Redland City Council v Kozik & Ors

[2023] HCATrans 34

[2023] HCATrans 034

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B41 of 2022

B e t w e e n -

REDLAND CITY COUNCIL

Applicant

and

JOHN MICHAEL KOZIK

First Respondent

SIMON JOHN AKERO

Second Respondent

SARAH AKERO

Third Respondent

NEIL ROBERT COLLIER

Fourth Respondent

Application for special leave to appeal

KIEFEL CJ
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION

ON FRIDAY, 17 MARCH 2023, AT 12.31 PM

Copyright in the High Court of Australia

____________________

KIEFEL CJ:   In accordance with the protocol for remote hearings, I will announce the appearances for the parties.

MR J.M. HORTON, KC appears with MS E. HOIBERG for the applicant.  (instructed by Gadens Lawyers)

MR G.J. GIBSON, KC appears with MR P.D. HAY for the respondents.  (instructed by Shine Lawyers)

KIEFEL CJ:   Yes, Mr Horton.

MR HORTON:   Your Honours, this application raises the question whether a defence of value received in unjust enrichment can be raised against a claim for return of wrongly levied imposts, and it does so in circumstances where the impost here was to specially benefit the payer; that is, that was the statutory formulation.  The decision below, in our respectful submission, treats that defence ‑ ‑ ‑

KIEFEL CJ:   Mr Horton, we are not – the sound quality is not very good and it is not timing with your articulation – with your mouth, so it is not going to be to your benefit, I think, unless we try to improve it.

The Court will adjourn shortly to see if we can improve it.  At the moment, it is quite blurred and difficult to follow.

MR HORTON:   Thank you.

AT 12.32 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.36 PM:

KIEFEL CJ:   Mr Horton, I understand that we have you by phone connection now.

MR HORTON:  You do – and I am sorry for that difficulty, your Honour.

KIEFEL CJ:   Not at all.  Would you like to proceed, then?

MR HORTON:   Yes.  Your Honours, this application raises the question whether a defence for value received in unjust enrichment can be raised against a claim for return of wrongly levied imposts.  It arises in circumstances where the impost was for the special benefit of the payers.  Our complaint, in our respectful submission, with the decision below is that it treats that defence as unable to be raised, and the point which our client ‑ ‑ ‑

KIEFEL CJ:   Can I just interrupt you?  I know it is rather early on, but could I interrupt you, Mr Horton, to just clarify something about how you would argue this, if leave were granted?  If the question is seen not to involve the defence of good consideration in the sense that the Court does not think it should extend beyond the area of contract into this area of charges or imposts, would you need to discuss – would you need to argue the matter more generally as on the basis of whether there was unjust enrichment or not, and if so ‑ ‑ ‑

MR HORTON:   The answer ‑ ‑ ‑ 

KIEFEL CJ:   Yes.

MR HORTON:   I am sorry, your Honour. 

KIEFEL CJ:   I was going to say, if that is the case, is that intended to be covered by your ground 2?

MR HORTON:   Yes.  The only defence we raise is one of value received.  Now, we say part of the unifying concept underlying it, is that that is raised at the point that one needs to ask whether the retention of the benefit by my client is unjust.  But if the only defence raised is that of value received, change of position in a mere sense was not something that we relied upon below, albeit that the change, having spent the money, is relevant as the . . . . . to our defence of value received.

So, we say that that defence is wrapped up as a necessary part, if we are correct, and if restitution and unjust enrichment apply equally in the public and private law context, applies equally and then it is part of the framing of the cause of action.  But if it needs ‑ ‑ ‑ 

KIEFEL CJ:   So, if what you call value received or the defence of good consideration, if that were – is that the only strand towards a conclusion of not unjustly enriched?

MR HORTON:   It is.

KIEFEL CJ:   You are not going to be arguing that there is a free‑standing principle of unjust enrichment ‑ ‑ ‑ 

MR HORTON:   No.

KIEFEL CJ:    ‑ ‑ ‑ which would be contrary to be authority, but you might be arguing it.  The reason I ask is your ground 2, which is your paragraph 3 in the application for special leave, would seem to leave that path open.

MR HORTON:   Yes, we do not seek to be expanding it beyond the defence of value received.  It was merely to secure that possibility.  Both those grounds are directed to that one concept.

KIEFEL CJ:   Yes, I see.  Thank you for that.

MR HORTON:   Your Honours will be aware here, of course, that the levies imposed upon the plaintiffs were special charges for things from which they specially benefited.  Works were done; there is no doubt about that, and that was found below.  They were spent keeping canals clean and navigable and maintaining walls on waterlines and so forth.

