resolution, which is a condition of their imposition, was invalid.

In our submission, the statute anticipates precisely the problem that has arisen in the present case.  There are onerous requirements in the statute – in the Regulation, I should say, for the imposition of special rates or charges.  In section 98, what the regulation is contemplating is that one or more of those requirements may not have been satisfied such that special rates or charges may have been incorrectly included in a rates notice when they do not apply to the land.  We rely, in addition, on the heading to the section:

Returning special rates or charges incorrectly levied –

GORDON J:   Do you think there is a distinction drawn between the resolution?  That is, the resolution itself and then the levying of the charge separately?

MR HOCHROTH:   I accept entirely that there is a distinction, but the two are linked.  One cannot validly levy if one does not have a valid resolution.

GAGELER J:   On one view you need a valid resolution before you have special rates or charges.

MR HOCHROTH:   One needs a valid resolution before one can have valid special rates or charges, but, as your Honour said in Kable, something done in fact which may not be good in law is nonetheless a thing done in fact.  And here, what this is talking about are special rates or charges that have been imposed in fact, by virtue of having been included in a rates notice which is sent to the ratepayer.  That, in our submission, is what the word “levied”, the first time it appears, means, in subsection 98(1).

Now, we also rely, as I said, on the heading.  In Queensland since 1991, section headings are treated as parts of the Act, that is the Acts Interpretation Act 1954 (Qld), section 14(2). They can be taken into account as a valid piece of statutory context, and I should say that is ‑ ‑ ‑

GORDON J:   Is the other statutory context, that may go against this argument, that if one looks at the structure of 98(1) and (2) it mirrors 94(2), that is it is tying back to the assumption you have a valid resolution and then the resolution must identify the rateable land and the overall plan.  Then one, in effect, comes forward to dealing with the assumption of a valid resolution, and then the difficulty is created by the fact that aspects of it are incorrect.

MR HOCHROTH:   Well, with respect, we do not see the structure of section 98 as mirroring the structure of section 94(2).

GORDON J:   And (3), I meant to say.  I meant to say 94(2) and (3).

MR HOCHROTH:   Sections 94(2) and (3).  We do not see it as mirroring that.  Section 98 does not use the word “overall plan”, does not talk about special benefit, does not talk about a resolution.  None of those words are in there.  It talks about rates being levied on land to which they do not apply.  And its concern is two-fold.  Its concern is firstly to save the rate notice, because if the rate notice goes, that is a problem for other reasons, because a rates notice will include not only special rates but also general rates.  It may include utility charges.

Your Honours will see by section 132 of the same regulation that when rates notices become overdue, and so when the unpleasant consequences for the taxpayer – the ratepayer – commence if they do not pay, all of that is determined by reference to the rate notice.  So, the rate notice is an important document, and the first important purpose of this section is that if there has been a problem, and we would say any problem, we want to save the rate notice.

GORDON J:   Does that mean that 94(14) is otiose ‑ ‑ ‑

MR HOCHROTH:   Well, no.

GORDON J:   ‑ ‑ ‑ On your construction?  Because you would not have need to, in effect, identify those aspects.  It would not matter about those aspects at all.  You would just address them all in 98(1) and (2)?

MR HOCHROTH:   No.  With respect, 94(14) is dealing with the resolution, and for that matter, with the overall plan.  So, it is setting out particular circumstances in which – and perhaps it might be for the avoidance of doubt, but in any event, this is saying we save the overall plan even if it does not identify all the rateable land, which could justifiably cause ratepayers to feel aggrieved – I am paying more, but my neighbour over here is not paying more.  So, in that event –  I am sorry, your Honour?

EDELMAN J:   In effect, you read the heading as though it read incorrectly or invalidly.

MR HOCHROTH:   In our submission, “incorrectly” includes invalidly but is not limited to invalidly.

JAGOT J:   Does section 98 not assume a valid, overall, plan in the sense that without that, by reason of 94(2)(b), you can never get to an incorrect resolution or rates notice.  If we look at the two requirements, one is that you have to have some land to which the special rates apply in 94(2)(a), and you have to have an overall plan.  Are they not the presuppositions of the operation of 98, that you have at least got some land – (a), and (b), a valid overall plan?  And then you have a resolution applying to additional land?  Is that not the structural sort of assumption there?

MR HOCHROTH:   This was a construction which commended itself to the majority in the court below.

