Roxborough & Ors v Rothmans

[2001] HCATrans 115

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S199 of 2000

B e t w e e n -

ALEXANDER GARNET ROXBOROUGH and GWENETH JOYCE ROXBOROUGH (t/as SANDYS TOBACCONIST)

First Appellant

BRUCE ALLDIS (Formerly t/as SMOKE KING)

Second Appellant

ARISTOTLE BALATSIAS (t/as CHIGARRO TOBACCONIST)

Third Appellant

EYEARN PTY LIMITED (t/as DEEPWATER PLAZA TOBACCONIST)

Fourth Appellant

RODNEY WHITE & SUSAN WHITE (t/as GUNSMOKE TOBACCONIST)

Fifth Appellant

GRAHAME COOK (t/as TAMWORTH PLAZA TOBACCONIST)

Sixth Appellant

PETER HEFFERNAN & CHRISTINE HEFFERNAN (t/as PETER & CHRISTINE’S TOBACCONIST)

Seventh Appellant

and

ROTHMANS OF PALL MALL AUSTRALIA LIMITED

Respondent

GLEESON CJ
GAUDRON J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 3 MAY 2001, AT 10.09 AM

(Continued from 2/5/01)

Copyright in the High Court of Australia

__________________

GLEESON CJ:   Yes, Mr Walker.

MR WALKER:   May I conclude briefly, your Honours.  What we submit concerning the questions of temporality raised by an attempt to interpret section 41(3) of the Act and the indications of difficulty they pose, in our submission, for the appellants’ case, however that case be framed.  Be it accepted for the purposes of this argument that the interpretation we proffer in accordance with Justice Emmett’s reasoning of the statute is not upheld.  Be it assumed for the purposes of this argument that the interpretation proffered by the Full Court and supported by my learned friend in this Court is the correct view of how section 41(3) operates.

In that case, and if one interprets the words “is liable” as strictly as the grammar would permit, literally, then on the day in question, call it the 27th day of the month commencing the licence period, at that point on various of the hypotheses put to me yesterday, including same day purchase and sale by the retailer, it would be possible in the case of a recalcitrant or insolvent wholesaler to see the double payment that my learned friend has referred to.  In that case of a recalcitrant wholesaler, that is without insolvency, it is clear that the mechanisms under sections 46 and 47, depending upon the nature of the recalcitrants, would be available eventually, although not yet, to render the wholesaler liable.

GAUDRON J:   To render the retailer liable? 

MR WALKER:   No, the wholesaler.  The retailer, on this argument, would be liable there and then because would not be able to point to an existing payment or liability, present liability, of the wholesaler on that day.  Thus far, we have come the whole way with the appellants’ argument.  In the case of the recalcitrant wholesaler, there is no question that sections 46 and 47 are available to the Commissioner, and coming with the appellants’ argument as far as we do, it may be supposed that on the day in question ‑ hence what we call the temporality questions – the retailer cannot point to a payment and cannot point to a present liability whereby the retailer is liable for the so-called double payment. 

The question of course is:  what are the consequences of that statutory reading for the relations between these parties in these circumstances?  We are still hypothetical at this stage though, because what my learned friend offers first is the scenario of a recalcitrant wholesaler.  Sections 46 and 47 are available and not referred to in my learned friend’s argument but necessary to be considered.  What are the practicalities?  Because this is a practical contract question.  The practicalities are that one does not know that a wholesaler is recalcitrant until it be established that the aggregate of sales put forward to calculate its licence fee is short, or until one knows that they are, in fact, wholesaling without a licence at all. 

Take the former case which is the more likely one and which permits one to concentrate on the notion “that tobacco” in 41(3) because of the distributive effect of the aggregate requirement on the wholesaler to pay a licence fee and the individual effect on the retailer whereby its ad valorem component depends upon whether the wholesaler has included something in respect of “that tobacco” in the much larger aggregate which makes up the wholesaler’s licence fee.  You will not know that, the Commissioner will not know that, the retailer will not know that, no one will know that, except by looking at the wholesaler’s records, those records which under the statute and regulations have to be kept in order to record the value of tobacco sold in the relevant period to produce the licence fee aggregate.

Practically speaking, then, the notion of the recalcitrant wholesaler which gives rise to the double payment on the retailer in that hypothesis becomes available and practically imposes the legal double payment liability on the retailer only because the Commissioner has fastened on a deficiency in the wholesaler’s return.  At that point, of course, practically speaking, it defies credulity that the Commissioner does not proceed under 46.  Certainly, whether or not one supposes the Commissioner would adopt the big, solvent, easily found wholesaler whose records are critical to the whole matter or whether he would chase a plethora of small retailers, leaving aside that speculation, which we submit is not very difficult to render credible in our favour, one has on any view of it the possibility of section 46 action against the recalcitrant wholesaler.

In terms of a Moorcock inquiry, the officious bystander tapping the parties on the shoulder, why would one suppose that there would be any obligation in the nature of refund on that scenario, because the wholesaler, if he had to refund, would then be refunding to the retailer and paying, with or without penalty, to the Commissioner if section  46 were eventually used; nothing to prevent it from being used and no contractual arrangement between the parties could prevent the Commissioner from using it. 

For those reasons, on Codelfa grounds, the notion of the recalcitrant wholesaler being a scenario, purely hypothetical, to drive a Moorcock implication in this case should be rejected.  We add to that, in any event, the notion that one needs a Moorcock implication raised against a company like Rothmans against the event of, perhaps, criminal conduct, that is no licence at all, leading to section 47 possibilities, ought also be rejected out of hand as an unreasonable and fantastic speculation.

But, of course, all this is still hypothetical.  My learned friend needs it to raise the spectre of double payment.  It is not this case.  Move then to the other hypothetical which is the double payment spectre raised by my learned friend and tested with me in argument yesterday.  The insolvent wholesaler would love to pay but cannot.  In that case, no amount of action under section 46 and 47 will avail the Commissioner.  Even if there not be a liability, there could later be a liability imposed by an assessment under 46 or 47 but it will be mere paperwork granted the fact that insolvency means the Commissioner will either get nothing or only a proportion.

Depending upon the nature of the insolvency, it will be no mere paper exercise and would be critical for the Commissioner to undertake in order to rescue something from the wreckage.  At that point, one again asks The Moorcock question, what does the anthropomorphic conception of justice, the reasonable person in that position, the Court, emerge is the answer to the question, “What does business efficacy require in that case?”.  One thing can be immediately seen.  It does not require a promise to make a preferential payment by way of refund.

So that the two possibilities, recalcitrance and insolvency, which do give rise on the interpretation supported by my learned friend to a double payment possibility by a retailer, can be seen for the reasons we put both to exclude any sensible possibility of a Moorcock implied term for a refund.  Then move out of hypothesis to the actual case, which is where we should have stayed always.  The actual case by definition has no double payment possibility.  The actual case is that no one has to pay these ad valorem components of the licence fees and, of course, there needs to be no Moorcock implication to deal with a refund to avoid the spectre of double payment in a case where there cannot be double payment.

It is for those reasons, in our submission, that the overall statutory scheme is one which throws up difficulties for my friend’s case, particularly as it lies at the foundation of what is said to be the commercial or financial reason between these parties for an implication of some term concerning refund. 

May I then go, your Honours – trying now to stay only within the actual – to the contract which was made between these parties.  The first thing to be noted is that the relevant contract is the discrete transaction of purchase.  There are many of them.  We know from the evidence, as my learned friend told your Honours yesterday – and the evidence can be found on this point in volume 2, page 95, lines 46 to 48, that there were ‑ ‑ ‑

KIRBY J:   What is that reference, again?

MR WALKER:   Volume 2, page 95, lines 46 to 48, which happens to be Mr Roxborough’s evidence – that the sales calls were made more or less weekly, and they were made more or less weekly for the delivery of inventory by wholesaler to retailer.  As I am about to show your Honours, the trading terms included, pursuant to the credit granted, seven days payment term.  So that is was upon the delivery of the next week’s inventory that the retailer paid the wholesaler for last week’s inventory and, unless the retailer, of course, were gradually building up a warehouse of tobacco to become stale, then one might suppose that a weekly sales visit with a one week credit term means that the retailer has, as you would expect, sold the goods before he has paid for them.

