Redland City Council v Kozic & Ors [2023] HCATrans 116 (13 September 2023)

Last Updated: 13 September 2023

[2023] HCATrans 116

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Brisbane No B17 of 2023

B e t w e e n -

REDLAND CITY COUNCIL

Appellant

and

JOHN MICHAEL KOZIK

First Respondent

SIMON JOHN AKERO

Second Respondent

SARAH AKERO

Third Respondent

NEIL ROBERT COLLIER

Fourth Respondent

GAGELER J
GORDON J
EDELMAN J
STEWARD J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 13 SEPTEMBER 2023, AT 10.01 AM

Copyright in the High Court of Australia

____________________

MR J.M. HORTON, KC: If it please the Court, I appear with my learned friend MS E. HOIBERG for the appellant. (instructed by Gadens Lawyers)

MR J.T. GLEESON, SC: May it please the Court, I appear with MR A.M. HOCHROTH for the respondents. (instructed by Shine Lawyers)

MS R.C.A. HIGGINS, SC: May it please the Court, I appear with my learned friend MR J.G. WHERRETT on behalf of the Attorney-General of the Commonwealth intervening. (instructed by Australian Government Solicitor)

MR G.J.D. DEL VILLAR, KC, Solicitor‑General of the State of Queensland: May it please the Court, I appear with my learned friends, MS F.J. NAGORCKA and MR M.J. HAFEEZ-BAIG, on behalf of the Attorney‑General of the State of Queensland intervening. (instructed by Crown Law (QLD))

GAGELER J: You need leave, or at least partial leave?

MR DEL VILLAR: If leave is necessary, your Honours, we would seek that.

GAGELER J: You have that leave on the basis that you are limited to your estimate of 20 minutes.

MR DEL VILLAR: Yes, your Honour.

GAGELER J: Thank you. We move to you, Mr Horton.

MR HORTON: Your Honour should have received orders in times for the plan for oral address with the plan to finish tomorrow. Can I inquire: have your Honours received the outline of oral argument for the appellant that should have been filed – thank you. Your Honours, this appeal invites this Court to apply defence, which has already been recognised in connection with restitutionary claims, for private transactions. We invite its application to claims involving those for return of wrongly levied imposts by public authorities.

The principled statement of defence in contract cases readily permits its application in this different context, and we accept it is a different context, but because the defence grew up in a time of implied and quasi‑contract as the underlying rationale, and because the circumstance of his application had been very frequent in contractual settings, we would urge a focus on the principled articulation of the defence, and not the language of contract, which, quite understandably, we say, occasionally dominates the application of the discussion and application of the defence in particular cases.

EDELMAN J: I do not think, Mr Horton, anyone is using consideration in the contractual sense. I do not think there is any – there does not seem to be any confusion in any of the submissions in that regard.

MR HORTON: In our respectful submission, it does permeate what is put against us. There must be a reason. What was “in the mind of the payer”, et cetera, other than in respect of benefit. But we rather do read the submissions differently, your Honour.

EDELMAN J: You think that is what “consideration” means in contract, do you?

MR HORTON: We say that what is put against us is a case which is embedded in contract, from which, we say, the principal articulation of offence is free. But that language has tended to be confused with that and it was by the majority, as an example of that. We will come to that.

Your Honours will have seen, from our submissions, the terms “consideration” – “total failure of consideration”, in particular, seem to have caused difficulty. They have in the majority’s consideration of and here at paragraph [60] of the reasons for judgment, and we would wish to make that fundamental division, as we see it, in the cases very clear – in particular this difference. There is not, in respect of the case before your Honours, a market like there is in the cases where there is contractual bargaining. There is not an operative market for the provision of works and services to benefit what is common property from which particular people cannot be excluded until they pay.

The difference in this case, as distinct from contractual cases, is public law has had to intervene to do two things. One is to benefit by ensuring that everyone who specially benefits pays. That is the first aspect of this which is sometimes left out of account. It is of benefit to me, as someone who will specially benefit, that everyone else who specially benefits pays their share, as well, of the benefit. It makes it cheaper for me, it means the work is more likely to be effected because they are funded. The other element of benefit here, of course, is that which the statute overlays as a necessity of levying special benefit.

That is why, we say, the operation in public law does call for different thinking. That is, authorities brought to bear in order to make these things happen, whereas in a purely contractual case, of course, that is not present. But it also means that one moves completely from the realm of free bargaining, if you like, what the person bargained for, to a statutory context and a context which is necessary because of the nature of the market, the nature of the circumstances in which these people are participating.

Can we give you a brief roadmap, your Honours, of how we propose to address the Court by reference to the outline of oral submissions? Points 1, 2, 3 and 4, as we see it, are the points put against us, the most persuasive points put against us, by the respondents.

GORDON J: Just so I am clear, is that on the basis that the existing authorities dealing with this issue you seek address – what might be described as the disentitling factors for the recovery?

MR HORTON: Yes. These are said to be disentitling factors, it seems. Maybe fundamentally disentitling or maybe in the weighing of the unjustness equation which my client bears the onus of making out. This is where we say the crux of the case lies, but we will take your Honours to David Securities, of course, in the course of dealing with point number 1 to show the principled application offence is operative in our case.

Points 1, 2, 3 and 4 – and we say that they also reveal, some of them, the contractual analysis which, we say, is no longer warranted. Point 5: why the Regulations here, which the court found below in our favour on, do not compel return of this money because they are not applicable, and then, briefly ‑ ‑ ‑

GORDON J: Not applicable because the resolution was invalid?

MR HORTON: Yes, there are two types.

GORDON J: Yes, I understand.

MR HORTON: And then finally, to address very briefly on Woolwich, we do not propose to spend any particular time on that. Your Honours have our written submissions on that, and the interveners have, of course, addressed this very fully in written submissions and perhaps will do so orally as well.

Could we turn to our first point. It is raised against us, at the respondents’ submissions at paragraphs 25, 36, 38, for example, that the unrequested nature of this benefit and the absence the bargain means that we are not entitled to the defence which we seek to avail ourselves of. At the centre of this case, and of the reasoning of the majority below to which we will take you presently, is the absence of the exercise of will, as we read it, by the payer in seeking the benefits that were provided and in having any choice about paying for them. But this point against us is one firmly rooted in that language in contract.

We accept the usual case will be where, in a private transaction, the parties have bargained for a benefit they want, and in such cases the benefit analysis is relatively simple. What someone bargains for, what someone wants, and has a choice about, must be taken to benefit them, if they get it, full stop. We say that is, compared to this case, relatively simplistic, but it does not prevent the need in other cases, where there is no bargain, in order to still ask the benefit question and to analyse it. Here, of course, as your Honours will have seen, there are findings below in our favour that the respondents especially benefitted from; each holding waterfront properties, and each benefitting from the services and works provided, whether it be by revetment walls, dredging of canals, keeping water clean, and so forth.

GORDON J: If you accept that it does not require a contractual bargain, and one comes out of the contractual prism, do you accept that it still requires some mutuality or exchange?

MR HORTON: A correlation it requires. That is, the thing – the payment and the benefit must correlate.

GORDON J: When we talk about the payment and the benefit being required to correlate, which is your language, I assume you will come to it, but what do we do about the fact that your clients were statutorily obliged to carry out these works regardless of whether or not there were levies imposed, charges imposed for works that are on public land. There is a whole range of other factors that went into the mix.

MR HORTON: Yes, that is our point two. We come to that specifically, but we do not shy from that. But that is the other point put against us; this had to be done anyway, so disentitled for that reason also.

STEWARD J: Can I ask you – you mentioned correlation, how closely correlated must it be?