JAGOT J:   The Court of Appeal, yes.

MR HOCHROTH:   In the Court of Appeal.  We say no.  This is a subsection which sets out expressly its premise.  Its premise is only a rate notice includes special rates or charges that were levied on land to which the special rates or charges do not apply, or should not have been levied.  It leaves entirely open the reason why the special rates or charges do not apply or should not have been levied, and the beneficial purpose that sits behind the section, in our submission, should be construed as including where there is no resolution.

EDELMAN J:   It does not flow quite as naturally, in light of the sections that you have taken us to in 96 and 97.  Section 96 assumes there is a plan that is not carried out, 97 assumes that there is a plan that is cancelled, and you say 98 applies whether or not there is a plan.

MR HOCHROTH:   Correct.  Correct.  Sections 96 and 97 are quite explicit in setting out that they assume the existence of a plan, which is either not carried out or then cancelled.  But 98 says nothing at all about whether a plan exists or not, and in our submission, encompasses cases where there is a plan, but there has been some other problem – the notice has just been sent to the wrong person through administrative error, for example; or there is no plan.

STEWARD J:   Can I ask you – if it is as broad as you suggest, why is there no equivalent statutory remedy in the case of wrongly imposed general rates?

MR HOCHROTH:   There is a remedy for – in respect of general rates, the usual reason why they may have been wrongly imposed would be that the land has been incorrectly valued, and there is a statutory remedy for that ‑ ‑ ‑

STEWARD J:   I understand that, but you need a resolution for general rates, let us just suppose the resolution is invalid for some reason, it is not executed, it was never passed properly, or what have you, but is it not odd that you have a broad remedy for special rates in the way you have suggested, but not for general rates?

MR HOCHROTH:   The disconnect could be explained by the fact that there is a much more involved process to properly levy special rates than there is for general rates.

STEWARD J:   I see.  All right.

MR HOCHROTH:   It is not hard to jump through the hoops to be able to levy general rates, as long as you have a budget meeting and pass a resolution.

GORDON J:   Can I just raise one final section as part of the context against which this broader construction is to be assessed?  We know, if you go back to the Local Government Act that overdue rates and charges are a charge on rateable land.  It is a bit odd, is it not, that you would have an invalid, no resolution imposition for a special rate and charge, and yet, somehow, the failure to pay that constitutes a charge on the land as distinct from looking at – and assuming that you have got a valid resolution for the operation of the sections that you have taken us to.

MR HOCHROTH:   The difficulty, again, is that the rates notice is going to include the utility rates, the general rates and the special rates – they are all going to be on the one document.  What this is saying is, we acknowledge that there may be problems that occur from time to time with the levying of the special rate, the rate notice is still valid, you have still got to pay but there is an immediate – or as soon as practicable – right to get your money back.  That is way the regulation has chosen to deal with that problem. 

So, your Honours, as I was saying, we say that there is a dual purpose to this section.  First, to preserve the validity of the rate notice – and I have given your Honours submissions as to why that is important.  Secondly, to provide a clear statutory obligation on the Council to return the unlawfully imposed special rates and a corresponding, we say, statutory right of recovery for the ratepayer.  Those purposes would be thwarted if the narrow construction – which found favour of the Court of Appeal below – were adopted.  In particular, the validity of the rates notices, themselves, would not be preserved, as the appellant appears to accept in its reply submissions at paragraph 18, nor would there be any statutory or regulatory obligation to return money which had been collected pursuant to an ultra vires demand.

EDELMAN J:   Why would not the rest of the rates notice, if you are wrong, remain valid?  Why would not the special rates simply be severable from the remainder of the rates notice?

MR HOCHROTH:   I accept that this is a possibility.  The very presence of this section appears to suggest that there was at least a risk that the rates notice, itself, would go – and the highest I can put, at least, is that there would be nothing specific in the statute, saving the rates notices.  It would, at least, be vulnerable in that sense.  But I accept the force of what your Honour has said.  Before the primary judge – your Honours will see this in the primary judgment at paragraph [43], in the core appeal book on page 17:

The Council submitted that the phrase “land to which the special rates or charges do not apply” should be construed as if it read “land to which the special rates or charges could not apply”.