That is dealt with by the standard terms and conditions in a way which needs to be looked at.  Economically, commercially and financially it means that one can dispel entirely any impression that may have emerged yesterday of the retailers going out on a limb financially in order to put my client in funds for some future licence fee obligation.  They got the seven days credit for what could be seen to be a seven day sales cycle.

Can I take your Honours then to the terms and conditions which can most usefully be found in the blown‑up and more legible version, annexure A to my learned friend’s written submissions in reply?  The reference in the appeal book, which I have asked your Honours not to go to, is 119.  We are grateful to our learned friends for the version which is easier to read.  There are some of the terms that my learned friend did not draw to your attention upon which we do rely.  Clause 2.

CALLINAN J:   Mr Walker, I am sorry to come back to this but perhaps I did not quite understand an answer you gave me yesterday.  Is it the fact that in respect of tobacco products sold to the appellant during the period 1 July 1997 to 5 August 1997 the appellant actually paid money on account of the tax?

MR WALKER:   Yes.

CALLINAN J:   The appellant did.

MR WALKER:   There was no withholding.  There was no protest.

CALLINAN J:   No.  All right.  Now, was that money that was so paid in fact paid by your client to the revenue authority?

MR WALKER:   I will get the precise date but one ought to assume that most of it was not.  Most, if all, I think was not.

CALLINAN J:   Was not?

MR WALKER:   That is because there ceased to be any obligation to pay an ad valorem component of a licence fee.

CALLINAN J:   And that is the precise claim of the appellants in this case.  It is in respect of the money so designated or forming part of the payment by the appellants but not in ‑ ‑ ‑

MR WALKER:   Yes.  That is why we are here.

CALLINAN J:   Does not that really make irrelevant everything you have put to us with respect to the ordinary system of payment of accounting?

MR WALKER:   No, your Honour.  It is first put as a matter of the implication of a term or spelling out the promises made between these parties.

CALLINAN J:   We will take the implication case.

MR WALKER:   May I just complete ‑ ‑ ‑

CALLINAN J:   Yes.

MR WALKER:   Your Honour asked for a reference:  the evidence at volume 2, page 303, in relation to the calculating and payment of the fee in July 1997 and at 305, lines 15 and following, one will see the evidence that Rothmans paid the fee for the period from 28 June to 27 July under protest.

CALLINAN J:   So your client still holds money – I do not mean the actual sum of money but a sum of money equivalent to a payment of revenue, a revenue charge, that has not in fact been paid to the revenue authority?

MR WALKER:   I am sorry, I have misled your Honour by miscorrecting the error at 305, line 16.  Could I take your Honours to page 334, which is the annexure there referred to.  That is the application for the licence.  The licence period for which it was made was 28 July to 27 August, a licence period that includes of course the day of judgment in Ha.  The relevant period, that is the period whose sales produced the ad valorem amount, was June 1997.

KIRBY J:   But there is no getting away from Justice Callinan’s analysis, is there, that you have ended up with a windfall?  I mean, there is no getting away from that fact, but you say that is your entitlement?

MR WALKER:   No, I have not been, I think, at pains to ‑ ‑ ‑

KIRBY J:   But you have because you were paid money that was intended to be paid to the revenue ‑ ‑ ‑

MR WALKER:   I have not said, “We have not got the money”.  We have got the money.

KIRBY J:   Yes.  You are being very candid about it.  There was no legislation, was there?  There could not be State, I suppose, but there was no federal legislation designed, as it were, if it be constitutionally valid, to rake in what would otherwise appear to be a windfall in your hands?

MR WALKER:   We cannot point to the effect of any of the subsequent Commonwealth fiscal legislation.

KIRBY J:   I thought at the time that we were asked to delay Ha on the basis that something was going to be done.

MR WALKER:    Your Honours were, but we cannot point to and do not rely upon any provision or effect of the subsequent Commonwealth fiscal legislation ‑ ‑ ‑

KIRBY J:   So it is a windfall to you.

MR WALKER:   ‑ ‑ ‑ to say that, in effect, if the money goes over to my learned friend’s clients, then we will have been hammered twice or three times.  We do not rely on that.  Your Honour, metaphor, not for the first time, perhaps introduces colour which is not helpful.  To talk of windfall perhaps is unnecessary.  Everyone has used the phrase in this case, on all sides.

KIRBY J:   Look, it is an ordinary English word.

CALLINAN J:   Well, I will not use one.  I mean, you received money on account of a liability that you have never had to discharge.  There is no metaphor there.

MR WALKER:   No, there is no metaphor there and, in our respectful submission, the proper analysis requires attention to what the so‑called liability is in what your Honour has just referred to.  There was no liability existing at the time of the sales in question.  It is a liability that depends upon a number of matters, including, one, the wholesaler applying for a licence, and, two, the law requiring the licence fee to have an ad valorem component.

CALLINAN J:   Yes.

MR WALKER:   Now, because your Honour asked about the period in July, I am going to come very soon to the material that puts beyond any doubt that in terms of expectations there was a degree of knowledge and appreciation in these appellants which explains, first, why there has never been any question of frustration argued, and, second, why, in our submission, there is no element of windfall or lack of dessert.

CALLINAN J:   What is the relevant expectation, then, that you are referring to?

MR WALKER:   The relevant expectation is that there could be a demolition of the ad valorem component of the licence fee scheme in the imminent judgment of this Court, but may I come to the evidence specifically because its terms, specifically, are relevant.

CALLINAN J:   Would there not, inevitably, in those circumstances be an accompanying expectation that if that happened and that your client ceased to be liable, that you would not retain money paid on an account which you do not have to discharge?

MR WALKER:   Absolutely not, your Honour.  As your Honours will all recall, at that time it was not known how, how quickly and in what measure the tax would be replaced.  Nobody thought that the smokers of Australia were to be spared an impost on the cigarettes.  Nobody thought the real cost to the consumer was going to come down by reason of victory by Mr Ha and his co‑parties and, as Justice Kirby has pointed out, there was some kind of amorphous expectation – absolutely correct in the event – that the Commonwealth would move in to impose an excise, the tax in question having been unveiled as in truth an excise.

KIRBY J:   And that was not done? 

MR WALKER:   No, it was done.  There was an excise imposed; the Commonwealth did subsequently ‑ ‑ ‑

KIRBY J:   I realise that, but there was nothing special done for the transitional position. 

MR WALKER:   But at the time of the transactions in ‑ ‑ ‑

KIRBY J:   Assuming that to be possible. 

MR WALKER:   Nothing.  That is why I do not rely upon any of that legislation.  But at the time of Ha – before Ha’s judgment, at the time of the transactions that Justice Callinan has asked me about this morning, nothing was known, nothing could be known, about the extent to which, the speed with which, and the sails upon which the new ad valorem excise, surely to be imposed by the Commonwealth sooner or later, would bite.  So the notion that one did not need to arm oneself with money to defray an excise in the future could not, with respect, be the question of such security and such assurance that it went without saying, without dispute as to the terms in question, that there would be a refund by us. 

GLEESON CJ:   As I would understand it – to resurrect the metaphor of a windfall – the reasoning in the courts below was that if there is a windfall here, this case is about which of two undeserving parties gets the benefit of the windfall.  And, in those circumstances, there is no standard of reasonableness, much less a standard of reasonableness upon which they would have agreed, as to which of them should get the undeserved benefit. 

MR WALKER:   That is precisely our position, for which we contend, and ‑ ‑ ‑

KIRBY J:   That has a double bite, in respect – at least as far as I am presently concerned – of the claim for equitable relief. 

MR WALKER:   It applies to all of them.  Implied term, terms on reasonableness – the purpose in question, that money had and received will in due course turn out to be something which is driven by such conceptions, would come to that.  Certainly, equity is, expressly, as well. 

KIRBY J:   And has there been any development in restitutory doctrine that imports that notion into that doctrine as well?  Of restitution. 

MR WALKER:   The short answer ‑ ‑ ‑

KIRBY J:   In other words, that those who seek restitution must be willing to do restitution. 

MR WALKER:   No. 

GLEESON CJ:   I suppose there could be a new maxim applied here:  in pari fortuna potior est conditio defenditis.

MR WALKER:   Yes.  We could not possibly, of course, accept delicto in selling what is still a lawful product, but yes, your Honour. 

