Roxborough v Rothmans of Pall Mall Australia Ltd

[2001] HCA 68

HIGH COURT OF AUSTRALIA

GLEESON CJ,
GAUDRON, GUMMOW, KIRBY, HAYNE AND CALLINAN JJ

ALEXANDER GARNET ROXBOROUGH & ORS                   APPELLANTS

AND

ROTHMANS OF PALL MALL AUSTRALIA
LIMITED  RESPONDENT

Roxborough v Rothmans of Pall Mall Australia Limited
[2001] HCA 68
6 December 2001
S199/2000

ORDER

1.   Appeal allowed with costs.

2.Set aside orders of the Full Court of the Federal Court made on 11 November 1999.

3.   In place thereof, order that:

(a)   the appeal to that Court be allowed with costs;

(b)   the orders of Emmett J made on 18 February 1999 be set aside; and

(c)    in place of the orders of Emmett J, there be:

(i)judgment entered for the first appellant in the sum of $14,377.33; for the second appellant for $11,017.12; for the third appellant for $18,521.99; for the fourth appellant for $31,716.32; for the fifth appellant for $15,622.98; for the sixth appellant for $35,877.19; and for the seventh appellant for $26,456.55;

(ii)an order that the respondent pay the appellants' costs of the action; and

(iii)liberty to apply to a Judge of the Federal Court for an order for interest under s 51A of the Federal Court of Australia Act 1976 (Cth).

On appeal from the Federal Court of Australia

Representation:

S J Gageler SC with R A Dick for the appellants (instructed by Glasheen & Quilty)

B W Walker SC with I M Jackman for the respondent (instructed by Clayton Utz)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Roxborough v Rothmans of Pall Mall Australia Limited

Contract – Money had and received – Total failure of consideration – Contract between wholesaler and retailers – Wholesale cost included cost of goods plus tax identified as tobacco licence fee – Tax a distinct part of consideration paid by retailers – Tax held invalid so wholesaler not liable to pay tax collected from retailers – Retailers sought repayment of money for tax as a result of failure of consideration – Whether wholesaler had title to retain the money – Whether failure of the tax involved a failure of a distinct and severable part of the consideration.

Restitution – Recovery – Unjust enrichment – Contract between wholesaler and retailers – Wholesale cost included indirect tax held to be invalid – Whether wholesaler had a duty to make restitution to the retailers – Whether enrichment was at the expense of the retailers who had passed the tax on to consumers and the consumers were unlikely to claim the tax back – Whether unjust enrichment must be at the expense of the party seeking to recover – Whether passing on is a defence to a claim for recovery.

Contract – Implied terms – Test for implying a term – Contract between wholesaler and retailers – Wholesale cost included cost of goods plus tax – Tax held invalid – No express agreement about what would happen if the tax was held to be invalid – Whether such an agreement could be implied from the terms of the contract.

Constitutional law (Cth) – Duty of excise – Invalidity of state law – Consequences of invalidity for contracts agreed to on the basis of the validity of such law – Proceedings by retailers for recovery of invalid tax from wholesaler – Retailers unwilling to refund any amount received to consumers to whom tax passed on – Whether retailers have suffered any loss which they can recover from wholesaler – Whether any such recovery would constitute unjust enrichment of retailers – Whether different principles govern recovery from a state party which has recouped invalid tax and from a private corporation which holds such tax at time invalidity is pronounced.

Words and phrases – "total failure of consideration" – "at the expense of" – "passing on".

Business Franchise Licences (Tobacco) Act 1987 (NSW), ss 41, 45.

1. GLEESON CJ, GAUDRON AND HAYNE JJ.   For many years, States, including New South Wales, imposed what was in substance, even if supposedly not in form, an indirect tax upon tobacco products.  The burden of the tax was intended to be, and was, passed on to the consumers of those products.  If the tax were a duty of excise, then it was invalid, because the power of the Commonwealth Parliament to impose such duties is exclusive (Constitution, s 90).  The form of the tax, which it was hoped would sustain a conclusion that it was not a duty of excise, involved the imposition of periodic licence fees upon wholesalers and retailers of tobacco products, such fees being calculated by reference to the value of tobacco sold by a licensee during a period preceding the period for which a licence was issued.  In calculating the value of tobacco sold by a licensed retailer, the value of tobacco purchased from a licensed wholesaler was to be disregarded if the wholesaler had paid, or was liable to pay, a licence fee in respect of that tobacco.

2. It is presently immaterial to go into the reasons why it was thought that such a tax might not be a duty of excise.  In Ha v New South Wales[1] this Court held that it was a duty of excise, and that the New South Wales legislation pursuant to which it was imposed was invalid.

   [1](1997) 189 CLR 465.

3. Before the legislation was declared invalid, licensed retailers of tobacco (such as the appellants) and licensed wholesalers (such as the respondent) conducted their business dealings upon a basis which reflected the importance, and size, of the tax.  At the relevant time, the periodic licence fee was a nominal amount plus 100 per cent of the value of tobacco sold during the earlier period by reference to which the licence fee was calculated[2].  Wholesalers, in a manner which will require closer examination, included the tax in their charges to retailers; and the price of tobacco products to consumers, although determined ultimately by market forces, inevitably reflected the substantial impost which entered into the costs of all retailers.

   [2]Business Franchise Licences (Tobacco) Act 1987 (NSW), ss 41(1)(a) and (c).

4. Licences were normally for a month.  The relevant period, by reference to which licence fees were calculated, was the month commencing two months before the commencement of the month in which the licence expired[3].  Since sales during that period were the basis of calculation of the fees, and since it was the common expectation of wholesalers and retailers that the wholesaler would continue to maintain a licence, and would pay or become liable to pay a licence fee in respect of tobacco sold by wholesale, (thereby producing the result that the value of that tobacco was disregarded in calculating the retailer's licence fee), prices charged by a wholesaler to a retailer involved, in practical effect, payments to the wholesaler in anticipation of licence fees to be incurred at a future time.  The amounts of those payments, like other costs of the retailer, affected the prices retailers charged to consumers.  On 5 August 1997, when the taxing legislation was declared invalid, amounts had been paid by the appellants, to the respondent, in respect of tobacco products supplied by the respondent since 1 July 1997, which had been identified on the respondent's invoices as "tobacco licence fee".  If the legislation had been held to be valid, equivalent amounts would have been paid by the respondent to the revenue authorities when the respondent's licence was renewed.  In the events that occurred, the respondent did not have to make those payments.  The appellants claimed to be entitled to repayment of those amounts.  That claim failed at first instance in the Federal Court[4], and again, by majority, in the Full Court of the Federal Court[5].

   [3]Business Franchise Licences (Tobacco) Act 1987 (NSW), s 3(1).

   [4]Roxborough v Rothmans of Pall Mall Australia Ltd (1999) 161 ALR 253.

   [5]Roxborough v Rothmans of Pall Mall Australia Ltd (1999) 95 FCR 185.

5. In all probability, whoever succeeds in these proceedings will have made a windfall gain.  In the absence of some legislative intervention, the appellants, if they succeed, are unlikely to be obliged to pass on the fruits of their success to the smokers who bore the financial burden of the invalid tax.  For its part, the respondent has collected what was held to be a tax on goods, but it has not had to pay it over to the revenue authorities.  Leaving the cards to lie where they fall is a possible approach; one which, Lord Shaw of Dunfermline once said, "works well enough among tricksters, gamblers, and thieves"[6].  It may also work well enough in cases where there is no contractual or other relationship between the parties, and no coherent legal principle to dictate any other outcome.  But here we are concerned with reputable commercial people, who entered into ordinary business dealings, and whose expectations were defeated by the supervening illegality of one aspect of those dealings.  They made contracts.  The justice of the situation in which they now find themselves must lie in the principles of law and equity which governed their dealings.  Those principles, in turn, must be related to the contracts into which they entered.  The contracts, both in form and in substance, were strongly influenced by the prevailing fiscal regime.

   [6]Cantiare San Rocco SA v Clyde Shipbuilding and Engineering Co [1924] AC 226 at 259.

6. The details of the legislative scheme for the imposition of the tobacco tax are set out in the reasons for judgment of Gummow J, as are the facts concerning the contractual arrangements between the parties.  As they appear to us, the most significant elements are as follows.

7. Although an attempt was made to represent it as a personal tax, in the nature of a fee for a licence, the tax was a tax on goods.  That was the essence of the decision in Ha[7].

   [7](1997) 189 CLR 465.

8. In its operation in relation to sales by wholesale, the tax was imposed by reference to the value of tobacco sold during a relevant period by the wholesaler.  The Minister administering the legislation was empowered to determine the basis upon which such value was to be ascertained[8].  The Minister determined that such value was to be ascertained by reference to a manufacturer's published wholesale list price from time to time, excluding any amount included in the selling price in consideration of a licence fee.  Such exclusion was necessary, for otherwise there would be a tax upon a tax.  Thus, separating the value of the tobacco from the tax was important, both to the fiscal regime, and to the commercial response to that regime.

   [8]Business Franchise Licences (Tobacco) Act 1987 (NSW), s 45.

9. The respondent published wholesale price lists in which it set out in one column, (the third column), the wholesale list price per 1000 cigarettes, which was the value upon which the Minister's determination operated, and, in another column, (the fourth column), the total wholesale cost per carton "including State licence fees 100%".  This distinction between "price" and "cost" reflected the fact that the tax was imposed by reference to the wholesale value (price) but was to be passed on to the retailer (and ultimately to the consumer), and so formed part of the retailer's cost.

10. In order to deal regularly with the respondent, each appellant was required to sign a form of request for a commercial trading account.  The form of request referred to the respondent's wholesale price list as varied from time to time, and provided that any increase in (amongst other things) excise duty between date of order and date of delivery would be payable by the retailer. 

11. There was a standard form of invoice issued by the respondent to the appellants. It specified, in relation to each type of product sold, the wholesale price per 1000 cigarettes, being the price specified in the third column of the price list which, after adjustment for discounts, (which no doubt reflected the bargaining strength of a particular retailer), went to make up an "invoice sale subtotal". It specified separately the amount of the "tobacco licence fee". The combined amount of the invoice sale subtotal and the tobacco licence fee was then shown at the foot of the invoice as "net total". The net total was the amount payable by the retailer. It may be inferred that the form of the invoices was, in turn, related to the licensing scheme. The regulations under the Act which imposed the tax required persons who carried on the business of selling tobacco to keep certain records, including records of the value of tobacco sold. The regulations provided that the records could be in the form of invoices or copies of invoices containing the required particulars[9].