That is the submission recorded there.  That is somewhat similar to the argument which is now advanced to your Honours on this appeal.  His Honour rejected that argument – rightly, we say – as inconsistent with the text of the regulation and unsupported by the context.  We say, his Honour correctly described the purpose of the section – this is referring to the 2010 Regulation, but it is the same for the 2012 – at paragraph [48], on page 18 of the core appeal book.

In the Court of Appeal, in the core appeal book at tab 4, Justice McMurdo addressed the submission that was put below and what the primary judge said about it – paragraph [25], on page 46.  Then, over on paragraph [26] – can I just deal with one submission that Mr Horton made?  He made the submission that in paragraph [26], line 4, the word “no” should be “an” – that it was a typo:  “but where there had been” an “effective resolution”.  We do not think that is correct – although I do not know if it affects this point.  In that sentence, his Honour was saying:

The ordinary meaning is not that the section applies where a rate notice included what was said to be a special rate . . . but where there had been no effective resolution to levy that rate or charge on any land.

So, there is a double negative in the sentence which, I think, deals with what Mr Horton was saying.  Then, what is put there is what Justice Jagot put to me a moment ago, that section 32(1) contains a premise:  that there is a special rate or charge which, by the terms of a valid resolution, was able to be levied on some ratepayers.  In our submission, that is the error.  There is no such premise.  And, as I have already submitted, the only premise on which section 32 and, later, section 98 operate, is the premise which is expressly set out in it.  But the premise is that there is a:

rate notice includes special rates or charges that were levied on land to which the special rates or charges do not apply –

which could occur if there is either no resolution at all, or an invalid resolution due to some defect, or a valid resolution but the special charges were then imposed on the wrong land for some reason.  All of those situations have in common special rates or charges being levied on land to which they did not apply.

Even if one accepted the Court of Appeal’s interpretation to be open, as we have submitted, the court was required to adopt the interpretation which would best achieve the purpose of the regulation under section 14A of the Acts Interpretation Act as applied to the regulation, and we submit that the Court of Appeal’s construction – the majority’s construction – did not do that.

GAGELER J:   What is the purpose?

MR HOCHROTH:   The purpose, as I have said, is to, firstly, have an explicit saving of the rate notice, and, secondly, to provide an obligation to return wrongly levied rates to the person who paid them.

GAGELER J:   But the purpose you just draw from the statutory language ‑ ‑ ‑

MR HOCHROTH:   The purpose one draws from the statutory language itself.  That is right.

GAGELER J:   All right.

MR HOCHROTH:   Can I then address the arguments made by Mr Horton yesterday?  He submitted that the point of the regulation was to require the return of special rates and charges levied on land which does not, in fact, benefit from the service or facility to be funded by the special rates and charges, whether that be because the land was not included as land which benefited in the overall plan, or because the land was in the plan but should not have been in the plan because the land did not, in fact, benefit.

Now, we do not dispute that those two situations would be covered by the regulation, but we say there is no reason to think that the regulation was intended only to cover those two scenarios, or to construe the regulation narrowly to cover only those scenarios.  The two sections do not use the words “specially benefit” or “special association” or anything of that kind, and if the intention had been that the regulation was to be engaged only when the requisite special association was not there, it would not have been difficult to say that in terms. 

Our learned friends also rely upon the legislative history which attended the amendment in 2014 of the 2012 Regulation.  That history confirmed that the immediate concern, which led to the addition of the words:

or should not have been levied.

was to capture situations were the resolution or overall plan pursuant to which the special rates or charges are levied, includes land which does not, in fact, benefit from the services or facilities to be provided.  That can be accepted, but it says nothing about the breadth of the expression:

land to which the special rates or charges do not apply –

in the original form of the regulation, and we respectfully adopt what Justice Callaghan said in dissent at paragraphs [92] to [97] on page 63 of the core appeal book in respect of the amendments.  They were intended to expand the operation of the section.  As his Honour noted at paragraph [99], there is “no other provision” in the regulation containing an obligation to:

return money that has been taken without lawful authority.

and there is “insufficient reason” to think that section 32 and section 94 were limited to cases of “misidentification”.  Finally, the appellant also says that the language of “return” – the word “return” in the regulation – suggests that it cannot apply where the funds have been spent.  We respectfully submit that is incorrect.  The word “return” means two things:  one, do not spend the money; two, give it back.  Now, if the money has, in fact, been spent, then the obligation to return can only mean give a refund of the money that was, in fact, paid.