MR HORTON: Well, as direct ‑ ‑ ‑

STEWARD J: Bearing in mind there does not seem to be a particular finding that so much work was done on X person’s waterfront, cutting mangroves and so forth, worth X dollars, and therefore they had to pay Y dollars.

MR HORTON: Yes.

STEWARD J: So, how close?

MR HORTON: As close as consideration in contract.

STEWARD J: All right.

MR HORTON: That is, close, very close. The other conceptual reason for consideration.

EDELMAN J: I do not understand that. I do not understand what you mean by correlate. I mean, in contract, if you are talking about contractual consideration, then it is a quid pro quo, it is an exchange. But you say this is not an exchange, nor is this something that is causally correlated. What does correlated mean?

MR HORTON: Well, it is, it is causally correlated. The only reason for the payment was for the expenditure on these works. Now, it was compelled. We accept that, we do not shy from that coercive nature of ‑ ‑ ‑

EDELMAN J: No, you have to look at it from the other way around. The expenditure for the works were not caused by the payment. You accepted a minute ago, I understood, and you will come to this point soon, that the works were things that were obliged to have been completed.

MR HORTON: We do not accept that proposition in the way it is put against us, and we will come to it. That is, the fact you might have an obligation to keep clean canals, for example, which is the obligation put against us. One, it does not apply to all of the estates. Second, it applies only to canals, and then reliance is placed on the general power of councils to do things, but that says nothing about funding, and it says nothing about whether works would be done absent funding. We accept the correlation, the need for correlation, or the direct link. That is, the benefit must be what was paid for, just as the benefit in contract must be that for which one bargained, which one wanted.

We do not have want here. We do not have want, we do not have will, we do not have a request, we do not have choice. We are in the realm of public law. The conceptual framework we are advancing is a different conceptual framework but aimed at the same principled articulation of offence. That is, did value move directly referable to the payment? Back to the payer, yes.

STEWARD J: Do you have the finding fact or facts that make good that correlation? I am thinking of the report about visual amenity, where the report says that depending on where exactly you lived some people received more of a benefit than others.

MR HORTON: Yes. The findings on benefit appear in the core appeal book at page 45, your Honour, at paragraphs [18] and [20]. They are not as specific as I would like in the regard your Honours put to me, but they seem to be treating the issue as, as it was in our respectful submission showing the evidence, uncontroversial, ultimately. That is, there was an acceptance by the witnesses in cross‑examination of benefitting more greatly than the general public. If it is needed, in paragraph [18]:

the value of the lands would increase by more than one or two per cent.

Your Honours will appreciate ‑ ‑ ‑

STEWARD J: Is that not true for all ratepayers? Some ratepayers get a greater benefit from some services than others.

MR HORTON: Yes, and when they do ‑ ‑ ‑

STEWARD J: I mean, my family have more bins than other people.

MR HORTON: I suspect you pay for your extra bins.

STEWARD J: I am not sure we do.

MR HORTON: Yes. Well, in many cases: one extra bin, extra payment, but this is the choice available to the Council. That is, the statute says there are differential rates – that is, you can impose the same rate on everyone, but for some things you have the discretion where there is a special benefit to charge that person more. We know here there was a weighing of that because the Council ‑ ‑ ‑

STEWARD J: So, does that mean, in your case, whenever the Council levies a special rate, as distinct from a general rate, you have a sufficient correlation, in your view?

MR HORTON: In the exceptional circumstance where the rate is being levied for the special benefit, yes. Now, we accept it is exceptional. Most taxes, most levies, are not levying in a way that requires the direct special benefit back to the payer.

GORDON J: Just so I am clear, we started off with a proposition that it required correlation in the context where I think you accept that there was – maybe you are going to come to this. Leave that aside for a moment. Then you said that the conceptual framework is one where the value must move directly referable to the payment.

MR HORTON: Get what they paid for.

EDELMAN J: What is the benefit you are talking about? Is it the provision of the service, or is it the enhancement of the value of their land?

MR HORTON: The effect of the works and services. It cannot just be the doing of them, but they must produce the desired effect, which is cleaner water, better views, a better place to live.

EDELMAN J: Assuming you are right on everything, why does that give you a total defence? Why would one not just look at the extent to which the properties have been enhanced in value? In some cases it might be very, very small, in some cases it might be very large.

GORDON J: Might be detrimental to some at the expense of benefit for others.

MR HORTON: Yes. Well, they are not the findings here, of course. It was run as a class action and was treated that these plaintiffs’ case resolved all the group members’ cases.

GORDON J: We are trying to test your proposition.

MR HORTON: Yes, I understand. Now, it might; this is not that case on the findings. Really, our case is these were demonstrably beneficial things: cleaner water for people who have waterfront properties, dredging and maintaining access for people who have pontoons, for example. So, there was more than one way in which people would benefit the repair of revetment walls. There were overlapping ways in which people benefitted, not by one singular means.

GAGELER J: Mr Horton, you referred us to paragraphs [18] and [20] of the Court of Appeal judgments. Do we take the reference to the “evidence” in paragraph [18] to be a finding of fact, or simply a reference to evidence? I am not sure what we are to draw from that paragraph for present purposes.

MR HORTON: Yes. The same difficulty really attends [20]. It is recording what the primary judge found.

GAGELER J: Yes. So, can we be specific about the benefit?

MR HORTON: Yes.

GAGELER J: I mean, I am asking, can you be specific about the benefit?

MR HORTON: Yes, yes. Well, in most, specifically – and that is the finding that the primary judge is making, that there was valuation evidence uncontradicted. There was no separate valuer and no separate visual amenity expert who said, look, it is hard to put a number on it, but if you want me to put a number on it: one to two per cent in the case of doing or not doing the works. So, if one wants a fiscal answer we pleaded non‑fiscal advantages, also. It was not the only benefit, there was, obviously, better amenity ‑ ‑ ‑

EDELMAN J: Is that a finding that relates to the plaintiffs, or the group, as a whole, or is that a finding that every individual plaintiff was better off as a result of the works?

MR HORTON: That every individual plaintiff was, and each was cross‑examined and, in effect, admitted that. And second, that that must apply equally in a class action to the group members, because they are advanced as involving matters of common law and fact.

GORDON J: Well, it depends on what the question was before it, whether it binds to subsequent group members.

MR HORTON: Yes.

EDELMAN J: But you say every individual plaintiff accepted that the value of their property had increased as a result of the work?

MR HORTON: Yes. I think we have extracted – paragraph 15 of our primary submissions, in a brief footnote in footnote 14, how each did that.

GAGELER J: So, the benefit is the increase in the value of the land?

MR HORTON: Well, that is the clearest, most specific benefit. That is the clearest – we pleaded many other benefits, and we proved many others, but for the purpose of simplicity, if you like, that is our best case, if you like, on benefit.

GAGELER J: So, we can proceed on the basis that the benefit is a one to two per cent increase in the value of the land?

MR HORTON: Yes.

EDELMAN J: Of every single plaintiff?

MR HORTON: Yes.

GORDON J: I am sorry to harp on the point. Value in their land, as a result of works carried out on public land?

MR HORTON: Yes, with the subtlety, if you like, that revetment laws, of course, will be partly on private and public land, but all in proximity, which we pleaded, to these lands. The unique feature of these lands being, for the plaintiffs, that they are waterfront properties, unlike others. That is, each has a frontage to the water where the works were done. We can give your Honours a reference, perhaps also for completeness on this topic, to the findings of Justice Bradley, the primary judge, on benefit, page 17 of the core appeal book, paragraphs [44] and [45]. The most important words, perhaps, at the beginning of paragraph [45]:

All this may be accepted.

Now, there was no challenge on the benefit point between trial and appeal, which might explain the appeal court’s recording of these matters, rather than the active adoption, if you like, of the findings, because they were not in play.