GLEESON CJ:   I suppose you could test it by saying:  if this Court had legislative power and we, without giving any reasons, could simply legislate as to which of the two parties should retain this windfall ‑ ‑ ‑

MR WALKER:   Or whether they should share it.  Or, as Justice Kirby points out, give it to a charitable foundation for the investigation of certain diseases. 

KIRBY J:   No, but equity could fashion a remedy and impose conditions and develop a scheme.

MR WALKER:   With great respect, we wish to adopt in large measure some of the matters that your Honour raised with my learned friend for his consideration, and we will come to that fairly soon.  But if one is not talking about equity imposing terms, but if one is talking at common law, the money had and received or in contract, the answer is, with great respect, that as the Chief Justice puts it, if the court had an at large ex aequo et bono legislative function or quasi-legislative function, then the kind of consequence for which my learned friend contends would no doubt be accompanied by argument about who should get the windfall or should there be a split of the proceeds of the windfall or should there be somebody not in court who should get the windfall.  The people not in court, of course, include the consumers.

GLEESON CJ:   But our task is this, is it not, that accepting that as between the two competing contenders for this money with which we have to deal, accepting that there is no superior merit on either side, the question is:  what is the principle which may operate in other cases where there is merit; what is the principle that yields a result in this case?

MR WALKER:   Yes, we have the money.  The other side have to point to a principle which, against the background of the equal lack of merit or equal merit, will lead to an order of this Court requiring us to give an equivalent sum to the appellants.

KIRBY J:   Mr Gageler disdains it, but what would be wrong with the Court saying, “Well, you succeed in your common law arguments for the reasons you have advanced.  It is impossible to impose as reasonable a term as between the parties and so on, but Mr Gageler is entitled to his equitable relief, but upon condition, and only upon the condition that the fund paid over to him is provided for a scheme to be provided for health eduction or hospitals or still to be settled by the court below”?  That would be the just solution to this whole thing.

MR WALKER:   The short answer, your Honour, is that because they reject that out of hand now, that possibility can be left as hypothetical in this case as it was left in the similarly hypothetical matter raised with respect to Learned Hand’s suggestion, by Chief Justice Mason in the Royal Insurance Case ‑ ‑ ‑

KIRBY J:   It is harder to fashion a remedy for cabaret attenders than it is to fashion a remedy in equity for those who are the victims of smoking.

MR WALKER:   It is much more straightforward to identify customers, one would have thought, your Honour.

KIRBY J:   I could not even begin to imagine such a remedy. 

MR WALKER:   At 182 CLR 78 Chief Justice Mason in the first full paragraph commencing “But does all this require” raises for consideration, equally we would say hypothetically because of the position in the case, the matter that your Honour Justice Kirby in effect raised yesterday. The answer, in light of the considerations there raised which did not have to be finally concluded in that case, applies in this case as follows. At every point, first instance, intermediate appeal and in this Court, the appellants invoking equity’s assistance have steadfastly, and for very obvious reasons of self-interest which we do not criticise, refused to have anything to do with a single solitary cent of this money being held otherwise than by them beneficially to be no doubt distributed in accordance with arrangements between them and their lawyers, to which we will come.

KIRBY J:   But they might, if they were faced with the unpalatable prospect, which they have come to this Court to contest, of the money ending up with you or ending up with the consumers, be prepared to accept this public-spirited litigation in order that it be paid back to those who ultimately paid it in the first place, namely the purchasers of packets of cigarettes.

MR WALKER:   It is not public spirited litigation.  That much is proved in the record to which we are coming.

KIRBY J:   Well, it might come over them.

MR WALKER:   But it is not, your Honour.

KIRBY J:   If that was the condition for the provision of equitable relief.

MR WALKER:   All your Honour’s blandishments yesterday failed to shake my friend in his candid, brief response, “No”, he said, and that is an end to an equity suitor’s claim if the Court, as it should, finds that there is a measure of doing equity involved in being an equity suitor.  That is why your Honour need not, as it were, create by way of a condition a scheme for the relief of hacking coughs, or whatever else.

CALLINAN J:   Did any of the other Justices in that case adopt the same approach as Chief Justice ‑ ‑ ‑

MR WALKER:   That is not an approach that leads to the relevant conclusion.  May I take that question on notice?  I think the answer is, no, your Honour.

CALLINAN J:   Yes, the answer is, no.  Anyway, the general result from Royal Insurance has to be looked at in the light of SCI.  The general notion of getting mandamus to pay moneys is somewhat an eclipse after SCI.

MR WALKER:   It is not an authority or a case which plays any part in the mainstream of our argument, your Honour, but that passage is a passage which is certainly redolent of what was raised by Justice Kirby yesterday, which is why I have drawn it to attention.

GAUDRON J:   But his Honour was there talking about a person really in the position of your client recovering back from the revenue.

MR WALKER:   Well, yes.  There are multi-stage recoveries, one can suppose, in this area, and only one of them includes the claim against the revenue.  We are the only one who would have a claim against the revenue.  There is no claim against the revenue in this case.

CALLINAN J:   In any event, there is no suggestion that consumers got an invoice when they bought a packet of cigarettes which separately identified the tax component.

MR WALKER:   No.  If that had been the case, no doubt, it would be in the evidence, your Honour, and it is not in the evidence.

KIRBY J:   Yes, but there would be no doubt that the consumers knew because it was always a hot issue at budget time, that they were having to pay a tax.

MR WALKER:   Beer and ciggies used to be an annual headline.  It did not refer to the price of tobacco at the farm.  It always referred to tax.

KIRBY J:   I am sure every cigarette purchaser watched that budget very closely for the tax that was steadily increased, mainly in order, so it was said, to fund hospitals and education, and all the other things that are necessary.

MR WALKER:   Well, your Honours, may I go back to the terms of trade which, in our submission, are critical to justify some of my answers, particularly to Justice Callinan.  Clause 2 of those terms of trade made these conditions “apply to all orders for Goods” ‑ ‑ ‑

GUMMOW J:   That is the battle of the forms clause.

MR WALKER:   Yes, it is.  There were no contending forms here because the back of the van saw the cheque for last week’s inventory with a receipt together with the invoice, all of which was governed by these terms.

GUMMOW J:   It could not have covered the whole of each of these contracts because it did not say how much tobacco or how much you have to pay.

MR WALKER:   No.  This is that part, as it were, which is bolted on to an order, the order being that which defines what is to be bought at what price, to be delivered when.  So the “orders for Goods” in the first line of clause 2 is something which really triggers each transaction.  Each transaction is separate and unless there be some repugnancy, which has never been proposed in this case, these are terms which are going to apply to those orders.  Under clause 4, we have a reference to what the price will be and your Honours see that other forms of tax, not this tax, is referred to as by way of examples of things which may lead to increase in price.  We then have in clause 6 the seven day payment term.  They:

shall pay for all Goods delivered within 7 days from the date of receipt of the Goods –

and “Until such time as the Company” either “recovers the goods or is paid” for them, there is an interest rate, as your Honour Justice Hayne observed yesterday.

Under clause 7 there is the dealing with property passing in these articles of fairly rapid commerce and under 7(a) if:

the Purchaser fails to pay the Seller as and when due and payable any moneys comprised in the Purchaser’s debt –

under those then:

the Seller may at its option exercise all or any of the following rights -

and they include taking possession:

of all Goods title to which has not passed to the Purchaser –

We then come to clause 10 which stipulates when title is to pass and under 10 one sees that:

until payment is made in full to the Seller for the Goods:

(a) property in the Goods remains with the Seller and the Purchaser agrees to hold the Goods in a fiduciary capacity as bailee –

Ownership is common law equity in every way possible reserved until payment in full.  There is the on sale as well, 10(e), so as to avoid the ludicrous prospect of something in the nature of a Romalpa clause over the remains of a cigarette.  What is the debt, what has to be paid in full?  A colloquialism is the bottom line.  The bottom line in this case your Honours have already seen.

GAUDRON J:   It was not just a bottom line.

MR WALKER:   No.  It is all the lines that make it up and they start with cartons of cigarettes and they have balance items such as discounts and rebates and they also have the all‑important, second‑last line, which is the tobacco licence fee entry.  The bottom line is the net total, an expression which, as to both of the words in it, emphasises that that is what has to be paid.

GAUDRON J:   But it is not what is referred to in the building industry as a lump‑sum contract, is it?

MR WALKER:   I am going to come to that, your Honour.  It is, we say.

