SCI Operations Pty Ltd v Commonwealth of Australia
[1996] FCA 754
•28 AUGUST 1996
CATCHWORDS
CUSTOMS AND EXCISE - Commercial Tariff Concession Order (CTCO) under s.269C of the Customs Act 1901 - whether interest should be ordered on duty paid to the Comptroller under 269N of the Customs Act and subsequently refunded to importer - CTCO's to have retrospective operation by express statutory provision - importer liable to pay duty upon importation of product - Comptroller obliged to retain duty paid unless and until CTCO made - whether restitutionary principles apply when determining Comptroller's liability to refund duty - whether liability to refund duty derived exclusively from statutory source - whether availability of action affected by operation of s.167(4) of the Customs Act - obligation to pay duty under protest and commence action within six months of payment where liability to pay duty disputed - no assertion that duty was not payable - action for refund of duty not precluded
INTEREST - claim for interest under s.51A of the Federal Court of Australia Act 1976 - entitlement to refund of duty under s.269N of the Customs Act - date on which cause of action accrues for purpose of calculating interest payable - retrospective operation of Commercial Tariff Concession Orders (CTCO) - CTCO made 3 June 1994 - CTCO deemed to come into effect on 1 September 1987 - whether cause of action may be deemed to accrue on a particular date - whether departure from general rule that interest is payable from date of accrual of cause of action permissible - whether "exceptional circumstances" justify substitution of notional date - whether possibility of importer making "windfall gains" by retrospective liability to pay interest relevant
INTEREST - claim for interest under s.51A of the Federal Court of Australia Act 1976 - orders for interest to be "included in the sum for which judgment is given" - whether Court may make orders for the payment of interest on sums recovered otherwise than by way of judgment - whether Comptroller liable to pay interest on claim awarded to appellant by consent - debt upon which interest calculated unpaid at time proceedings instituted - whether fact that interest is to be included in a judgment prevents application of s.51A(1)(a) - whether procedural provisions may effect "substantive entitlement to interest"
INTEREST - claim for interest under s.51A(1)(b) of the Federal Court of Australia Act 1976 - inclusion in sum for which judgment is given of a lump sum in lieu of interest - whether entitlement to interest to be implied from statutory scheme - judicial discretion with respect to quantum - whether restitutionary principles assist exercise of statutory discretion - whether Commonwealth's use of monies subsequently
2.
repaid relevant - Crown's obligation to behave as "model litigant" - obligation to make decisions within reasonable time
RESTITUTION - whether "free-standing" restitutionary cause of action for recovery of interest available - claim for interest on monies obtained by the Commonwealth and subsequently refunded - whether Commonwealth unjustly enriched - whether entitlement to interest as "fair and just compensation" for the enrichment accepted - whether restitutionary principles applicable to exercise of statutory discretion under s.51A(1)(b) of the Federal Court of Australia Act 1976
Federal Court of Australia Act 1976, s.51A(1)(a), (b) Customs Act 1901, ss.167, 269C, 269N
State Bank of New South Wales v Commissioner of Taxation (1995) 132 ALR 653
The Medina Princess [1962] 2 Lloyds Rep. 17
Techno-Impex v Gebr. van Weelde [1981] 1 QB 648
President of India v La Pintada Compania Navigacion S.A. [1985] AC 104
Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70
State Bank of New South Wales v Commonwealth Savings Bank of Australia (1984) 154 CLR 579
Melbourne & Metropolitan Board of Works v Bevelon Investments Pty. Ltd. [1977] VR 473
Baltic Shipping Co. v Dillon (1993) 176 CLR 344
Goss v Chilcott [1996] 3 WLR 180
McCauley v Hamilton Island Enterprises Pty. Ltd. (1986) 69 ALR 270
Commonwealth of Australia v Mewett (1994) 126 ALR 391
Downey v Pryor (1960) 103 CLR 353
Commissioners of Inland Revenue v Joicey (No.1) [1913] 1 KB 445
Reg. v Tower Hamlets London Borough Council; Ex parte Chetnik Developments Ltd [1988] AC 858
Blackpool and Fleetwood Tramroad Co. v Bispham with Norbreck Urban District Council [1910] 1 KB 592
The Melbourne Steamship Company Ltd. v Moorehead (1912) 15 CLR 333
Re Federal Commissioner of Taxation; Ex parte Australena Investments Pty. Ltd. (1983) 50 ALR 577
Moses v Macferlan (1760) 2 Burr 1005
Atchison, Topeka & Santa Fe railway Co. v O'Connor (1912) 223 US 280
Haig v The Minister Administering the National Parks & Wildlife Act 1974, New South Wales Court of Appeal, 17 May 1996, unreported
Idemitsu Queensland Pty. Ltd. v Agipcoal Australia Pty. Ltd. [1996] 1 Qd R 26
3.
Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] 2 WLR 802
Comptroller-General of Customs v Kawasaki Motors Pty. Ltd. (No.2) (1991) 32 FCR 243
Collector of Customs v Gaylor Pty. Ltd. (1995) 127 ALR 641
Ferrier and Knight v Civil Aviation Authority (1994) 55 FCR 28
Do Carmo v Ford Excavations Pty. Ltd. (1984) 154 CLR 234
University of Wollongong v Metwally (1984) 158 CLR 447
JURISDICTION, PRACTICE AND PROCEDURE - matters remitted by High Court to the Federal Court under s.44 of the Judiciary Act 1903 - power of High Court to award interest up to judgment under s.77MA(1) of the Judiciary Act - provision in the same terms as s.51A(1) of the Federal Court of Australia Act 1976 - remitter not to prejudice position of either party
State Bank of New South Wales v Commonwealth Savings Bank of Australia (1984) 154 CLR 579
Commonwealth of Australia v Mewett (1994) 126 ALR 391
McCauley v Hamilton Island Enterprises Pty. Ltd. (1986) 69 ALR 270
WORDS AND PHRASES - "included" - whether any requirement for an outstanding debt before interest can be "included" in a judgment for the debt - no pre-condition to application of s.51A(1) that debt, although unpaid when writ issued, remains unpaid thereafter -
Y.Z Finance Co. Pty Ltd. v Cummings (1964) 109 CLR 395
No. G85 of 1996
SCI OPERATIONS PTY LIMITED v COMMONWEALTH OF AUSTRALIA
No. G86 of 1996
ACI OPERATIONS PTY LIMITED v COMMONWEALTH OF AUSTRALIA
BEAUMONT, EINFELD AND SACKVILLE JJ.
SYDNEY
28 AUGUST 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY )
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
No. G 85 of 1996
BETWEEN:SCI OPERATIONS PTY LIMITED
Appellant
AND:COMMONWEALTH OF AUSTRALIA
Respondent
No. G 86 of 1996BETWEEN: ACI OPERATIONS PTY LIMITED
Appellant
AND:COMMONWEALTH OF AUSTRALIA
Respondent
CORAM: Beaumont, Einfeld and Sackville JJ.
PLACE: Sydney
DATE: 28 August 1996
MINUTES OF ORDER
THE COURT ORDERS:
Appeals allowed, with costs.
Set aside the orders made at first instance. In lieu thereof:
(a)Declare that, unless good cause (in the form only of a "windfall" defence) is shown to the contrary, the appellants are entitled to an order for interest under s.51A(1)(a), or if this be inappropriate, an order for interest in a lump sum amount to be determined in accordance with the discretion conferred by the provisions of s.51A(1)(b) of the Federal Court of Australia Act 1976;
(b)Order that the matters be remitted to a single Judge of the Court to be dealt with in accordance with these reasons and as the justice of the case requires.
2.
(c)Order that the respondent pay the appellants' costs at first instance.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
SCI OPERATIONS PTY LIMITED v COMMONWEALTH OF AUSTRALIA
(No. G 85 of 1996)
ACI OPERATIONS PTY. LIMITED v COMMONWEALTH OF AUSTRALIA
(No. G 86 of 1996)
INDEX TO REASONS FOR JUDGMENT
INTRODUCTION 1
THE BACKGROUND TO SCI's APPEAL 2
THE HISTORY OF THE PREVIOUS LITIGATION
BROUGHT BY ACI 5
THE MAKING OF THE CTCO ON 3 JUNE 1994 (EFFECTIVE
FROM 1 SEPTEMBER 1987) 7
THE INSTITUTION OF PROCEEDINGS IN THE HIGH COURT
ON 3 JUNE 1994 7
THE PAYMENTS BY THE COMMONWEALTH TO ACI AND SCI
ON 3 JUNE 1994 7
THE REASONING AT FIRST INSTANCE 8
(a) Section 51A 10
(b) Restitution 12
THE GROUNDS OF THE APPEALS 13
CONCLUSIONS ON THE APPEALS 14
(a)Did, or could, s.51A of the FCA Act apply here? 14
(i) Was s.51A still available once the
principal amount (i.e. the duty)
was paid after issue of the writs
but before judgment could be entered? 14
(ii) What was "the date when the cause of action
arose" for the purposes of s.51A(1)(a)? 33
(iii) Was s.51A(1)(b) also potentially
available here? 34
(iv) "Good cause to the contrary" -
a possible "windfall" defence? 55
(v) Other possible defences? 56
(b) Was a claim in restitution (unjust enrichment)
under the general law also available? 58
SUMMARY OF CONCLUSIONS 61
ORDERS PROPOSED 62
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY )
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
No. G 85 of 1996
BETWEEN:SCI OPERATIONS PTY LIMITED
Appellant
AND:COMMONWEALTH OF AUSTRALIA
Respondent
No. G 86 of 1996BETWEEN: ACI OPERATIONS PTY LIMITED
Appellant
AND:COMMONWEALTH OF AUSTRALIA
Respondent
CORAM: Beaumont, Einfeld and Sackville JJ.
DATE: 28 August 1996
REASONS FOR JUDGMENT
BEAUMONT AND EINFELD JJ.
INTRODUCTION
These are appeals from a judgment of a Judge of the Court (Wilcox J.) dismissing claims for interest in proceedings remitted to this Court from the High Court.
Since the cases are identical in point of principle, and since there is no dispute about the relevant facts, it will be sufficient, for present purposes, to refer, at this
stage, to the background to SCI's appeal as follows.
THE BACKGROUND TO SCI's APPEAL
By its writ of summons filed in the High Court on 3 June 1994, SCI claimed from the Commonwealth the sum of $5,296,690 "as money had and received by the [Commonwealth] to the use of [SCI] or otherwise", together with interest.
The statement of claim filed by SCI in this Court on 7 November 1994 alleged, relevantly, the following:
(1) Between September 1987 and March 1992, SCI imported certain resin ("the goods").
(2) Customs duty was from time to time demanded, and paid, in the total sum of $5,457,379.08 in that connection.
(3) Without such payments, SCI could not have obtained the release of the goods under the Customs Act ("the Act").
(4) On 3 June 1994 (and before the commencement of these proceedings) a Commercial Tariff Concession Order ("CTCO") was made (to the effect that the goods were free of duty) under s.269C of the Act.
(By s.269C.(1) of the Act, it is provided as follows:
"269C. (1)Subject to this Part, where the
Comptroller, after considering an application under section 269G for the making of an order under this section in respect of particular goods, is satisfied that:
(a)goods serving similar functions to the particular goods are not produced in Australia; and
(b)goods serving similar functions to the particular goods are not capable of being produced in Australia by any person in the normal course of business;
the Comptroller shall make a written order, declaring that the particular goods are goods to which a prescribed item specified in the order applies.")
(5) The CTCO was made as a consequence of conditional orders made by a Full Federal Court (see Comptroller-General of Customs v ACI PET Operations Pty. Ltd. (1994) 49 FCR 56). The CTCO specified 1 September 1987 as the date upon which it came into effect.
(A retrospective operation is given to a CTCO by the provisions of s.269N:
"269N. (1) A concession order (not being an order made under subsection 269P (10) [dealing with revocation of an order and not here material]) in respect of particular goods shall be deemed to have come into effect on such day before the making of the order as is specified in the order.