The decision below, in our respectful submission, falls back into complications associated with the causative mistake of law doctrine which this Court in David Securities dispelled.  To some extent that is understandable because there is no decision of this Court directed to the facts raised here and, so far as we can see, no intermediate Court of Appeal decisions, likewise.

We raise this case as a vehicle to cement unjust enrichment as the unifying theory underlying recovery in both private and public law.  This restitutionary aspect, we submit, was overlooked below.  That is, as a public law case it seemed to have been treated differently by his Honour.  We submit this case offers several opportunities and is a good vehicle for resolution of the question.  One, to clarify some terminology about the defences – “total failure” of the consideration versus “good consideration” versus “value received” and “change of position”. 

Two, to make clear that the mistake associated with a payment of an invalid impost is not itself an answer to the defence of value received, which seems to have been the approach of, particularly, Justice McMurdo below.  Third, to do so in the context of a revenue case in which the whole purpose of a scheme is to benefit the payers, the likes of which has not come before the courts, so far as we can tell, but certainly not before this Court.

Can we take your Honours briefly to the decision below to explain the error.  At application book pages 52 and 53, your Honours will see at paragraph [51] of Justice of Appeal McMurdo’s decision below that his Honour embarks on a question of what is:

“good consideration” –

as the opposite of what is a:

failure of consideration –

The error, however, in the following paragraph is to regard the mistake – that is, the mistake of law under which the payer has satisfied the impost – as:

the state of affairs –

you will see there at the end of paragraph [52] – really exhausting the question of consideration – whereas we would say that is only half of the equation.  There is no doubt that the payer has paid under a mistake of law and there is no doubt that is the state of affairs.

But the next question which arises is unjust enrichment, which is the unifying concept which underpins this doctrine about what they might have got in return.  Now, that is specially raised here, of course, because there was a return.  It was found below there was a return and in many ways that was uncontentious at first instance.  So, the error we would identify is that the analysis below failed to proceed beyond mistake, and the ‑ ‑ ‑

KIEFEL CJ:   Mr Horton, when you refer – when his Honour refers to the “state of affairs”, is that to say that the ratepayers and those levied felt obliged to pay?

MR HORTON:   Yes.  We understand that, and it is a substitute for finding – I guess by analogy to contract – some sort of consideration.  But we say the analysis really was never in debate – that is, of course they paid under a mistake – we accept the impost was wrongly levied.  But the question which we sought to agitate at first instance and on appeal was whether, notwithstanding that, the defence operates after one accepts the mistake.

Now we say that is an orthodox application of principle in these cases, particularly as the High Court expounded it in David Securities, but his Honour seemed to be unwilling to go the next step and ask whether – as your Honours can see in paragraph [54] and following of the reasons – whether those cases in intermediate courts of appeal where such a defence is being recognised could operate here.

His Honour does not seem ever to come to a conclusion about why those cases here do not assist in showing there is a defence of “value received” which is available – accepting, of course, we are in a slightly different factual situation.

Your Honours, we say that this matter goes to the very fundamental approach to the recovery of invalid imposts.  Your Honours will be aware and, of course, David Securities alluded to the decision of Woolwich in the Court of Appeal and then the House of Lords in the United Kingdom.  In that case, their Lordships found a general right of recovery founded on the concept of unjust enrichment to the State.  That decision was handed down some eight weeks before David Securities was decided, and the Court generally endorsed what was said in Woolwich.

But the difference, perhaps, between the two is Woolwich more squarely raises unjust enrichment as the basis, whereas in David Securities there was a willingness on the part of the High Court to retain reference to what was called the traditional rule derived, in particular, from decisions of Lord Mansfield.  But the result of not approaching it below as a question which was underpinned by a unifying concept of unjust enrichment, as we say the High Court found in David Securities, was to never ask the question, who has the superior claim and what are the circumstances of unjustness beyond finding invalidity and mistaken payment?

We say this case raises the defence of value received very squarely – there is no relevant factual dispute, as we can perceive it, on the material, there does not seem to be a dispute raised – it cannot be that value was not given, at least in a commensurate way with what was paid.  There is no applicable statutory regime.  The regulations below were found not to apply, and there is no suggestion in our learned friends’ response that they seek to reagitate that question here, having not succeeded below.  Third, it is the only defence raised.  We do not raise mere change of position and nor do we raise, as I said in response to your Honour the Chief Justice’s question, some freestanding right by which a defence on these facts might be raised.