    [9]Business Franchise Licences (Tobacco) Regulation 1995, reg 14.

12. The part of the net total paid to the respondent by reference to the tax was thus shown separately from the wholesale price of the products sold.  The nature of the tax, and the method by which it was imposed and collected, explain why that was done.  The tax was an ad valorem tax on goods.  The value of the goods had to be distinct from the tax.  The tax was to be passed on to the retailer, and was to form part of the cost to the retailer of the goods.  But in the documents which formed part of the ordinary course of dealing between the appellants and the respondent, and by reference to which their contractual rights and liabilities are to be determined, the parties distinguished between wholesale price, tax, and net total cost to the retailer.

13. The amounts paid by the appellants to the respondent in respect of the tax represented a distinct part of the consideration for the tobacco products purchased by the appellants.  They were treated by both parties to each relevant contract as separate from the wholesale price of the goods sold, that price constituting the value by reference to which the amount of the tax was determined.  And the tax, being a tax on goods, was of such a nature that it was not intended to be borne ultimately by either the appellants or the respondent.  The tax increased the exchange value of the tobacco products in the hands of the retailers, but the initial value by reference to which the Minister's determination as to the basis of the tax operated was a wholesale price exclusive of the tax component.  While the wholesale price, exclusive of the tax, was arrived at by the operation of forces of supply and demand in the market for tobacco products, and reflected the negotiated agreement of the parties, the tax was imposed externally by government.

14. The appellants based their case, in part, upon the principles underlying the common indebitatus count for money had and received by the defendant to the use of the plaintiff.   The notes to the 1868 edition of Bullen and Leake's Precedents of Pleadings, giving examples of cases where such a count would lie, said[10]:

    "Money paid by the plaintiff for a consideration that has failed, may be thus recovered …

    …

    The failure of consideration must be complete in order to entitle the plaintiff to recover the money paid for it …; but where the consideration is severable, complete failure of part may form a ground for recovering a proportionate part of the money paid for it …; as where a quantity of goods were ordered at a certain rate of payment, and only a portion was delivered."  (emphasis in original)

    [10]Bullen and Leake, Precedents of Pleadings, 3rd ed (1868) at 48-49.

15. Mason and Carter, in Restitution Law in Australia, point out that cases decided in relation to the common indebitatus counts, although they involved an implied contract analysis which is now out of date, "form the precedents which make up the legal matrix of restitution law"[11].  Lord Mansfield, in Moses v Macferlan[12], referred to money paid "upon a consideration which happens to fail" as an example of money which, ex aequo et bono, a defendant ought to refund and, therefore, money for the recovery of which the count for money had and received lies. 

    [11]Mason and Carter, Restitution Law in Australia, (1995) at 73.

    [12](1760) 2 Burr 1005 at 1012 [97 ER 676 at 680-681].

16. Failure of consideration is not limited to non-performance of a contractual obligation, although it may include that.  The authorities referred to by Deane J, in his discussion of the common law count for money had and received in Muschinski v Dodds[13], show that the concept embraces payment for a purpose which has failed as, for example, where a condition has not been fulfilled, or a contemplated state of affairs has disappeared[14].  Deane J, referring to "the general equitable notions which find expression in the common law count", gave as an example "a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it"[15].  In the case of money paid pursuant to a contract, it would involve too narrow a view of those "general equitable notions" to limit failure of consideration to failure of contractual performance.  In the present case, the amount of the net total wholesale cost referable to the tax was, from one point of view, part of the money sum each appellant was obliged to pay to obtain delivery of the tobacco products.  But there was more to it than that.  The tax was a government imposition, in the form of a fee payable under a licensing scheme.  The nature of the scheme was such that the licensed wholesaler, or, if not the wholesaler, then the licensed retailer, would pay the amount referable to particular tobacco products.  The respondent, anticipating liability for the fee, required the appellants, when purchasing products by wholesale, to pay an amount equal to the fee.  The appellants, in turn, had an interest in the respondent paying the fee to the revenue authorities, for they were thereby relieved of a corresponding liability.  There was a purpose involved in the making of the requirement that the appellants pay the amounts described as "tobacco licence fee", and in the compliance with that requirement.  To describe those amounts as nothing more than an agreed part of the price (or, to use the language of the parties, cost) of the goods, is to ignore an important aspect of the facts.

    [13](1985) 160 CLR 583 at 619-620.

    [14]See Birks, An Introduction to the Law of Restitution, (1985) at 223.

    [15](1985) 160 CLR 583 at 619-620.

17. In a contract for the sale of goods, the total amount which the buyer is required to pay to the seller may be expressed as one indivisible sum, even though it is possible to identify components which were taken into account by the parties in arriving at a final agreed figure.  The final figure itself may have been the result of negotiation, making it impossible to relate a cost component to any particular part of that figure.  Or there may be other factors which prevent even a notional apportionment.  But there are cases, of which the present is an example, where it is possible, both to identify that part of the final agreed sum which is attributable to a cost component, and to conclude that an alteration in circumstances, perhaps involving a failure to incur an expense, has resulted in a failure of a severable part of the consideration.  Here, the buyers, the retailers, were required to bear, as a component of the total cost to them of the tobacco products, a part of the licence fees which the seller, the wholesaler, was expected to incur at a future time, and which was referable to the products being sold.  It was in the common interests of the parties that the fees, when so incurred, would be paid to the revenue authorities by the seller, and it was the common intention of the parties (and the revenue authorities) that the cost of the goods would include the fees.  In the events that happened, the anticipated licence fees were not incurred by the seller.  The state of affairs, which was within the contemplation of the parties as the basis of their dealings, concerning tax liability, altered.  And it did so in circumstances which permitted, and required, severance of part of the total amount paid for the goods.

1. The case is not unlike that considered by the Court of Appeals of New York in Wayne County Produce Co v Duffy-Mott Co Inc[16].  A war tax of 10 per cent was imposed on cider.  A manufacturer sold a quantity of cider by wholesale, at a certain price per gallon, less a stated discount, plus the tax.  The total amount was paid to the manufacturer, and the manufacturer remitted the tax to the government.  Later, it was ruled that the particular product sold was not taxable, and the manufacturer recovered the tax from the government.  The purchaser claimed to recover from the manufacturer that part of the amount paid for the cider which was referable to the tax.  The Court of Appeals upheld the claim.  Cardozo CJ, who delivered the reasons of the Court, described the issue as being whether the money refunded to the manufacturer by the government was held "to the use of the plaintiff"[17].  He went on to say[18]:

   "This is not a case where the item of the tax is absorbed in a total or composite price to be paid at all events …  This is a case where the promise of the buyer is to pay a stated price, and to put the seller in funds for the payment of a tax besides.  In such a case the failure of the tax reduces to an equivalent extent the obligation of the promise."

   [16]155 NE 669 (1927).

   [17]155 NE 669 at 669 (1927).

   [18]155 NE 669 at 669 (1927).

2. The same idea may be expressed by saying that, in the present case, the failure of the tax involved the failure of a severable part of the consideration for which the net total amounts shown on the invoices were paid.

3. Although an attempt was made by the appellants to invoke an implied agreement under which they could claim repayment of any unpaid tax, it was artificial and unconvincing.  The parties made no agreement, express or implied, about what was to happen if the tax was held to be invalid.  If there is here a right to enforce repayment upon the basis of a failure of consideration, it is because, in the circumstances, the law imposes upon the respondent an obligation to make just restitution for a benefit derived at the expense of the appellants[19].  If there had been a total failure of consideration, because, for example, there had been a prepayment for goods which were never delivered, the respondent's duty to make restitution would have been clear.  But there are two questions.  The first is whether there has been a failure of a severable part of the consideration.  The second is whether, in the absence of restitution, the respondent will retain money at the expense of the appellants.  The second problem arises because the appellants have passed on the burden of the tax.  According to the respondent, if the respondent has been enriched, then that has been at the expense, not of the appellants, but of the customers of the appellants, and justice does not require it to make restitution to the appellants.

   [19]Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 257 per Deane J.

4. It accords with the basis of dealing, and contractual arrangements, between the appellants and the respondent to regard that part of the net total amount of each invoice referable to the "tobacco licence fees" as a severable part of the consideration, which has failed.  There is no conceptual objection to this.  For the reasons already given, the tax component of the net total wholesale cost was treated as a distinct and separate element by the parties.  It was externally imposed.  It was not agreed by negotiation.  It was not like the discounts, which might differ between retailers, just as the wholesale list price would vary from time to time in accordance with market conditions.  To permit recovery of the tax component would not result in confusion between rights of compensation and restitution, or between enforcing a contract and claiming a right by reason of events which have occurred in relation to a contract[20].

   [20]cf Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32; Baltic Shipping Co v Dillon (1993) 176 CLR 344.

5. It then becomes necessary to consider the respondent's objection based upon the fact that, at least in a practical sense, the burden of the tax has been passed on by the appellants to their customers.  The factual basis of this objection cannot be refuted.  It is in the nature of an indirect tax that it enters into the cost of the goods the subject of the tax and is borne by the consumers of the goods.  The conclusion that the character of the tax was that of a tax on tobacco rather than a personal tax on wholesalers and retailers was an important part of the reasoning leading to the decision that it was a duty of excise.

6. Although the factual basis of the objection is correct, it is necessary to be clear as to its legal frame of reference.  It cannot be simply an assertion that the appellants lack merit.  In that respect, their position is no worse than that of the respondent.  It was put on the basis that any enrichment of the respondent is not at the expense of the appellants and that, in consequence, the equitable foundation for a claim for restitution does not exist.  But this, in turn, assumes that, in the circumstances of a case such as the present, it would only be unconscionable of the respondent to withhold repayment of the amounts referable to the tax if the appellants, for their part, were ultimately left impoverished to that extent.  It is clear that, in a direct and immediate sense, the payments were made by the appellants, out of their own funds, to the respondent.  They did not pay the amounts as agents, on behalf of third parties.  The consumers of cigarettes, in an economic sense, bore the burden of the tax, but they were never legally liable as taxpayers.  The appellants themselves were taxpayers under the licensing scheme, although if the respondent paid, or became liable to pay, tax in respect of particular tobacco products, the value of those products was disregarded in calculating the appellants' licence fees.  And the respondent passed the tax on to the appellants, not merely in an economic sense, but also by the express terms of the dealings between the parties.  They dealt on the basis that the appellants would pay to the respondent an amount equal to that part of the respondent's "tobacco licence fees" referable to the products sold to the appellants.