(2)Subject to subsections 269P (7) and (8), [dealing with revocation of an order] a concession order applies in relation to the particular goods to which it relates that are first entered for home consumption on or after the day on which it comes into effect.
(3)Subject to subsections (4), (6) and (7), the day to be specified in a concession order for the purposes of subsection (1) is the day occurring 28
days before the day on which the application for the order was made.")
(6) (Further, and in the alternative.) In September 1987, SCI applied to the Comptroller-General of Customs under s.269G of the Act for a CTCO in respect of the goods. By s.269C of the Act, the Comptroller-General was under a duty to make a CTCO where he was satisfied of certain matters. By reason of facts known to him, the Comptroller-General was, by no later than 1 November 1987, under a duty to make a CTCO.
(7) The demands for duty made after 1 November 1987 should not have been made and the receipt of duty thereafter was pursuant to wrongful demands, and not authorised by law, and the payments were made involuntarily. (It appears that at a directions hearing held prior to the trial at first instance, it was indicated that (6) and (7), above, would not be pressed.)
(8) After the commencement of these proceedings, the Commonwealth paid SCI the sums of (a) $5,457,379.08 and (b) $263,700.07.
(Item (a) is the refund of the duty paid. Item (b) is not presently material, being a sum paid by way of interest in respect of the period 15 October 1993 to 31 March 1994 (the latter being the date of the judgment of the Full Federal Court, above) pursuant to an undertaking, given by the
Commonwealth on 16 December 1993, to pay interest from 15 October 1993 to the date on which the Full Court gave judgment.)
SCI accordingly claimed interest on the amounts paid in the periods (i) 1 September 1987 to 14 October 1993; and (ii) 1 April to 3 June 1994.
At first instance, SCI's case was that it was entitled to interest under the provisions of s.51A of the Federal Court of Australia Act 1976, or alternatively, under the general law of restitution.
As has been said, Wilcox J. dismissed both proceedings; and SCI and ACI now appeal.
THE HISTORY OF THE PREVIOUS LITIGATION BROUGHT BY ACI
Reference should also be made, by way of further background, to the very long history of the previous litigation brought by ACI against the Comptroller.
On 29 September 1987, ACI applied to the Comptroller seeking a CTCO in respect of the goods. The application was initially refused on 22 August 1988 by a delegate of the Comptroller. This decision was internally reviewed on ACI's application. On 5 July 1989, the initial decision was affirmed, for reasons published on 18 August 1989. ACI sought
from this Court judicial review of that decision. In 1990, the matter was heard by Foster J., who ordered review on 18 October 1990, setting aside the decision to refuse to make the CTCO, and ordering that the matter be remitted to the decision-maker for reconsideration in accordance with the reasons for judgment (see ACI PET Operations Pty. Ltd. v Comptroller-General of Customs (1990) 26 FCR 531).
Thereafter, the matter was reconsidered by another delegate who, on 9 July 1991, again refused the application. On 3 October 1991, ACI once more sought judicial review of this refusal. On 13 March 1992, it was ordered, by consent, that this decision be set aside.
Another delegate then further considered the matter. On 24 July 1992, and again on 29 January 1993, the application was once more refused. ACI further sought judicial review and this dispute was again heard by Foster J. On 15 October 1993, his Honour set aside these decisions and remitted them for reconsideration in accordance with the reasons for judgment (see ACI PET Operations Pty. Ltd. v Comptroller-General of Customs (1993) 118 ALR 114).
The Comptroller appealed, and ACI cross-appealed, from these orders to the Full Court. The appeal was dismissed; but the cross-appeal was allowed, setting aside the order of remitter and in lieu thereof ordering that the
Comptroller (1) forthwith advertise a limited application for a CTCO pursuant to s.269L of the Act; and (2) in the event that no objections were received within the prescribed time, make the CTCO as from 1 September 1987 up to and including the date fixed by the Comptroller as the production commencement day pursuant to s.269N(3B) (see 49 FCR at 82).
THE MAKING OF THE CTCO ON 3 JUNE 1994 (EFFECTIVE FROM 1 SEPTEMBER 1987)
As has been noted, as a consequence of the conditional orders made by the Full Federal Court on 3 June 1994, a CTCO was made, specifying 1 September 1987 as the date upon which it came into effect.
THE INSTITUTION OF PROCEEDINGS IN THE HIGH COURT ON 3 JUNE 1994
Also on 3 June 1994, as we have seen, both SCI and ACI sued in the High Court for the import duty paid by them respectively between 1 September 1987 and 29 February 1992, together with interest.
THE PAYMENTS BY THE COMMONWEALTH TO ACI AND SCI ON 3 JUNE 1994
Later in the day, on 3 June 1994, the Commonwealth paid ACI and SCI an amount equal to the whole of the duty paid by each of them in respect of the period 1 September 1987 and 29 February 1992, together with interest in respect only of that amount of duty for the period covered by the undertaking previously mentioned, that is, 15 October 1993 to 31 March
1994.
THE REASONING AT FIRST INSTANCE
The learned primary Judge said that it was common ground that the duty demanded at the time of each importation was due and payable; and that no payment had been made under protest. He referred to s.167 of the Act, which is relevantly as follows:
"167(1)If any dispute arises as to the amount or rate of duty payable in respect of any goods, or as to the liability of any goods to duty, under any Customs Tariff ... the owner of the goods may pay under protest the sum demanded by the Collector as the duty payable in respect of the goods, and thereupon the sum so paid shall, as against the owner of the goods, be deemed to be the proper duty payable in respect of the goods, unless the contrary is determined in an action brought in pursuance of this section.
(2)The owner may, within the times limited in this section, bring an action against the Collector, in any Commonwealth or State Court of competent jurisdiction, for the recovery of the whole or any part of the sum so paid.
(3)A protest in pursuance of this section shall be made by writing on the entry of the goods the words `Paid under protest' and adding a statement of the grounds upon which the protest is made, and, if the entry relates to more than one description of goods, the goods to which the protest applies, followed by the signature of the owner of the goods or his agent.
(4)No action shall lie for the recovery of any sum paid to the Customs as the duty payable in respect of any goods, unless the payment is made under protest in pursuance of this section and the action is commenced within the following times;
(a)In case the sum is paid as the duty payable under any Customs Tariff, within 6 months after the date of the payment; ...
...
(5)Nothing in this section shall affect any rights or powers under section 163."
His Honour then cited s.163, relevantly as follows:
"163(1)Refunds, rebates and remissions of duty may be made:
(a)in respect of goods generally or in respect of the goods included in a class of goods; and
(b)in such circumstances, and subject to such conditions and restrictions (if any), as are prescribed, being circumstances, and conditions and restrictions, that relate to goods generally or to the goods included in the class of goods.
(1A)The regulations may prescribe the amount, or the means of determining the amount, of any refund, rebate or remission of duty that may be made for the purposes of subsection (1).
...
(2)In this section, `duty' includes an amount paid to a Collector in respect of duty that may become payable."
(It will be convenient, for our purposes, to refer now to the Customs Regulations. As at 8 July 1988, for instance, Reg. 126 prescribed, for the purposes of s.163, circumstances under which refunds, rebates and remissions may be made. They included, for example:
"126. Where -
(a)the goods on which duty has been paid or is payable have deteriorated or been damaged, pillaged, lost or destroyed during the voyage or flight;
...
(e)duty has been paid through manifest error of fact or patent misconception of the law;
(f)after duty has been paid on goods, a by-law or determination is made under Part XVI of the Act, or a Commercial Tariff Concession Order is made under Part XVA of the Act, the effect of which is that duty is not payable on those goods or duty is payable on those goods at a rate which is less than the rate which was applicable when the goods were entered for home consumption;
..."
Subsequently, additional circumstances were prescribed. For instance, although not specifically in point here, para.(ea) was added as follows:
"(ea)a decision referred to in subsection 273GA(2) of the Act has been reviewed by the Administrative Appeals Tribunal and the Tribunal, or a court on appeal from the Tribunal, has held that the amount of duty payable (if any) is less than the amount of duty demanded in consequence of that decision, or has remitted the matter to a Collector who has accordingly decided that the amount of duty payable (if any) is less than the amount demanded in consequence of that decision ... .")
(a) Section 51A
Wilcox J. turned first to consider s.51A of the Federal Court of Australia Act 1976 ("FCA Act"). It provides:
"51A. (1)In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:
(a)order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be,
thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or
(b)without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest."
His Honour rejected a submission made on behalf of the Comptroller that, by virtue of the use of the word "included" in para.(a) of s.51A(1), this provision enables the Court to allow interest on only so much of the original debt as is included in the judgment. His Honour held, following his earlier decision in State Bank of New South Wales v Commissioner of Taxation (1995) 132 ALR 653, that it did not follow from the fact that the whole of the original debt was paid on the day the proceedings were commenced, that the section had no application.
However, his Honour noted that s.51A(1)(a) referred to:
"... interest ... on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered". [Emphasis supplied by his Honour]
In rejecting the claim for interest under s.51A, Wilcox J. said:
"... it is common ground that the duty was payable when demanded and that the Comptroller General was not obliged to make a refund until the CTCO had been
made; indeed he would not have been entitled to do so. How then can it be said that the applicants had a cause of action before the time when the CTCO was made? If they had sued to recover the money before that date, they would have failed. There would have been no basis upon which they could have claimed that they were entitled to a repayment; in other words, they would have had no cause of action."
(b) Restitution
In refusing this claim also, Wilcox J. said that it was inconsistent with most of the reasoning in Commissioner of State Revenue (Victoria) v Royal Insurance Australia Limited (1994) 182 CLR 51. In Royal Insurance, an insurance company paid to the Comptroller of Stamps amounts which it believed to be due, but in ignorance of legislative amendments by way of exemption. Section 111(1) of the Stamps Act 1958 (Vict.) provided:
"Where the Comptroller [of Stamps] finds in any case that duty has been over-paid...he may refund...the amount of duty found to be overpaid."
The Comptroller of Stamps found, pursuant to s.111(1), that duty had been overpaid but decided not to make a refund. It was held, for different reasons to be considered later, that the Comptroller was obliged to refund the amounts overpaid.
Wilcox J. said:
"...in Royal Insurance the High Court was not directly concerned with interest. But I think it is clear that, with the exception of Mason CJ, the members of the Court reached two conclusions that are fundamentally opposed to the restitution
argument put by the applicants in this case. First, they thought that the law of restitution is inapplicable to a situation where payments are made pursuant to an existing legal obligation, but the obligation is retrospectively abrogated. Second, they thought the rights of the parties in such a situation were governed by the relevant statute, not the common law.
In the present case, there is power to make a refund, under s.163 of the Customs Act. I need not pause to consider whether that power should be construed as a duty to do so, in appropriate circumstances. Royal Insurance would probably support such an approach; but it is not necessary to consider the point because the duty itself has been refunded. The Customs Act says nothing, relevantly, about interest. Once it is concluded that s.51A does not assist, the applicants have to get an obligation to pay interest from the general law of restitution; and the majority High Court view in Royal Insurance is that it does not apply to a case like this. The restitution argument also fails."
THE GROUNDS OF THE APPEALS
In each appeal it is submitted that his Honour should have allowed interest on both of the grounds pressed below.
In contending that s.51A of the FCA Act applied, it is argued that, by virtue of the retrospective operation given to the CTCO by s.269N of the Act, a cause of action arose in relation to each payment of duty at the time such payment was made.
Alternatively, in support of the claim in restitution, it is contended, in each appeal, that the respondent had been unjustly enriched by each payment made by the appellant to the respondent, and the respondent would continue to be so enriched unless ordered to make restitution to the appellant of interest on those amounts, accruing from the date of payments.
CONCLUSIONS ON THE APPEALS
It will be convenient to deal with the grounds of appeal in turn.