Can we point to one distraction which we say arises on the material?  Both Justice of Appeal McMurdo at paragraph 62 of the reasons, application book 55, and our learned friends rely heavily on whether or not a request was made by the plaintiff for provision of these works and services.  We say that the distraction . . . . . one, it reverts back into contractual . . . . .  Second, it overlooks the obvious desire which each of these planks would have for the work to be done, recognising the special benefit which is the threshold for imposition of the impost, and because, in cases like this, be it a body corporate case or a . . . . . case there is a need for some community coercive power to affect these works and charge all who benefit from them.

So, we say that the request here, or the absence of a request, is something which will not fall to be decided, or will not be an obstacle to deciding the optimum defence in our client’s favour.  We say this defence we raise is recognised doctrinally, your Honours.  And we say it also follows from an orthodox application of general principles.  We say it is part of the well-known statement of Justice Goff in Barclays Bank.  We cite that in our application, your Honours, at paragraph 22.  That seems to have been accepted to be the touchstone, if you like, or the starting point, of the way in which one approaches this, and it was approved by this Court in David Securities.

That is, the mistake gives rise to a prima facie right to recovery, but one must go further and ask whether that claim fails if the payment is made for good consideration.  We say it follows also, in our application, at page 74 of the book on the concept expressed in paragraph 39 by reference to the academic work of Edelman and Bant.  That is, the plaintiff must not be enriched by an order for restitution – a question which we say was never asked below.

Importantly, we say, your Honours, it conflicts with decisions of intermediate courts of appeal and, in particular, that of the Victorian Court of Appeal in Ovidio Carrideo Nominees v The Dog Depot, and also that of the New South Wales Court of Appeal in Adrenaline Pty Ltd v Bathurst Regional Council.  And in particular there, in the case of Adrenaline Pty Ltd, your Honours, if we could take you to paragraph 87 of the decision of Justice of Appeal Leeming, at page 255 of volume 97 of the New South Wales Law Reports.

You will see there, your Honours, that the benefit which the court found to have been returned was the use of the track for which payment had been made.  And the court there, in paragraph 87, cites the principles which

gave that dissent force in that case.  Can we make one point there, about the use of language in paragraph 120 that is cited within paragraph 87?  “Change of position” was the way in which that court framed the defence.  We would respectfully suggest that is a defence of value received, and that is part of the invitation for this Court we make in this application that some of the nomenclature . . . . . classifications, the naming, should be visited and improved and clarified by this Court to clarify the way in which the defences operate.  And you will see the court there goes on to cite the position in New South Wales in paragraph 121 that is there:

The enquiry is as to the injustice of the retention –

and that, we say, is the principle to be drawn upon here.  Can we explain, in conclusion, why we say this matter has general application?  Although this is a specialised scheme – one for special rates and charges – it is a scheme which operates, as we can see it, in every State – that is, local governments have the capacity to levy special rates and special charges where that is to the special benefit of certain ratepayers in certain locations.  We say it also has possible applications to body corporate cases where, likewise, levies are imposed ‑ ‑ ‑

KIEFEL CJ:   Mr Horton, I am not sure these matters, which you say are of general importance, take you very far in this for the reason that this case turns on particular facts, and there is either a question of principle relating to the defences as a matter of general importance, or there is not.  Is that not the position?

MR HORTON:   Yes, and we say that the facts here very squarely raise that defence without unnecessary clutter for this Court were it to grant special leave.

They are our submission, your Honours.

KIEFEL CJ:   Yes, thank you, Mr Horton.  Yes, Mr Gibson.

MR GIBSON:   Thank you, your Honours.  There are two binary and, indeed, fundamental reasons, we submit, for refusing special leave in this case.  The first is that none of the special leave questions require consideration by this Court because each is sufficiently answered by established authority.  Secondly, that the errors asserted by the proposed grounds of appeal are not maintainable.  As to those two primary positions, the special leave questions said to arise appear at paragraphs 5 to 7 of the application, at page 68 of the book.

As to the first of those special leave questions, the simple answer is that the Court of Appeal did proceed on the basis that the defence of unjust enrichment was, in principle, available when payment of a public impost is made under a mistake of law.  Furthermore, no contrary submission was made by the respondents below.  Indeed, in practical terms, the contrary would be unarguable ‑ ‑ ‑

KIEFEL CJ:   But, Mr Gibson, I think the applicants are saying that the Court of Appeal held against the applicant and concluded that there was no unjust enrichment on the basis of a matter which appertains only in the context of the local authority and a particular impost, which is not the same scenario which arises in contract and, therefore, has not squarely faced, or dealt with, how unjust enrichment applies in this different context.  That is, as I see it, raised against you.