HAYNE J:   How does that work then, in the perhaps not uncommon case of the retailer who says, “The carton of X cigarettes you delivered to me was wet.  I am not paying for that carton.  Here’s the cheque for the balance of the delivery.”  How do you then work through these conditions in such an event?

MR WALKER:   Your Honour is asking me ‑ ‑ ‑

HAYNE J:   That is, is the failure to pay the whole of what you have described as the bottom line something that triggers, for example, the retention of title clause in respect of that part of the order for which they have paid.

MR WALKER:   There may or may not be a Mondel v Steel operation of law by which the price to be paid is reduced, pro tanto by a failure of the goods to answer either the statutory or contractual description.  The statutory description is preserved, of course, under clause 8, which is drawn so as to leave in force all statutory warranties.   That does not, however, in any way detract from the actual operation commercially and legally of the requirement to pay in full in order to obtain property.

It raises the question:  what in that case has to be paid in order to have paid in full?  In the case of the identifiable damaged goods, one could, with respect, see that there would be an abatement in price.  To pick up Justice Gaudron’s point, just as in a building contract for a lump sum one can see and usually does see on the face of the documents, particularly the tender documents, the make‑up of the lump sum price, because you can see that on each of these invoices, you will of course be able to carry out the abatement.  But abatement is a process which demonstrates the need to pay the total rather than detracts from it.  It is a lump sum contract in the sense your Honour Justice Gaudron asked me to consider in the sense that here is an indivisible or inseverable obligation in the way ‑ ‑ ‑

GAUDRON J:   That is the question to be decided.

MR WALKER:   Yes, it is – in the way that expression is used and discussed, for example, at the beginning of Justice Mason’s reasons in Baltic v Dillon 176 CLR 350. In the passage to which attention has already been drawn, I do not need to go to it in any more detail.

GAUDRON J:   I do not think there is a real analogy, is there, though?  I mean, they could not leave this lady on the Cook Islands and say, “We’ve performed three-quarters of the contract”.

MR WALKER:   No, they could not.

GAUDRON J:   But you could say in this case, “A quarter of last week’s delivery was defective.  I want you to take it back and I’ll only pay you next week for three‑quarters”.

MR WALKER:   Yes, but, as in a building contract, an entire contract, a Mondel v Steel abatement can apply.  That does not detract from the fact that you still have to pay the total due.  It simply says notwithstanding the vendor or builder has insisted that the total due is a certain sum, the court is able to say by operation of law that there will be full discharge of that obligation to pay the total by reason of the doctrine of abatement and by reason of the departure from the stipulated conditions of either the building or the delivery, as the case may be.

As Justices Deane and Dawson pointed out in Baltic v Dillon 176 CLR 377, one could have, though they did not in that case, constructed a contract by which the fare could be apportioned or allocated on a day‑by‑day basis. That is quite unrealistic, for all the reasons pointed out by all the Judges, including your Honour Justice Gaudron, in that case. However, while analogies between a pleasure cruise and a wholesale transaction for the delivery of cigarettes are not obvious in any commercial or trading sense, contractually there is no difference. The case, in order to be determined in principle, will proceed from principles which apply to a wide variety of transactions, including transactions as disparate as a cruise and a wholesale delivery of cigarettes.

GLEESON CJ:   Mr Walker, it may be that the principle for which you contend is that in a case like this the cards lie where they fall, but I do not know what the trading terms applicable to these individual appellants were, but suppose one of them had 30 days to pay and suppose the goods were delivered and the invoice was handed over on day 1, this Court gave its decision in Ha on day 15, and the time for payment arrived on day 30.  What would be the amount for which you could sue?  I mean by that, what is the amount that you could recover?

MR WALKER:   The whole amount opposite the words “NET TOTAL” on the invoice given with the goods.  Now, that then comes to the question:  what does the line two above that reading “TOBACCO LICENCE FEE” mean by way of the trading terms between these parties?

KIRBY J:   I suppose the appellant could refuse to pay that component which had been devoted in the invoice to the tax not now payable.

MR WALKER:   That would then test whether there is any – I am sorry.

KIRBY J:   But the commercial realities would be that they would not be supplied with their tobacco if they took that stand.  I mean, you are the supplier; they need your goods.

MR WALKER:   The is the corollary, of course, of the commercial reality that they would have no difficulty in recovering the same retail mark up as they had been recovering while ever Ha was still only an idea.

GLEESON CJ:   You cannot test people’s contractual rights by commercial realities.  Suppose they had never intended to do any business with one another again, it does not alter their contractual rights.

MR WALKER:   Not at all.

GLEESON CJ:   So if on day 30 you sued for the full amount, the net total amount of the invoice, could they resist payment of that part of it that referred to tax on the basis that in between the time of delivery of goods and rendering of the invoice and the time for payment it had become apparent that there was no such tax?

MR WALKER:   No.  In order to raise a defence on the contract price, a price which is, after all, just one of the more obvious places where risk has been allocated under this transaction, in order to mount a defence it would have to be something in the nature of an abatement, because we are not talking at the moment about cross-claims or set-offs by reason of a breach of an obligation by us.  Your Honour has asked me about a defence.  It will have to be something in the nature of an abatement.  The only abatement that the common law has hitherto found is where there is something in a delivery of goods which is not that which was promised about the goods, and it has not hitherto extended to overthrown expectations about what the vendor will do with money which is the vendor’s.

KIRBY J:   But that may not be so, because in England you could not get the problem that we have to face in Australia and that in America in that series of three or four cases that Chief Justice Mason mentions they have had to face, namely, of legislation being struck down.  They just did not have to face that and, therefore, we have a new situation.  The common law is the common law of Australia, not the common law of England.

MR WALKER:   No, but when I talk about the common law I am bound in abatement, your Honour, to observe that there is at present no difference between the common law of Australia and the common law ‑ ‑ ‑

KIRBY J:   Yes, but maybe there is a need for a difference to meet the new situation.

MR WALKER:   There may be.

KIRBY J:   After all, if you look at those American cases that Chief Justice Mason mentions in Royal, they are endeavouring, in the American courts, to respond to this problem which is common to them and to us.

MR WALKER:   Yes.

KIRBY J:   We should not just blindly follow English precedents which have really got very little to say on this particular problem.  They may in the future have something to say but they did not until now.

MR WALKER:   No.  I do not wish to cavil with anything that your Honour says there.  I need to observe that this case has not at any stage raised for consideration by way of a preliminary to one of the arguments, presumably money had and received, that there ought to be understood to be – have been, hypothetically – a defence in the nature of an abatement of price in the case the Chief Justice has put to me.

KIRBY J:   I do not see why there should not, given the new situation which the law has to respond to.

MR WALKER:   I am simply observing that this Court would be looking for the first time in this litigation at that question, it being a question which has not been advanced by the appellants, has not been argued, and, in particular, no suggestion that the way in which the scope of abatement has been understood in the common law hitherto should either be departed from or perhaps simply incrementally extended.  There has been no such argument.

KIRBY J:   Or query whether in the facts of this case the issue arises because the facts posited did  not actually occur but it is a way of testing your propositions as to implied terms.

MR WALKER:   Or the more telling that – well, your Honour says it is a way of testing the proposition.  We are answering propositions because we have the money and the onus is on them.  We are answering the proposition that there is a cause of action – one presumes, money had and received is the one in question, which entitles them to a refund, so‑called.  Now, if that is so and if the argument involves testing it by inquiring about a common law defence to an action for the price which action is brought after the tax has been held invalid so that the second last line refers to something which is never going to be an impost on the wholesaler, then one would have expected to see that in the argument.

One does not see it in any of the argument at all and we have to answer argument.  In our submission, we are entitled, at the moment, to proceed on the basis that there is no challenge to the proposition that there is not a case which allows for abatement, as it is presently understood, upon which the appellants could rely in the hypothetical position the Chief Justice has raised with me.

KIRBY J:   Well, this is not really a case of abatement, is it?  This is a demand for refund.

MR WALKER:   No, it is not but we apprehend that if there were a defence in abatement then it would be for reasons which could as well underlie an action for money had and received for past payment and that is why we understand the relevance of the question.  There not being such a case in abatement, the other side is deprived of that argument, so we submit.  Your Honours, the price in this case, is, as I say, one of the matters about which the parties allocated risk.