(a) Did, or could, s.51A of the FCA Act apply here?
(i)Was s.51A still available once the principal amount (i.e. the duty) was paid after issue of the writs but before judgment could be entered?
As has been noted, Wilcox J. had previously held, in State Bank, that s.51A authorised an award of interest on moneys that are paid before judgment. In so holding, Wilcox J. declined to follow the decision of Hewson J. to the contrary in The Medina Princess [1962] 2 Lloyds Rep.17. On behalf of the Comptroller, it is now contended that the Medina Princess should have been followed here.
The Medina Princess was special in some respects. In an action in rem in Admiralty by seamen for unpaid wages, no defence was delivered, but the wages were paid after the action was commenced. The plaintiffs moved for default judgment for interest under s.3(1) of the Law Reform (Miscellaneous Provisions) Act 1934 (U.K.), which used language very similar to that used in s.51A of the FCA Act.
Hewson J., without reference to authority, said (at 21):
"... it seems to me that this Court has no power to order, and there is no discretion in the matter of ordering, interest to be paid unless it has given judgment in respect of the damages or debt. The words of the section are `shall be included in the sum for which judgment is given'. This Court has given no judgment in respect of any sum and, so far as I can see, is not empowered to award interest upon sums which have already been paid and which have not been the subject of its judgment."
Moreover, Hewson J. went on (at 21) to hold that there was no "inherent" or "residual" jurisdiction to award interest in those circumstances.
In Techno-Impex v Gebr. van Weelde [1981] 1 QB 648, Oliver L.J. (at 675) and Watkins L.J. (at 681) criticised the Medina Princess and discounted its authority. But in President of India v La Pintada Compania Navigacion S.A. [1985] AC 104, like Techno-Impex, a case dealing with the power of an arbitrator to award interest for late payment, Lord Brandon said (at 120-1):
"Watkins L.J., in his judgment in the Techno-Impex case... cited the passage from my judgment in The Aldora... which I have myself set out above. He appears, however, to have treated it as laying down some principle far wider than the terms of the passage warrant, or than I intended them to convey.
I was not saying that the law and practice of the Admiralty Court allowed it to award interest of any kind in any case in which it might feel that it would be just and equitable to do. In particular, I was not referring in any way either to the question of awarding interest on sums already paid, or to the question of awarding compound interest. I was not
doing so for two very good reasons: first, that such questions never arose for decision and, secondly, that it would never have occurred to those taking part in that case, all well experienced in Admiralty law and practice, that any equitable principle of such width as to encompass the award of interest on debts already paid, or the award of compound interest in any case, did, or could ever, have existed.
I said that there was no authority for the proposition that the Admiralty Court could award interest on debts already paid. There is, however, an authority against such proposition: that is The Medina Princess... in which Hewson J. held, in a wages action, that he had no jurisdiction to award interest on wages which, by the time he came to give judgment, had already been paid, albeit much later than they should have been paid. That decision was criticised, and its authority discounted, by Oliver and Watkins L.JJ. in their judgments in the Techno-Impex case... . In my opinion, however, The Medina Princess... was, as the law then stood, correctly decided, and your Lordships should take this opportunity of giving it your approval.
My Lords, on the footing that the common ratio decidendi of the majority of the Court of Appeal in this case was, for the reasons which I have given, based on two fundamental misconceptions about the scope of the powers which a court exercising Admiralty jurisdiction then had to award interest, it follows that the decision of that majority cannot be supported on the grounds on which it was reached." [Emphasis added]
In State Bank, Wilcox J., in deciding not to follow the Medina Princess, said (at 665):
"I do not think this court should adopt that view of the significance of the word `included'. It is not clear to me that it would be followed even in England today. In Woolwich the only order was for payment of interest; the capital sums had long since been repaid. Apparently, nobody saw any problem about that, notwithstanding that s 35A of the Supreme Court Act uses the same formula: `included in any sum for which judgment is given simple interest...'."
As will be mentioned below, however, s.35A contains a specific provision on the point, unlike s.51A(1) and its English counterpart considered by Hewson J.
Wilcox J. went on to say (at 665):
"In any event, whatever the position in England, s 51A(1) is a facultative provision intended to confer power on the court to do justice between parties in relation to pre-judgment interest, a matter of some importance in these days of high interest rates and extensive delays in finalising litigation. The subsection should be interpreted as widely as its language allows. While it is true that an item `included' in another item will usually constitute only part of the latter item, this is not necessarily so. The point may be illustrated by a sporting example. Take a batsman who has the misfortune to score `ducks' in his first three innings in a season, then scores 50 runs in the fourth. If a computation was then made of the team members' aggregates, his 50 runs would be `included' in his aggregate, notwithstanding that it constituted all the runs in the aggregate. Similarly, runs scored by a batsman off the opening ball of an innings are immediately `included' in the team's innings score.
In my opinion, as a matter of interpretation, s 51A(1) is available in this case."
We agree.
In Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70, relied on by Wilcox J. in this context, a building society challenged the validity of transitional provisions in U.K. building society taxation Regulations. But to avoid adverse publicity which might flow
if it had been the only building society failing to pay in accordance with the Regulations, and to avoid penalties, it paid instalments as required by the Regulations, but without prejudice to its right to recover those sums if it were correct in its contention that the Regulations were void. On 31 July 1987, in the judicial review proceedings, Nolan J. held that the Regulations were beyond power. Although reversed by the Court of Appeal, the House of Lords restored Nolan J.'s original order. Earlier in July 1984, the building society had commenced separate proceedings against the Revenue claiming the payment of the tax paid, and interest. The Revenue repaid the building society the moneys paid, with interest from 31 July 1987, the date of judgment, on a "voluntary" basis, but refused to pay interest up to the date of judgment. The building society continued its claim for interest up to the date of judgment, not under the provision considered in The Medina Princess, but under the provisions of s.35A of the Supreme Court Act 1981 (U.K.), from the dates on which the instalments had been paid, on the ground that the principal had been repayable on those dates as sums paid pursuant to an unlawful demand. Nolan J. dismissed the claim for interest, but the Court of Appeal, by a majority, reversed his decision. An appeal to the House of Lords was, by a majority, dismissed.
Section 35A(1) is as follows:
"35A(1)...in proceedings...before the High Court for
the recovery of a debt...there may be included in any sum for which judgment is given simple interest...on all or any part of the debt...in respect of which judgment is given...for all or any part of the period between the date when the cause of action arose and - (a) in the case of any sum paid before judgment, the date of the payment... ."
[Emphasis added]
The presence of the emphasised provision no doubt explains why it was not disputed by any of the parties in Woolwich, that s.35A(1) could apply, notwithstanding that the taxes had been repaid. Since, by virtue of para.(a) above, s.35A(1) expressly provides for interest to be "included" in the case of a sum paid before judgment, the authority of Woolwich on this particular adjectival aspect should to some extent be discounted.
But the presence of para.(a) in s.35A(1) is also an indication that it is possible, contrary to the view of Hewson J., to accommodate pre-judgment interest where the "principal" is paid before judgment within the phrase "included in any sum for which judgment is given... ." In other words, this is not, as was apparently thought in the Medina Princess, an impossibility; the two notions may co-exist or be reconciled.
In any event, in our opinion, this aspect of the matter should be regarded as free from any authority binding on this Court for present purposes. As Oliver L.J. noted, Hewson J. cited no authority for his conclusion and appears to have relied on a literal approach to s.3(1). Moreover, the
Medina Princess, as also La Pintada, arose in a rather special admiralty context. In our view, the present question should be seen as one of construction of a provision which was plainly intended to be remedial (see the comments by Gibbs C.J. in State Bank of New South Wales v Commonwealth Savings Bank of Australia (1984) 154 CLR 579, made before the introduction of s.51A in 1984; see also the Explanatory Memorandum, Statute Law (Miscellaneous Provisions) Bill (No. 2) 1984 at p.29). As remedial legislation, s.51A ought to be liberally construed (see Pearce and Geddes, Statutory Interpretation in Australia, 4th ed., 1996 at 222).
On behalf of the Comptroller, in support of the approach taken in the Medina Princess, reliance is placed upon observations made in the report of the NSW Law Reform Commission on Interest on Certain Debts (LRC 35,1983) as follows (at 38-9):
"4.27Payment of a debt may be made by the defendant to the plaintiff after proceedings have been instituted, without any monies having been brought into court. In such cases the plaintiff may be confronted with a debtor who has ignored demands for payment, and who has waited until the last moment before judgment. Such a debtor may be aware that there is no defence to the claim. Further, the debtor may be advised that there is no point in using the procedures for payment into court as a means of inducing a compromise for less than the full amount of the debt.
4.28.As the law currently stands, a plaintiff receiving such a payment or an offer of payment, without any interest, is in a quandary. If the money is accepted it will not be possible for the plaintiff to obtain judgment for the debt. Since the present provisions conferring discretionary
jurisdiction to award interest depend on the obtaining of a judgment it follows that interest cannot presently be recovered under those provisions unless a judgment is obtained." [Emphasis added]
No authority was cited for this opening statement, but presumably the Commission had the Medina Princess in mind.
The report went on:
"4.29If the plaintiff refuses to accept the payment for the reason that he or she wishes to recover interest, then the consequences may be inconvenient or worse. First, there is likely to be delay and cost to the plaintiff while the matter is set down for hearing. Secondly, there will be uncertainty about the recovery of interest because a defendant pleading payment or tender after action would have an arguable case that interest should not run, at least from the date of the attempted payment. Thirdly, there is the risk that the defendant's financial position will have deteriorated by the time the matter is determined, so that recovery may be frustrated.
4.30Considerations of justice suggest that a plaintiff who is offered payment or who receives payment after action has been commenced without interest, should be able to accept it without prejudicing a claim for discretionary interest and without the uncertainties described above. The plaintiff will have been kept out of moneys to which he or she was entitled, and will have suffered loss. The position of the defendant would also be strengthened, for by making the payment he or she could confidently expect that interest would cease to run from that moment. The amount in issue would be confined to the period between the accrual of the cause of action and the date of payment. At present such a defendant does not know with certainty whether payment would carry that consequence, the assessment of interest being entirely discretionary.
[Emphasis added]
4.31An alteration of the law to give the courts a discretion to award interest in such cases would not affect the power of the parties to agree upon an accord and satisfaction at the time of payment. It could suit the parties to negotiate a compromise as to interest at that time. For the plaintiff there could be the advantage of early finality and certainty as to the amount recovered. For the defendant there could be the advantage of an opportunity for a final discharge. For each party, there would be the possibility of lessening costs.
4.32To allow recovery of interest in these circumstances appears to be consistent with the intention of the existing discretionary interest provisions. These provisions presuppose the commencement of proceedings by the plaintiff to recover the principal debt. Once that step has been taken the right of the plaintiff to recover interest, and the liability of the defendant to pay interest, should not depend on the plaintiff obtaining formal judgment for the debt. In our view there is no justification for a difference between the plaintiff who obtains judgment after a hearing and the plaintiff who after commencing proceedings either receives payment of the debt or obtains default judgment without a hearing."
With respect, we agree with Wilcox J., and with the view expressed in this report, that justice and the apparent intention of the legislation require, contrary to the opinion advanced in the Medina Princess, that the Court not be deprived of the jurisdiction or power to award interest where the principal amount is paid after the issue of the writ.
A liberal approach in this area also accords, at least speaking generally, with authority in other Australian jurisdictions to which reference should next be made.
In Melbourne & Metropolitan Board of Works v Bevelon Investments Pty. Ltd. [1977] VR 473, which is cited, with approval later in the N.S.W. Law Reform Commission Report (at 39), a claim for interest in the present circumstances was upheld under s.78 of the Supreme Court Act 1958 (Vict.) as follows:
"Upon all debts or sums certain hereafter recovered in any action the judge at the hearing shall upon application unless good cause is shown to the contrary allow interest to the creditor at a rate not exceeding eight per cent per annum from the time when such debt or sum was payable."