If the Court is with us in construction on the cross‑appeal, we do not understand it to be in dispute that the Regulations, if engaged, can be enforced by the respondents and group members by way of an action in debt, and we submit that there is no qualification on the obligation to return, and, unlike the other provisions that I have shown the Court, it is not limited to unspent portions of the money ‑ ‑ ‑ 

GAGELER J:   Could you speak up a little, please?

MR HOCHROTH:   I am sorry.  I said, there is no qualification on the obligation to return and, unlike the other provisions which I have taken the court to, it is not limited to the unspent portions of the money.  It is an obligation to return the whole of what was paid to the person who paid it.

GAGELER J:   Are you able to tell us whether the special levy is paid into a particular fund?

MR HOCHROTH:   I am not.  I was hoping to check the regulation, which Justice Jagot mentioned to work that out.

GAGELER J:   It just may bear on this submission. 

MR HOCHROTH:   Yes, I accept that.  The answer on my feet is, I do not know.  Unless I can assist the Court further, those are our submissions on the cross‑appeal. 

GAGELER J:   Yes, Mr Horton.

MR HORTON:   First of all, your Honours, I am instructed that, yes, the special rates and charges are paid into a particular trust fund, not into the consolidated fund.

GAGELER J:   Can you give us the reference for that?

MR HORTON:   No, but can I take some instructions in the meantime but ‑ ‑ ‑

GAGELER J:   Yes, of course.

MR HORTON:   I am sorry, it is nowhere in the material.

GAGELER J:   Pardon? 

MR HORTON:   It is nowhere in the material.  I am not suggesting ‑ ‑ ‑

GAGELER J:   Is there a statutory basis for it to occur? 

MR HORTON:   Not that I understand, but I understood the question to be one of practice, and in practice it is.

GAGELER J:   Well, I think there was more ‑ ‑ ‑

JAGOT J:   I am not sure that can be right, actually, looking at the Regulations.  Anyway, I think it could definitely be paid into an earmarked fund in the general, like a reserve, that might have a label on it.

MR HORTON:   Yes, but may not be a trust.

JAGOT J:   I just suspect it cannot be the trust fund.

MR HORTON:   We will double check.

JAGOT J:   But that is just my own suspicion based on reading things like clause 149 of the Regulations.

MR HORTON:   Thank you.  Yes.  With respect to the agreed fact – which is, of course, agreed – it was said, in connection with it, that no attempt was made by my client to prove benefit from the overall plan.  Well, of course, the overall plan itself was not in evidence, but the resolutions were, as were the benefit maps that were attached to them.  They were agreed and went into evidence by agreement as part of the electronic court book.  Those resolutions, of course – as your Honours can see from the regulation itself – do some of the work.  That is, they are to state the rateable land to which the special rates or charges apply, first of all, so the resolutions themselves do some of the work that the overall plan does as well.

Second, the overall plans were not impugned so far as they were said to describe the service, facility or activity, and to identify the rateable land to which the special rates or charges apply.  That is because it was very specifically agreed in the agreed statement of facts that the only two deficiencies were those which have been stated; that is, time and cost in the overall plan.  It would not be correct for the Court to proceed on the understanding there was nothing before the primary judge as to benefit and its connection with the relevant land, because the deficiencies in the overall plan did not speak to those matters.

In terms, your Honours, of the way in which this case is now put – that is, on one alternative, anyway – by our learned friends, a failure of basis case.  This is the first time in the proceeding it has been put in that manner.  Your Honours will have seen from our submissions – page 18, footnote 79, just for reference – Woolwich was always advanced in the Court of Appeal on the basis that it would be engaged only if there was some difficulty with the mistake threshold.

We accept here the case has advanced, really, free of Woolwich in some ways because it is said it could just as easily be advanced on a failure of basis, but that was not the way that it was put below, and it is not, in our respectful submission, a matter really of subtraction.  That is, if one merely takes away the mistake element, one is left with less but not anything different.  But it is not, with respect, the approach.  It might, for instance, have changed the attitude to one’s defences below, and particularly with respect of change of position in the way the case is now framed.

GAGELER J:   But you are not making a Coulton v Holcombe point here, are you?  You are not saying that there is a procedural reason why the issue cannot be raised before us, in the way that Mr Gleeson has sought to raise it?