All sorts of risk of the ordinary commercial which, as your Honour the Chief Justice has pointed out, will remain the terms of trade and will remain the obligations between the parties quite regardless of what actually happens in commercial reality.  Extremely expensive labour by reason of industrial dispute, extremely expensive tobacco by reason of doubt or flood – none of that will affect the allocation of risk as between us and them as to price.  The same is true, we say, of TLF.  This did not come as a bolt out of the blue.  May I take your Honours to volume 2, page 112.

In terms of the allocation of risk, which means that if we had sued after the tax had been invalidated, for the bottom line, there would have been no answer.  On that page, which is one of the affidavits of Mr Roxborough, he refers to a letter he received and read on or about 9 July.  One goes to that at page 114.  That letter, which is in the form of a circular letter with a tear-off stub, is addressed to tobacco retailers and refers, at line 16 or so, to the recent conclusion of the argument in this Court in Ha, an argument about licence fees being unconstitutional, and then goes on to say:

If the High Court action is successful then payments made by you to your licensed wholesalers for the period of one to two months prior to the date of Judgment should be refundable.  Depending on the terms of the Judgment, there may be the potential for claims beyond that period. 

Then a reference to the “considerable negotiation and/or litigation” that would be necessary, and an offer to act in return for a charge to be rendered by a consultant company of the equivalent of up to 5 per cent of the funds recovered, and an invitation to form a retainer.  That was read and understood by Mr Roxborough on 9 July.  One then goes back to page 112 of the affidavit – and this is their evidence-in-chief, though this is by way of supplementation in light of the issues then posed between the parties.  Paragraph 6, line 35 or so of that affidavit, refers to the payment of licence fees on particular dates, which your Honours will see are dates following delivery of the judgment in Ha. 

Those invoices (k), (l) and (m), referred to in line 34, may be seen on page 94 of the appeal book, to be invoices of 31 July, 1 August and 5 August.  May I, at that point, apologise to your Honours because in paragraph 61 of our written submissions – I do not need to take your Honours to it – there is a factual error in the last sentence.  Not all of the payments were made before 5 August.  Most were, but not all.  Your Honours, that is the state of mind before the relevant transactions, 9 July is this state of mind.  No wonder there is no claim to frustration.  Even in frustration, where, as Lord Radcliffe pointed out in the passage ‑ ‑ ‑

GUMMOW J:   This paragraph on page 112 seems to be boiling up some case for the State, which has disappeared. 

MR WALKER:   May I put that in context.  The evidence-in-chief in this case led by the appellants and read by them at trial – in the Federal Court, after all – was in support of two causes of action, as well as those still before your Honours, which have disappeared:  section 52 and mistake. 

HAYNE J:   Why are you taking us to it, other than to excite our passion?

MR WALKER:   No, because it is relevant to implied term; it is relevant to money had and received - that is purpose; and it is relevant to the equity.  In each case, what they adverted to and accepted by way of risk allocation under the contract is relevant to the present causes of action still persisted in.  Now, in writing, though not elaborated in address, my learned friend has said to your Honours, “You need take no account of the evidence given by these people”.  In our submission, that is wrong in law and on authority. 

Even in the “frustration” case, which could never have been mounted in this case, where, according to Lord Radcliffe, one is not looking at what people knew or feared, or the like, what is important, as this Court made clear in its approval of that passage in Codelfa, even in frustration, it is important to know about the expectation, the importance of the unexpected event is critical to a frustration case.  There is nothing frustrating about the favourable outcome for the tobacco retailers in Ha.  It was something which these parties, these appellants, took into account in the most deliberate fashion, both before they entered the contracts and as they performed some of them and in prospect was the very event.

So that, if one were thinking about frustration there could not be any radical overturning of that which they were bargaining for.  They were bargaining to get cigarettes and, as your Honour Justice Kirby has pointed out, of course they wanted to keep getting the cigarettes, and of course we would not deal with them if they did not pay the amount.  But that, after all, is because this is a wholesale transaction for commodities to be on-sold by them as retailers.

GUMMOW J:   Now, can we, hopefully, sooner or later, get to purpose with common money count?  Does purpose - several questions arise, law, perhaps.  You seem to be suggesting that the notion of purpose there is somehow closely linked with the notion of reasonableness with the implication of the contract term.  Is that right, or do the cases say that?

MR WALKER:   It is, in this sense, that what the cases say - take Fibrosa - is that it is consideration in the older more broad sense of occasional reason which underlies this notion of purpose for the money had and received count, the second alternative of the two ways my friend put it.  That notion of reason or occasion, consideration in that broader sense, is one which requires examination of the circumstances.  There can be no doubt about that.  They are the same circumstances with the same interplay of commercial expectation and risk allocation as one looks at for Moorcock considerations.  When one does that - I am sorry, your Honour ‑ ‑ ‑

GUMMOW J:   But does purpose mean sole purpose?

MR WALKER:   No, but it does mean a purpose in the sense that it is the reason why that money was bargained to be paid.

GUMMOW J:   “The” reason, not “a” reason.

MR WALKER:   No, the reason why that money was bargained ‑ ‑ ‑

GUMMOW J:   Well, it is exclusive then?

MR WALKER:   Well, in this case, we do not have to get into questions of ranking of reasons as to which was the predominant one or which was a subsidiary one ‑ ‑ ‑

GUMMOW J:   I am just wondering if the old cases on money had and received look at it that way.  I suspect they do not.

MR WALKER:   I think they do not break up the question, they simply as whether there has been a purpose of the payment defeated.

GUMMOW J:   Yes.

MR WALKER:   Now, your Honour, I do not think one will find any exploration in the cases of a difference between “the purpose” and “a purpose”.

GUMMOW J:   No.

MR WALKER:   We do not suggest there should be.  In this case, one asks what was the purpose of the money to be paid over.  It was not a disinterested concern on the part of the retailers that we stay in business in the future or that we pay licence fees to the Commissioner in the future.  It was quite simply to get the cigarettes.  That much is made quite clear when one looks at what they said themselves about that, and the relevance of what they said themselves is that even in the case of presumed intention - see Lord Justice Bowen in Moorcock itself.  One looks to what was in the mind of the parties at the time of the transaction about the transaction.

KIRBY J:   Yes, but you could have invoiced them in a global way without identifying the tax, could you not, or is that required by the statute?

MR WALKER:   No, we could not, your Honour.  Could I take your Honours to 298 to 301 of the appeal book to answer that.  Our invoice form is no accident, it comes about by reason of the obligations of record keeping and the presentation of paper, including the possibility, that is, the faculty of doing it by an invoice, required by the TLF scheme itself.

KIRBY J:   But is that not against you then ‑ ‑ ‑

MR WALKER:   No, your Honour.

KIRBY J:    ‑ ‑ ‑ because it is requiring the specific identification of this sum as something separate from the sum for the cigarettes as such? 

MR WALKER:   It does require that.  If that is against me so be it.  It does require that, yes.  Now, partly that, of course, is highlighted by the odd language one saw in 33A.  We have value, cost and price floating around as words.  It is a 100 per cent tax on the price according the ministerial determination which one will find at appeal book 313.  But before going there, the passage from 298 to 301 sets out in detail how the form of the paperwork came about and it seemed to be a regulatory matter.

HAYNE J:   What part of that evidence do you point to as recording the obligation to separately identify the amount of the tax?

MR WALKER:   At 21 on page 301, (d) on the end of that, and the form of the ministerial determination which one finds at 313 and, in particular, the terms ‑ ‑ ‑

HAYNE J:   Well, 21(d) is the deponent’s conclusion.  What regulation?

MR WALKER:   Yes, may I come to 313, line 20.  Now, that is a determination made under section 45 by which the Minister determined the basis upon which value, and one sees under 1(i) that the list in question had to identify a price excluding that which was included in it an:

amount . . . in consideration of a licence fee –

so that there was a positive requirement for the wholesale list price ‑ ‑ ‑

HAYNE J:   Yes, not the invoice, the wholesale list, yes.

MR WALKER:   No, for the wholesale list price to do that.

HAYNE J:   Yes.

MR WALKER:   The value is as in that wholesale list price.

HAYNE J:   Just so.  What is it obliged the invoice to record it separately?

MR WALKER:   Under regulation 13(1)(d)(iii) which is referred to, conveniently, on page 298.  Your Honour says, and correctly, that this is a mere deponent’s say-so, but it is also to be found from the material before your Honours.  It is page 808 in the print of the regulation which is given to your Honours.  I think there is no dispute that it is also accurately set out by Ms Freire on page 298 of the appeal book.  I am sorry, there is a contest, I withdraw that.