It was there held that a debt or liquidated demands paid to the plaintiff after the issue of a writ was "recovered in the action"; that is, even though judgment was not entered, Anderson J. arrived at this conclusion by looking to the "substance" of the matter (at 474), rather than its mere form.
Such an approach, in essence a purposive rather than literal one, is consistent with other modern statements of high authority in analogous areas in the general law. In Baltic Shipping Co. v Dillon (1993) 176 CLR 344, Deane and Dawson JJ said (at 376):
"In particular, the notions of good conscience, which both the common law and equity recognized as the underlying rationale of the law of unjust enrichment, now dictate that, in applying the relevant doctrines of law and equity, regard be had to matters of substance rather than technical form."
[Emphasis added]
On equity's preference for substance rather than form see, further, Nelson v Nelson (1995) 132 ALR 133 per Deane and Gummow JJ. at 148; and for a recent example of the application of restitution principles in accordance with the substance, rather than the form, of a transaction, see Goss v Chilcott [1996] 3 WLR 180 (P.C.). It is noteworthy here that Lord Goff, (at 188) said that "doubtless judgment would, in the event, be given for the balance with interest at the appropriate rate" (emphasis is added); reference was then made to the Court of Appeal decision in the Westdeutsche Case, to be mentioned further below.
If the construction of s.51A(1) is also to depend upon substance rather than form, there can be no justification for holding that the Court, once properly seized of jurisdiction to entertain the claim for interest, somehow loses that power upon the respondent paying the (principal) debt or liquidated sum claimed (see Burgundy Royale Investments Pty. Ltd. v Western Banking Corporation (1989) 18 FCR 212 at 219; compare the converse situation of a failure to apply for prejudgment interest and the Court's power, to be exercised liberally, yet fairly, to permit the judgment to be varied under O.35 r.7, see Kewside Pty. Ltd. v Warman Interntional Ltd. (1990) ATPR 41-012 per French J.)
We should say something here about the remitter, if only to put it aside as not significant for present purposes. As has been said, these proceedings were remitted by the High Court to this Court. But nothing, in our view, turns on the remitter for the following reasons. (Nor, it should be acknowledged, does the respondent suggest otherwise.)
Upon the issue of the writs in the High Court on 3 June 1994, the provisions of s.77MA(1) of the Judiciary Act 1903 conferred upon the High Court the power to award interest up to judgment in the same terms as s.51A(1) of the FCA Act, so that, at that point of time, each of the appellants had the right to claim interest in accordance with this provision. The proceedings were subsequently remitted to this Court under s.44 of the Judiciary Act. By s.44(3) it is provided that, on remitter to a court (a) that court has jurisdiction in the matter; and (b) subject to any directions of the High Court, further proceedings in the matter shall be as directed by that court. But the settled course of authority makes it plain that remitter could not prejudice either side's position.
In the Commonwealth Savings Bank Case, above, Gibbs C.J. said (at 586):
"The purpose of a remitter under s.44 is simply to relieve this Court of the necessity to hear cases that might more conveniently be heard elsewhere, particularly where the litigation involves the trial of issues of fact. The Court should not, by making a remitter, alter the rights of the parties."
In McCauley v Hamilton Island Enterprises Pty. Ltd. (1986) 69 ALR 270, Mason J. said (at 275-6):
"... the Federal Court...relevantly stands in the jurisdictional shoes of this [High] court by virtue of a remitter under s.44... ."
In Commonwealth of Australia v Mewett (1994) 126 ALR 391, Foster J., after citing Mason J. and Gibbs C.J., said (at 402):
"Accordingly, it is clear that in determining what law is to be applied in relation to Mewett's claim in this court, it is necessary to determine what law would have been applied in the High Court if no remitter had taken place. This does not mean, of course, that this court must apply the purely procedural rules of the High Court rather than its own. Once the remitter has occurred, this court must deal with the case in accordance with its own procedures in relation to interlocutory steps and the hearing."
Since no relevant differences in procedure exist, i.e. since s.77MA(1) of the Judiciary Act and s.51A of the FCA Act are in the same terms, it must follow that nothing here turns upon the circumstance that the proceedings were remitted to this Court from the High Court; in particular, the rights of the parties were not thereby altered.
I propose next to consider the claim for interest at each relevant stage of the litigation. It is convenient then to consider first the position at the time when writs were issued in the High Court. At that stage, in the language of s.77MA(1) of the Judiciary Act (or s.51A(1) of the FCA Act), the necessary ingredients were present here, that is to say, there were: (1) proceedings for the recovery of money; and (2) in respect of a cause of action that arises after the commencement of the section.
It will be recalled that the statute then provides that, upon application (and that requirement was undoubtedly
satisfied), unless good cause is shown to the contrary, the Court shall make one or other of the orders in para.(a) or (b).
For immediate purposes, paras.(a) and (b) are, in material respects, to the same effect. It will suffice to refer to (a), relevantly as follows:
"...
(a) order that there be included in the sum for which judgment is given interest...for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered... ."
It will be recalled that the essence of the reasoning in the Medina Princess was that the absence of a "judgment" was fatal. But, as there, it is not expressly stated in our local provision that there must be a "judgment" for the recovery of the (principal) debt, as distinct from a "judgment" for the interest. By s.4 of the FCA Act, "judgment" is defined to mean "a judgment, decree or order, whether final or interlocutory, or a sentence".
In our view, a judgment, or order, even if for interest only or for costs only, is nonetheless a "judgment" within s.4, and within s.51A(1).
It is true that s.51A(1) states that the amount of the interest must be "included" in the judgment, but it is
necessary to consider what, if anything, follows from this.
The current dictionary (Macquarie, 2nd ed.) definitions of the verb "include" are:
"1. to contain, embrace, or comprise, as a whole does parts or any part or element. 2. to place in an aggregate, class, category, or the like. 3. to contain as a subordinate element, involve as a factor."
The Shorter Oxford English Dictionary (3rd ed.) offered these meanings:
"Include 1. trans. To shut or close in; to shut up, confine. ... b. To enclose (in an area) ... 2. To contain, comprise, embrace: a. as a member of an aggregate, or a constituent part of a whole ... b. as a subordinate element, corollary, or secondary feature ... 3. To place in a class or category; to embrace in a general survey; to reckon in a calculation etc. ... 4. To bring to a close. ..."
In Y.Z. Finance Co. Pty. Ltd. v. Cummings (1964) 109 CLR 395, Kitto J. explained the meaning of the verb "includes" (at 401-2):
"I agree in the conclusion that sub-s.(2) of s.24 exhaustively prescribes the ambit of the word `security' for the purposes of the section. It is expressed as a statement of what the word `security' in the section `includes'. Unlike the verb `means', `includes' has no exclusive force of its own. It indicates that the whole of its object is within its subject, but not that its object is the whole of its subject. Whether its object is the whole of its subject is a question of the true construction of the entire provision in which the word appears. The well-known statement of Lord Watson in Dilworth v Commissioner of Stamps... should not be taken so literally as to reduce the inquiry in a case like the present to an inquiry into the meaning of the word `includes'. Strictly speaking, that word cannot be equivalent to `means and includes'. But a provision in which it appears may or may not be enacted as a complete and therefore exclusive statement of what the subject expression includes. A provision which is of that character has the same effect as if `means' had been the verb instead of `includes'. The question whether a particular provision is exclusive although `includes' is the only verb employed is therefore a question of the intention to be gathered from the provision as a whole." [Emphasis added]
The present statutory context indicates, as one would expect, that, ordinarily, a judgment would deal with at least the debt and interest. Other items, such as costs, may also be dealt with, but this need not be pursued. Where both the debt and interest are dealt with in, or are part of, or factors in, a judgment, it would accord with the dictionary meaning of "include" to say that interest is "included" in the judgment. But if, in its formal dimensions, the judgment does not need to speak about the debt because it has since been paid, does it follow, as appears to have been held in Medina Princess, that s.51A(1) can have no application?
Section 51A(1) is, we think, capable of application in such circumstances, at least where, as here, the debt had not been paid at the time of, i.e. after, the institution of the proceedings. In other words, as a matter of statutory construction, it is not a pre-condition to the application of s.51A(1) that the debt, although unpaid when the writ was issued, remains unpaid thereafter.
Put differently, the form of the judgment, that is, the machinery employed as a means to an end, should not be allowed to dictate the outcome of the substantial question whether, on the overall merits of the situation, interest should be allowed. There is ample authority to this effect.
In Downey v Pryor (1960) 103 CLR 353, Kitto J. explained why mere machinery provisions should not usually dictate substantive outcomes (at 361-2):
"No doubt the introduction, into a provision conferring a right, power or authority (it will suffice to speak of an authority), of words requiring that in exercising the authority a prescribed method (to use the word in a comprehensive sense) shall be observed, may have either of two results. Upon consideration of the words themselves, the context, and the nature of the provision, the intention may appear that a prescribed method is of the essence of the authority, so that there is no authority capable of exercise at any given time unless at that time a valid prescription of a method is in force... . But on the other hand the meaning may be that the authority is to be subject to a power in the Executive to regulate its exercise and that in the reference to the prescribed methods the words `if any' are to be implied... . In the latter class of cases, a person exercising the authority must observe any method which is prescribed for the time being; but if none is prescribed the authority is exercisable by any appropriate method. Illustrations of this kind of provision may be found in Commissioners of Inland Revenue v Joicey [No. 1]... and Moate v Dartnell... ." [Emphasis added]
In Commissioners of Inland Revenue v Joicey (No. 1) [1913] 1 KB 445, a case mentioned by Kitto J., a statute provided that any person aggrieved by the decision of a referee under the Act may appeal to the High Court "within the time and in the manner and on the conditions directed by the Rules of Court". Some Rules were made under the section, but did not apply to the case at hand, an appeal by the Revenue. It was held that the right of appeal was absolute, and not affected by the omission from the Rules of complete, exhaustive, or appropriate provisions as to the procedure upon an appeal by the Commissioners.
Hamilton L.J. said (at 455):
"...the words are not `any person aggrieved . . . . may appeal . . . . so soon as the time, manner, and conditions of such appeal shall have been directed by Rules of Court'. The right of appeal is mentioned first; the mode of appeal afterwards. It is one thing to say that when the rules have been issued appellants must conform to them as a condition of the enjoyment of the right of appeal. It is another to say that till the rules have been issued no right of appeal exists at all. The reasoning of Holt C.J. in Ashby v White... adopted by the House of Lords, in the passage beginning `if the plaintiff has a right he must of necessity have a means to vindicate and maintain it,' is strong to shew that as soon as it is clear that the Legislature has given a right of appeal it is available to the subject quocunque modo, unless the rest of the enactment clearly negatives this corollary." [Emphasis added]
This reasoning is properly analogous here. That is, the substantive entitlement to interest should not be governed by the absence of appropriate machinery (in the form of the judgment). This result can be achieved, as Kitto J. pointed out, by construing s.51A(1) so as to mean that interest may be "included" in the sense of being a part of a judgment which also orders the payment of the debt "(if any)".