7. There having been a failure of a distinct and severable part of the consideration for the net total payments made by the appellants to the respondent, then, as between the parties to the payments, the respondent has no right to retain the amounts in question.  If the tobacco products in question remained unsold by the appellants at the time the claims for repayment arose for determination, the respondent's obligation to make restitution would be clear.  Why does it make a difference to the conscientiousness of the respondent's retention of the moneys that the products were sold by the appellants at prices that had the practical effect of recouping the expense they bore in paying the "tobacco licence fees"?  The holders of licences were those upon whom the tax was imposed, but they were always intended to pass the tax on to the consumers.  As between the licensees, it was the appellants who incurred the expense, in that they were charged, and paid, a severable amount for the purpose of the tax.

8. The decision of this Court in Commissioner of State Revenue (Vict) v Royal Insurance Australia Ltd[21] strongly supports the appellants on this question.  That was a case of moneys paid by an insurance company to a revenue authority by mistake, in the form of overpaid stamp duty.  The revenue authority was held liable to refund the overpayments, even though the amounts had been passed on to policy holders.  That conclusion was reached on general restitutionary principles.

   [21](1994) 182 CLR 51.

9. Mason CJ said[22]:

   "Restitutionary relief, as it has developed to this point in our law, does not seek to provide compensation for loss.  Instead, it operates to restore to the plaintiff what has been transferred from the plaintiff to the defendant whereby the defendant has been unjustly enriched.  As in the action for money had and received, the defendant comes under an obligation to account to the plaintiff for money which the defendant has received for the use of the plaintiff.  The subtraction from the plaintiff's wealth enables one to say that the defendant's unjust enrichment has been 'at the expense of the plaintiff', notwithstanding that the plaintiff may recoup the outgoing by means of transactions with third parties."

   [22](1994) 182 CLR 51 at 75 (footnote omitted).

10. He also pointed out, in terms equally applicable to the present case, that, as between the parties to the litigation, the defendant having no title to retain the moneys, the plaintiff had the superior claim[23].  That, in our view, is the critical question.  As between the appellants and the respondent, who has the superior claim?  The answer lies in the circumstance that there has been a payment of moneys by the appellants to the respondent for a consideration which has failed, and the respondent has no title to retain the moneys.

    [23](1994) 182 CLR 51 at 78.

11. Brennan J, with whom Toohey J[24] and McHugh J[25] agreed, said[26]:

    "The fact that Royal had passed on to its policy holders the burden of the payments made to the Commissioner does not mean that Royal did not pay its own money to the Commissioner.  The passing on of the burden of the payments made does not affect the situation that, as between the Commissioner and Royal, the former was enriched at the expense of the latter.  It may be that, if Royal recovers the overpayments it made, the policy holders will be entitled themselves to claim a refund from Royal … However that may be, no defence of 'passing on' is available to defeat a claim for moneys paid by A acting on his own behalf to B where B has been unjustly enriched by the payment and the moneys paid had been A's moneys."

    [24](1994) 182 CLR 51 at 103.

    [25](1994) 182 CLR 51 at 103.

    [26](1994) 182 CLR 51 at 90-91.

12. 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.

13. The appellants were entitled to succeed in their claim for money had and received by the respondent to the use of the appellants.

14. The appeal should be allowed, and orders made as proposed by Gummow J.

15. GUMMOW J.   At all material times, each of the seven appellants was a retailer of tobacco products and the holder of a retailer's licence granted pursuant to the Business Franchise Licences (Tobacco) Act 1987 (NSW) ("the Act") and the respondent ("Rothmans") was a wholesaler of tobacco products and the holder of either or both a wholesaler's licence or a group wholesaler's licence under the Act.

16. In the period 1 July 1997 to 5 August 1997 inclusive ("the Dispute Period"), Rothmans supplied tobacco products to each of the appellants. On 5 August 1997, the Full Court of this Court answered questions respecting the validity of the Act which had been submitted to it for determination on cases stated by Brennan CJ[27]. The Full Court had reserved its decision on 19 March 1997. The Act imposed a licence fee in a nominal sum on the retail and wholesale sale of tobacco and an additional fee. This was ad valorem in nature and was calculated by reference to a prescribed percentage of the value of the tobacco sold in a period preceding the licence period. The prescribed percentage had been increased from time to time by legislative amendment from 30 per cent at the commencement of the operation of the Act to 100 per cent as from 28 June 1995[28]. The Act took its form in reliance upon the reasoning in Dennis Hotels Pty Ltd v Victoria[29] and later decisions of this Court which denied to these imposts the character of duties of excise within the meaning of s 90 of the Constitution.

    [27]Ha v New South Wales (1997) 189 CLR 465.

    [28]Ha v New South Wales (1997) 189 CLR 465 at 486.

    [29](1960) 104 CLR 529.

17. However, it was held in Ha v New South Wales[30] that the licence fees imposed by the Act were duties of excise within s 90 of the Constitution. The result was that the legislation was invalid as beyond the competence of any State Parliament.

    [30](1997) 189 CLR 465.

    The litigation

18. The present litigation is a sequel to the decision in Ha. Any rights of recovery from the State of moneys paid to it under the invalid provisions of the Act are regulated and curtailed by the Recovery of Imposts Act 1963 (NSW). This case is not concerned with any such claims. Nor are any claims made in this litigation by or on behalf of consumers who dealt with retailers. Rather, the issues concern the respective rights and liabilities under the general law of Rothmans as wholesaler and the appellants as retailers who dealt with Rothmans in the Dispute Period. There is no real conflict as to the primary facts, although the parties differ as to the inferences to be drawn from those facts.

19. In a proceeding instituted in the Federal Court on 1 May 1998, the appellants claimed from Rothmans certain amounts paid to it in respect of tobacco products supplied by Rothmans during the Dispute Period which covers some five weeks immediately preceding the handing down of the decision in Ha on 5 August 1997.  Emmett J ordered that the application be dismissed[31].  An appeal to the Full Court was, by majority (Hill and Lehane JJ, Gyles J dissenting), dismissed[32].

    [31]Roxborough v Rothmans of Pall Mall Australia Ltd (1999) 161 ALR 253.

    [32]Roxborough v Rothmans of Pall Mall Australia Ltd (1999) 95 FCR 185.

    The Act

20. For an appreciation of the nature of the claims made by the appellants and the issues which arise, it is necessary to return to a further consideration of the Act. The parties to this litigation were prohibited under penalty from selling tobacco (s 28), whether by wholesale (s 29) or retail (s 30), without a licence. Licences were issued on application (s 35), for periods of not more than a month, each month expiring on the 27th day of the month (s 39).

21. If on or before the expiry of a licence the licensee paid to the Chief Commissioner for Business Franchise Licences (Tobacco) ("the Chief Comissioner") the fee payable for a further licence, the licensee was to be taken to have applied for a further such licence and to have been granted it (s 40).  However, as Emmett J stated[33]:

    "Section 40 did not itself create any liability to pay a licence fee. It simply provided that, if the fee payable for a further licence was paid, the licensee was to be taken to have applied for and have been granted a further licence. If a licensee did not pay the licence fee, the relevant licence was simply not renewed and if the former licensee thereafter engaged in the relevant activity an offence was committed. The Act imposed criminal sanctions for selling tobacco, carrying on tobacco wholesaling or carrying on tobacco retailing without being the holder of the appropriate licence."

    His Honour went on[34]:

    "However, under s 47(1), if a person was required to hold a licence in respect of any period but did not do so, the person was required to pay to the Chief Commissioner an amount equal to the fee that would have been payable for the licence if the person had held one plus a penalty.  Under s 47(2), the Commissioner was authorised to assess the amount payable.  The amount was to be paid within 14 days of service on the person of notice of demand for payment.  Further, under s 46(1), if, in the opinion of the Chief Commissioner, the fee assessed in respect of a licence was assessed incorrectly, the Commissioner was authorised to reassess the fee.  Under s 46(3), if on a reassessment the fee was increased, the additional amount was payable and was to be paid within 14 days after service of notice of the reassessment."

    [33](1999) 161 ALR 253 at 256.

    [34](1999) 161 ALR 253 at 256.

22. The fee payable by Rothmans for a wholesaler's licence was calculated pursuant to par (a) of s 41(1). This read:

    "(1)     The fees to be paid for licences are as follows:

    (a)for a wholesaler's licence – a fee of $100 together with an amount equal to 100 per cent of the value of tobacco sold by the applicant in the course of tobacco wholesaling during the relevant period, other than tobacco sold to the holder of a wholesaler's licence or a group wholesaler's licence".

    The expression "the relevant period" meant, in relation to a licence, "the month commencing 2 months before the commencement of the month in which the licence expires" (s 3(1)). The fee to be paid by the appellants for retailer's licences was prescribed as follows in par (c) of s 41(1):

    "(1)     The fees to be paid for licences are as follows:

    …

    (c)for a retailer's licence – a fee of $100 together with an amount equal to 100 per cent of the value of tobacco sold by the applicant in the course of tobacco retailing during the relevant period, disregarding any such tobacco purchased from a licensee".

    Paragraph (c) of s 41(1) was qualified by s 41(3). This read:

    "For the purposes of subsection (1)(c) … the value of tobacco purchased from the holder of a wholesaler's licence or a group wholesaler's licence is to be disregarded only if the holder of the licence has paid or is liable to pay a licence fee in respect of that tobacco."

23. The interrelation between sub‑s (3) and par (c) of sub‑s (1) is a matter of some difficulty and produced differences of opinion in the various judgments in the Federal Court.  It will be necessary to return to this matter later in these reasons.

24. Section 45 was a provision of central importance for the commercial relationship between wholesaler and retailer. It empowered the Minister from time to time to determine the basis upon which and the means by which a value was to be attributed to tobacco sold during any period. On 9 June 1988, the Minister determined the value of tobacco relevantly to be:

    "The wholesale list price for tobacco as published from time to time by tobacco manufacturers and importers, excluding … any amount included in the selling price in consideration of a licence fee."

    Emmett J pointed out that[35]:

    "It is significant that that determination (the minister's determination) contemplated that an amount might be 'included' in 'the selling price', being an amount which was in some way related to a licence fee.  In other words, the minister recognised that a manufacturer would add on to the published list price an amount representing a contribution to the licence fee which would be payable by the manufacturer as a wholesaler of tobacco by reason of that sale of tobacco if the manufacturer subsequently applied for renewal of its licence.