KIRBY J:   But that has maintained separate records, that is in its own recording, it is not to reveal that to the retailer.

MR WALKER:   Subsection (3), as I said earlier, there was a faculty with respect to the invoice.  Subclause (3) of that regulation permitted that to be in the form of invoices.  We made the choice to adopt that permitted course, and she swore, and it could hardly be doubted, that is why the invoice appears in that way.  There is a first a requirement for it to be recorded somewhere, and there is second a statutory permission availed of by us to do so in the invoice.

KIRBY J:   Well, presumably, as it permitted, you could have declined, but you went along with it and identified as separate this particular ‑ ‑ ‑

MR WALKER:   No, your Honour, because of another provision.  I am sorry there is so many.  Section 66(2)(a) of the Act obliged the wholesaler to issue an invoice.  With respect to every invoice, the records of the wholesaler had to include in relation to each invoice under regulation 13(1)(d)(iii)(c):

the quantity and value of each brand of tobacco sold.

The value taking you back to the notion of the allocated or split price, price without TLF.

KIRBY J:   I wonder if that is inherent.  You could adjust the value, arguably; it is just the global amount.

MR WALKER:   No, that is not – the value is said by the ministerial determination not to be the global amount.  It is said to be the amount minus any amount included in the selling price in consideration of a licence fee.

KIRBY J:   But is not this specificity against you in the sense that there is a high particularity in the identification of the component for the tax.

MR WALKER:   Unquestionably, in so far as high particularity, that is, the capacity exactly to apportion or allocate the amount in consideration of a licence fee.  If that is against us, then, yes, there is complete, unimpeded ease in allocating or knowing the amount in consideration of a licence fee.  We have never contested that, and it is plain from a look at our invoices.

The trading terms, however, were that they had to pay everything.  They took, as the evidence I have just shown you suggests, the risk of what would happen thereafter.  They took it for an evident and sensible commercial purpose to get the commodity they wished to sell at a profit, and we know that that is exactly what they did.  We know from volume 3, and this is by way of example, there are consistent answers on this, pages 444, 445, the tendered answers to interrogatories, answers by the appellants, that the price for which they sold the tobacco in question - and they did sell it - exceeded the price they had paid for it.  That much is clear.  It is not a matter of speculation or expectation; it is a fact in this case for all of the tobacco in question.

GUMMOW J:   It seems to me we are going around in circles really.  It is as plain as a pikestaff really that this consideration satisfies what Sir Owen Dixon talked about in Steele v Tardiani.  It was capable of being apportioned by a jury.

MR WALKER:   There is no doubt about that.

GUMMOW J:   No doubt about that.  The only question to my mind at the moment is this question of reverse failure of a purpose.

MR WALKER:   That is right.  In money had and received, that is correct.  As your Honour appreciates, I also have to contend against a contract claim.

GUMMOW J:   Yes, I realise that, but I am assuming that in your favour for the moment.

MR WALKER:   Could I give your Honours some references to evidence which, in our submission, is relevant in the Lord Justice Bowen sense in The Moorcock to know what was in the minds of these people ‑ ‑ ‑

GUMMOW J:   We were in The Moorcock an hour ago.

MR WALKER:   Your Honour, I have not been able, with respect, to be able to complete what we need to say about the evidence which the other side does not rely upon but which came when they adduced evidence of what was in their minds concerning risk because, despite what they swore ‑ ‑ ‑

GUMMOW J:   Is the evidence that you want to refer to indicated in any of the paragraphs in your written submissions?  That is where it should be.  It should be just a question of referring us to a paragraph with some numbers on it.

MR WALKER:   Your Honour then has the written submissions and it is the material in particular ‑ ‑ ‑

GUMMOW J:   That is why we have written submissions.

MR WALKER:   ‑ ‑ ‑ referred to in paragraph 3A and 3B, and in particular the evidence referred to in paragraph 3B is critical.  There is no doubt that these people entered these transactions and paid the money on the basis that the purpose of paying the whole bottom line was simply to obtain their tobacco and they did not care what we did with any of the money, including the TLF component – this is what the cross‑examination reveals – any more than they cared what we did with money to pay our electricity bill or our wages.  It was all indifferent to them, an expense to be paid out of our money as and when we chose.

So that the notion of anything under The Moorcock which would make it reasonable for either an obligation for us to stay in business or an obligation for us to stay in business to the particular month which would have seen these sales counted towards a fee collapses.  The actual term upon which the other side relies is an implied term of a refund in a certain event.  For the reasons we have already put, there is no Moorcock point there because there is no double payment spectre in the case of unconstitutionality.  There is in any event, as there would have been had frustration been pleaded, an answer that this is an event which you did, cannot be said to be unexpected, did not radically change the nature of your transaction.  You never expected to make anything other than the ordinary mark‑up which you did.

Next as to The Moorcock, it does not answer any of the problems about what happens in the case of the refund in the other positions that I have already addressed concerning recalcitrant or insolvent wholesalers.  That deals with the case in contract, but to say that it deals with the case in contract does not mean that one automatically moves on.  If the appellants lose in contract, it does not mean that other parts of the common law, money had and received, or equity is thereby available to them, because each of the money had and received and equitable jurisdictions relevantly are interstitial, that is gap fillers.  If the contract has looked after the matter, then that is an end of it.

Test it this way:  if there had ever been a promise to pay that money – and that is an inexactness that ought to be exposed – meaning a promise to include that sale in the aggregate which would generate a future tobacco licence fee, if there is a promise to have done that – and there could not be – but if there had been, why not sue on it if it had been breached?  What was to prevent a simple action on the contract?  There are of course clear answers why they would not choose to do so because, beyond nominal damages, it is impossible to see any loss they have suffered.

But that of course is not a reason to move on to examine money had and received or equity.  It is a reason to be content that the principal area of doctrine governing these parties’ relationship, namely contract, has dealt with and leaves no recourse for the appellants’ claim.  That is why it is critical, as was observed in Baltic v Dillon, as is the case in Goss v Chilcott, as is the case in David Securities, that one gets to money had and received only if there is a relevant voidness or other unavailability at law of the contract to govern the relations of the parties.

In this case, if there had ever been an executory obligation in terms of applying for a licence in the future or refunding if you do not, then that remained capable of being enforced by an action in damages on the contract.  The fact that they clearly had no financial interest in doing so does not mean that then one moves to what are truly interstitial areas of the law.  Restitution, so called, simply does not supplant contract in the way that that movement would have it.

Now, so far as one comes to the question of purpose, it can be seen from the same evidence and facts that the notion there was in the broader sense of consideration a requirement, that is, a predestination or an earmarking, to use my learned friend’s unhelpful metaphor, of this money to be paid in the future ought to be rejected.  There was no earmarking of any funds at all in any tracing sense and “earmarking” is a metaphor that talks about the capacity to segregate something from what would otherwise be a promiscuous and indifferent flock and there is nothing of that kind here.

That is why Quistclose, when one comes to equity, was never asked for and why, whatever Learned Hand said in dissent, germane to this case, cannot apply, bearing in mind that what that famous judgment refers to is the receipt of money as a fiduciary.  There is no suggestion that there was any fiduciary aspect to the receipt at the back of the van of a single cheque for the bottom line of last week’s consignment, a single cheque.  The appellants make it very plain that they at no stage expected the separate accounts or the prohibition on mingling that would have been the hallmark of Quistclose or for that matter, we suggest, the hallmark of the argument in dissent by Learned Hand.

Now, your Honours, it can therefore be seen that there has not been any failure of anything which could be seriously called a purpose in the sense of the old‑fashioned view of consideration.  That left only one alternative for money had and received and that one can be disposed of with the contract case because it is said that this is the case of the impossibility of performance of a promise.  Severable consideration, and we have conceded, I hope, as plainly as we can ‑ ‑ ‑

GUMMOW J:   But you are saying that purpose has to be a contractual term.

MR WALKER:   No.  It has to be something which can be gathered in this case from the contract, because the contract happens to be the setting of this action for money had and received, as the predestination of part of the price and there is no ‑ ‑ ‑

GUMMOW J:   Often there will not be a contract between the relevant ‑ ‑ ‑

MR WALKER:   No.