If it be needed, a further example, in the present context, of a necessary adaptation being made to address the special circumstances of the case at hand, as part of the proper process of statutory interpretation, is provided in another aspect of Bevelon, above. It will be recalled that s.78 of the Supreme Court Act provided that interest be allowed by the Judge "at the hearing" upon debts or sums certain recovered in the action. The plaintiff there moved for summary judgment. It was submitted for the defendant that upon a summons under O.14 for summary disposal there was no "hearing", so that s.78 was unavailable. Rejecting the submission, Anderson J. said (at 476):
"The rule provides for summary judgment in an action to which, in effect, there is no defence, but to reach that determination the judge has to consider the evidence before him and to satisfy himself of the validity of the plaintiff's claim to the same degree and extent, save for procedural short cuts allowed by the rule, as he would have been required to do had there been a hearing in open court with oral evidence and all the requirements of a full trial. Other rules in O.14 emphasize the judicial, deliberative nature of the proceedings. If a plaintiff succeeds on an O.14 application, the order is for leave to enter judgment and the formal entry of judgment is a ministerial act, so that no further judicial deliberation is necessary. However, what has happened, in my opinion, is that there has been a hearing appropriate to the nature of the proceedings and in a form required by the Rules. There has been a determination of the issue between the parties and it is evident to me that what transpires before the judge in such circumstances takes place `at the hearing'. Indeed, if the hours of argument before me in this case did not constitute a hearing, it is hard to imagine what would." [Emphasis added]
Once substance is preferred to form, it follows that the entitlement to interest under s.51A(1) cannot be conditional upon the debt, unpaid at the time of issue of the writ, remaining unpaid at the time of entry of judgment.
It follows that we agree with Wilcox J. in State Bank, and in the present case, on this point. It further follows that we cannot accept the correctness of the Medina Princess on this aspect. In fairness to Hewson J., it should be noted that the approach of the courts here and in England to the award of interest, has shifted considerably since 1962 when the Medina Princess was decided (see, e.g. Hungerfords v Walker (1988) 171 CLR 125 per Mason C.J. and Wilson J. at 141-3; and for an illustration of an implication of an entitlement to interest being made in a statute in modern times, see Shaikh v Bolton M.B.C., Court of Appeal (U.K.), 24 May 1966, unreported).
(ii)What was "the date when the cause of action arose" for the purposes of s.51A(1)(a)?
In our view, s.51A(1)(a) should be treated as picking up the date when, by the operation of the relevant legal processes, the cause of action, notionally, or in truth, arose. In other words, it is possible here, given the retrospective operation of s.269N, to construe s.51A(1)(a) as referring to a cause of action arising, retrospectively, in September 1987, rather than on 3 June 1994. A retrospective perspective for the purposes of s.51A(1)(a) would accord with the intent of the scheme of the Customs legislation. That is to say, s.51A(1)(a) should be interpreted so as to refer to
the date when the cause of action arose, or should be treated as having arisen. Such a minor gloss upon the provision is, we think, permissable as reflecting the intention of the legislation, given its remedial character.
Such an interpretation is also consistent with authority, for instance, the reasoning of the N.S.W. Court of Appeal in Collector of Customs v Gaylor Pty. Ltd. (1995) 127 ALR 641. There, Handley J.A. said (at 646):
"The decision of the AAT (or a court on appeal) in favour of the importer in such a case does not complete the plaintiff's cause of action but merely removes a procedural defence. ...[D]ecisions of the House of Lords... establish that such procedural defences do not postpone the accrual of causes of action either for limitation purposes or for determining the period for which interest can be awarded under provisions such as s 94 of the Supreme Court Act 1970 (NSW).
A further analogy is to be found in the principle that causes of action for malicious prosecution and wrongful arrest are complete when the acts complained of occur, and if necessary damage is suffered, although the plaintiff cannot succeed unless the prosecution later terminates in his favour, or the relevant conviction or order is set aside... ."
It follows, in our opinion, that potentially, that is, in the absence of good cause to the contrary in the limited sense later explained, s.51A(1)(a) was available here.
(iii) Was s.51A(1)(b) also potentially available here?
It will be recalled that, under this limb, the Court or a Judge may, without proceeding under (a), "order that
there be included in the sum for which judgment is given a lump sum in lieu of any such interest." No mention, or at least no specific mention, is made of the accrual of the cause of action as the time from which interest runs.
It should be said at the outset that we agree with Wilcox J. that the procedures laid down by s.167 of the Act can have no application to a claim for interest under either limb of s.51A(1). Section 51A(1) is a free-standing provision operating independently of s.167 (see Gaylor above; note also that, in any event, s.167(5) excludes refund situations under s.163).
Moreover, where, as is possible here, there may be a doubt whether, in the exercise of the judicial discretion, it is proper to proceed under para.(a) of s.51A(1), it is, we think, appropriate for the Court or a Judge to invoke para.(b). Under the latter branch of the provisions of s.51A(1), the Court or a Judge is given, with respect to quantum, a very broad discretion. Of course, the judicial discretion is to be exercised in a principled, rather than an arbitrary, fashion, that is, "according to the rules of reason and justice, not according to private opinion" (see The Queen v Anderson; Ex parte Ipec Air Pty. Ltd. (1965) 113 CLR 177 per Kitto J. at 189).
In the exercise of the discretion under this limb, it would be legitimate to take into account, as relevant to the fairness and equity of the situation, the objective circumstances, first, that the Commonwealth had the benefit of the payments made by the appellants from September 1987 onwards, and retained that amount until 3 June 1994, nearly seven years later in the case of some payments, notwithstanding that from September 1987, the appellants had continuously sought a CTCO; and secondly that, as this Court has held after a series of judicial interventions, the CTCO ought to have been made retrospective to September 1987.
Moreover, there is now a formidable body of high authority to support the proposition that, in the present circumstances, the statutory discretion under para.(b) ought to be exercised in favour of the taxpayers, in the absence of any exceptional feature (i.e. "good cause to the contrary").
In Royal Insurance, Mason C.J. said (at 65):
"In Reg. v Tower Hamlets London Borough Council; Ex parte Chetnik Developments Ltd. [1988] AC 858 the House of Lords dealt with a discretionary power to refund in particular circumstances rates paid when not payable and not recoverable otherwise than by means of an exercise of the discretionary power. Lord Bridge of Harwich expressed the principle invoked by the House of Lords in these terms...:
`Parliament must have intended rating authorities to act in the same high principled way expected by the court of its own officers and not to retain rates paid under a mistake of law ... unless there were, as Parliament must have contemplated there might be in some cases, special circumstances in which a particular overpayment was made such as to justify retention of the whole or part of the amount overpaid.'
Much the same comment may be made about s.111."
Earlier in his speech in Chetnick, Lord Bridge (at 876) had referred, inter alia, to a statement by Bray J. in Blackpool and Fleetwood Tramroad Co. v Bispham with Norbreck Urban District Council [1910] 1 KB 592 as follows:
"Then the justices have found as a fact that the respondents have been overpaid by the appellants £460 8s., that is, an amount exceeding that claimed in respect of the 1908 rate. In my opinion the respondents were bound in equity to apply that sum, which they had been overpaid, in payment of the 1908 rate..." [Emphasis added]
Lord Bridge went on to say (at 876):
"In both these passages I take the words `in equity' to be used in the same sense as that in which they were used by James L.J. in Ex parte James... as explained by Vaughan Williams L.J. in In re Tyler... i.e. as referring not to an equity enforceable in a suit or action, but to a moral principle which the court could expect to be observed by a public body such as a rating authority. I say this because I know of no general principle that money paid under a mistake of law which is irrecoverable may nevertheless found a defence of equitable set off against a later claim by the recipient of the money mistakenly paid."
Under the rule in Ex parte James, an officer of the court will not be permitted by the court to take advantage of his or her strict legal rights "if this has the effect of unjustly enriching the estate at the expense of an innocent claimant" (see McPherson's Law of Company Liquidation, 3rd ed., J. O'Donovan, at 266).
The application of the rule in bankruptcy is sometimes complex (see, e.g. Downs Distributing Company Proprietary Limited v Associated Blue Star Stores Proprietary Limited (In Liquidation) (1948) 76 CLR 463 at 476; Re Roberts (1976) 12 ALR 730 per Riley J. at 734-5; Re Douglas (1987) 75 ALR 97 per Pincus J. at 103; Hartogen Energy Limited (In Liquidation) v The Australian Gas Light Company (1992) 36 FCR 557 per Gummow J. at 571-6). But in the present context, the position of the Crown itself, especially given its default in failing to make the CTCO, should also be taken into account. Otherwise the Crown would be taking, or be seen to be taking, advantage of its own default, whereas it is well established that the Crown must act, and be seen to act, as a model litigant.
For instance, in The Melbourne Steamship Company Limited v Moorehead (1912) 15 CLR 333, Griffith C.J. said (at 342):
"The point is a purely technical point of pleading, and I cannot refrain from expressing my surprise that it should be taken on behalf of the Crown. It used to be regarded as axiomatic that the Crown never takes technical points, even in civil proceedings, and a fortiori not in criminal proceedings.
I am sometimes inclined to think that in some parts - not all - of the Commonwealth, the old-fashioned traditional, and almost instinctive, standard of fair play to be observed by the Crown in dealing with subjects, which I learned a very long time ago to regard as elementary, is either not known or thought out of date. I should be glad to think that I am mistaken."
On securing "good administration", see also Kelson v Forward (1996) ALD 303 per Finn J. at 326-7.
It is also pertinent to note that there is an obligation on all decision-makers (and of course the courts themselves are not exempt from this obligation) to ensure that they not only address the correct legal question, but do so within a reasonable time. A decision excessively delayed is a bad decision. The fact that nearly seven years passed here before the CTCO was (properly) made is a material factor to be taken into account in considering whether, in fairness, the taxpayers should receive some compensation in the form of an appropriate allowance for interest, or whether, on the other hand, the Revenue should, in effect, retain the benefit of a substantial interest-free loan.
Thus, in Re Federal Commissioner of Taxation; Ex parte Australena Investments Pty. Ltd. (1983) 50 ALR 577, Murphy J. said (at 578):
"The first question is whether the Commissioner has a public duty to allow or disallow within a reasonable time. The Commissioner suggested that the duty to `consider the objection' under s 186 of the Act, at its highest, is a duty to give diligent and honest consideration to objections. He contended that there is no time limit, reasonable or otherwise, in which he is required to determine an objection.
Where time limits have not been specified in other sections of the Act a reasonable time has been implied... . Without a time limit any duty would be illusory. I interpret s 186 of the Act as requiring the Commissioner to allow or disallow an objection in whole or in part within a reasonable time."
Applying the reasoning of Murphy J. here, it follows that the right to apply for a CTCO will be "illusory" unless it is dealt with in a reasonable time. Where, as here, despite the continuing best efforts of the appellants over a period substantially in excess of a reasonable time, the respondent neglected to make the CTCO, it is not sufficient for the respondent to repay the duty on a retrospective basis. The statutory right to apply for a CTCO on a retrospective footing will remain illusory, unless the appellants are adequately compensated for the loss of the use of the moneys they have paid in the intervening period. Prima facie at least, it must follow, we think, as a matter of fairness and justice, that interest should be paid in the present extraordinary circumstances.
In the circumstances, and given especially the observations of Lord Bridge and of Mason C.J. in comparable contexts, it is not necessary to consider whether s.64 of the Judiciary Act makes any difference here (see Susan Kneebone, "Claims against the Commonwealth and States and their instrumentalities in Federal Jurisdiction: Section 64 of the Judiciary Act" (1996) 24 Federal Law Review, 93 at 121, 131). But if further illustrations be needed of modern examples of the courts being willing to imply an entitlement to interest out of a statutory scheme, reference could be made to Wardens and Commonalty of the Mystery of Mercers of the City of London v New Hampshire Insurance Co. [1991] 1 WLR 1173 and to Shaikh's case, above. As to the liberal position in equity in this area, a modern application is provided by Biala Pty. Ltd. v Mallina Holdings Limited [1994] 13 WAR 11 per Ipp J. at 83-5. These illustrations, in similar situations, demonstrate that the justice system should now take a more liberal attitude to claims for pre-judgment interest than may previously have been the case.
From what date should interest generally be allowed? In Ferrier v CAA (1994) 127 ALR 472, it was held, in a preference context (at 530-2), that an award of interest under s.51A(1) should not commence before the cause of action accrued, but should commence from the date of the demand. In the present case, this date was, effectively, September 1987 when the appellants first sought the CTCO and, consequently, freedom from duty. That was, ultimately, the date fixed, albeit retrospectively, as the time from which the appellants' goods were freed from tax.