    …

    The minister's determination made it necessary for Rothmans to publish a wholesale list price for tobacco. Rothmans published a price list which it updated from time to time. The price list that was current during the dispute period consisted of a document comprising five columns. The first column was a description of each brand of cigarette. The second column specified the quantity of cigarettes of that brand in a carton. The third column specified the wholesale price per 1000 cigarettes. The fourth column specified the cost per carton at wholesale, including licence fees. The final column specified the recommended retail price per packet 'including State licence fees 100 per cent'. … But for the provisions of the Act, Rothmans would not have published a price list in such a form."

    [35](1999) 161 ALR 253 at 256‑257.

    The contracts

1. The Act also required (s 66) Rothmans to issue invoices for the tobacco it supplied to the appellants and to keep copies thereof.  The invoices issued to the appellants by Rothmans during the Dispute Period were in a standard form.  This specified the name and address of the purchaser, the date of the sale and the quantity of each brand of tobacco sold.  It also specified the wholesale price per 1000, being the sum specified in the third column of the price list in relation to the relevant product.  A summary appeared at the foot of the form of invoice which specified an amount in respect of "tobacco licence fee".

2. It may be convenient for some purposes to refer to "the contract" between the appellants and Rothmans.  However, as was accepted in argument in this Court, there was a new contract with each purchase in the Dispute Period and one question on this appeal concerns the terms of those contracts.  Save as to quantity sold and moneys paid, those terms did not differ.

3. The contracts were evidenced partly by writing and partly by the acts of, and the course of the dealings between, the parties. Rothmans issued a price list as required by the Act. Each appellant had completed a document addressed to Rothmans and headed "Commercial Credit Application". This stated that the applicant requested a trading account with Rothmans and agreed to comply with the accompanying Terms and Conditions. Clause 2 thereof ambitiously declared that the Conditions applied to all orders placed with Rothmans to the exclusion of all other terms or conditions "unless expressly agreed in writing". Clause 10 contained a Romalpa clause and reserved to Rothmans property in the goods until full payment was made. Clause 6 stipulated payment within seven days of delivery of the goods. No reference was made to the Act or to licence fees payable thereunder. Clause 4 did state that Rothmans might without notice alter the prices as set out in its "applicable list".

4. The course of trade involved sales representatives calling at the premises of each appellant, the oral placement of an order, followed by the supply of the goods from the delivery truck, with an invoice, on one copy of which the appellant confirmed receipt of the goods.

   The appellants' case

5. The appellants seek to recover from Rothmans sums equal to the amounts shown as "tobacco licence fee" in 74 identified invoices supplied to them by Rothmans in the Dispute Period.  Payment of these sums was made within the Dispute Period, save for those in respect of nine invoices which were paid on or shortly after 6 August 1997.  The appellants pleaded their case in various ways.  These include the assertion that Rothmans is accountable to them as a constructive trustee in respect of the amounts in question.  However, in argument in this Court it became clear that what the appellants pressed was not a claim to any beneficial entitlement in respect of any assets of Rothmans; rather, the equitable relief they sought would be that consequent upon a finding that Rothmans owed the sums in question as equitable debts.  The failure to press any claim to specific proprietary relief against Rothmans no doubt reflects a point made by Gyles J in his dissenting judgment in the Full Court.  His Honour observed[36]:

   "[A]s [Rothmans] is solvent and retains the benefit of the moneys collected, there is no need to pursue equitable remedies for there to be effective recovery".

   That statement should serve as a cautionary reminder against what, for some, appears to be a mesmeric fixation upon the (not always well understood) potential of equitable, particularly trust, remedies where what the common law offers will meet the case[37].

   [36](1999) 95 FCR 185 at 217.

   [37]See Bridgewater v Leahy (1998) 194 CLR 457 at 494 [126]-[128]; Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at 585 [42]; Giumelli v Giumelli (1999) 196 CLR 101 at 113 [10]; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 409 [70].

6. Accordingly, attention first should be directed to determining the legal claims made by the appellants.  They assert that, in refusing to repay the moneys, Rothmans is in breach of contractual obligations owed to the appellants.  However, they also claim that the moneys were had and received by Rothmans to the use of the appellants and are recoverable by reason of a total failure of consideration.  The appellants accept that, following Baltic Shipping Co v Dillon[38], if they are entitled to recover for moneys had and received, there applies "a pragmatic limitation"[39] whereby they cannot as well recover these amounts as components of a damages recovery on any successful claim they might sustain for breach of contract.  It is convenient to consider in the first instance the claim for moneys had and received.

   [38](1993) 176 CLR 344.

   [39]Grantham, "Security of Contract:  the Challenge from Restitution", (2000) 16 Journal of Contract Law 102 at 110.

   Section 41 of the Act

7. Before doing so, however, it is necessary to return to a consideration of the proper construction of s 41 of the Act.

8. Paragraph (c) of s 41(1) required for the grant of a retailer's licence (say for the month commencing 28 April) payment of a fee including an ad valorem component in respect of the value of certain (not all) tobacco sold by the retailer in the "relevant period". On this example that would be the month commencing 28 February. The tobacco whose value was to be taken into account in computing the fee payable by the retailer comprised (i) tobacco which the retailer had purchased from a party who was not a licensee and (ii) tobacco which, although purchased by the retailer from a licensee, was tobacco whose value, by reason of the operation of s 41(3), was not to be disregarded. If either (i) or (ii) applied, the retailer carried the full burden of the ad valorem component in respect of that tobacco.

9. The reference in s 41(3) to the value of tobacco which is to be disregarded requires identification of particular tobacco sold by the retailer during the relevant period, here the month commencing 28 February, which is tobacco in respect of which the wholesaler "has paid" or "is liable to pay" a licence fee. The identification is to occur at the time when the retailer computes the fee it will pay for the licence period to begin 28 April.

10. Because the "relevant period" precedes the licence period, either of two possibilities apply.  First, it may be possible to say whether tobacco sold by the retailer during the relevant period commencing 28 February is tobacco in respect of which, at some earlier time, the wholesaler has paid a licence fee.  Secondly, if the retail and wholesale transactions both occurred in the same relevant period commencing 28 February, then, at the time (say 27 April) the retailer determines whether its licence fee includes an ad valorem element, the wholesaler "is liable to pay" its licence fee.  In the phrase "is liable to pay" the word "liable" is used in the sense of exposure to a requirement of payment of the licence fee as the price for the grant of a wholesaler's licence for the period commencing 28 April.

11. If the wholesaler does not seek a licence for that period, the retailer bears the full burden of the ad valorem component in respect of that tobacco and also may be subject to reassessment under s 46 by the Chief Commissioner.

12. Where the wholesaler does not renew the licence, there may or may not have been a breach by the wholesaler of s 50A.  That provision fixes an obligation by reference to the intention of the wholesaler at an earlier time.  When paying the fee for the renewal of the licence for the relevant period commencing 28 February, the wholesaler had been obliged by s 50A to declare whether or not it intended to carry on business during either or both the two months beginning 28 March.

13. What is of particular importance for the present litigation is that when, in July 1997, during the Dispute Period, the appellants purchased tobacco at a price which specified a component for "tobacco licence fee", they had an interest in ensuring that Rothmans as the wholesaler, along with the appellants, renewed its licence for the period beginning 28 August 1997.  This also was true of the payments made immediately before 5 August 1997, in respect of the licence period to begin 28 September 1997.  The payments funded the wholesaler to meet a cost of continuing in business for these future licence periods, to the mutual benefit of both wholesaler and retailer[40].

    [40]cf Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 392.

    The terms of the contracts

14. The first task is to consider the evidence and to find the relevant express terms[41]. The terms respecting the dealings between the appellants and Rothmans are to be deduced or inferred objectively from the documents to which reference has been made and from the course of conduct of the parties, all against the background of the operation of the Act. Rothmans emphasised in its submissions that each appellant knew and accepted that it would not receive the goods unless it undertook to pay the whole of the amount stipulated in the respective invoice. But that does not necessarily exclude the addition of a term respecting the payment of that element of this amount which was specified as "tobacco licence fee".

    [41]Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 442.

15. The better conclusion from the evidence is that, in the contracts made during the Dispute Period, each appellant agreed to pay both the invoiced price of the goods and the licence fee component in exchange for the supply of the goods, but the payment of the licence fee component was the subject of a further term. This was that, if the appellant remained in business and renewed its licence for the periods beginning respectively 28 August and 28 September, Rothmans then would so act that the appellant would not, under s 41(1)(c) and s 41(3) of the Act, bear the ad valorem components of its renewed licence for those periods.  The term ordinarily would be performed by Rothmans paying for the renewal of its licence for those further periods the equivalent amount to that received and identified as "tobacco licence fee".

16. That is not to maintain that Rothmans failed to acquire ownership in specie of the funds it was paid[42]; nor does it mean that Rothmans was obliged to earmark and keep those funds separate or otherwise treat them as if they were impressed with trusts in favour of the appellants[43].  Nor, given what, it will appear, is the adequacy of the legal remedy available to the appellants, is there any occasion to consider whether, and, if so, when and on what terms, there arose in their favour a constructive trust of the species discerned by Judge Learned Hand in his dissenting judgment in 123 East Fifty-Fourth Street Inc v United States[44], and to which Mason CJ gave qualified acceptance in observations made in Commissioner of State Revenue (Vict) v Royal Insurance Australia Ltd[45].

    [42]cf Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 390; Ilich v The Queen (1987) 162 CLR 110 at 140‑141.

    [43]cf Cohen v Cohen (1929) 42 CLR 91 at 101; Commissioner of State Revenue (Vict) v Royal Insurance Australia Ltd (1994) 182 CLR 51 at 77‑78.

    [44]157 F 2d 68 (1946).

    [45](1994) 182 CLR 51 at 75‑78.

17. The circumstance that at least some of the appellants were aware during the Dispute Period that a challenge to the validity of the Act was on foot does not require any contrary conclusion to that reached above concerning the conditional nature of the licence fee payments. Nor does the circumstance that no express provision was made as to the future relationship between the parties if the pending challenge to the validity of the Act were to succeed. Litigation asserting the invalidity of legislation based upon the Dennis Hotels model had been recurrent over many years and essentially unsuccessful.  This is not a case where, from the existence and terms of a contract between the parties, it is proper to infer that the parties denied recourse by one of them to an obligation imposed by the general law[46].