GUMMOW J:   Why is the fact that there is a contract somehow exhaustive?

MR WALKER:   Because it happens in this case – this is not a necessary matter of law, but it happens in this case to provide the circumstances for what the law does require to identify it, namely, the consideration in the broader sense of the payment, for the payment.  It is the contract and the statutory setting in which the contract was made and the commercial expectation and risk allocation between the parties ‑ ‑ ‑

GUMMOW J:   Take the case of a master who said to the servant, and I suppose there was a contract of master and servant, “Take this money and go and pay this creditor” and the servant, as it happens in the case, lost it in the…..  It never reached the creditor.  The servant was liable for money had and received.

MR WALKER:   Yes.  That money is predestined.

GUMMOW J:   Now, no one worried themselves about whether there was some implied term to use his best endeavours in carrying out his master’s directions from time to time.

MR WALKER:   Or even if there was a contract at all.

GUMMOW J:   The purpose was what the master said to him, “Go and do this”.

MR WALKER:   Yes, that is right, and that is why, your Honour, the evidence of how these parties dealt – which happens, in this case, to include contracts but is not confined to the contract.

GUMMOW J:   And, of course, in that example, the servant is not enriched.

MR WALKER:   No.  Now, your Honour, in our submission, looked at in that fashion it is unmistakable that one needs to spell out of these dealings which include but are not restricted to the terms of their contract a predestination of this money to a particular end.  Now, when one bears in mind what can be seen in the theoretical sense about the course of trading, namely, that we pay an ad valorem fee for our first month of trading, so that it is not correct to say that we are always in arrears, we are always recouping, we are always coming from behind.  It happens that the retailers in this case are always ahead, bearing in mind the likelihood of the seven‑day system operating, as it does.

Now, for those reasons, in our submission, the notion that any part of the bottom line which they have sworn, all of them, was what they were happy to pay to get their cigarettes, content for us to use the money which was ours for anything that was necessary in any of our expenses, with no distinction between a TLF expense in the future or an electricity bill at the time.  In that case one cannot say - by analogy with a servant boy and a master, one cannot say that there is anything in the nature of the conversation which mandated and predestined what the boy was to do with the money.  It simply does not apply.

KIRBY J:   Justice Gyles says you can if you take a commonsense view.

MR WALKER:   Your Honour, that is a view, however, which says of the wholesaler that for reasons which have to pass muster under The Moorcock that there will be trading in the future which says that there is some fear of double payment because, otherwise, of what moment is it to a retailer whether we pay it or not.  Now, the answer to that question given in‑chief by my learned friend was “double payment double payment”.  On our analysis, that does not run in the case of an unconstitutional licence fee, there will be no double payment.

What other interest is there?  It cannot possibly be that there is, as it were, the interest to make sure that they get the windfall rather than us because if that had been their intention the parties could have bargained to allocate the risk of the windfall.  Of course, not surprisingly, there is no evidence of any such bargain.  One could expect a pretty brisk response that the retailer would have got from the wholesaler had it been proposed that the cigarettes before Ha ‑ ‑ ‑

KIRBY J:   That is why the postulate is a little unreal.

MR WALKER:   Well, it is unreality we rely upon, your Honour.  These parties allocated the risk as to what would happen and as it happens we know beyond any doubt in the same way that we would know in an equity case by reference to the actual evidence.

CALLINAN J:   But the hypothetical officious bystander always asked a question of a kind that did not occur to the parties at the time.

MR WALKER:   Yes.

CALLINAN J:   So, there is nothing novel about the idea that the parties did not bargain for it.  Indeed, the occasion for the consideration of the question whether there should be an implied term only arises when the parties have not thought about it.

MR WALKER:   Yes.  That is why it does not apply in this case, your Honour.  These appellants had thought about it; 9 July, they had thought about it. 

CALLINAN J:   But they had not foreseen the consequence which ‑ ‑ ‑

MR WALKER:   They had foreseen (a) unconstitutionality, and (b) a promised refund, in terms.  Now they, for their section 52 case, swore that they were misled by the form of our invoice into believing that the TLF scheme was valid, impregnable, and each of them, under cross‑examination gave that up.  It is said against us that Mr Alldis did not do so, but it is clear from a comparison of page 140 – his affidavit – and the last page of his cross-examination, page 49 of volume 1 – part of the references we have already given in our written submissions – that he, too, did not get any of this from the invoice.

So the notion that they were labouring under some misconception, either fostered by us or explaining why they had not turned their minds to this matter for the officious bystander now tests, has to be put to one side as a matter of fact in this case.  That is why one does not find about mistake, either. 

Can I then move, your Honours, shortly to the question of the equity spelled out – this is an equity which arises from the defeat of a joint endeavour, according to my learned friend’s argument.  They resist what is called a proprietary constructive trust.  We would simply observe – and our written submissions seek to elaborate this point – that when one talks about trust, one has to be able to posit some property, and that when one talks about a monetary equitable remedy, in view of a constructive trust as in Barnes v Addy, the knowing assistance in a breach of fiduciary duty, the word “trust” is really being used as a similitude or analogy:  liable as if there were a constructive trust, liable as a constructive trustee, meaning in the same manner you have to make good the deficiency. 

In our submission, your Honours, there can be no question in this case of anything in the nature of that kind of joint endeavour being defeated so as to give rise to either a trust or the analogous monetary remedy which is, in fact, what they seek.  Trust is only used as an intellectual staging post;

the cases in question ought all to be seen, with respect, as cases which have either property which was imprest with a trust, or property out of which, by an equitable lien, for example, money can be paid.  That is how one should understand Giumelli v Giumelli, Muschinski v Dodds in particular.  Those are not cases which bear any analogy with the facts or these ‑ ‑ ‑

GUMMOW J:   No.  Mr Gageler says all he needs is something in the nature of a equitable debt. 

MR WALKER:   Exactly, but it has to arise from an equity, that is, it is the remedy that equity decrees in order to satisfy an equity.  One finds that equity, he says, because there is a joint endeavour. 

GUMMOW J:   Yes, or some variant of that idea. 

MR WALKER:   Some variant of that idea that has to do with what I will call defeat of expectation in a way that makes it unconscientious for us to keep the money.  For the same reasons we have put about money had and received, equity as a gap-filler, equity as ancillary to the common law, has no part in overthrowing the risk allocation of this contract when it can be seen that what happened is something that they looked forward to happening and that what happened was something that they could have but did not bargain to deal with under their contract. 

For all of those reasons, there can be no question of dictates of conscience in this case requiring that the retailers of the cigarettes, as opposed to the wholesalers of the cigarettes, should enjoy what has unkindly been called a windfall.  That is another reason, on top of the failure to do equity, upon which we rely in support of our opposition to the equity claim.  May it please your Honours.

GLEESON CJ:   Thank you, Mr Walker.  Yes, Mr Gageler.

MR GAGELER:   Your Honours, there are seven points in reply which will take me less than 10 minutes.  The first is that it is wrong to say that the appellants’ entire case turns on the construction of section 41(3) which produces the result that a retailer is liable to pay if the wholesaler does not.  The claim, in so far as it relies upon a failure of promissory consideration, is so based.  The remaining claims are not so based but are assisted by that construction.

The second point is that in dealing with the operation of the Act this morning, my learned friend advanced two scenarios.  One scenario he called that of the recalcitrant wholesaler who does not pay the whole amount of the licence fee upon renewing his licence.  The other scenario was the insolvent wholesaler who cannot pay the whole amount of the licence fee upon renewing the licence.  What he left out was the case of the wholesaler who simply does not renew his licence on the 27th day of the month following the wholesale sale.

In that case, the wholesaler does not pay the licence fee under section 40(1) and cannot become liable to pay the licence fee under either section 46 or section 47, and that is the precise scenario to which section 41(3) is directed, that subsection making sure that, one way or another, somebody is going to pay this licence fee.

HAYNE J:   And his answer to that depended, in part at least, on 33A and 50A.  Are there circumstances in which a wholesaler would not seek a licence for the period for which the retailer seeks a licence in which there was no breach by the wholesaler of 33A and 50A?

MR GAGELER:   Your Honour, without wasting time, I could not give your Honour necessarily an accurate answer but ‑ ‑ ‑

HAYNE J:   It seems to me there are such cases.

MR GAGELER:   I think the answer is, yes ‑ ‑ ‑

HAYNE J:   Sections 33A and 50A turn upon the intention of the wholesaler at the relevant time.