High authority in this country, in England and in the United States in similar circumstances, dealing with the general law principles of restitution or unjust enrichment, indicates that it is fair and just and in accordance with natural justice and equity, that interest of the kind now claimed should ordinarily be awarded under a statutory provision along the lines of s.51A(1)(b). There is no reason, in the absence of the existence of an exhaustive statutory statement to the contrary, that is, a "code" situation, why
those general law principles, anchored as they are in the true merits of the situation, should not provide at least some guidance in the exercise of the discretion given by s.51A(1)(b). There is nothing in s.51A(1) which would exclude those principles from consideration to some extent at least.
In Woolwich, in the Court of Appeal, a member of the majority, Glidewell L.J., cited authoritative observations of Lord Mansfield ([1993] AC at 79-80) and Holmes J. ([1993] AC at 92) which are pertinent here and should be restated now.
In Moses v Macferlan (1760) 2 Burr. 1005, Lord Mansfield said, in a familiar observation (at 1012):
"... [Restitution] 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."
In Atchison, Topeka & Sante Fe Railway Co. v O'Connor (1912) 223 U.S. 280, Holmes J. said (at 285-6):
"It is reasonable that a man who denies the legality of a tax should have a clear and certain remedy. The rule being established that apart from special circumstances he cannot interfere by injunction with the state's collection of its revenues, an action at law to recover back what he has paid is the alternative left. Of course we are speaking of those cases where the state is not put to an action if the citizen refuses to pay. In these latter he
can interpose his objections by way of defence, but when, as is common, the state has a more summary remedy, such as distress, and the party indicates by protest that he is yielding to what he cannot prevent, courts sometimes perhaps have been a little too slow to recognize the implied duress under which payment is made. But even if the state is driven to an action, if at the same time the citizen is put at a serious disadvantage in the assertion of his legal, in this case of his constitutional, rights, by defence in the suit, justice may require that he should be at liberty to avoid those disadvantages by paying promptly and bringing suit on his side. He is entitled to assert his supposed right on reasonably equal terms." [Emphasis added]
In Woolwich in the House of Lords, Lord Goff said (at 171-2):
"The justice underlying Woolwich's submission is, I consider, plain to see. Take the present case. The revenue has made an unlawful demand for tax. The taxpayer is convinced that the demand is unlawful, and has to decide what to do. It is faced with the revenue, armed with the coercive power of the state, including what is in practice a power to charge interest which is penal in its effect. In addition, being a reputable society which alone among building societies is challenging the lawfulness of the demand, it understandably fears damage to its reputation if it does not pay. So it decides to pay first, asserting that it will challenge the lawfulness of the demand in litigation. Now, Woolwich having won that litigation, the revenue asserts that it was never under any obligation to repay the money, and that it in fact repaid it only as a matter of grace. There being no applicable statute to regulate the position, the revenue has to maintain this position at common law.
Stated in this stark form, the revenue's position appears to me, as a matter of common justice, to be unsustainable; and the injustice is rendered worse by the fact that it involves, as Nolan J. pointed out [1989] 1 WLR 137, 140, the revenue having the benefit of a massive interest-free loan as the fruit of its unlawful action." [Emphasis added]
Lord Browne-Wilkinson said (at 197):
"In the present case, the concept of unjust enrichment suggests that the plaintiffs should have a remedy. The revenue demanded and received payment of the sum by way of tax alleged to be due under regulations subsequently held by your Lordships House to be ultra vires. The payment was made under protest. Yet the revenue maintains that it was under no legal obligation to repay the wrongly extracted tax and in consequence is not liable to pay interest on the sum held by it between the date it received the money and the date of the order of Nolan J. If the revenue is right, it will be enriched by the interest on money to which it had no right during that period. In my judgment, this is the paradigm of a case of unjust enrichment."
[Emphasis added]
Moreover, although Royal Insurance is relied on strongly by the respondent here, there is nothing in Royal Insurance which is inconsistent with the approach taken in Woolwich. It is true that Royal Insurance was concerned with a disputed claim for the repayment of the duty, a matter not arising here since it was eventually repaid without a court order; and that Woolwich involved, as here, only the question of interest. But the same underlying notions of natural justice and the equity of the situation were applied in both these cases once the true legal position was, ultimately, clarified.
In Royal Insurance, Mason C.J. said (at 67):
"In one respect, Royal's belief at the time of payment was not mistaken: in the case of the cost-plus policies, payments were made when there was a legal liability to pay them. Only subsequently and retrospectively was an exemption granted. But the retrospective operation of s.2(4) of the 1987 Act enables one to say that, in the light of the law as it was enacted with retrospective effect in 1987, the payments of duty were made under a mistake as to the legal liability to pay them. In David
Securities it was accepted that...: `the payer will be entitled prima facie to recover moneys paid under a mistake if it appears that the moneys were paid by the payer in the mistaken belief that he or she was under a legal obligation to pay the moneys or that the payee was legally entitled to payment of the moneys. Such a mistake would be causative of the payment.' And, prima facie, that is all that is required where, as here, the recipient has no legal entitlement to receive or retain the moneys. The recipient has been unjustly enriched."
[Emphasis added]
It is true that, in finding a purely statutory entitlement to a refund, Brennan J. (Toohey and McHugh JJ. concurring) distinguished (at 90) the circumstances in Woolwich, where payments had been made under statutory provisions that were held to be invalid. But the reasoning in Woolwich was not criticised. Moreover, on the approach taken by Brennan J., s.51A(1) may be seen as the equivalent of s.111, that is, as the source of the appropriate remedy.
Dawson J. held (at 102) that the statute imposed an obligation upon the Revenue to make a refund, not merely a discretion to do so if it were so minded. Dawson J. said (at 101-2):
"The confined grounds upon which an administrative decision may be reviewed by a court would preclude the substitution of a decision based upon restitutionary principles. Of course, a court would require the discretion to have been exercised having regard to the scope and purpose of the relevant legislation and to be within the confines formulated in Associated Provincial Picture Houses Ltd. v Wednesbury Corporation... with regard to reasonableness. But that is something different from an application of the common law relating to restitution. That may be seen from the decision in Reg. v Tower Hamlets London Borough Council; Ex
parte Chetnik Developments Ltd.... where it was held that the purpose of legislation, which conferred a discretion upon a borough council to refund overpaid rates, extended to the repayment of rates paid under a mistake of law. The exercise by the council of its authority was, however, discretionary notwithstanding that it was to be governed by the scope and purpose of the legislation in question, as well as the principle of reasonableness as applied to administrative discretions. True it is that Lord Goff of Chieveley pointed out that the general principles of the law of restitution should be of assistance in the exercise of the discretion, but it is clear that he did not regard those principles as necessarily determining the outcome."
[Emphasis added]
Likewise, in the present context, it may be said that general law restitutionary principles assist, without entirely governing, the exercise of the statutory discretion as to quantum conferred by s.51A(1)(b).
Consequences of Commissioner of State Revenue v Royal Insurance
The consequences for the present case of Commissioner of State Revenue v Royal Insurance are twofold. First, the Comptroller's liability to refund the duty paid by the appellants in respect of PET resin, once the CTCO was made in June 1994, derived exclusively from a statutory source. The liability did not rest on any common law notions of restitution, but flowed from the terms of s.269N(1) of the Customs Act. To adapt Brennan J.'s observations, it was only by creating a right to a refund of duty that retrospective effect could be given to s.269N(1) of the Customs Act.
The present case is different from Collector of Customs v Gaylor, Supra. There, an importer, who had paid customs duty under protest ultimately succeeded before the Administrative Appeals Tribunal in establishing that the goods were not dutiable. Section 273GA(7) of the Customs Act provides that, in these circumstances, the duty deemed to be payable is that determined by the Tribunal. The New South Wales Court of Appeal held that the importer was entitled to claim the duty improperly demanded on the basis of orthodox restitutionary principles. In Gaylor the importer plainly had a pre-existing claim for money had and received, since there was never any liability to pay duty on the goods. The Court saw nothing in s.273GA to suggest "a legislative intention to remove from a person, from whom moneys had wrongly been demanded, the right to sue for their recovery": at 662, per Cole JA; see also at 653, per Clarke JA; at 655, per Handley JA. In the present case, no duty had ever been wrongly demanded from the appellants. They were liable to pay and did pay the duty imposed on PET resin at the time they imported the goods.
Secondly, if the Comptroller (or Collector - it is unnecessary to distinguish between the two) had refused to refund the customs duty paid by the appellants, they could have obtained an order for mandamus to compel the Comptroller to perform his or her duty. I appreciate that the scheme of the Customs Act is not identical to that of the Stamps Act considered in Commissioner of State Revenue v Royal Insurance. Nonetheless, the two enactments are sufficiently similar for the principles outlined by the High Court to apply.
Section 163(1)(b) of the Customs Act contemplated that regulations would prescribe specific circumstances in which the power to refund duty would be exercised. These included circumstances in which the Comptroller was subjected to a statutory duty to refund duty. Regulation 126(f) specified circumstances that were clearly intended to provide importers with a remedy to enforce the liability imposed on the Comptroller by s.269N(1) of the Customs Act. In Julius v Lord Bishop of Oxford, Lord Selborne said this (at 235):
"The question whether a Judge, or a public officer, to whom a power is given by such words [as 'it shall be lawful'], is bound to use it upon any particular occasion, or in any particular manner, must be solved aliunde, and, in general, it is to be solved from the context, from the particular provisions, or from the general scope and objects, of the enactment conferring the power."
See also Finance Facilities Pty Ltd v Federal Commissioner of Taxation, at 134-135, per Windeyer J. The statutory context strongly suggests that the Comptroller was obliged to exercise the power conferred by s.163(1)(b) in the circumstances prescribed by reg.126(f). The remedy of mandamus was available to enforce that duty.
This does not necessarily mean, however, that mandamus is the exclusive remedy available to importers seeking a refund of duty in consequence of the retrospective effect of a CTCO. In Commissioner of State Revenue v Royal Insurance, Brennan J. considered (at 90) that s.111(1) of the Stamps Act was clearly intended to prescribe the means (by which I understand his Honour to have meant the exclusive means) by which the Commissioner's liability to refund stamp duty could be discharged. Thus mandamus was the appropriate remedy, rather than an action against the Commissioner to recover the stamp duty.
In the present case, the position is by no means as clear. Regulation 126(f) is not, of course, part of the Customs Act. In the absence of reg.126(f), s.163, relevantly, would merely confer a power to make refunds of duty "in respect of goods generally or in respect of the goods included in a class of goods": s.163(1)(a). It may be that ss.163 and 269N(1), when read together, should be regarded as imposing a duty on the Comptroller to exercise the power conferred by s.163, at least where a CTCO was made having the effect provided for in s.269N(1). An alternative view is that, regardless of the presence or absence of reg.126(f), s.269N(1) created a right to a refund of duty where a CTCO was made. That right would be enforceable directly as a statutory cause of action, without the need for the importer to invoke the complexities and limitations associated with the remedy of mandamus. The alternative view would receive some support from the reasoning in Collector of Customs v Gaylor, although that case was concerned with the relationship between ss.167 and 273GA of the Customs Act.
I do not think that it is necessary to resolve this question in the present case, although I am inclined to the view that the appellants did have a cause of action for recovery of the duty, based on s.269N(1). In my opinion, it makes no difference to the appellants' claim for interest whether the remedies available to them were limited to mandamus, or whether they included a statutory cause of action for recovery of the duty paid. I prefer to leave this issue to a case which clearly presents it for resolution.
Did s.167(4) Preclude a Cause of Action?