    [46]cf the observations, respecting the relationship between contract and tort, by Lord Goff of Chieveley in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 191‑194 and in the joint judgment in Astley v Austrust Ltd (1999) 197 CLR 1 at 20‑23 [44]-[48].

18. In this regard, Emmett J made the following important findings[47]:

    "Had the ad valorem element of the licence fee not been held invalid [on 5 August 1997], the value of tobacco products sold during July would have been taken into account in calculating the licence fee payable by Rothmans for the licence period commencing on 28 August 1997.  That licence fee would ordinarily have been remitted on or just prior to 27 August 1997.  The value of tobacco products sold from 1‑5 August 1997 inclusive, together with the value of products sold during the balance of August, would have been taken into account in calculating the licence fee payable by Rothmans for the licence period commencing on 28 September 1997.  That licence fee would ordinarily have been payable on or just prior to 27 September 1997.

    However, by reason of the determination made in Ha's case, it was not necessary for any of the [appellants] or for Rothmans to obtain renewal of their respective licences under the Act on 27 August 1997 in order to carry on tobacco retailing and tobacco wholesaling respectively after that date. In particular, it was not necessary for Rothmans to pay any fee for a wholesaler's licence on that date and Rothmans made no payment. For the same reason, it was not necessary for Rothmans to make any payment for licence fee on 27 September 1997 and Rothmans made no such payment."

    [47](1999) 161 ALR 253 at 258‑259.

19. The result was that the appellants had paid moneys on a basis that later became falsified; the state of affairs presented before 5 August 1997 by the operation of the Act in respect of the future licence periods beginning 28 August and 28 September failed to sustain itself. That failure meant that there was no obligation imposed upon Rothmans by State statute to pay a licence fee and Rothmans was free to continue its business, as were the appellants, without doing so. It should be emphasised that there was no contractual obligation, of any variety, which obliged any of the relevant actors to remain in business. A further point is that between Rothmans and the appellants there was no contractual obligation to pay further licence fees and no such term could sensibly be implied. The term which dealt with the payments of the licence fee components postulated for its performance from time to time the continued need for both Rothmans and the appellants to renew their licences. That need disappeared after 5 August and the term then had no further work to do; this is not a case where one party asserts a right to performance of a contractual term and the other sets up discharge consequent upon frustration caused by a supervening event or state of affairs. Nor, contrary to a submission by the appellants, can it be said to have been "necessary" in the sense of the authorities[48] to imply a term in the contracts made in the Dispute Period that, if in law it became unnecessary to renew licences for the future periods, Rothmans would refund the moneys the appellants now seek to recover in this litigation.

    [48]Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347.

20. However, that is not the end of the matter.  The purpose upon which the moneys in question had been paid having failed, in the sense described above, does the common law impose upon Rothmans an obligation to restore the moneys to the appellants?

    Money had and received

21. The appellants rely upon the principle encapsulated by Viscount Haldane LC in Royal Bank of Canada v The King[49].  In a passage later adopted by Lord Wright[50], his Lordship said[51]:

    "It is a well-established principle of the English common law that when money has been received by one person which in justice and equity belongs to another, under circumstances which render the receipt of it a receipt by the defendant to the use of the plaintiff, the latter may recover as for money had and received to his use.  The principle extends to cases where the money has been paid for a consideration that has failed."

    [49][1913] AC 283.

    [50]Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 at 65.

    [51][1913] AC 283 at 296.

22. The words used by the Lord Chancellor derive from the statements respecting the action for money had and received made by Lord Mansfield in Moses v Macferlan[52].  In speaking of the action for money had and received, Mason CJ said in Baltic Shipping[53]:

    "The action was, as Lord Mansfield said in Moses v Macferlan[54], 'quasi ex contractu' and founded on an obligation imposed by law and accommodated within the system of formal pleading by means of the fictitious assumpsit or promise. It was necessary to plead the fictitious assumpsit until the enactment of s 3 of the Common Law Procedure Act 1852 (Eng).  And even then its influence continued.  The abolition of the forms of action inspired an analysis of the sources of obligation in the common law in terms of a rigid dichotomy between contract and tort.  In that context, there was little room for restitutionary obligation imposed by law except as a 'quasi-contractual' appendix to the law of contract.  As a result, until recently, restitutionary claims were disallowed when a promise could not be implied in fact[55].  However, since Pavey & Matthews Pty Ltd v Paul[56], such an approach no longer represents the law in Australia."

    Earlier, in National Commercial Banking Corporation of Australia Ltd v Batty[57], Gibbs CJ indicated that he found it unnecessary in that appeal to discuss the doctrinal basis for the action for money had and received, but continued[58]:

    "Whether the action is based on an implied promise to pay, or on a principle designed to prevent unjust enrichment, the emphasis on justice and equity in both old and modern authority on this subject supports the view that the action will not lie unless the defendant in justice and equity ought to pay the money to the plaintiff". (footnotes omitted)

    The rejection of the implied contract theory, of which Mason CJ spoke in Baltic Shipping, should be taken as reflecting the settled position in Australia.

    [52](1760) 2 Burr 1005 [97 ER 676].

    [53](1993) 176 CLR 344 at 356‑357.

    [54](1760) 2 Burr 1005 at 1008 [97 ER 676 at 678].

    [55]Birks and McLeod trace civil law origins of the implied contract approach:  "The Implied Contract Theory of Quasi-Contract:  Civilian Opinion Current in the Century Before Blackstone", (1986) 6 Oxford Journal of Legal Studies 46.

    [56](1987) 162 CLR 221.

    [57](1986) 160 CLR 251 at 268.

    [58](1986) 160 CLR 251 at 268.

23. However, the identification of a satisfactory doctrinal basis for the action is a more difficult matter.  The common money counts, particularly after the decisions of Lord Mansfield, have occupied an uneasy position in the legal system between the three great sources of obligation in private law, tort, contract and trust.

24. In Pan Ocean Shipping Co Ltd v Creditcorp Ltd[59], Lord Goff of Chieveley stated as a general rule that the existence of a contractual regime for the recovery of overpayments made the imposition by law of a remedy for total failure of consideration "both unnecessary and inappropriate".  However, that is not to assert that an action for money had and received may not lie to recover payments made with a view to entry into a contract which never comes to pass.  The contrary is the case.  Recovery of a deposit made "subject to contract", where the
    

    [59][1994] 1 WLR 161 at 164; [1994] 1 All ER 470 at 473‑474.

    [60]Chillingworth v Esche [1924] 1 Ch 97.

    [61]Wright v Newton (1835) 2 CM & R 124 [150 ER 53]; Simmons v Heseltine (1858) 5 CB (NS) 554 [141 ER 224].

    contract is not entered into[60] or is defeated by non‑fulfilment of a condition[61], is an example.

1. The action may lie in respect of the moneys improperly received by a fiduciary, in addition to purely equitable remedies.  Boston Deep Sea Fishing and Ice Company v Ansell[62] and Reading v Attorney-General[63] are well known examples.  In Lipkin Gorman v Karpnale Ltd[64], the plaintiff firm of solicitors sued the defendant gambling club for moneys had and received which represented defalcations by a partner from its trust account; why no tracing remedy was sought does not appear.  Presumably the plaintiff regarded the common law remedy as adequate.

   [62](1888) 39 Ch D 339 at 367‑368.

   [63][1951] AC 507 at 515.

   [64][1991] 2 AC 548.

2. With respect to express trusts it was settled by 1852, when Edwards v Lowndes[65] was decided, that it was only at the stage when there remains nothing to the trustee to execute except the payment over of money to the beneficiary, or the trustee admits the debt, that an action for money had and received might lie at the suit of the beneficiary against the trustee; in other respects, in the courts of law the trustee was treated as the absolute owner and the beneficiary's remedy was exclusively in a court of equity which might give effect to equitable set‑offs and other equitable defences available to the trustee.  The trust which had not been wholly performed was treated as analogous to the "open" contract, that is to say, one not discharged[66]; at that earlier stage, the action for money had and received did not lie.

   [65](1852) 1 El & Bl 81 at 89 [118 ER 367 at 370]. See also Bartlett v Dimond (1845) 14 M & W 49 at 56 [153 ER 385 at 387‑388]; Pardoe v Price (1847) 16 M & W 451 at 458‑459 [153 ER 1266 at 1269]; R v Brown (1912) 14 CLR 17 at 25; Bullen and Leake, Precedents of Pleadings, 3rd ed (1868) at 46‑47; Rath, Principles and Precedents of Pleading, (1961) at 28.

   [66]Edwards v Bates (1844) 7 Man & G 590 at 598‑601 [135 ER 238 at 241‑242]. See also Baker, "The Use of Assumpsit for Restitutionary Money Claims 1600‑1800", in Schrage (ed), Unjust Enrichment, (1995) 31 at 48.  Another use of the expression "open" contract is to identify an informal contract, particularly for the sale of land, which does not deal expressly with matters of detail usually found in such contracts:  Cavallari v Premier Refrigeration Co Pty Ltd (1952) 85 CLR 20 at 25.

3. Finally, unlike the general position in tort law, the action for money had and received is not concerned with recovery as compensation for loss or damage suffered by the plaintiff.  It is settled in this Court that, at least where the plaintiff is not asserting a trust in its favour or seeking other equitable relief, an action for money had and received is, as Mason CJ put it, not "defeated simply because the plaintiff has recouped the outgoing from others"[67].  This is important for the present litigation, given the dealings between the appellants as retailers and the consumers.  Mason CJ observed in Commissioner of State Revenue (Vict) v Royal Insurance Australia Ltd that[68]:

   "it seems that there is no recorded instance of a court engaging in the daunting exercise of working out the actual loss sustained by the plaintiff and restricting the amount of an award to that measure".

   Further, his Honour added, why "as between the plaintiff and the defendant, the passing on of the tax to customers of the plaintiff results in conduct which should disentitle the plaintiff in equity from recovery is difficult to understand"[69].

   [67]Commissioner of State Revenue (Vict) v Royal Insurance Australia Ltd (1994) 182 CLR 51 at 78.

   [68](1994) 182 CLR 51 at 75.