MR GAGELER:   Indeed.  Your Honour, the other point about those sections made in the judgment of the Full Court, volume 3 at page 531 to 532, is that they were introduced after section 40(3).  They are directed to the same end but they are, as I referred in‑chief, the braces that were added to the belt at a later stage.

The next point, the third point, in relation to your Honour Justice Callinan’s question about the amounts that were collected in July and up to 5 August 1997 not being paid over to the State, there was a finding to that effect by Justice Emmett, volume 3 of the appeal book, page 484, paragraphs 21 and 22.  The evidence is also clear, your Honours, at page 417 to 418 of volume 3 and in the cross‑examination of Ms Freire in volume 1, page 92.

The fourth point involves addressing the notion raised in argument of this being a case between two undeserving parties, that being related to the point hammered by my learned friend that my clients sold the tobacco products at a profit.  There are two principled answers to that.  The first principled answer is in dealing with the area of restitution, even if one descends into use of the language of unjust enrichment, one is not concerned with some broad and undiscriminating notion of justice, in all the circumstances of the case, one is concerned with defining a particular unjust factor.  That is the point made in David Securities 175 CLR at 378 to 379.

Once the unjust factor is identified that is sufficient to allow recovery.  At common law one does not go further and ask, “Well, in the circumstances of this case is justice still to be served?”  That is the first point.  The second point is that passing on is no defence to a restitutionary action at common law.  That was recognised in Royal Insurance 182 CLR 51, the most relevant passages being in the judgment of Chief Justice Mason at page 75, point 1, and in the judgment of Justice Brennan at page 90, point 9, to 91, point 1.

KIRBY J:   Are you aware of any cases other than those that Chief Justice Mason refers to, I think it is on 98, the East Fifty-Fourth Street Case, the Wayne County Case and the Javor Case in the United States which have approached this problem, or any articles that have reviewed the response, because this is a problem of a federation where legislation may be struck down?

MR GAGELER:   Yes, I am aware of another case and it is the case I took your Honours to in‑chief which is the Wayne County Produce Case, the judgment of Justice Cardozo.

KIRBY J:   Yes, I mentioned that.  That is mentioned by Chief Justice Mason.

MR GAGELER:   I thought it was not, your Honour.

GUMMOW J:   It is in a footnote.

MR GAGELER:   We did not find it that way.  The answer is no.

KIRBY J:   You have to read the footnotes.

HAYNE J:   You are still issuing white hats and black hats, are you, Mr Gageler?

MR GAGELER:   No, your Honour.  No, the answer is no, I am not aware of any other case.

KIRBY J:   There is no law review discussion of this problem?

MR GAGELER:   Your Honour, we have done as exhaustive a search as the circumstances of Sydney counsel permit and we have not found anything.

KIRBY J:   What has Sydney counsel got to do with it?

CALLINAN J:   How do they differ from elsewhere?

MR GAGELER:   Well, your Honour, I know what our library facilities are.  I am not sure what they are in other States, but we have done the best we can and we have not found any other cases.

KIRBY J:   The library keeps complaining of theft of books in Sydney and saying that is professional misconduct, that is all.  Maybe the books are out.

MR GAGELER:   Well, your Honour, the books we sought were certainly marked out to certain people who are present in the room, yes.

GUMMOW J:   I think the 195 case in a way in the United States lingers in a pond by itself, that is my impression.  I do not know quite why that is.  There is some practical reason why that is, but it does not really seem to be taken very far in subsequent decisions.

MR GAGELER:   I am sorry, your Honour, it arose, of course, in a context of an attempt to obtain a refund from the State of a tax that was overpaid and in the United States, like here under the sales tax legislation section 12A of the 1935 Act and similar provisions in the 1992 Act prevented by statutory means recovery where there was passing on.  So the point is really overtaken by statute.

GUMMOW J:   Yes, that may be the answer, yes.

MR GAGELER:   Your Honours, I was coming next to the Chief Justice’s question – this is my fifth point – of what would happen if the wholesaler sued for the bottom line after 5 August, could it recover so much of the amount as was referred to as “tobacco licence fee”?  My learned friend answered that by saying that it all turned on whether or not there would be an abatement of price in those circumstances.  That answer assumes that the bottom line was the price and that is the issue in these proceedings.  Indeed, that precise question was addressed by Justice Cardozo in the Wayne County Produce Case at page 669 in the right‑hand column at about point 7 where his Honour said that there would be no contractual right to recover because what would then be sought to be recovered would not be the thing covered by the contract, and your Honours will see that, page 669, after what your Honour referred to me as the critical sentence.  Justice Cardozo said:

Annulment of the tax after the sale and the delivery of an invoice, but before the payment of the price, would have extinguished the seller’s right to exact payment from its customer of the added 10 per cent.  Payment, if then exacted, would have been no longer payment for a tax, but payment for something else.

GUMMOW J:   He also uses the expression “the end to be served”.

MR GAGELER:   Yes.

GUMMOW J:   Well, that talks about purpose ‑ ‑ ‑

MR GAGELER:   Yes, your Honour, purpose ‑ ‑ ‑

GUMMOW J:   He said it seems to be assumed in Wayne County that Moorcock term would not be engaged.

MR GAGELER:   The Moorcock term for a refund, your Honour?

GUMMOW J:   Yes.

MR GAGELER:   Yes.

GUMMOW J:   They certainly did have Moorcock terms because Chief Justice Cardozo ‑ ‑ ‑

MR GAGELER:   Of course, yes.  Well, your Honour, let me answer your Honour in another way.  His Honour was dealing with the cause of action being brought by the party before him, which he characterises at the top of 669 in terms that make it appear that he was dealing with a claim for money had and received.  That does not mean that there was not available a separate contractual claim.

GUMMOW J:   Yes, I understand.

MR GAGELER:   The next point that I wish to address is my learned friend’s reliance on what he says is the availability of an action in contract which would lead to only nominal damages and related to that, the absence of frustration.  In our submission, that fails to come to grips with the nature of the action for money had and received which, when one is concerned with a total failure of promissory consideration, is concerned with a total failure of the promised performance.  No doubt, the action can only lie where there is no possibility of future performance of the promise.

But that can cover a myriad of circumstances which do not fall within the traditional categories of frustration or mistake leading to voidness.  Frustration, on the other hand, is only relevant when one is concerned with another cause of action, and that is where it is sought to sue on the promise for damages, and then the question is whether the failure to

perform that promise is excused by frustration or not.  Different area of discourse; different cause of action.  Your Honours, that point is made very clearly in McRae v Commonwealth Disposals 84 CLR 377 at page 405 to 407 in the judgment of Chief Justice Dixon and Justice Fullagar.

Can I deal, finally, your Honours, with the question of purpose in this context.  The purpose for total failure of consideration need not be the failure of a contractual term, but it is sufficient, in our submission, that the purpose of the payment is a contractually identified purpose as it was in this case, that is, to be determined objectively.  Individual subjective intentions or understanding are simply beside the point.  That is illustrated perfectly in this case where there are a number of applicants or plaintiffs who had, as the evidence reveals, a variety of understandings of the standard form contracts they were entering into.  They were, to use an appropriate colloquialism, “all over the shop” in their evidence, and that is only to be understood when one is concerned with contracts of adhesion entered into with multiple parties.  Your Honours, those are my submissions.

KIRBY J:   Could I ask this.  I saw somewhere in the materials that there was a proposal in the former government for legislation.  I had this idea in my mind, which I would like to banish if it is the case, that there was some legislation to it, as it were, attacks this fund, and that that was not proceeded with.  Can we accept that there was no such legislation and there is no present proposal for any such legislation?

MR GAGELER:   The answer is yes.

KIRBY J:   And to the end of this case from your solicitor’s letter to the death knock you do not seek, if you are only entitled to equitable relief, to have any consideration given to the relief on conditions that would require you to disgorge the fund for the benefit of consumers?

MR GAGELER:   No, your Honour.  Can I add to that; it would be practically unworkable, in any event.

KIRBY J:   Nothing is unworkable.  Equity can design schemes.

MR GAGELER:   No is the answer.

GLEESON CJ:   We will reserve our decision in this matter, and will adjourn for a couple of minutes in order to enable the papers to be replaced for the next case.

AT 11.48 PM THE MATTER WAS ADJOURNED