GAGELER J: Thank you.

MR HORTON: We wish to draw this distinction, which we have opened, that in each of the cases where there has been a contract there has been a function market. Ovidio Carrideo, the lease case in Victoria; the racetrack, Adrenaline, open market for these things; Roxborough, a branch between retailers and wholesalers; David Securities, foreign currency loans and security arrangements. But here, of course, as we have said, there are no effective markets while we have bodies corporate for strata arrangements, while we have owners’ corporations backed by statutory authority to do the things which, left otherwise, might not be done. Can we take your Honours, please, to David Securities? David Securities appears in the joint book of authorities, volume 3, behind tab 24. This was a case ‑ ‑ ‑

GAGELER J: As we move to that, can you just tell me the chain of causation between the payment and the increase in the value of the land by one to two per cent?

MR HORTON: The doing and completion of the works mean that to the hypothetical purchaser – in the market we are to assume on Spencer’s Case, that purchaser will pay one to two per cent more than they would, had those works not been done and had the effect they did.

GAGELER J: So, does that involve the proposition that but for the payment of the levy the works would not have been done?

MR HORTON: Subject to the point to which I will come as point two, which has been put to me by both Justice Gordon and Edelman, were the works to be done, in any event, by reason of some statutory obligation on my client. To which we say, no, that is a different case and different to say – funding is a different question from the doing, and the two have related context. That is, councils have ‑ ‑ ‑

GORDON J: You will have to slow for me.

MR HORTON: I am sorry.

GORDON J: I did not understand what you just said then.

MR HORTON: Yes.

GORDON J: I apologise, I am being slow.

MR HORTON: I am maybe being too rapid as well.

GAGELER J: To me this is quite an important point.

MR HORTON: It is.

GAGELER J: So, if you could spell it out, it would be helpful.

MR HORTON: Let me come to it. It is put to us that a statute requires us to keep clean and maintain canals – my client. That applies only, with respect, to two of the three estates, because only the two of the three are canal estates; Sovereign Waters is not a canal. So, first of all, it is only two of the three. Second, it is only keeping clean and maintaining canals. It does not explain the full services and works that were provided. That is the first point to that, but the statutory obligation, so far as it is an obligation, exists in relation to two of the estates, and only for canals. So, not revetment walls, for example.

JAGOT J: How does this fit with the pleadings where – I read them as saying you admitted an obligation to do the works. It is not the core appeal book, but the book of further materials. The relevant pleadings against you are at page 40, up the top, paragraph 2(j) and (k), which uses the words:

irrespective of whether or not the defendant . . . was obliged –

That relates to the Aquatic Paradise Works. Then (k), the same. What else do we have? Then the same pleading for the Raby Bay Works is at page 51, subparagraphs (j) and (k). Then, you get answers at page 65, paragraphs 8(a), 9(a); then another answer at page 67, paragraphs 16(a) and 17(a).

EDELMAN J: And 47, 10(b)(iii) records in closing submissions the admission that:

it was obliged – not merely empowered – to carry out the canal works . . . which the defendant accepts.

MR HORTON: Yes. This provision of the Coastal Protection and Management Act is cast in mandatory terms:

must maintain and keep clean –

canals. So, the admission is a reflection of the statutory provision.

GORDON J: Then the general government obligations under the Local Government Act – what happens about that admission?

MR HORTON: Yes, they are a different story, of course, because they are the general empowering provisions of local government. So, the highest the case rises against us is that the canals for two of the estates, we had obliged, but it does not answer all the works and services. And, in respect of the other statutory provision, of course, this is the general one we would expect from local government, but it does not compel us to do particular things with particular facilities.

JAGOT J: How do we know this factually? So, we know you were obliged to do the Raby Bay Works as they are defined. We know you were obliged to do the Aquatic Paradise Works as defined, because that is ‑ ‑ ‑

MR HORTON: So far as they were maintaining and keeping clean canals, which is part only the works – but yes.

JAGOT J: That is not how the pleading reads. This has – and how do we know the rest?

EDELMAN J: You have an admission for the Sovereign Waters Works, as well.

JAGOT J: Yes, that one is at 40 ‑ ‑ ‑

EDELMAN J: That is subparagraph (iv) on page 47 of the materials.

MR HORTON: The obligations are not in dispute.

GORDON J: Sorry, they are not in dispute?

JAGOT J: I am totally confused.

MR HORTON: The obligations as recorded in the statute are not in dispute. They could not be.

GORDON J: So, the reason why we are asking this is because – Justice Gageler put it in much more direct terms – we are trying to work out the chain of causation, and the chain of causation has to start with your statutory obligation to carry out the works.

MR HORTON: Yes.

GORDON J: And I think you do not dispute that you are statutory obliged to do the works.

MR HORTON: That is right, in respect of canal keeping clean and maintaining, directly and in a mandatory way, but in the more general terms in the Local Government Act, in the way one normally has a local government – more generic terms – and one which allows choices to be made about what might be done, and when, and how they are to be funded.

EDELMAN J: But the one to two per cent finding of fact that you took us to does not just relate to this little residuary that you are now claiming you were not obliged to do. That relates to all of the work.

MR HORTON: Yes. Yes, bearing in mind the payments are relatively small here, and, of course, the benefit from one to two per cent property increase is large. There is a big disparity between the two, bearing in mind the Council made its own contribution to the works at 30 per cent, and bearing in mind, of course, that about half the funds were returned. What we ‑ ‑ ‑

EDELMAN J: So, you cannot maintain the answer that you gave to Justice Gageler, which is that there is a causal connection between the payment of the money and the performance of the works, because at least for the works you are now conceding were works that were obliged, those works would have had to have been done in any event and may have been a big chunk of the one per cent.

MR HORTON: But may not have been. Those particular works at that particular time may not have been done without the funding – there are other canals and other priorities – but the funding secured the doing of these works in line with the Council’s obligations.

JAGOT J: Well, I must say I am factually not clear at all. I think it is a very important fact and the pleading does not seem to match what you are saying, so I just do not know where we are, for my point.

MR HORTON: Can I come to causation for a moment?

JAGOT J: Maybe it is because I have not read the definitions closely enough to work out what it is you are talking about it, but the defence seems to be more general in what it accepts you are obliged to do.

MR HORTON: Yes.

JAGOT J: And I must say, I had formed the impression from reading everything that you were obliged to do what you did, all of what you did, and you levied to get part of the money for that.

MR HORTON: Well, all of it was in the Council’s power to do.

JAGOT J: No, no. Not power – that otherwise things would fall into the waterway, or you would not be complying with your own obligations under various pieces of legislation, Coastal Management, Local Government Act. That is the impression I formed. To me, if that is wrong, that is really important.

MR HORTON: Yes, but how in particular – leave aside the Coastal Management and Protection Act for a moment, because it is cast in more mandatory specific terms with respect to canal cleaning and maintenance. In respect of the general obligation, in our respectful submission, it cannot be said that the failure to do these works would automatically mean a miscarriage of that duty or power which the Council has in the general setting. It might be different with respect to canals.

JAGOT J: No, no. I am just looking at the pleading where you admit that you were obliged – and I think the word is “obligation” or “obliged” – and to me that carries a particular meaning. Leave aside timing, might be discretionary, all those things, but it carries a particular meaning of a duty. But, if that is wrong, that is important – but I am factually totally unclear.

MR HORTON: I understand. I have probably taken it as far as I can for the moment.

STEWARD J: Can I ask, just quickly before you move on, a question about your one to two per cent benefit. That was an unrealised gain, in that you – but was there any finding that it also led to increase in liability for general rates?