MR HORTON:   No, I am not, but I am saying for the reasons – on other bases we have articulated, this is not the case which squarely raises those matters to determine what is said to be a failure of basis case.  It is raised in this Court for the first time without the benefit of being considered below, including consideration of any – any, I emphasise that word – defences which might attend them.

JAGOT J:   I am not sure I follow that because is not the change of position defence available anyway, but you did not raise it?  Even on the mistake of law, you have only ever raised the good consideration – good value, whichever way you want to put it.  As I understand it, you have never suggested a change in position defence, whether it be mistake or Woolwich.

MR HORTON:   Yes, it was raised at one stage and struck through.

GORDON J:   Sorry, I did not hear what you just said then.

MR HORTON:   It was raised at one stage and was struck through.

JAGOT J:   And was struck through?

MR HORTON:   Yes.  We abandoned reliance upon it.

JAGOT J:   You abandoned it.  But you abandoned it for both aspects, I thought.

MR HORTON:   But not for a failure of basis case, because there was none.  This is really the point, that one makes those decisions in the context of a case advanced and the case at that time advanced was not one of failure of basis.

JAGOT J:   You are saying Woolwich was not raised below?

MR HORTON:   Woolwich was raised but only in the alternative to mistake not being made out.  And, as we understand it anyway, the failure of basis case now advanced is somewhat detached, in any event, from Woolwich.  It seems to be an independent basis upon ‑ ‑ ‑

JAGOT J:   No, well ‑ ‑ ‑

MR HORTON:   ‑ ‑ ‑ which is now put on the basis of Australian constitutionalism.

GAGELER J:   I can understand you saying this is not an appropriate case for us to address Woolwich, but you are distinctly not saying that there is some unfairness to you in us addressing Woolwich?

MR HORTON:   That is right.  I am not saying the latter.  It was put to my learned friend, I think by Justice Gordon, or asked whether the benefit in the statute is the same as for unjust enrichment.  Can we reply to some of the responses that were given in answer to that question?  The first response was the benefit here was not exclusive.  That is, walkers and members of the general public might also enjoy the benefits of the works and services.  That is no reason, in our respectful submission, in any way to diminish the benefit which someone else derives, and certainly no reason to diminish or wipe away the benefit which someone has who specially benefits, particularly an owner of property immediately adjacent to those things which are being improved.

With respect, the two cannot be acquainted.  The casual passer‑by with the landowner who is there 24 hours a day, in effect, and who holds a proprietary interest directly adjacent to where the works are being done.  One might use Adrenaline as an example.  The case of Adrenaline, the racetrack hirer had years of enjoyment of the racetrack.  So too, no doubt, did those who attended races and the drivers, but it does not diminish the benefit which accrued to the hirer of the racecourse.

It has been suggested here that the benefit is too generalised to constitute value.  We say a number of things in response.  Difficulty of quantification does not mean a qualitative assessment cannot be made or should not be made.  Obviously, valuation is the easiest in numerical terms, but numerical terms are not the only way we express benefit and value.  We say it goes against basic principles of loss and damage to say one must always only recognise that benefit which can be reduced to dollar values in a valuation sense.

GAGELER J:   Well, you put the benefit in‑chief as the one to two per cent difference in the value of the property.  Do you resile from that way of putting it?

MR HORTON:   I think I said at the time it was the clearest benefit.  It is the clearest numeric benefit; it is the best most ascertainable benefit.  But we did plead below, and we did call evidence about, of course, fiscal and, what we called, non‑fiscal ‑ ‑ ‑

GAGELER J:   Given all that, how do you put the case now?

MR HORTON:   We do put valuation as the clearest case, but we did run a visual amenity case, and we put proximity to those things which have now been improved as part of the benefit.  Can we put a dollar value on those?  No, of course not.  That is what is put against us as being too generalised and unspecific.

EDELMAN J:   All of those alternatives are, however, quite different from Adrenaline, which you just mentioned, where the benefit that was assessed was the value of the opportunity to use.  In other words, the value of the service that had been provided, the opportunity to use the racecourse.  Here, you do not say the benefit is the value of the services that are provided, you say it is this visual amenity, is the one to two per cent; it is always the end product you are concerned with, which is quite different from these cases.  To put it another way, in Adrenaline it would not have mattered if the hirer had suffered a huge loss every year, so that they had objectively been far worse off at the end of the five years, they still would have had to have paid the value of the use of the racetrack.