   [69](1994) 182 CLR 51 at 75. The United States decisions on the question are divided: Note, "Buyer's Recovery of Invalidated Processing Tax Under Original [Agricultural Adjustment Act]", (1941) 51 Yale Law Journal 348; Woodward, "'Passing‑on' the Right to Restitution", (1985) 39 University of Miami Law Review 873, where, at 882, 900 and 923, reference is made to Windeyer J's judgment in Mason v New South Wales (1959) 102 CLR 108 at 146.

4. The doctrinal reason which points against the "passing‑on" defence is the unconscientious conduct of the defendant in refusing to account to the plaintiff.  In Mason v New South Wales[70], Windeyer J, in a passage approved by Mason CJ, Brennan, Toohey and McHugh JJ in Royal Insurance[71], said:

   "The concept of impoverishment as a correlative of enrichment may have some place in some fields of continental law.  It is foreign to our law.  Even if there were any equity in favour of third parties attaching to the fruits of any judgment the plaintiffs might recover – and there is nothing proved at all remotely suggesting that there is – this circumstance would be quite irrelevant to the present proceedings."

   [70](1959) 102 CLR 108 at 146.

   [71](1994) 182 CLR 51 at 74‑75, 90‑91, 103; cf the observations of Lord Goff of Chieveley in Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70 at 177‑178.

   Unjust enrichment theory

5. Writing extrajudicially, Justice Paul Finn has said of the concept of "unjust enrichment" that "[a]t a quite visceral level it provides an important catalyst to further legal inquiry", particularly as "a unifying legal concept"[72] which "explains why the law recognises an obligation to make restitution in particular contexts"[73].  The conventional view is that it is the unjust enrichment which gives rise to the obligations of restitution.  However, Justice Finn  expresses concern that the concept of unjust enrichment may "contrive legal analysis" and continues (in a passage I would adopt)[74]:

   "[T]o the extent that it directs attention to outcomes and to the character to be attributed to them, it is capable of concealing rather than revealing why the law would want to attribute a responsibility to one party to provide satisfaction to the other.  This is particularly so where, as is so often the case, it is conduct in a relationship or dealing – an expectation created and relied upon; a mistake not corrected; etc – which provides the focus of legal attention and which generates the issue of legal policy for which resolution is required.  This, I suspect, provides the reason why 'unconscionable conduct' and not 'unjust enrichment' (a possible effect of that conduct) has achieved the currency it has in Australian law."

   [72]Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256‑257; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 375.

   [73]Finn, "Equitable Doctrine and Discretion in Remedies", in Cornish et al (eds), Restitution:  Past, Present and Future, (1998) 251 at 251.

   [74]Finn, "Equitable Doctrine and Discretion in Remedies", in Cornish et al (eds), Restitution:  Past, Present and Future, (1998) 251 at 252.

6. However, in Baltic Shipping, Mason CJ said that, in cases of money had and received, the retention of the money in question[75]:

   "is regarded, in the language of Lord Mansfield, as 'against conscience' or, in the modern terminology, as an unjust enrichment of the defendant because the condition upon which it was paid, namely, performance by the defendant may not have occurred". (footnote omitted)

   Nevertheless, reflection will demonstrate that the notion of unjust enrichment cannot be accepted as a modern synonym for a refusal "against conscience" to pay the money in question.  This is because, as Rothmans emphasised in its submissions, the action for money had and received lies against defendants who fail to account but who, on any sensible understanding of the term, have not been enriched.  A recent example[76] is the decision of the New Zealand Court of Appeal in Martin v Pont[77].  A principal who entrusted money to an agent for the purpose of investing it with a nominated finance company was entitled to recover from the agent when, by reason of a defalcation by an employee of the agent which did not benefit the agent, the purpose was not carried out.

   [75](1993) 176 CLR 344 at 359.

   [76]Earlier authorities include Parry v Roberts (1835) 3 Ad & E 118 [111 ER 358]; cf The Oriental Bank Corporation v Hewitt (1862) 1 SCR (NSW) (L) 220.  See also Jackson, The History of Quasi-Contract in English Law, (1936) at 24‑26.

   [77][1993] 3 NZLR 25. See also Stoljar, "Unjust Enrichment and Unjust Sacrifice", (1987) 50 Modern Law Review 603 at 612‑613; Kwai‑Lian Liew, "Restitution and Contract Risk:  Commentary", in McInnes (ed), Restitution:  Developments in Unjust Enrichment, (1996) 163 at 165‑166, 171‑175; Grantham and Rickett, Enrichment and Restitution in New Zealand, (2000) at 277‑279.

7. Considerations such as these, together with practical experience, suggest caution in judicial acceptance of any all-embracing theory of restitutionary rights and remedies founded upon a notion of "unjust enrichment".  To the lawyer whose mind has been moulded by civilian influences, the theory may come first, and the source of the theory may be the writing of jurists not the decisions of judges.  However, that is not the way in which a system based on case law develops; over time, general principle is derived from judicial decisions upon particular instances, not the other way around.

8. In McGinty v Western Australia[78], McHugh J referred to Judge Posner's description of "top-down reasoning" by which a theory about an area of law is invented or adopted and then applied to existing decisions to make them conform to the theory and to dictate the outcome in new cases.  Judge Posner spoke of the use of the theory by its adherents[79]:

   "to organize, criticize, accept or reject, explain or explain away, distinguish or amplify the existing decisions to make them conform to the theory and generate an outcome in each new case as it arises that will be consistent with the theory and with the canonical cases, that is, the cases accepted as authoritative within the theory".

   As it happens, Lord Mansfield favoured the development of legal principle by a journey in the opposite direction.  In Ringsted v Lady Lanesborough, his Lordship said[80]:

   "General rules are, however, varied by change of circumstances.  Cases arise within the letter, yet not within the reason, of the rule; and exceptions are introduced, which, grafted upon the rule, form a system of law."

   [78](1996) 186 CLR 140 at 232.

   [79]"Legal Reasoning From the Top Down and From the Bottom Up:  The Question of Unenumerated Constitutional Rights", (1992) 59 University of Chicago Law Review 433 at 433.  See also Waters, "The Reception of Equity in the Supreme Court of Canada (1875-2000)", (2001) 80 Canadian Bar Review 620 at 645.

   [80](1783) 3 Dougl 197 at 203 [99 ER 610 at 613].

9. Unless, as this Court indicated in David Securities Pty Ltd v Commonwealth Bank of Australia[81], unjust enrichment is seen as a concept rather than a definitive legal principle, substance and dynamism may be restricted by dogma.  In turn, the dogma will tend to generate new fictions in order to retain support for its thesis.  It also may distort well settled principles in other fields, including those respecting equitable doctrines and remedies, so that they answer the newly mandated order of things.  Then various theories will compete, each to deny the others.  There is support in Australasian legal scholarship for considerable scepticism respecting any all-embracing theory in this field, with the treatment of the disparate as no more than species of the one newly discovered genus[82].

   [81](1992) 175 CLR 353 at 378‑379.

   [82]See, for example, Stoljar, "Unjust Enrichment and Unjust Sacrifice", (1987) 50 Modern Law Review 603 at 610‑613; Tilbury, Civil Remedies, vol 1 (1990) at [4003]-[4019]; Tilbury, "Restitutionary Damages", in Carroll (ed), Civil Remedies:  Issues and Developments, (1996) 2 at 2‑6, 43‑47; Glover, Commercial Equity:  Fiduciary Relationships, (1995) at [5.15]-[5.17]; Dietrich, Restitution:  A New Perspective, (1998) at 92‑100; Grantham and Rickett, "Property and Unjust Enrichment:  Categorical Truths or Unnecessary Complexity?", (1997) New Zealand Law Review 668; Grantham and Rickett, Enrichment and Restitution in New Zealand, (2000) at 13‑16; Wright, "Professor Birks and the Demise of the Remedial Constructive Trust", (1999) 7 Restitution Law Review 128 at 129‑136; Doyle and Wright, "Restitutionary Damages – The Unnecessary Remedy?", (2001) 25 Melbourne University Law Review 1 at 17‑20; Kremer, "The Action for Money Had and Received", (2001) 17 Journal of Contract Law 93 at 94‑97.  See, further, Jaffey, The Nature and Scope of Restitution, (2000) at 15‑26.

10. On the other hand, the action to recover the moneys sought by the appellants after the failure of the purpose of funding Rothmans to renew its licence may be illustrative of the gap-filling and auxiliary role of restitutionary remedies[83].  These remedies do not let matters lie where they would fall if the carriage of risk between the parties were left entirely within the limits of their contract.  Hence there is some force in the statement by Laycock[84]:

    "The rules of restitution developed much like the rules of equity.  Restitution arose to avoid unjust results in specific cases – as a series of innovations to fill gaps in the rest of the law."

    [83]Dietrich, Restitution:  A New Perspective, (1998) at 29‑35; Grantham and Rickett, "On the Subsidiarity of Unjust Enrichment", (2001) 117 Law Quarterly Review 273 at 289‑293.

    [84]"The Scope and Significance of Restitution", (1989) 67 Texas Law Review 1277 at 1278.

    The decision in Moses v Macferlan

11. That returns one to a consideration of the decision in Moses v Macferlan itself.  What was decided in Moses v Macferlan[85]?  Moses had owed Macferlan £26, did not pay him and Macferlan sued him.  The claim went to arbitration and settlement was reached:  Moses would pay £20 and indorse over to Macferlan four 30s promissory notes made by one Jacob to Moses; Macferlan would seek to collect on the bills from Jacob and, if he recovered the entire value of the notes, he would pay one-half of the costs of Moses of the earlier collection action against Moses; by written instrument, Macferlan indemnified Moses against any liability on the notes as an indorser and gave Moses a release.

    [85]What follows is drawn from the report (1760) 2 Burr 1005 [97 ER 676], together with an account of the case given by the New South Wales Full Court in Lyons v Hardy (1881) 2 NSWR (L) 369 at 372‑374, Keener, A Treatise on the Law of Quasi-Contracts, (1893) at 413‑415 and Oldham, The Mansfield Manuscripts, (1992), vol 1 at 169‑175.

12. Macferlan was unable to collect on the notes and sued Moses in the local Court of Conscience, for the County of Middlesex, established by statute 23 Geo II c 33 (1750)[86].  Macferlan sued Moses on the promissory notes.  It would appear that Moses might have enjoined that action by a suit in Chancery to enforce the indemnity agreement made with Macferlan and thereby have avoided the multiplicity of litigation that ensued.  Moses failed to take any such steps.  Further, Moses might have sued in a common law court on a special assumpsit to recover the damage suffered by reason of the breach by Macferlan of that agreement.  Presumably the failure of Moses to seek injunctive relief would have provided no defence to his action at law.  However, Moses did not bring such an action.