MR HORTON: No, to the latter question. To the first statement, Mr Kozik, of course, had sold his property in the meantime, so he is maybe the exception. We accept ‑ ‑ ‑

STEWARD J: He realised. But does it follow, though, from an increase in value of the land of one to two per cent that there should be an increase in the liability to pay general rates?

MR HORTON: Only if it translates into the unimproved value assessment that the Valuer‑Generals make. We do not ‑ ‑ ‑

STEWARD J: We do not know.

MR HORTON: We do not know. There is no finding about it, there was no evidence about it, but that would be the link one would have to then say, well, the Valuer‑General would have to pick up on that, or has picked up on that, because the works are being done regularly, and that would be the case, but it was not a line that was pursued.

STEWARD J: Thank you.

MR HORTON: Can we say something briefly about causation?

GAGELER J: Of course. You can tell that we are particularly interested in the question of causation, and it would be very good if you could address it systematically. Whether it is convenient to do that now or later is a matter for you.

MR HORTON: Yes, I think it is, in light of the concerns that have been expressed. We do not advance causation as a necessary element of making available the defence. That is – which is why we put it in the terms we did – they must get what they paid for. The Council has options in its statute about how it levies for works, whether obliged to them or not, whether – obviously, they all have to be within their power to do. But causation again risks falling into the contractual sphere. What matters is this value that the payer receives back is that for which they paid.

GAGELER J: Does that not involve, implicitly, a proposition about causation?

MR HORTON: It may be startling to say, but not as I stand here, to my mind.

GAGELER J: What is the nature of the connection between the payment and the value that is required to fulfil your proposition?

MR HORTON: A decision by the Council, not impugned, ultimately, that the people who are being levied coercively for this will benefit more than the general public from the effect of what is to be done. In effect, a decision about fairness, about who pays for what is about to be done, whether obliged and necessary, or not.

EDELMAN J: This is a specific defence that is only in public law? Or are you saying it would also apply in private law, between private parties?

MR HORTON: We pick up the defence from David Securities, as articulated, and we apply it in this context. Is it an extension of a different context? Yes. Does it do any violence to the principal articulation of the ‑ ‑ ‑

EDELMAN J: You have a problem with the result in David Securities, then, because good consideration failed. On your claim, not only would it have succeeded, it would have succeeded in a wide range of circumstances beyond David Securities.

MR HORTON: No. Here, we have the statute. We have the statutory context, which was not in David. We have a statute which says these things, especially benefit – the precondition to doing this.

EDELMAN J: So, it is just the public law defence, then?

MR HORTON: Well, in the way we are advancing that benefit be analysed. We say it is not by reference to a bargain, because there is none. That would disentitle the defence from operating outside contract. Likewise, it would lock it forever within a quasi-contract. We say, when one looks at the principal articulation of the value, how that is to be assessed – and the statute assists with that, we have the findings, such as they are – but we cannot ignore here that a statutory context defines, if you like, what has been done – set is a fact that this specially benefitted people.

GORDON J: The statutory context in your – when you talk about the statutory context, what is it?

MR HORTON: The requirement that, in order to levy special rates and charges, they must especially benefit. That is, the special association must exist. That is in section 92 of the Local Government Act. It is in the joint book of authorities, volume 1, pages 28 and 29:

Special rates and charges are for –

things:

that have a special association with particular land because –

and then different ways in which you can have that special association, but each requiring special benefit, special access, special contribution which we say, if the funds are indeed spent for those things, then that answers the value proposition completely. Whether or not those things would have been done by different means – by levying deferential rates, for example, with no special charges; whether the Council decided just to cover them this time.

EDELMAN J: Even if the ultimate benefit is only a fraction of the cost to the ratepayers?

MR HORTON: No. The benefit must be equal to or outweigh the payment, in our respectful submission. We do not shy from that. It must be a real returned benefit which is equal to or greater than the payment. Now, I think I began ‑ ‑ ‑

GORDON J: I know I am jumping ahead, but that idea of this extension in what you describe as the public law context, which is correlation – picking up the language which we have used so far – value moved directly referable to the payment that – that was the second way it was put – and now that we have a third element, as I understand the submission so far, and that is that the benefit must equal or outweigh the payment.

MR HORTON: Yes.

GORDON J: Well, that is not always going to be the position in relation to some of the taxpayers. What happens in that situation: we have an application where certain taxpayers then say, hang on a moment, I have paid out X thousand, but I have received a negative benefit, or I have received less of a benefit, and that would be treated differently from other taxpayers.

MR HORTON: Yes. This is a defence tailored to individual circumstances to unjustness or not. That is the great benefit of this defence: it looks at individual circumstances. This is not a statutory blunt‑force regulation not requiring return. This is a consideration of the elements of justice.

GAGELER J: So, the steps, as I understand it: one, the money is, in fact, paid for an identified statutory purpose of benefitting the respondents. Two, the money paid is, in fact, used for that purpose. Three, the respondents are, in fact, benefitted by a greater amount – being one to two per cent of the value of their property – than the money that they pay. Is that the claim of it?

MR HORTON: Yes. Yes. Can we add one more?

GAGELER J: Yes, it is your case.

MR HORTON: It is done in good faith. That is, we are articulating what we would expect the Court to ask us to do; articulate the defence. In good faith, that is – and we might come to it in a different context – that is, the money was spent without the notice, if you like, of the illegality. There is a finding here in our favour to that effect in the appeal court that, before it was realised, the money was spent. That is important.

EDELMAN J: Can I just clarify your second element. The money is used for that purpose. All of the money is used for that purpose?

GORDON J: It was not here, because it was repaid.

MR HORTON: Precisely. So, the Council makes a 30 per cent contribution. There is money returned and there is money spent, but only the money spent is the money claimed.

EDELMAN J: So only ‑ ‑ ‑

MR HORTON: That will always be the case – probably – that only the money spent is that claimed because – sorry, I did not mean to interrupt, your Honour – either because the unspent portion is being returned by the public authority, as it should, because it does not have the good faith element, if you like, of the defence.

EDELMAN J: So, all of the money is used for that purpose, but it does not matter if the money would have been used for that purpose, or if money would have been used for that purpose, in any event.

MR HORTON: Yes. We put it that highly. We do not accept the casual necessity, if you like – and they will often be that.

GORDON J: One of the ways of testing this – and this is not raised by you because, of course, your client could not raise it. Often, in this area, you ask yourself, would they have a defence of change of position, because one looks to the causal link for the reason why one has made the payment. Here, of course, your client could never run that argument because there is no change of position. You are statutorily obliged to carry out the works to the extent – there may be a dispute about the extent. So, there would never be a change of position. You had to maintain the walls. You had to make sure that the canals worked. Is that not another way of testing this proposition you are now putting to us?

MR HORTON: In a way, but it favours us, in our respectful submission. Can we explain why?

GORDON J: Sure.

MR HORTON: The change of position is in spending the money, not the detrimental change of position – for a moment. The change of position is in spending the money without realising, as Justice of Appeal McMurdo says. That is the change, because without that, we do not have the defence and we are obliged to return anyway, because we cannot avail ourselves of the defence which operates against an action for money we had not received.

That is different from a detrimental change of position, which is why it was not advanced, because for a public authority to say we have detrimentally relied, detrimentally changed our position, would mean one has to say there is fiscal chaos – those sort of Canadian arguments.

EDELMAN J: No, it would not. There are authorities that say that it would not.

MR HORTON: In our respectful submission, it cannot be said with us that the change of position and the spending of the money meant that there was some injustice alone, separate from value received, impediment to repaying, because other means are at the Council’s disposal, obviously, to make up the funds that would otherwise have to be returned. It may not be the fairest approach; it may not be the optimal approach, which is why this stance was taken, that is to then say, look, in light of that, we should levy everyone where we previously thought we should levy a particular section of the public – of ratepayers.