MR GIBSON:   Yes, that is true.  But, in our submission, although the facts of this case have not been the subject of specific consideration by this Court previously, nevertheless, the principles which have been established are as capable of applying to these facts as otherwise and that, in the result, the approach adopted by the Court of Appeal was not only correct, it was, actually, unexceptional, and that the application of established principles – I am sorry, I put that poorly – established principles are capable of applying to this particular fact situation.  They were applied by the Court of Appeal, and they were correctly applied.  In consequence, not only are there no special leave questions which truly arise but, furthermore, the decision below was correct.

Your Honours, the Court of Appeal approached the question contrary to the submission that was made this morning to the effect that the Court treated a public law situation as different.  At paragraph [46] of the reasons for judgment at page 51 of the application book, his Honour Justice McMurdo – with whom the other members of the Court agreed on this question – specifically and correctly observed that the same principles apply in respect of overpayments of tax under an invalid law as apply generally. 

On that point, in the decision of this Court in Commissioner of State Revenue (Vic) v Royal Insurance, Chief Justice Mason observed at page 75 of that case two points.  Firstly, by way of introduction to this issue, restitutionary relief – as it has developed to this point in our law – does not seek to provide “compensation for loss”.  Furthermore, his Honour continued to the effect that these same principles are of general application. 

More recently, in Roxborough v Rothmans – excuse me for a moment – the same result was reached by the plurality at page 530 of that judgment, at paragraph 29, after referring to Commissioner of State Revenue, the plurality in Roxborough commented that:

It is impossible to explain those judgments, or that decision, upon the ground that there is some constitutional reason for treating restitutionary claims against governments differently from claims against private citizens.

It may be that the same principle applies, with even greater force, in the case of claims against governments, but Royal Insurance stands as clear authority against the respondent’s argument on this question.  We see no reason to depart from that recent decision of this Court and every reason in principle to support it.

So, upon that basis, his Honour Justice McMurdo extracted relevant statements of principle from David Securities – I have in mind at paragraph [45] of the reasons commencing at page 50 of the book and over to page 51 – and continuing at paragraph [48], more particularly [49], at page 51 – through to page 52 at paragraph [53].  The symmetry of the application of principles between private litigants on the one hand and as between a private citizen and a government or a government authority largely removes the substance of the applicant’s complaints in this case.

Might I turn briefly, then, to the second and third special leave questions said to arise at paragraphs 6 and 7?  They collectively raise the question of whether the benefit received by the payee or the person who receives the benefit of work done is properly characterised as consideration for the payment or, alternatively, as the term is coined, “value received”.

Now, the applicant must be understood as referring to value received in consequence of, or as a result of, the payment – because if their case is no more than that the payee or the person receiving the benefit – in this case, the ratepayers – received the benefit but was not referrable for the payment, then the applicants must confront the established principles to the effect that the conferral of a benefit on another without more is not a sufficient basis for ordering restitution by the recipient of that benefit.

Those cases are well established – Lumbers v W Cook, which your Honour the Chief Justice was a member of the plurality in that case.  At page 663, paragraph 80 of the judgment, the plurality consisting of Justices Gummow, Hayne, Crennan and your Honour observed this, that:

the bare fact of conferral of the benefit or provision of the service does not suffice to establish an entitlement to recovery.

and reference was made to the judgment of Lord Justice Bowen in Falcke v Scottish Imperial Insurance in the following terms:

“The general principle is, beyond all question, that work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone, create any obligation to repay the expenditure.  Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will.”

And the Court, that is, the High Court judgment, emphasised the last sentence.  To the same effect is the judgement of this Court in Stewart v Atco Controls, to which reference is made in our outline, and, also, the more recent decision of BMW Australia Ltd v Brewster.  Now, it is correct to say that in each of those cases exceptions or qualifications to the general principle were acknowledged.  But those exceptions or qualifications are recognised categories and they include, for example, free acceptance of the benefit conferred or the particular case of salvage or necessitous intervention or the like.  But none of those circumstances is relied on by the Council in this case.

So, inevitably, the value received to which the Council refers must be taken to be value or benefit conferred in response to, or as a consequence of, or as a result of, the payment that was made.  That is, the rates that were paid.  Once that is accepted, then the consideration – whether the term used is “consideration” or “value received”, the same principles apply, and they are the principles which were referred to and applied by the Court of Appeal in the paragraphs to which I have drawn attention.

For completeness in this context, in David Securities v Commonwealth Bank, the point was made that although there were exceptions to the general principles to which I have earlier referred, those exceptions – I will use the wording adopted by the Court:

it is not legitimate –

said the joint judgment:

to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable.  Instead, recovery depends upon the existence of qualifying or vitiating factors such as mistake, duress, or illegality.