Mr Gageler, who appeared for the Commonwealth, relied on an alternative argument to support his submission that the appellants were precluded from bringing an action at common law to recover the duty paid in respect of PET resin. He submitted that such an action was foreclosed by s.167(4) of the Customs Act. It is not necessary to consider this submission in relation to a common law action, since I have already concluded that such an action was not available to the appellants by reason of the decision in Commissioner of State Revenue v Royal Insurance. However, s.167(4) may have a bearing on the availability of a statutory cause of action based on s.269N(1) of the Customs Act.
Section 167, insofar as relevant, provides as follows:
"(1) If any dispute arises as to the amount or rate of duty payable in respect of any goods, or as to the liability of any goods to duty, under any Customs Tariff, ... the owner of the goods may pay under protest the sum demanded by the Collector as the duty payable in respect of the goods, and thereupon the sum so paid shall, as against the owner of the goods, be deemed to be the proper duty payable in respect of the goods, unless the contrary is determined in an action brought in pursuance of this section.
(2)The owner may, within the times limited in this section, bring an action against the Collector, in any Commonwealth or State Court of competent jurisdiction, for the recovery of the whole or any part of the sum so paid.
...
(4)No action shall lie for the recovery of any sum paid to the Customs as the duty payable in respect of any goods, unless the payment is made under protest in pursuance of this section and the action is commenced within the following times:
(a)In case the sum is paid as the duty payable under any Customs Tariff, within 6 months after the date of the payment; or
...
(5)Nothing in this section shall affect any rights or powers under section 163."
The history and operation of s.167 were considered at length in Comptroller-General of Customs v Kawasaki Motors Pty Ltd (No.2) (1991) 32 FCR 243 (FCA/FC). In that case Hill and Heerey JJ. held that (at 263):
"s.167 represents the only method whereby an action for recovery of overpaid Customs duty can be brought where there is a dispute between the owner and the Collector as to liability or matters affecting liability and that it operates to exclude the availability of any alternative common law remedy."
However, their Honours appeared to have accepted (at 264) that if no dispute had arisen as to the amount or rate of duty, or as to the liability of any goods to duty, the limitations imposed by s.167(4) did not apply. See also Collector of Customs v Gaylor, at 655, per Handley JA.
In this case, there was no dispute as to the duty payable in respect of PET resin at the time of importation, in the sense that the appellants did not claim at the time that the duty was not payable. Moreover, the appellants have never asserted that duty was not payable at the time of importation; indeed they have been careful, no doubt mindful of s.167, to avoid such an assertion. Their claim is that the making of the CTCO in June 1994 conferred an entitlement to a refund of duty, although they rely on the retrospective effect of the CTCO.
In my opinion, this is not a situation to which s.167(4) is directed. Section 167 is concerned to ensure that an importer who wishes to dispute liability to pay duty at the time of importation follows the stringent statutory procedure. An importer who has applied or intends to apply for a CTCO is not entitled to dispute liability to duty at the time of importation (unless there is some independent ground for doing so). The importer's entitlement to a refund depends solely on subsequent events, which may not occur (if they occur at all) until well outside the six month period for instituting proceedings provided for in s.167(4)(a). If s.167(4) applied to such a case, the importer would be required to commence proceedings before an essential element in the cause of action had occurred and before it was known whether it would occur. I do not think that this is the intention of the statutory scheme.
The present case is different from Comptroller-General v Kawasaki Motors. There, the issue was the liability of an importer to pay duty in respect of goods imported after the date of a purported revocation of a CTCO. The contest related to the importer's liability to pay duty at the time of importation. The same was true in A & G International Pty Ltd v Collector of Customs, S Ct Vic, Ormiston J., 22 December 1995, unreported. In the latter case, Ormiston J. made some observations about the interrelationship between s.167(1) and s.167(4) which may require some qualification to take account of a case such as the present.
It follows from what I have said that, if the appellants are otherwise entitled to rely on a statutory cause of action based on s.269N(1) of the Customs Act, they are not precluded by s.167(4) from pursuing such a claim.
Application of s.51A of the Federal Court Act
Section 51A of the Federal Court Act provides as follows:
"(1)In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:
(a)order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or
(b)without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest."
As I have previously noted, the appellants pleaded their case for refund of duty paid by them in alternative ways. First, they relied on the retrospective effect of s.269N(1) of the Customs Act. Secondly, they pleaded a case based on the alleged failure of the Comptroller to make the CTCO within a specified time of the application having been lodged. The second pleaded cause of action was not pressed in relation to the claim for interest.
The appellants, in the present proceedings, did not seek an order for mandamus directed to the Comptroller. Nor did they seek review of any decision made by the Comptroller or, for that matter, any other relief under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("ADJR Act"). For the reasons I have given, it was open to the appellants to bring proceedings seeking relief in the nature of mandamus (or at least it would have been open, had the Commonwealth not refunded the duty so promptly).
Had the appellants sought an order for mandamus, or relief under the ADJR Act, on the present state of the authorities, this would not have assisted them in their claim for interest under s.51A of the Federal Court Act. In Comptroller-General v Kawasaki Motors Pty Ltd, Hill and Heerey JJ. rejected an argument that an application for an order under s.16(1)(d) of the ADJR Act for the repayment of overpaid duty was a proceeding "for the recovery of any money" within s.51A of the Federal Court Act. Their Honours said this (at 266-267):
"The present proceedings, brought for judicial review, were not proceedings for the recovery of money. They were proceedings seeking judicial review of an administrative decision.... In Ausintel Investments Australia Pty Ltd v Lam (1990) 19 NSWLR 637, the question arose in the Supreme Court of New South Wales whether s.94 of the Supreme Court Act 1970 (NSW), for present purposes similar to s.51A of the Federal Court of Australia Act, authorised the payment of interest where proceedings had been brought for the winding up of a company consequent upon the non-issue of shares after payment of the subscription moneys for them. The moneys were ultimately repaid without order of the court. The Court of Appeal was of the view that there had been no breach of fiduciary duty in the circumstances of the case. It was held that proceedings for winding up were not proceedings for the recovery of money. Rather, the proceedings referred to in s.94 (the same may be said of the proceedings referred to in s.51A) must be proceedings which, per Meagher JA (at 649) '...if the plaintiff be successful, will result in a judgment in his favour to recover a sum of money'.
...Section 16(1)(d), even if authorising an appropriate order, would not have authorised an order for the entry of judgment for the overpaid Customs duty in favour of the respondent. At best, it would have authorised only an order directed to the Comptroller for the repayment of the duty."
This reasoning would lead to the conclusion that a claim for mandamus directed to the Comptroller would not constitute proceedings for the recovery of money, for the purpose of s.51A of the Federal Court Act.
For the reasons I have given, it was not open to the appellants to rely on restitutionary remedies to claim a refund of the duty paid by them in respect of the PET resin. However, as I have indicated, it may have been open to them to rely on a statutory cause of action deriving from the terms of s.269N(1) of the Customs Act. The statements of claim are open to the interpretation that the appellants pleaded such a cause of action.
Even so, the appellants' claim to interest, insofar as it is founded on s.51A of the Federal Court Act, in my opinion faces an insuperable difficulty. Section 51A only authorises an award of interest from the date the cause of action arises: Ferrier and Knight v Civil Aviation Authority (1994) 55 FCR 28 (FCA/FC), at 91-93. In the present case, in my opinion, the cause of action of the appellants did not arise until 3 June 1994, the date of the making of the CTCO. The duty was refunded the same day, so that no entitlement to interest arises.
As Wilson J. said in Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234, at 245, the concept of a cause of action
"is simply the fact or combination of facts which gives rise to a right to sue".
The appellants had no right to sue unless and until a CTCO was made. Had the appellants sought to recover the duty immediately after it had been paid, and before the CTCO had been made, they would have failed. The making of the CTCO was an essential element in the appellants' case, since it was the order that gave rise to the entitlement to recover the duty paid in respect of the PET resin. The appellants recognised as much by specifically pleading the making of the CTCO on 3 June 1994 in their statements of claim.
The appellants sought to meet this difficulty by contending that the retrospective operation of s.269N(1) of the Customs Act meant that the appellants' cause of action was complete at the time of the making of each payment of duty. Dr Griffiths submitted that s.269N(1) was intended to deem past facts to be different than those that actually occurred. The effect of the sub-section was to deem the appellants' cause of action to have been complete when each payment of duty was made.
In Commissioner of State Revenue v Royal Insurance, the majority of the High Court held that the retrospective abolition of stamp duty on certain transactions by the Victorian Parliament did not convert payments of duty into payments made under a mistake of law. Dawson J. (at 100) cited the observations of Deane J. in University of Wollongong v Metwally (1984) 158 CLR 447, at 478:
"A parliament may legislate that, for the purposes of the law which it controls, past facts or past laws are to be deemed and treated as having been different to what they were. It cannot, however[,] objectively... expunge the past or 'alter the facts of history'."
This passage indicates that it is open to the Commonwealth Parliament to provide that a CTCO shall not only be deemed to come into effect from a particular date, but that the importer's cause of action shall be deemed, for the purposes of other laws of the Commonwealth, to have accrued on the same date.
However, s.269N(1) says nothing about when the importer's cause of action is deemed to have accrued for the purposes of the Federal Court Act or, for that matter, other Commonwealth legislation. It is one thing for legislation to provide that a CTCO should be deemed to have come into effect retrospectively on a particular date. It is quite another for it to provide that, contrary to the fact, the importer's cause of action is deemed to have arisen on the same date.
The purpose underlying the enactment of s.269N(1) of the Customs Act in 1983 was simply to ensure that importers who had paid duty in respect of goods subsequently covered by a CTCO would be entitled to a refund of the duty paid by them at the time of importation. Section 269N(1) was not directed to the quite separate question of determining when the importer's cause of action accrued.
The background to the enactment of Part XVA supports the view that s.269N(1) was not intended to create an entitlement to interest as from the date of payment of the duty. The IAC report, which preceded the enactment of Part XVA in 1983, did not suggest that importers should be entitled to interest, despite the fact that the earlier system of concessional duties had operated, in part, through retrospective by-laws. The 1991 IC report, although prepared after the enactment of the old Part XVA, pointed out that some importers had benefited from the retrospective operation of CTCOs. Far from being kept out of their money pending the refund of duty, they passed on the cost of the duty to customers and did not necessarily give their customs the benefit of any refund subsequently obtained. Doubtless, this was a factor in enacting a statutory scheme which did not (and still does not) provide for interest to be paid in respect of customs duty refunded following the making of a CTCO. Compare, for example, the Sales Tax Assessment Act (No.1) 1930 (Cth), s.26(1A) and the Sales Tax Assessment Act 1992 (Cth) s.51(1), Sched.1, Table 3, CR 1, which make the refund of overpaid sales tax passed on to customers dependent upon the taxpayers refunding the overpayment to the customers.
In the present case, the evidence suggests that the appellants intend to pass on any refund of duty (less expenses) to their customers. However, there would be no requirement that they do so. Nor would any other importer obtaining a refund by reason of a CTCO be required to pass on the saving to customers. I appreciate, of course, that there is no "windfall gain" defence to an action based on unjust enrichment: Commissioner of State Revenue v Royal Insurance,
at 90. But the possibility of windfall gains is of some importance in ascertaining whether the Parliament intended to expose the Commonwealth retrospectively to a liability to pay interest.
It follows that the appellants cannot rely on s.51A of the Federal Court Act to support their claim for interest in the present case.
Interest on Moneys paid Before Judgment
The trial judge held, applying his own decision in State Bank of New South Wales Limited v Commissioner of Taxation (1995) 132 ALR 653 (FCA/Wilcox J.), at 665, that s.51A of the Federal Court Act authorises the award of interest on moneys paid before judgment. Mr Gageler challenged the correctness of State Bank v Commissioner of Taxation, referring to The Medina Princess [1962] 2 Lloyd's Rep. 17, at 19; President of India v La Pintada Cia Navigacion SA [1985] AC 104; New South Wales Law Reform Commission, Interest on Certain Debts (Community Law Reform Program Second Report, 1983) at 14, 38. In view of the conclusion I have reached it is not necessary to consider Mr Gageler's submission.