The change of position is important. It is put against us that we abandoned that. We did. We did not ultimately advance a mere – I want to emphasise the word “mere” – change of position. Not a detrimental change of position case; it was never raised. The change of position here will always accompany a public authority’s actions, where the defence is enlivened; that is, the money will have been spent, because someone has received some value referable to the payment. So, there will always be, in a factual sense, a change of position. The money will have gone, and the question is: has the money gone without the public authority having realised the problem? This is the way we respectfully suggest these factors fit together to create a workable defence in public law that has already been articulated in David Securities.

EDELMAN J: Can I just ask one more question about your element number 3, that the respondents are benefitted by an amount equal to or greater than their payment. You say that the benefit is the increase in the value of the land. Is that a benefit to somebody who does not want to sell their land, or maybe cannot sell their land?

MR HORTON: The clearest case of benefit is, of course, one has realised it – and we accept, on the scholarly work, there is a difference of views about how firm, if you like, the realisation or realisability has to be. But, of course, property value also underlines better loan to value ratios, and so forth. So, it is not a case where – with property, anyway ‑ ‑ ‑

EDELMAN J: I am just making a much simpler point. It is the point that Chief Baron Pollock made a couple of hundred years ago that one cleans another’s shoes, what can the other do but put them on? Why are you benefitted by a small increase in the value of land that you never intend to sell?

MR HORTON: Because, in the meantime, it is an increase in value and one may wish to borrow against the property, for example. So, there are a whole range of reasons why. The second reason is because the statute tells us that this person specially benefits, and the people told us in the box that they specially benefit. I know it is not a small claim to make, but the statute decides that, and it decides in a way which was not, ultimately, controversial. It may be different where it said the statutory threshold was not made out; that is, the illegality, if you like, was that your jurisdictional threshold for levying special rates and charters was not made out. It just was not the case here and certainly was not, ultimately, the case even if there were skirmishes about it at trial, and it was not the case in the intermediate Court of Appeal below.

Can we do now – we are still on point 1, but I think we have dealt with topic 2, if that is any consolation. Can we take your Honours to David Securities and, briefly, to the majority decision below to show the error and to show why ‑ ‑ ‑

JAGOT J: Sorry, you think you have dealt with point 2; I am still – I must say, just so it is clear – I can only find three categories of works – I may just be wrong – Aquatic Paradise, Sovereign Waters, Raby Bay – and, according to the pleadings, it says you are obliged to do all those works.

MR HORTON: We were.

JAGOT J: You were?

MR HORTON: We were. In the different ‑ ‑ ‑

JAGOT J: Were not? Your pleading says you were. I am just lost by this.

MR HORTON: I am sorry, I said we were.

JAGOT J: Were?

MR HORTON: That is in the positive. We accept that. We were obliged, but in the two different senses I have described. One, in terms of the statutory framing in terms of the Coastal Management and Protection Act, which is more emphatic, and, less specifically, directed in terms of the general local government obligations. But I think I have taken ‑ ‑ ‑

GORDON J: Sorry, you are going to have to slow down for me.

JAGOT J: Yes, too fast for me, too.

MR HORTON: I am sorry.

JAGOT J: I cannot also hear the difference between the “were not”s and the “were”s and things.

MR HORTON: I am sorry.

GORDON J: Would you mind just slowing down for me, please?

MR HORTON: Yes.

GORDON J: It is entirely me, I am sure.

MR HORTON: No, I am sure it is not.

GORDON J: I just think it would be useful if we could just take 10 minutes and just walk through the three admissions again, please – just so I am clear in my mind. I accept that this is me creating difficulties. If we go to the respondents’ book of materials, page 40, at paragraphs (j) and (k), we are dealing with Aquatic Paradise Works, and you are statutorily obliged to carry out all of those works, as defined.

MR HORTON: Which, in the statute, is to keep clear and maintain canals in those two canal estates. Yes.

JAGOT J: But I cannot – I am sorry, to keep interrupting. Are you not admitting that you are obliged to do the defined thing, the Aquatic Paradise works, in this – I am not talking about looking at the – I am just saying, was not the whole case run on the basis that you admitted that you were obliged to undertake the defined thing – all of the defined thing?

MR HORTON: Your Honour, the allegation against us was, we are obliged to undertake the works pursuant to obligations imposed on it, but the obligations imposed on us, which are admitted, are those in section 121, which are for keeping clean and maintaining canals. So, the statutory obligation is admitted.

JAGOT J: Hang on a minute. I just want to make sure I understand the pleading. I am being slow. You are saying that you did not admit, when you were – because that is not clear to me from the way the – wherever the answer is at page ‑ ‑ ‑

STEWARD J: Page 65?

JAGOT J: Flicking my way to – is it 65? So, you admit you were obliged to perform the whole, defined “Aquatic Paradise Works”?

MR HORTON: So far as the obligations imposed on us, which is the allegation against us, which is admitted, in section 121.

JAGOT J: That is just not what it says. This is where I am lost.

MR HORTON: Yes. So, if you wanted to look at page 40, subparagraph (j), what is put against us is a composite: you are obliged to do them under 121, and the general obligations. We agree, that covers all the works. If one thinks about it, a public authority will very rarely be doing things they are not empowered – I know that is different from obliged to, but often the statutory authority would be obliged to do things. This is not an unusual thing to have happen with a public authority. The public authority is vested with powers to do things and duties to do things, and they are the duties.

The point there is, your Honour, this is a composite allegation, and it is admitted. That is, those two things cover everything we did. But the point ‑ ‑ ‑

GORDON J: I will ask a different question. “Aquatic Paradise Works” are defined in 2(c) of the pleading on page 39 by reference to Annexures A to D of the counter‑claim. Are they not the whole of the works carried out as a result of the imposition of the levies?

MR HORTON: Yes.

GORDON J: So, let us just build the picture up. The whole of the works that were the subject of the levies were defined by reference to Annexures A to D of the counter‑claim and defined as the “Aquatic Paradise Works”. There is nothing outside of those works that was carried out by the Council in relation to that area.

MR HORTON: Correct.

GORDON J: So, we carry that definition forward on to page 40, and we have an admission on the pleading that you were statutorily obliged to undertake those works – all of those works.

MR HORTON: Yes.

GORDON J: And we have that reinforced on page 65 of the pleading, paragraphs 8(a) and (b).

MR HORTON: Yes.

GORDON J: Well, then, I am being really slow, because I do not understand what is outside of that.

MR HORTON: Nothing. My point was simply this, and I am sorry if I have not made it clearly, the obligation in 121 is more specific in respect of canals and cast in more mandatory language. That was really the point.

JAGOT J: What does that matter, given the plea? This is what I am not following, your focus on 121, when you have admitted you are obliged to do the whole, or all – it is a repeat pleading for the three categories.

MR HORTON: Yes. It may not be a point that finds favour with your Honours, but the point is this, that in respect of the canals, the obligation to do it was clearer and more specific than it was with other works, where it just fell in the general local government requirement.

GORDON J: Okay. So, we have a specific provision for the canals, we have a general provision for the other works, but you are statutorily obliged to do them all.

MR HORTON: Yes.

GORDON J: Thanks.

MR HORTON: And whether that matters is a point of causation, which we have addressed your Honours on separately. I am sorry if that was confusing. Can we take your Honours to David Securities, please. Just to put your Honour in the context, we are taking your Honours to the part of the decision – this is in joint book of authorities volume 3, behind tab 24. We would like to start, please, at page 555 of the book, which is 369 of the report.

Just to orient your Honours, we are dealing with the third issue which arose in that case – which was, was there entitlement to restitution – rather than with the preceding issues, which, of course, had been established and do not need to be gone over here. That is to orient your Honours. Then would you move forward, please, your Honours, to the statement of principle, 565 of the book, 379 of the report. Just below point 5 of the page, the statement of principle:

Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognizes would make an order for restitution unjust.