More recently in the case of Equuscorp v Haxton in which your Honour the Chief Justice again was part of a plurality comprising then‑Chief Justice French and Justice Crennan – at paragraph 30 reference was made to David Securities as establishing the principles applicable to recovery of payment made or benefit conferred as unjust enrichment.
And the joint judgement of the plurality went on to say:

That explanation may be expressed, at a fairly high level of abstraction, as an approach to determining such claims.  In summary:

·recovery depends upon enrichment of the defendant by reason of one or more recognised classes of “qualifying or vitiating” factors;

·the category of case must involve a qualifying or vitiating factor such as a mistake, duress, illegality, or failure of consideration, by reason of which the enrichment of the defendant is treated by the law as unjust;

·unjust enrichment so identified gives rise to a prima facie obligation to make restitution; 

·the prima facie liability can be displaced by circumstances which the law recognises would make –

and I emphasise “which the law recognises”:

would make an order for restitution unjust.

The difficulty confronting the Council in this case and the answer to its contention about a superior claim is that the work that was done was not requested by the respondents, it was not consented to by the respondents, it was not freely accepted by the respondents, it was not in the nature of a necessitous intervention.  It was work carried out to canals and other water bodies by the Council in the discharge of its obligations as a local authority, and the work was not done, or carried out, on the property of the respondents.  For the contrary, it was carried out to land which was identified by Justice Bradley at first instance, and the application book at page 8, paragraphs [3] and [4] as reserves being the land owned by the Crown and the Council’s local area.

There was no error in respect of the treatment and no conflation of mistake of law and consideration.  Justice McMurdo carefully considered the cases in the New South Wales Court of Appeal and the Victorian Court of Appeal of Adrenaline and Ovidio at paragraphs 54 through to paragraph [59] at pages 53 and 54 of the record.  The distinction in this case was the payment was made at common ground under a mistake of law.

But the state of affairs under which the payment was made is that the respondents considered that the payment would discharge their obligations in response to the receipt of the rate notice.  They did not do that, and unlike the cases carefully considered in the reasons for judgment, this was a situation where there was no consideration, no value conferred, no benefit conferred, in consequence of the payment that was made.  And there is no basis for a contention of a superior claim or otherwise, in our submission.

In the result, all those matters taken into account, it is our submission that the application should be refused.  If it is not refused, may I foreshadow that it is the respondents’ intention to file a notice of cross‑appeal contending that the majority of the Court of Appeal erred in its construction of the relevant statute.  Their construction, which was contrary to that of the trial judge, was to the effect that it did not create a statutory debt.  Our submission in due course, if leave is granted, is that it did create a statutory debt in consequence of which these restitutionary issues in fact would not arise for consideration.

Those were our submissions, thank you, your Honour.

KIEFEL CJ:   Yes, thank you, Mr Gibson.  Do you have anything by way of reply, Mr Horton?

MR HORTON:   Very briefly, your Honours.  If you take up application book, page 55, reasons for judgment [61] of Justice of Appeal McMurdo, the last sentence of that paragraph reveals, in our respectful submission, that the doctrine was not correctly applied.  That is, his Honour considered in that context – and we emphasise “in this context”:

in this context means the matter considered by the payer informing the decision to pay –

and then we emphasise his words:

rather than any benefit to the payee which subsequently ensued.

That is, his Honour there is expressly disavowing reliance upon any doctrine which might focus his Honour upon benefit to the payer.  That is, his Honour is considering it is resolved entirely by the state of affairs his Honour has earlier referred to, and this is just after referring to the decisions of Ovidio and Adrenaline.  The reference there in footnote 45 that his Honour gives is to a page of David Securities which deals expressly with contractual offers and in terms of what the parties were contracting for, and that is what we say is the essence of the error here.

They are our submissions in reply, your Honours.

KIEFEL CJ:   Yes, thank you, Mr Horton.  The Court will adjourn to consider the course that it will take.

AT 1.15 PM SHORT ADJOURNMENT

UPON RESUMING AT 1.18 PM:

KIEFEL CJ:   There will be a grant of special leave in this matter.  Mr Horton, it should not take – you should finish comfortably within a day, should you not?

MR HORTON:   Yes, your Honour, definitely.

KIEFEL CJ:   Would you agree with that, Mr Gibson?  I am sorry, I did not hear you, Mr Gibson.

MR GIBSON:   I apologise, your Honour.  Yes, we do agree with that.

KIEFEL CJ:   Yes, thank you.  Would you have your solicitors contact the Deputy Registrar for the usual directions.  Thank you.

The Court will now adjourn until 1.30 pm.

AT 1.19 PM THE MATTER WAS CONCLUDED