    [86]The statute was repealed by the County Courts Act 1846 (9 & 10 Vict c 95).  The number of commissioners, who composed the bench, the mode of their selection and their qualifications for office varied from one court to the other:  Winder, "The Courts of Requests", (1936) 52 Law Quarterly Review 369 at 375.  In their fifth Report on the Practice and Proceedings of the Superior Courts of Common Law, (1833), (reprinted British Parliamentary Papers, Legal Administration General, vol 5), which dealt with provincial courts for the recovery of small debts, the Commissioners said (at 11) that the suspicions of Blackstone respecting the procedures of the Courts of Requests and Courts of Conscience had "not been removed by later experience".

13. Rather, in his defence in the Court of Conscience he sought to rely upon the agreement with Macferlan.  However, that Court refused to receive that evidence on the ground that the agreement raised issues collateral to the action on the bills; if pursued, the Court might, to determine the defence upon the agreement, have gone beyond the monetary limits upon its jurisdiction.  Accordingly, on the notes, Macferlan recovered judgment for the full £6.  By statute, no writ of error or certiorari lay from the Court of Conscience to the Court of King's Bench or any other common law court[87].

    [87]23 Geo II c 33, s 4. See Blackstone, Commentaries on the Laws of England, (1768), bk 3, Ch 6 at 82‑83.

14. Moses did not seek from Chancery an injunction to restrain Macferlan proceeding on the judgment he had obtained[88].  Rather, Moses satisfied the judgment against him and then sued in the King's Bench to recover £6 in an action upon the case for money had and received by Macferlan to the use of Moses. 

    [88]cf Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 at 441‑442; High v Bengal Brass Co and Bank of NSW (1921) 21 SR (NSW) 232 at 237‑238.

15. Contrary to what has been said by some writers[89], the doctrine of res judicata had no application to this action in the King's Bench; there was no attempt by Moses to relitigate a cause of action that had merged into the judgment for Macferlan in the proceeding in the Court of Conscience[90].  Nor was there any issue estoppel, given the denial of jurisdiction in the Court of Conscience to deal with issues arising under the agreement[91].

    [89]Fridman, Restitution, 2nd ed (1992) at 449‑450; Jaffey, The Nature and Scope of Restitution, (2000) at 183.

    [90]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597, 610‑613.

    [91]Cachia v Isaacs (1985) 3 NSWLR 366 at 386‑387.

16. The action in the King's Bench was tried before Lord Mansfield and a jury and "there was no doubt but that, upon the merits, the plaintiff was intitled to the money"[92].  However, the Lord Chief Justice reserved for the opinion of the Court in banc the question whether the action for money had and received was misconceived.  Macferlan obviously had made no promise to repay the fruits of his judgment.  Was it necessary for Moses to plead an agreement?  If so, the only relevant agreement was the original indemnity agreement[93].  The central issue thus turned upon the appropriate form of the action.  The Court answered the question favourably to Moses who thus retained his verdict against Macferlan[94].

    [92](1760) 2 Burr 1005 at 1006 [97 ER 676 at 677].

    [93]Oldham, The Mansfield Manuscripts, (1992), vol 1 at 226‑227.

    [94]The actual decision in Moses v Macferlan sometimes has been regarded as overruled.  In J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 41 ALR 539 at 549, Blackburn, Deane and Ellicott JJ referred to the opinion of Keener on the point. This was that the case said to overrule Moses v Macferlan, Marriot v Hampton (1797) 7 TR 269 [101 ER 969], had proceeded on a different basis. It applied to consecutive actions in the King's Bench the rules of res judicata to decide that money had and received did not lie to recover an amount paid in the first action where newly discovered evidence would have given a defence in that action:  Keener, A Treatise on the Law of Quasi-Contracts, (1893) at 411‑415; cf DJL v Central Authority (2000) 201 CLR 226 at 243‑245 [33]-[38].

17. The litigation conducted by Moses in the King's Bench was not to enforce by an award of damages a primary obligation imposed upon Macferlan by the original indemnity agreement.  Macferlan had been bound thereby not to sue Moses on the notes.  Moses now sued to recoup what had been obtained from him in breach of that contract and "kept from him iniquitously"[95].

    [95](1760) 2 Burr 1005 at 1012 [97 ER 676 at 681]. See Comment, "Moses v Macferlan – Is it Sound Law?", (1915) 24 Yale Law Journal 246.

1. In Dennis Hotels Pty Ltd v Victoria[275], this Court held that licensing provisions in the Licensing Act 1958 (Vic), other than a provision which fixed fees for certain temporary licences, did not impose a duty of excise.  In Dickenson's Arcade Pty Ltd v Tasmania[276], the Court held that the Tobacco Act 1972 (Tas) validly imposed a scheme of licensing of sales of tobacco in which the fee payable was calculated by reference to tobacco sales in a period of 12 months ending six months before the commencement of the period in respect of which the licence was granted.

   [275](1960) 104 CLR 529.

   [276](1974) 130 CLR 177.

2. In Philip Morris Ltd v Commissioner of Business Franchises (Vict)[277], the Court disapproved the reasoning in Dickenson's Arcade.  The decision in Philip Morris was open to an interpretation that a fee payable under a licensing scheme would not be a duty of excise, if the imposition of the licence fee were an element in regulatory legislation controlling the sale and distribution of the particular commodity.  The licensing scheme under consideration here reflected an understanding of Dennis Hotels that, in the field of sales of alcohol and tobacco, a licence fee which might otherwise be regarded as a duty of excise would not be so treated if the fee could be characterised as a fee for carrying on a business, and if it were calculated by reference to sales made during a period other than the period of the licence.

   [277](1989) 167 CLR 399.

3. This understanding was rejected by the Court in Ha v New South Wales[278].  The majority (Brennan CJ, McHugh, Gummow and Kirby JJ) referred to the legislation in question here as "a simple device in legislative drafting"[279].  The "licence fee" was held to be a duty of excise not lawfully leviable by a State.  It followed that the appellants had paid, and the respondent had received, substantial sums of money on account of a tax which was not in fact lawfully leviable.

   [278](1997) 189 CLR 465.

   [279](1997) 189 CLR 465 at 497.

4. The appellants brought proceedings in the Federal Court to recover such amounts paid to the respondent in respect of sales during the relevant period as were identified in the respondent's invoices as "Tobacco Licence Fee".

5. The appellants' claim was dismissed by Emmett J at first instance and an appeal to the Full Court of the Federal Court (Hill and Lehane JJ; Gyles J dissenting) was also dismissed.

   The appeal to this Court

6. The appellants argue in this Court that the Federal Court should have allowed their claim on a number of bases:  as money had and received by reason of a total failure of consideration; as money had and received because of the failure of the purpose for which the amounts were paid; as a breach of an implied term; and as money held on constructive trust for the benefit of the appellants.

7. In his dissenting judgment in the Full Court, Gyles J made five points about the item identified in the invoice as "Tobacco Licence Fee"[280]: 

   [280](1999) 95 FCR 185 at 210 [92].

   "1.It is an amount which is calculated by reference to the value of the particular goods included in the invoice.

   2.It is the precise amount which will be required to pay the licence fee which will be calculated in due course by reference to those goods.

   3.That amount of licence fee will not be payable by the respondent for some weeks.

   4.Payment of the licence fee referable to the goods involved in the transaction evidenced by the invoice is the best means of ensuring that the retailer in question receives the benefit of s 41(3) of the Act.

   5.It cannot be assumed that the retailer in question will have received from its customers the amount paid to the respondent on account of the licence fee at the time of payment of the invoice according to ordinary terms of trade."

   His Honour went on to say this[281]:

   [281](1999) 95 FCR 185 at 211-212 [95]-[100].

   "The commonsense conclusion from the evidence is that the retailer agreed to pay the identified price of the goods and also agreed to, and did, fund the amount of the licence fee to be paid in respect of them, in return for which the wholesaler supplied the goods and promised to pay that licence fee in due course, as it had in the past.  As was said by Dixon and McTiernan JJ in Commonwealth Quarries (Footscray) Pty Ltd v Commissioner of Taxation(Cth)[282]:

   [282](1938) 59 CLR 111 at 121.

   'In a contract under which for a single lump sum of money a party undertakes to do various things, including the transfer of property in goods, it is quite true that the entire money consideration or contract price cannot be regarded as the amount for which the goods are sold.  In such a case the amount for which the goods were sold could not be ascertained from the transaction except by allocating part of the consideration to the other acts or things to be done by the seller.'

   In the present case, the amount sought and paid is expressly apportioned and identified.  See also Tanu Pty Ltd v Commissioner of Taxation (Cth)[283].

   [283](1999) 160 ALR 227.

   To use the expression of Gibbs J in Stephens v The Queen[284], the amount identified as the 'Tobacco Licence Fee' in the invoice is thereby earmarked for that purpose, rather than as payment to the respondent for value received by the appellants from it.

   The point as to earmarking is well illustrated by an American case, the facts of which are rather like the present.  The case was cited by counsel for the appellants on the constructive trust argument, but its significance is by no means limited to that.  It casts light upon the analysis of the contract.

   In 123 East Fifty-Fourth Street Inc v United States[285], a restaurant owner had collected taxes (subsequently held not to be payable) from its patrons and paid the amount so collected to the revenue authority.  The case was between the restaurant owner and the revenue authority.  Learned Hand J (in dissent) said[286]:

   '… I shall assume that, when the plaintiff charged its guests with the amount of the tax for which it supposed itself liable, it added the amount as a separate item and described it as a tax which it must pay, and which it was apparently collecting from the guests in order to pay it to the Treasury.  If the plaintiff wishes to dispute this, I should allow it to do so, because I regard the distinction as crucial whether it made the charge in that form, or merely included in the bills rendered the amount of the supposed tax without saying anything about it.  If it said nothing, I should agree with my brothers that the guests had no legally recognizable interest in the money collected, which gave them any claim to it superior to the plaintiff's; and in that case some statute would be necessary to deprive the plaintiff of its right to recover.  On the other hand, if the plaintiff collected the money under what the guests must have understood to be a statement that it was obliged to pay it as a tax, and that it meant to do so, the money was charged with a constructive trust certainly so long as it remained in the plaintiff's hands.  For example, if, before the plaintiff had paid it, the Treasury had declared that the tax was not due, the plaintiff could not have successfully resisted the guests' demand that it be turned back to them, the very purpose for which they had paid it having then become incapable of execution.'