That is, of course, in bare terms, but in principle terms we would pick up its application in this appeal:

entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust.

And then we say the two relevant defences there recognise, for example, of good considerations, as an emanation, if you like, of that principled articulation. Then, over the page, of course, referable to what Justice Goff had said in Barclays Bank, at 566 of the book, 380 of the report, and where reference is made to payment “for good consideration”.

GAGELER J: Do you shoehorn your entire case into that language of “consideration”, or can it stand as an unjust circumstance, looking more broadly at benefit?

MR HORTON: If one uses the word “consideration”, not locked in its contractual context – which we say, yes, correct not to do – that encapsulates what we wish to do; that is the defence as we articulated here. The tone is fraught because it immediately evokes contractual thinking, that we know ‑ ‑ ‑

EDELMAN J: For a long time in this area – with some mistakes – “consideration” has been understood to mean basis, reason, or condition for performance. Not the contractual sense of a bargained‑for promise, but the older and stricter sense of the objective reason or purpose for performance. Are you departing from that older, objective sense and saying that it should have a new sense, or are you adopting that?

MR HORTON: That does not get us quite where we need to be, that articulation, as your Honour has put it. We would say “consideration” here means “value”.

EDELMAN J: Is there any authority that has ever said that?

MR HORTON: Justice Gummow, of course, in Roxborough, was keen to ‑ ‑ ‑

EDELMAN J: Justice Gummow in Roxborough specifically says it means “basis” or “purpose”.

MR HORTON: Yes. He said it is a turn of some difficulty, and of many meanings.

EDELMAN J: Yes. But in this context, he said it meant basis or purpose.

MR HORTON: Yes. We do not accept that it means basis in this context, because we cannot ‑ ‑ ‑

EDELMAN J: Do you have any authority that says, in this context, it means “value”?

MR HORTON: No, but only in this sense. What is being talked about here, in consideration, is obviously, in some contexts, “consideration” in the sense that value went back; something of value was returned – or being in a bargain setting. We do not shy away from that consideration being, if you like, the linking and the basis, but different in public law, because the reason and the basis are different. And it, with respect, does not serve public law’s proper purpose.

That is, we already have the mistake paid under a misapprehension, if you like, as to the basis. Like happened here with the majority, if we keep that thinking of again looking for basis in consideration, we are liable to commit the error the majority did below at paragraph 60, to get endlessly tied up in finding basis, the state of affairs in the mind of the payer. Really, we say, it is not that complicated. The payer paid because they were obliged to, and did not want to take on the government about it. That is the mistake, and that is the vitiation.

The difficulty with the majority, the difficulty with the reasoning consideration, it precludes moving on. One then gets tied up – as the majority did below – in a total failure of consideration, as if they are the same thing. We find in the reasoning of the majority below, suddenly, in context of the defence, we are discussing a total failure of consideration – which, as we know, is another vitiating possibility, not something that bears upon the availability of the defence.

The language is fraught. It is fraught in public law because it seems to evoke, if not in the mind of the sophisticated thinker, in the mind of those who are everyday dealing with restitution cases, something which it is not. Trying to find a basis, but for what purpose with the defence, when the defence is only interested in whether value went back. At the basic proposition, unjust enrichment is saying: did you get what you paid for? The language of consideration complicates that. Recognising, however, we do need more – as we have articulated in what we said. We do need more, not just for went back, but as correlative in the way consideration would be, because it is the basis.

So, we do not shy from “basis” in that sense, but the term is problematic in public law, and is apt to keep leading people back to quasi‑contractual thinking, where this began.

GAGELER J: So, you were taking us to page 380, I think?

MR HORTON: We were. So, our first point about consideration is, unless it is to denote value, we do not adopt the term. The second point is this, it is, understandably, frequently used because all the cases, really, are contractual cases. So, it is quite proper to talk about value in a contractual case as being bound up in the concept of consideration – perfectly appropriate. But it is why we have urged focus on the principles, not on its frequent application, because its frequent application has been in a different context.

Now, their Honours go on at point 5 of that same page – page 380 of the report – to deal with – and we must admit, we have some difficulty with the judgment at this point. It is not entirely clear, but we are moving now in the reasons, to considering “failure of consideration”. So, again, one is having to recognise that what was previously being discussed as a defence, the discussion is now moving to something different, which is one of the vitiating possibilities, that is, “total failure of consideration” – confusing, because the same word is used. But note the plurality there say:

It is unnecessary in the present context to assess the merits of this argument because –

the defence has already been recognised. So, we say the defence is firmly recognised, but one needs to be cautious about the term “consideration”. Then, if your Honours would turn to 382 of the report, 568 of the book, and now we move fully to expounding this doctrine in the context of contract. Their Honours now openly use the language of contract in terms of what is being contracted for, the “state of affairs”, for example, in the payer’s mind, and then move again to the concept of “total failure of consideration”.

GORDON J: One of the reasons why they are concerned not to deal with it under the rubric of unjust enrichment, because they were dealing with this idea that there was some sort of amorphous principle that hung above everything. The courts in Australia have said that that has never been a position adopted, so they were seeking to identify what were to be not only the limits, if there were limits, but to identify some principles which underpinned that which was to be applied in order to ensure that we did not end up with this amorphous concept, which was not only difficult to apply, but difficult to explain.

MR HORTON: Yes. And this Court said descriptive, accumulative, incremental, and that is the approach here, with respect, that we would adopt, that is being applied – cautious, incremental approach not being carried away, if you like, by something which has great possibilities for freedom from restraint and rational thinking.

That is why we would seek to tie ourselves back to the principle and incrementally ask whether refreshing of the terms used, whether consideration binds it too much to its original context, recognising the defence we are advancing is in circumstances where it would be exceptional. You have seen that we fully accept that. It is rare to have a levy imposed which is statutorily and actually for the benefit of payers – body corporate perhaps, and local government, but I cannot think of any other context. We are very mindful though, of those warnings, if you like, about keeping the doctrine to its principal basis. Can we go, please, to the majority decision in the core appeal book.

EDELMAN J: So, are you moving away from David Securities now?

MR HORTON: For the moment, unless - - -

EDELMAN J: I am just wondering why, on your test, the defence of good consideration fails in David Securities? Why do you say the majority is right? Or do you say the majority was wrong to deny a defence of good consideration?

MR HORTON: No, correct, we do not differ in the result. But it is just a different circumstance, where we say here - - -

EDELMAN J: How do you explain the result? I mean, there is money that is paid by mistake of fact in relation to withholding tax that was not due. The bank gives an interest rate that is lower than it otherwise would have given, had it known that the withholding tax was to be paid by the bank rather than by the customer. Why does, on your case, the defence of good consideration fail?

MR HORTON: Yes. Well, I think that their Honours, the plurality get to the end, I think, and say something a little cryptic, which I do not pretend fully to understand, they are saying well, the bank might have done things differently.

EDELMAN J: Yes, but just on your approach, the defence of good consideration should succeed, should it not?

MR HORTON: It is on a statutory context, so ‑ ‑ ‑

EDELMAN J: I see. So, it is a different defence then. It is a very different offence in a statutory context.

MR HORTON: Same defence extended into the public law context – different context, and we opened with different context.

EDELMAN J: But with a different result.

MR HORTON: You cannot – in our respectful submission, you could not equate David Securities, where there is no statutorily‑defined benefit, with a case as here, where it is defined and proved – to the extent of being proved.

EDELMAN J: All right.

MR HORTON: Maybe I could reflect more about that at morning tea.