MR HORTON:   I do not embrace, with respect, there being any material difference between the doing of the services and the benefit they produce because it is a necessary part of them and the statute contemplates that, of course, as being essentially tied together.  One does the works which benefit.  There is no conception that there can be a difference.  The concept in the statute is the same; these things must specially benefit.  And, in effect, no contention here to the contrary.  There is no contention that works were done unnecessarily or that works miscarried, or that works were done other than as notified for a different purpose or benefitted other people who were not in the benefit area as identified.

I accept the proposition, probably, that in Adrenaline’s Case it is more direct:  I want that racetrack, and I got that racetrack to drive my car on, whereas here one is paying for a work or service, and the next step, the effect they produce, is the bit that gives the benefit, but which the statute seems to treat as the same necessary, linear step.  On this point, we have said, perhaps, the valuation comes into the realm of margin of error.  We just remind the Court that in the agreed facts which appear in tab 7 of the appellant’s book of further materials, the numbers are set out there, both of what was paid – page 37, paragraph 21 – and then what was returned – paragraphs 34 and following on page 40.  One has an appreciation of those amounts for which the plaintiff ratepayers were out of pocket, at the end of the day.

You might recall Mr Kamitsis’ evidence in cross‑examination was that he was “perfectly comfortable” on the transcript with the assessment of one to two per cent.  It was not a matter which he expressed ultimately in cross‑examination doubts about being correct about.

Can we turn to the next point, which is nexus.  It was suggested that we have not asked this Court to make a finding that moneys were paid in exchange for works.  A short point to that is, it has already been found, and it is in those findings to which we have already taken the Court, first in the appeal reasons at page 45 of the core book, paragraph [18], which, of course, picks up what the primary judge did.  In the middle of the paragraph:

The primary judge received evidence that the lands of all group members would benefit from those services, and that the value . . . would increase –

Then the last sentence:

The primary judge accepted that there was the requisite connection –

JAGOT J:   Well, that it was susceptible to the special charge.

MR HORTON:   Yes.

JAGOT J:   That is a different point, is it not?

MR HORTON:   We say not.

JAGOT J:   Okay.

MR HORTON:   You can levy these charges on land which specially benefits.  That is levied and that is spent on the works and services foreshadowed as part of things to be done in connection with the benefit area.  With respect, we see it as well‑established on these findings.  In any event, if your Honours would turn to the appellant’s further materials, you will see at page 41 of the agreed facts paragraph 42.  It seems to be agreed between the parties: 

The part of the Special Charges expended by the Council was for the works and services and for which they were levied, being those set out in Annexures A to N –

which are those annexures, part of which your Honours have already seen.

JAGOT J:   Sorry, which paragraph was that?

MR HORTON:   I am sorry.  Paragraph 42 on page 41 of our further materials book.

JAGOT J:   Yes, sure. 

MR HORTON:   The nexus, in our respectful submission, was established.  It was said as part of this point, as I recall, that no one was called from the Council to explain why the works were done.  That is incorrect, Mr Toby Ersham was called.  Whilst he gave two affidavits, he was not cross‑examined.  He was the Council’s engineer, and he gave evidence about the nature of the estates, the work that was needed for each aspect of how and when it was done, and why.  He answered in a second affidavit some of the evidence or the plaintiffs on this point.  Nexus, we say, was firmly made out below, and agreed.

In terms of the deficiencies – that is, the errors found in the invalidity here – it was suggested in argument the deficiencies went to whether there was an exchange in payment affecting the works or services relevant to establishing the relevant connection between payment and expenditure.  With respect, the errors do not go to those matters.  They go to time and cost, but they do not go to the description of the works being a different limb of the overall plan not said to have been in error, and they do not go to the identification of benefit area, which is something done, in any event, by the resolution, and that part of the resolution not said to be a basis for invalidity.

Next it was said we do not have and did not ask for a finding of good faith.  There is the finding by the appeal court which is the very same thing at paragraph 19. 

GAGELER J:   But equally, bad faith was never suggested in this case.  It is really not an issue. 

MR HORTON:   Can we come this final point, your Honours, which really is about the respondents’ case more generally.  To accept it, we say, is to act inconsistently with established jurisprudence in these following ways.  First, with respect to illegality, no matter how small or technical, errors are to be treated as fundamental.  It does not cohere with the approach in Equuscorp; it does not cohere with the approach in Kable, referred to a moment ago by my learned friend; it does not cohere with the approach in Project Blue Sky that a statute is the basis for understanding the consequences of invalidity. 