Restitution
The appellants' alternative argument rested on the proposition that an entitlement to interest on restitutionary principles should be acknowledged as a common law right, independent of the limitations of the discretionary jurisdiction to award interest under statutory provisions such as s.51A of the Federal Court Act. The appellants relied on the arguments put forward by Mr Mason QC and Professor Carter in their comprehensive and challenging work, Restitution Law in Australia (1995).
In Chapter 28 of that work, Mr Mason and Professor Carter argue in favour of a "free-standing" restitutionary cause of action to recover interest. Although the entire chapter repays careful study, the key passages appear in para.2807 (at 950-951):
"It will be seen that the current law of interest leaves significant gaps, enabling those who owe money (whether under restitutionary causes of action or otherwise) to be enriched at the expense of the person owed the principal sum. The current state of the law may not recognise a general common law right to recover interest on restitutionary claims, but the possibility of development has been noted. Given the limitations of the statutory jurisdiction to award interest, and the non-universal scope of equity's more expansive jurisdiction, it is appropriate to consider whether the common law is capable of development as regards interest upon restitutionary claims... .
We consider that the unjust enrichment principle itself supports a free-standing cause of action to recover interest. The discretion to award statutory interest, with all its limitations, would then have little relevance in this field. Entitlement to interest should be seen as a right. The argument, which is in our view supported by most Australian decisions in this area, is as follows.
For the same reason as the law recognises that the receipt of money is an incontrovertible benefit, the law should recognise that the capacity to use money over time is a distinct and additional benefit. Where it is unjust that the person who had the use should pocket the fruits (being the interest earned or capable of being earned), there should be an independent restitutionary right vested in the person at whose expense that enrichment occurred. This right should not derive from a fictional or tortured fiduciary relationship between the payer on the one hand and the payee or some third party (such as the directors of the payee) on the other. It is independent in the sense that it is unaffected by the nature or legal origin of the so-called principal debt, and it exists whether or not the principal debt is repaid. The right is not subject to the limitations of statutory interest. In particular, its award is not subject to the exercise of a statutory discretion.
The jurisprudential basis of the right is the unjust enrichment principle. The principle is satisfied because the debtor's use of the plaintiff's money [in the sense of what is owed to the plaintiff] involves an independent enrichment at the plaintiff's expense. The unjust factor is that which supports the debt to which the interest claim is necessarily appendant, coupled with the absence of justification for the defendant pocketing the benefit of having had the plaintiff's money between the time when the obligation arose and the disgorgement of the principal. In most, if not all cases, this will also correspond with the principle that the plaintiff should be compensated for the loss of the use of what in one sense or another is the plaintiff's money. In this way, in this context at least, the law of interest is freed from its confused and tangled state, where the historical vagaries of common law, equity and statute prevail, rather than underlying principle."
It is to be noted that this analysis seizes upon the injustice of the defendant using the "plaintiff's money", that is, money owed to the plaintiff. The authors accept that the claim to interest is "necessarily appendant" to a debt, in the sense of an independently owed obligation: see at 949-950.
Mr Mason and Professor Carter point out (at 951) that a claim for interest may arise in circumstances where no question of fault is involved, as is the case with direct restitutionary claims such as the recovery of money paid under a mistake of law (David Securities Pty Ltd v Commonwealth Bank of Australia
(1992) 175 CLR 353) or under a judgment subsequently reversed (Government Insurance Office of New South Wales v Healy (No.2) (1991) 22 NSWLR 380). The authors also point out (at 951-953) that the general law permits interest to be awarded in certain circumstances from the date of payment of the money by the plaintiff to the defendant, even though the plaintiff's cause of action accrues after that date. An example is a payment made under a contract which is voidable by reason of misrepresentation. While the restitutionary cause of action arises only upon rescission, a successful plaintiff may receive interest upon the sums paid as from the date of payment to the defendant: Jad International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378 (FCA/FC), at 392-393; see also Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 Qd R 446, (S Ct Qd/McPherson J.) at 461-462. Even so, Mr Mason and Professor Carter acknowledge (at 951) that
"the valuation of the plaintiff's monetary recovery of interest necessarily presumes the defendant's obligation to pay a capital sum as and from the date of receipt from the plaintiff."
It is fair to say that the law of restitution is in a rapidly developing phase. The High Court has acknowledged the "unifying legal concept" of unjust enrichment: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, at 256-257; David Securities v Commonwealth Bank, at 375. But, as Lindgren J. has pointed out in a recent paper, it is still necessary for a plaintiff to identify a recognised category of unjust enrichment, such as payment under a mistake or pursuant to the
provisions of an invalid statute: K. Lindgren, "Recent Developments in the Law of Restitution" (Paper delivered at Judges' Conference, Darwin, Jan. 1996), at 20-21. Even though the categories are not closed, it is perhaps doubtful whether the law has yet reached the point suggested by Mr Mason and Professor Carter.
However, even if the law does recognise a free-standing cause of action to recover interest (as distinct from a series of individual categories, in which the defendant is recognised as having been unjustly enriched at the plaintiff's expense), the question remains whether the appellants can bring themselves within the principle enunciated by Mr Mason and Professor Carter. To do so, they need to establish that the Commonwealth was unjustly enriched at their expense, by retaining the customs duty in the interval between the date of payment and the date the CTCO was made. In other words, they need to show that the Commonwealth had the use of "their money" during that period.
In the case of a decision which, by virtue of an enactment, has retrospective effect, the answer must depend upon the proper construction of the statute. I do not construe s.269N(1) of the Customs Act as intended to produce the result that, once a CTCO is made, the Commonwealth is deemed to have retained money to which the appellants were always entitled. This is not the same question as determining when the appellants' cause of action occurred, but the issues are similar.
As I have indicated, the purpose of providing for CTCOs to have retrospective effect was to ensure that the importers of goods subject to a CTCO (whether or not they had applied for the CTCO) could recover duty paid in respect of the goods. The legislative intent was not to treat importers of such goods as being in the same position as, say, an importer unlawfully required to pay duty at the time of importation of the goods. The statutory scheme had to balance a number of competing considerations. As was said in Comptroller-General of Customs v Kawasaki Motors Pty Ltd (No.1) (1991) 32 FCR 219 (FCA/FC), at 241, per Hill and Heerey JJ., the regime of customs duties, including CTCOs, involves "social, political and economic considerations affecting the whole Australian community". The statutory scheme had to take account of such matters as the fact that all importers of goods subject to a CTCO (and not merely the applicants) could claim a refund; that the "concession orders" were worth hundreds of millions of dollars annually; that not all importers would pass on the benefit of the concessions to customers; that ordinarily the lapse of time between an application and the making of a CTCO was relatively short; and that the scheme would involve administrative costs.
Section 269N(1) might have been expressed in more precise language had the draftsman adverted specifically to the question of interest. But the language used does not seem to me to evince an intention, not revealed in the IAC report or, for that matter the Parliamentary debates, to expose the Commonwealth to a liability to pay interest to each and every importer of goods under the concessional scheme. What was intended was that the making of the CTCO would create an entitlement of the importer of goods to recover any duty paid on those goods after the date of the application. The entitlement was not to arise unless and until a CTCO was made.
For these reasons, I do not think it can be said that the Commonwealth was unjustly enriched at the appellants' expense by the fact that the duties were not repaid until the date the CTCO was made. The foundation for a restitutionary claim, even on the broad approach enunciated by Mr Mason and Professor Carter, has not been established.
The inability of the appellants to claim interest may be thought to create an injustice, because their application for a CTCO was delayed for a number of years. The unfortunate history of the present case suggests very strongly that there should at least be some provision for interest where the decision-making process miscarries (assuming that there is no other remedy available). But, as I have already said, the argument put forward by the appellants is not based upon a case of excessive delay or erroneous decision-making. It relates to all cases where CTCOs are made and are deemed to have come into force as from an earlier date.
Some Additional Observations
Since preparing these reasons for judgment, I have had the advantage of reading in draft the judgment of Beaumont and Einfeld JJ. Since I am differing from their Honours' conclusions, I should make four brief additional observations in relation to s.51A(1)(b) of the Federal Court Act. In doing so, I note that their Honours rely on s.51A(1)(b) only as an alternative ground in support of their conclusion that the appeal should be allowed.
First, as thier Honours point out, the trial judge did not appear to address the possible application of s.51A(1)(b) of the Federal Court Act to this case. The reason would seem to be that the point was not argued before him. In any event, it was not raised before us. Dr Griffiths specifically stated that
"the issue that is at the heart of the section 51A argument is the question of when the appellants' primary cause of action in respect of the payment of duty arose". (Ts of Argument, 17.)
These observations indicate that Dr Griffiths accepted that interest could not be awarded under s.51A(1) from a date prior to the accrual of the relevant cause of action. It seems to follow that he accepted that s.51A(1)(b) could carry the matter no further, in this respect, than s.51A(1)(a).
Be that as it may, I think the suggested construction of s.51A(1)(b) raises a number of issues that warrant close consideration. These include the significance of the opening words of s.51A(1)(b), namely, "without proceeding to calculate interest in accordance with paragraph (a)...". In my respectful view, these words suggest that s.51A(1)(b) is intended to be a subsidiary provision, permitting a quantification of interest in the form of a lump sum, in lieu of the more detailed calculations required by s.51A(1)(a). If this view is right, s.51A(1)(b) is not an independent source of power to allow interest to be awarded regardless of when the relevant cause of action arose. I should add that the Full Court in Ferrier and Knight v CAA did not appear to regard s.51A(1)(b) as an independent source of power of this kind.
A further issue is the significance of the words "in respect of a cause of action" in s.51A(1). At first blush, it may be difficult to reconcile these words with the view that interest can be awarded under s.51A(1)(b) when it is "fair and just" or in accordance with "natural justice and equity", at least where the result is to require payment of interest prior to the date of accrual of any cause of action.
Secondly, in my respectful opinion, care must be exercised in translating references to the "considerations of justice" or fairness from one context to another. It is one thing, for example, to hold that interest can be awarded in respect of payments made pursuant to a judgment which is subsequently overturned on appeal. Considerations of justice and fairness undoubtedly support the conclusion that an appellant should have restored that which "was wrongly taken from him and given to the respondent" (National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386, at 597, per Brooking J.), by reason of the erroneous judgment. It is, however, another thing to determine that, as a matter of construction, s.51A(1)(b) confers a power to award such interest as is fair and just, independently of whether the initial payment (in this case the customs duty) was erroneously made and regardless of the date on which the payee's cause of action accrued. Compare the remarks, in a different context, of Deane J. in Muschinski v Dodds (1985) 160 CLR 583, at 616.
Thirdly, few would dispute a preference for substance over form. But in the present context an important element in determining the "substance" of the appellants' entitlement to recoup customs duties paid is the intention of the legislation creating that entitlement. Accordingly, in my view, it is necessary to determine whether Parliament intended that the making of a CTCO should place all taxpayers importing the relevant goods in the same position as a taxpayer from whom taxes were unlawfully demanded and received. For reasons I have explained, I do not think that was Parliament's intention.
Finally, as I have already said, it is no part of the appellants' case that the Executive failed to address their claims "promptly and correctly". If the appellants succeed, all importers recovering duties paid prior to the making of a CTCO will be entitled to interest, regardless of whether it was or was not possible to process their applications more speedily.
Conclusion
The appeals should be dismissed with costs.
I certify that this and the preceding 47 pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville.
Associate:
Dated:28 August, 1996
Heard:16 May, 1996
Place: Sydney
Decision:28 August, 1996
Appearances: Dr J.E. Griffiths, instructed by Blake Dawson Waldron, appeared for the applicant.
Mr S.J. Gageler with Dr J.G. Renwick, instructed by the Australian Government Solicitor, appeared for the respondent.
13
35
0