GORDON J: Can I add one question to that, that is this, if you are answering Justice Gageler’s question about causation, then David Securities – the thing that was the causal difficulty was the mistake of fact in relation to the withholding of tax. Where do you start the causal connection inquiry, on your analysis?

MR HORTON: We do not have an analysis, because the payment is made because of, here, the compulsion to pay. And of course, there has been a lot made of that, this is a coercive system. So, we ‑ ‑ ‑

GAGELER J: Well, you start with the mistake of law, do you not?

MR HORTON: Yes, yes.

GAGELER J: Is that not the foundation of the cause of action?

MR HORTON: Yes.

GAGELER J: And then you said you have a defence, which you labelled “receipt of value” or “good consideration”, depending on what you mean by “consideration”.

MR HORTON: Yes.

GAGELER J: And the only element of your defence that might be described as one of causation is concerned with how the money paid was actually used.

MR HORTON: Yes.

GORDON J: Well, you have two limbs – you now have two. You have money paid – used – and then you have this requirement that there be a benefit which is equal to or greater than the payment. But there has to be two, on your view. Is that how the way we are to read it, understand it?

MR HORTON: Yes, we have given a few, of course, but they are important elements of it.

EDELMAN J: Was it even that payment that was used? Were the works done before or after the payment of the special rates?

MR HORTON: I think it is fair to say – I am not 100 per cent sure about this – because there was an unspent portion that was returned, there must have been – there was an expenditure of some and works done, but not expenditure of all, because not completed – and so, that is returned. The bit that had not been spent to the works was returned with interest to those who paid it – rateably – which gives some safety, in our respectful submission, of the value being equal to or greater than, because in this rare case, some of the money that was paid, yet the service . . . . . delivered was returned. So, not only did the Council make a contribution itself to the cost, but the ratepayers received about half the money back.

EDELMAN J: But it would not matter, on your submission, whether the works had been done before the rates were paid or after the rates were paid – if you do not have to have a strict causal connection, then that should not matter, should it?

MR HORTON: Well, it matters that the works – perhaps not. But it matters that that be referrable, that it could be correlative. So, one cannot do it five years ahead of time and levy after it. It must be a correlation. It must be what they paid for.

GORDON J: Say that again? So, you cannot say, well, there is a five‑year time period example ‑ ‑ ‑

MR HORTON: Well, you cannot do the works five years ahead of time, as an afterthought. levy, and then say, well, you received the benefit which we had previously given you. That is, it is referrable to that, collected for that purpose as the statute requires. But the statute has that built in, you may levy this for that purpose. And, in fact, the way the Regulations work, the ones my client did not comply with fully, one has to ‑ ‑ ‑

GORDON J: You have to have a plan, you have to have time, and you have to have cost elements.

MR HORTON: Yes. So, one has to do those things. So, that is the inbuilt protection for that. The scheme seems to foreshadow there being a resolution for the doing of things which are planned to be done.

GAGELER J: Was it not the problem here? Am I wrong?

MR HORTON: No, the problem was that what was done did not have in the right document – the overall time and overall cost of what was to be done, they were the two things that were missing from the overall plan.

GORDON J: Did not have the necessary elements which provided the safety net that you have just described.

MR HORTON: Yes, and we will come to this in the context of illegality, which – we say they are for transparency and accountability, but which did not feature in the case as a criticism of something that was denied. We will come to that when we come to illegality and what purpose we say the statutory power asserts in asking what significance it is that there was illegality and what type. Could I go briefly to the majority decision, your Honours, where we say the error appears, and an error borne of this terminological problem. It is at page 55 of the core appeal book. Could I ask, did your Honour propose to take the break at 11.15?

GAGELER J: Yes.

MR HORTON: Thank you. The errors, your Honours, in our respectful submission, appear in paragraphs [60] and [61]. The first error being his Honour is here dealing with the defence, having dealt with, for example, Ovidio and Adrenaline, which were defence cases and advanced by us as application to the defence, yet his Honour here is considering questions more related to a total failure of consideration. That is, his Honour has returned to consider vitiating error in the context of the defence. You will see the words “failure of consideration” in the third‑last line of paragraph [60]. That is the first error. Total failure of consideration does not bear upon, in that context, the defence of good consideration.

EDELMAN J: So, Ovidio and Adrenaline are both wrong in that respect as well?

MR HORTON: No, they both recognise a defence of good consideration.

EDELMAN J: But they, at least as I understand the judgments in both of those cases, they are using consideration in the context of providing something for which the basis had been bargaining for.

MR HORTON: We respectfully disagree, actually. In that case, there was a contract – so, one, they are contract cases, bear that in mind. Two, the thing bargained for was provided, or part of it: use of the racetrack, use of the premises. That is not a total failure of consideration case. And there will never be a total failure of consideration case where the defence have good consideration. It is logically impossible to hold those two thoughts together.

EDELMAN J: So, when Justice Leeming says in Adrenaline that the promoter “received precisely what it bargained for”, in the context of the good consideration defence, is that a correct or an incorrect application of the notion of consideration in that context?

MR HORTON: Perfectly correct. They received what they bargained for, as here, you received what you paid for. That is perfectly correct, but that is not a total failure of consideration case. It is one, I would have thought, it is the opposite of total failure, that is, it is a consideration case, why the terminology is so irretrievably confused, with respect.

EDELMAN J: I think what I am saying to you is, is the meaning of the word “consideration” any different when you are considering from the perspective of the payer who is seeking restitution or the defendant who is saying, well, I can defend that on the basis that I have given good consideration. Does the word not have the same sense, in the way Justice Leeming is using it?

MR HORTON: The two are the same but only because one must recognise it must be value to the payer. So, the only value that matters is value to the payer. In a contract case, that is a simplistic, with respect, exercise. Did you get what you bargained for, because that is what we can all take, rightly or wrongly, for a moment, as being of benefit to you, of value to you. You entered a free will transaction, and you wanted this, and someone else did something, and you did something, and you received this.

GORDON J: So, the difference here is that we do not have the bargain, whether it is contractual or otherwise. We have an imposition, which is a mistake of law imposed, not requested – there is no basis for it. There is no, to use the more neutral language – and you say forget about basis, I do not need a basis, I need to extend this concept of unjust enrichment to expand it to include a situation where there is no basis. And it is not called total failure of consideration, there is just no basis. It is imposed upon the person, but they received value.

MR HORTON: Yes.

GORDON J: That is really your case.

MR HORTON: No. I do not embrace “basis”. I just do not embrace that.

GORDON J: No, no, there is no basis. You do not embrace basis.

MR HORTON: Yes, sorry, yes.

GORDON J: You say there is no basis, you do not need a basis, I can impose it on you, and I am entitled to have the doctrine applied.

MR HORTON: Yes.

GORDON J: So one is removing what up until now has been one of the considerations which have provided a foundation for limitation of the concept of unjust enrichment.

MR HORTON: Well, I am not sure I would accept that last proposition.

GORDON J: Okay.

MR HORTON: In some ways, it works the opposite way, which is that for which anyone bargains, and gets, is taken to be of benefit to them. In my respectful submission – I know this is a simplistic economics argument – but that is what it is. It is a pragmatic argument: that for which someone bargains is taken to benefit them.

GORDON J: But there is no bargain here. We have just established that there is no bargain.

MR HORTON: Precisely.

GORDON J: That is my point. You have no bargain, you have no basis, that is what you have removed.

MR HORTON: Precisely. Yes, so, it removes the ease of definition of “benefit”, I understand that, because the bargain is so revered.

EDELMAN J: There are lots of failure of consideration cases where there is no bargain. Is that not a problem for your argument?

MR HORTON: Well, in every contract case, there will be some sort of bargain reached.