GAGELER J:   I am not quite sure what you mean by “fundamental”.  Here, the error is conceded to be jurisdictional.

MR HORTON:   Yes.

GAGELER J:   So, what is the point of the “fundamental” description?

MR HORTON:   There are gradients of error, and all errors on the respondents’ approach are put in a Bill of Rights sense:  no taxation without parliamentary authority.  Now, we know here there is Parliamentary authority to oppose charges of just this very kind.

What it says is, the Bill of Rights should be read as saying there is no taxation without following all the procedures associated with the grant of statutory authority tax.  That is to elevate error, no matter how minor, to something more fundamental and not what, we say, a fair reading and understanding, historically, of the Bill of Rights protection is about.  That is the first fundamental error.  It continues to infuse, in our respectful submission, the respondents’ case because, at every stage of the equation, one still talks about error.  We will come to this. 

Second, it is a marked change, we say, from David Securities in this sense, and the jurisprudence which preceded it.  David Securities, and the jurisprudence which proceeded it, work on a fundamental policy that there is a value in the finality of dealings, transactions, that were to be tied to contract, necessarily.  That is, the payments, even of tax, must have some threshold to be satisfied before being able to be undone.  The approach of failure of basis moves wholly away from that approach and, in doing so, takes away a defence which would be available as between citizens – on the respondents’ approach, that would be available between the State and the citizen.

The third fundamental error, or third basic error, we say, in the respondents’ approach is this:  when it comes to analysing in a public law context basis or state of affairs used in neutral terms in David Securities, we have two options.  One is we choose a basis which says, what is the operative matter in the payer’s mind at the moment before payment is made?  Or we could say, as we put the alternative on basis, one looks to the subsisting statutory regime, the arrangement which is in place, which is the whole purpose for paying, albeit under coercion, in order to achieve what the statute sets up as the inevitable result.

Each are open on the generic neutral description in David Securities of the state of affairs, we accept that.  The first is in error, in our respectful submission, because it does what we had submitted at the outset one should not do.  It treats the moment of payment as if one were about to enter into a contract.  It treats it as the moment of the bargain and elevates the compulsion in paying, if you like, into some sort of contractual understanding.  But the proper approach, we say, of the state of affairs in a case such as this, and an impost case, statutory impost case, is to view the basis or the state of affairs as the subsisting statutory arrangement.

Fourth basic error is to treat the statute as swept away and incapable of defining benefit, or indeed the state of affairs, once invalidity is made out.  There are two basic errors with that.  One is here the statute is not said to be invalid and nor is the regulation.  So, why would those arrangements be ignored as a matter of fact even on the Kable Justice Gageler analysis as a factual underpinning, if not more.  There is no invalid statute.  We are accused of filleting the statute, but why is the statute not still speaking as the whole basis for the arrangement?

The second problem is this:  that even something which is invalid in this context, a prohibited contract, an illegal aspect of an arrangement that breaches 261 of the Income Tax Act, all examples in the cases your Honours have seen, it does not involve the Court saying that we must not look any more at those invalid arrangements.  In fact, it still analysed closely as being the basis for the bargain, what was it that each party was wanting out of the deal.

Will you treat inconsistently statutory arrangements with what the established jurisprudence dictates?  In that sense, we return, really, to where we started.  Illegality saturates, in our respectful submission, the respondents’ approach.  It saturates it by removing defences, it saturates it by removing vitiating error, and it saturates it by removing any possible reference to the statute after error has been established, no matter how minor or immaterial.

By that I mean, by reference to the power by which this particular requirement to have in the overall plan was conferred, it treats that as not part of the equation because the statutory arrangement has been swept away, and illegality, however small, is fundamental.  Yes, I am sorry, we are not able to assist further on the statutory or legislative basis – the statutory basis for the trust or like arrangement, I am sorry, at this moment.

GAGELER J:   We will direct the parties to confer on this and provide us a joint note within a week.

MR HORTON:   If it please the Court, they are our submissions in reply.

GAGELER J:   Yes.  Thank you, Mr Horton.  The Court will reserve its decision in this matter and will adjourn until 9.30 am tomorrow.

AT 11.08 AM THE MATTER WAS ADJOURNED