   In Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd[287], Mason CJ said:

   'I would accept so much of Learned Hand J's analysis in 123 East Fifty-Fourth Street as leads to the conclusion that the restaurant owner was a constructive trustee of the amount of the tax received from its patrons if the owner charged the separate amount of the tax to its patrons.  The tax so received was received by the owner as a fiduciary on the footing that it would apply the money in payment of the tax.  If that purpose failed or could not be effected because the tax was not payable then the owner held the moneys for the benefit of the patrons who paid the moneys.  The same result would ensue if the owner recovered payments from the revenue authority made as and for tax which was not payable.  And, in my view, the patrons who paid the tax to the owner would have a right of recovery, as Learned Hand J makes clear, against the revenue authority so long as it retained the payments which it was not entitled to retain.'

   This analysis of the effect of describing an item in a bill as tax by Learned Hand J, approved by Mason CJ, is most persuasive.  Whatever problem there may be about the remedy of constructive trust (and I do not mean to imply that I think there is one) does not detract from this reasoning.  I should mention that the majority in 123 East Fifty-Fourth Street allowed the possibility of common law recovery by the patrons against the restaurant owner in the event of non payment of the taxes.  It seems to go without saying that Learned Hand J (and Mason CJ) would have allowed recovery at common law in the present circumstances.  In 123 East Fifty-Fourth Street the constructive trust was required to provide a basis for the return to the restaurant owner of taxes paid to the revenue authority and subsequently found not to have been payable.  That complication does not exist here."

   [284](1978) 139 CLR 315 at 333.

   [285]157 F 2d 68 (1946).

   [286]157 F 2d 68 at 70-71 (1946).

   [287](1994) 182 CLR 51 at 77-78.

8. I would respectfully adopt what his Honour said in the passages I have quoted.  It is consistent with what was said by Lord Porter in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd[288].  The relevant sums paid by the appellants were shown as separate items ascribed to a particular component of the total sum payable.  They answered his Lordship's description of separate parts of money payable for or on account of a divisible part of a contract[289]:

   "Under that system money had and received to the plaintiff's use can undoubtedly be recovered in cases where the consideration has wholly failed, but unless the contract is divisible into separate parts it is the whole money, not part of it, which can be recovered.  If a divisible part of the contract has wholly failed and part of the consideration can be attributed to that part, that portion of the money so paid can be recovered, but unless this be so there is no room for restitution under a claim in indebitatus assumpsit."

   In the same case Viscount Simon LC explained the principle in this way[290]:

   "In English law, an enforceable contract may be formed by an exchange of a promise for a promise, or by the exchange of a promise for an act – I am excluding contracts under seal – and thus, in the law relating to the formation of contract, the promise to do a thing may often be the consideration, but when one is considering the law of failure of consideration and of the quasi-contractual right to recover money on that ground, it is, generally speaking, not the promise which is referred to as the consideration, but the performance of the promise.  The money was paid to secure performance and, if performance fails the inducement which brought about the payment is not fulfilled.

   If this were not so, there could never be any recovery of money, for failure of consideration, by the payer of the money in return for a promise of future performance, yet there are endless examples which show that money can be recovered, as for a complete failure of consideration, in cases where the promise was given but could not be fulfilled[291].  In this connexion the decision in Rugg v Minett[292] is instructive.  There the plaintiff had bought at auction a number of casks of oil.  The contents of each cask were to be made up after the auction by the seller to the prescribed quantity so that the property in a cask did not pass to the plaintiff until this had been done.  The plaintiff paid in advance a sum of money on account of his purchases generally, but a fire occurred after some of the casks had been filled up, while others had not.  The plaintiff's action was to recover the money he had paid as money received by the defendants to the use of the plaintiffs.  The Court of King's Bench ruled that this cause of action succeeded in respect of the casks which at the time of the fire had not been filled up to the prescribed quantity."

   [288][1943] AC 32.

   [289][1943] AC 32 at 77.

   [290][1943] AC 32 at 48-49.

   [291]See the notes in Bullen and Leake, Precedents of Pleadings, 9th ed (1935) at 263.

   [292]11 East 210 [103 ER 985].

9. I would reject the respondent's submission that it is only in cases in which contracts have been frustrated, discharged for breach, or held to be unenforceable, or otherwise avoided, that a party may obtain restitution.  Gyles J answered that submission, correctly, in my opinion, in this way[293]:

   "The contract [here] has been executed in all respects save for payment of the licence fee by the respondent.  The licence fee is no longer payable.  It cannot and will not be paid by the respondent.  That is the end of the matter.  Performance is no longer possible.  If formal termination by the appellants is necessary, then bringing these proceedings is sufficient." 

   [293](1999) 95 FCR 185 at 214 [106].

10. This is also a case of the kind referred to by Mason CJ, Deane, Toohey, Gaudron and McHugh JJ in David Securities Pty Ltd v Commonwealth Bank of Australia[294]:

    "In cases where consideration can be apportioned or where counter-restitution is relatively simple, insistence on total failure of consideration can be misleading or confusing.  In the present case, for instance, it is relatively simple to relate the additional amounts paid by the appellants to the supposed obligation under cl 8(b) of the loan agreements.  The appellants were told that they were required to pay withholding tax and the payments that they made were predicated on the fact that, by doing so, they were discharging their obligation.  Such an approach is no different in effect from the cases under the old statutes of usury whereby a borrower could recover from the lender the excess interest which the lender was prohibited from stipulating or receiving." (original emphasis)

    [294](1992) 175 CLR 353 at 383 (footnote omitted).

11. Accordingly, I am of the opinion that the appellants have made out a case for the recovery of the money paid on the basis that relevantly there has been a total failure of consideration, that is to say, a failure in respect of a discrete, clearly identified component of the consideration.

12. There is one further matter in respect of the appellants' entitlement to recover the money paid under the head of money had and received that I should discuss.  In argument the respondent sought to makes these points:  the appellants' claim was a claim in equity because the cause of action had its foundation in equity; the appellants were, therefore, not entitled to relief in equity as they had not offered to do equity by repaying or undertaking to repay to purchasers of tobacco the component of the licensing fee that was contained in the retail price.

13. There are two answers to this.  The licensing component of the retail price was not shown in an invoice or elsewhere, or charged or paid as a discrete part of the retail price of tobacco bought and sold.

14. But, in any event, the money claim made here is not an equitable claim.  It is true that the following comments of Lord Mansfield in Moses v Macferlan can be taken to suggest that a claim for money had and received is an equitable one[295]:

    "This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged.  It lies only for money which, ex aequo et bono, the defendant ought to refund:  it does not lie for money paid by the plaintiff, which is claimed of him as payable in point of honor and honesty, although it could not have been recovered from him by any course of law; as in payment of a debt barred by the Statute of Limitations, or contracted during his infancy … because in all these cases, the defendant may retain it with a safe conscience, though by positive law he was barred from recovering.  But it lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition, (express or implied;) or extortion; or oppression; or an undue advantage taken of the plaintiff's situation, contrary to laws made for the protection of persons under those circumstances.

    In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money."

    [295](1760) 2 Burr 1005 at 1012 [97 ER 676 at 680-681].

15. However Lord Mansfield's comments may be interpreted, subsequent authority makes it clear that the claim is not an equitable one.  This much is apparent from the speech of Lord Sumner in Sinclair v Brougham[296].  His Lordship there explained that the action for money had and received was a form of assumpsit; that Lord Mansfield probably had never conceived that the action was to be administered as "an equity", as the term was understood in the Court of Chancery; and that Pollock CB had bluntly declared that the notion that the action was an equitable one had been "exploded"[297].  His Lordship's conclusion is worth quoting[298]:

    "[A]llusions have been made from time to time to the connection between this cause of action and equity or the aequum et bonum … but I take them all to be merely descriptive of the undoubtedly wide scope of this essentially common law action.  There is now no ground left for suggesting as a recognizable 'equity' the right to recover money in personam merely because it would be the right and fair thing that it should be refunded to the payer."

    [296][1914] AC 398.

    [297][1914] AC 398 at 454-456.

    [298][1914] AC 398 at 456.

16. It is not necessary for me to deal with the other arguments of the appellants, although I would be inclined to agree with the conclusion of Gyles J that it might also be appropriate to imply a term in favour of the appellants for repayment of the relevant sums.  The term is that in the event that it is not necessary or possible to pay the tax, the sum represented by it would not be kept by the respondent but would be returned to the appellants.  The appellants almost certainly would only have paid the sums in question upon the underlying common understanding that those sums would of legal necessity be payable by the respondent to the revenue authority.  An implication of the kind that I have stated, in those circumstances, could fairly readily be made by the hypothetical officious bystander whose opinion the courts invoke in a case of this kind.  That bystander is assumed to be a person who draws attention to a matter not the subject of express reference by the parties in their contract.  A question, "What if you (the respondent) cannot, or are not required to, pay this amount to the revenue authority?" would likely have provoked an insistence by the appellants that money not so paid be refunded to the appellants.  This is even more obviously an answer that might be given in the circumstances also imputedly known to the bystander, that the appellants here had a personal, contingent liability to pay the sums themselves.  Such a term would appear necessary to give business efficacy to the contract between the parties.  Efficacy means no more than power or capacity to effect an intention.  Business efficacy would ordinarily require that money effectively demanded and paid in anticipation of its payment to a revenue authority would be so paid.  Such an implied term, subject to one possible qualification, would be both reasonable and equitable, and it certainly contradicts no other term[299].  The only question is whether the respondent, confronted with a stipulation by the appellants of a term in the language that I have stated, might regard it as unreasonable to be bound by such a term unless the appellants undertook to refund to purchasers from them the licence fees forming part of the retail price, that amount otherwise being a windfall to the appellants.  Because I would allow the appeal for the reasons earlier stated, I need not express any concluded opinion on this question.

    [299]BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347 per Mason J.

1. I would allow the appeal with costs and enter judgment in favour of the appellants in the amounts paid by the appellants to the respondent in respect of tobacco products sold to the appellants during the period 1 July 1997 to 5 August 1997 and identified in the respondent's invoices as "Tobacco Licence Fee". I would also order that the respondent pay to each appellant interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth), and that the respondent pays the appellants' costs of the action and the appeal to the Full Court.