EDELMAN J: But outside contract – non-contractual cases where a payment is made on a condition or for a purpose – even though there is no bargain, there can still be restitution, if that purpose either fails from the outset, or subsequently fails.

MR HORTON: Yes. A total failure of consideration case or something like that.

EDELMAN J: Yes. It does not have to be in a contractual context.

MR HORTON: Yes. We do not advance – I am sorry, your Honours, I forget the time ‑ ‑ ‑

GAGELER J: No, finish your answer, and then we will take the 15‑minute adjournment.

MR HORTON: Yes. It is just in the public law context, we say the basis question is resolved by the simple bare, raw facts, if you like, that one pays because one does not wish to have this attached as a charge to their property. But that has not failed, that still subsists. That is the whole benefit that is being delivered, that my neighbour has to pay, and if he does not pay, he is going to get the charge affixed, which means he is going to pay, and we are all going to contribute to these services. A different conceptual framework, but not one which means there is no benefit given in return.

GAGELER J: We will take the 15‑minute adjournment at this stage.

AT 11.15 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.29 AM:

MR HORTON: Your Honours, could I briefly finish on paragraph [61] of the majority decision at page 55 of the core appeal book, on this point, and then perhaps move to point 4 of our argument. The error, as we have articulated it, is considering failure of consideration as if it was at play in the consideration of the defence. But could we, perhaps, say something about basis here? That is, the total failure of consideration, we accept would be, in normal contexts, the failure of basis. Here, the basis could be the lawful ability to compel payment – which has failed in one sense, but we say, which is not the correct analysis for basis. That is the analysis’ mistake – and, by this stage, one is past that analysis and accepted that there was a mistake of law in the payment and an illegality in its levying.

But the basis – if it is to be used in the context of consideration here – is the thing which the statute says is the reason for payment – that is, to secure the works and services that benefit you, for a moment – accepting the statute to be all‑knowing about those matters. So, if one considers consideration, then, rather than a total failure, for a moment – which is where the focus is for the defence – the basis still is there. So, there is not a total failure of consideration, obviously, because the basis in that sense exists and has been delivered. But so, too, it becomes a consideration case, not a total failure of consideration case, because the basis for paying – albeit under compulsion – has been the delivery of those things which the statutes deigned, deemed to benefit you.

EDELMAN J: But that basis certainly does not fail from the Council’s perspective, because the Council has done that which it is obliged to do, and that has been achieved.

MR HORTON: And not from the payer’s perspective, because the payer has received the thing for which they paid as the basis for payment.

EDELMAN J: Yes, but from the perspective of a defence by the Council, the Council does not have a defence to say that the basis upon which it has provided the services gives rise to some form of injustice that entitles it to get back the value of the benefit that it conferred.

MR HORTON: Yes, your Honour, not without being able to say, as we do here, not in the absence of showing benefit delivered back to the payer – and benefit from the perspective of the payer. None of those principles we seek to do any disruption to – that is, one can see the basis, but one just needs to see it not as a bargain basis – if you like – but as something which the statute sets up. So, perhaps I disavowed basis too early, earlier, but it just requires a different analysis, in our respectful submission, in public law.

Can we move, please, to point 4 of our oral outline. Point 3 is made adequately in writing. This is the question of illegality. In much of what is put against us, this did not feature prominently as a disentitling factor, but we rather see from the oral outline it may be put more front and centre than it has been. It seems to attach significance, in the respondents’ case, to the levies having been imposed here without statutory authority – that is, without compliance with the subordinate legislation’s requirements.

There is no doubt here that statutory power existed – that is, this is not a fundamental absence of power case. As we read the case against us, it would treat illegality as dominating the justice question. That is, an illegal levying could never found a claim by a public authority that its retention of the money was not unjust. We accept in the case of fundamental absence of power that may well dominate the justice question such as to disentitle reliance upon the defence. That is, it could not be thought that a public authority could retain funds which they had had no power at all to levy for any purpose within their statutory remit, for example.

We make these submissions on illegality: one, it is of course, part of the mistake – so, to some extent it is occupied and exhausted by the mistake, the vitiating part of the equation in public law. We accept after that stage it may remain relevant to the justice question, which is for the statutory authority to show. We accept that a fundamental absence of power may well – would likely – disentitle reliance upon the defence.

GORDON J: Can I ask just one question about that? When you say fundamental absence of power – given we have a mistake of law, is that fundamental absence in the particular circumstances, or at large? Here, we know there is an argument – which I assume you seek to deal with – which says that there was no power to impose the levy, because the resolution was itself invalid. That is, we do not get to the levying aspect of the power, because the precondition to the application of the levy was not made out. Is that in your first category, or in your second category?

MR HORTON: That is not a fundamental absence of power. That is ‑ ‑ ‑

GORDON J: The reason why I ask that is because in relation to the way – and you will deal with this, I assume, in paragraph 5 – is, is there a distinction drawn in the Regulations between the resolution being invalid and the levy itself being invalid, giving rise to particular rights of recovery by the Councils?

MR HORTON: Yes.

GORDON J: Has Parliament already turned its mind to those circumstances in which there is to be recovery by the Council, and by the taxpayer?

MR HORTON: Yes. Yes. Let me perhaps be more systematic about it. If there was no power in the Local Government Act to levy special rates and charges, then that would be a fundamental absence of power that we did it. That is the fundamental absence of power. That is, could not, even in compliant with procedural steps, have levied. No valid path to levying.

That is not the case here, of course. As we have seen with the obligation to do these things, this is the Council’s bailiwick, and the Council has power to choose, if you like, about the means by which it funds those activities. So, the deficiency here appears from joint book of authorities volume 1, pages 33 and 34, about what the “overall plan” had to do in section 28(4) of the regulation. So, it did all but (4)(c) and (4)(d) – not:

the estimated cost –

and not:

the estimated time –

self‑evidently, things which exist for transparency and accountability purposes – no point was run below that there had been a threat to those, but the illegality is the illegality. Now, for the purpose of the defence, we say, and the question of unjustness, it is relevant to know what sort of error – what the nature of the error was. Here, for relevant purposes, we simply say it is not fundamental absence of power.

GAGELER J: Well, it is an absence of power, but not fundamental.

MR HORTON: Yes. Now, it is relevant to us, we say, and we can take you by analogy to Equuscorp – a slightly different case, but we say it shows coherence in the law, joint book of authorities volume 4, in the decision of Chief Justice French and Justices Crennan and Kiefel. Would your Honours turn to page 626 of the book – or page 518 of the report – paragraph 34.

There, of course, the contract under consideration was one which was prohibited by statute. But the purpose of us taking you to this, your Honours, is to see in terms of coherence how one, looks at illegality in this sort of context:

There is no one‑size fits‑all answer –

We would endorse that, with respect. But the question is – and this is what we say is a central touchstone for illegality:

will depend upon the scope and purpose of the relevant statute.

at about point 8 or 9 of the page. And one looks to whether:

the statutory purpose is protective of a class of persons from whom –

recovery is sought, and:

whether it is an innocent party or involved in the illegality.

Now, different context slightly, but what we seek to draw from that is the principle and that is, in understanding the nature and seriousness of the illegality, one needs to understand the scope and purpose of what is being done, in effect, what purpose is it that this power was conferred to protect or do? And here, we would say the purpose is self‑evidently transparency or accountability, but not in any way which featured in the case below.

EDELMAN J: It is really a submission that a defence would not be precluded because of stultification of some underlying statutory principle.

MR HORTON: Yes. With respect, that is right. And, as we see, the point put against us is no taxation without lawful authority, but we say that does not answer the point at all. There was lawful authority to levy this type of charge, but in the execution of it, there were these deficiencies such as invalidity. That is said, with respect, Justice Edelman, further on in Equuscorp, page 652 of the book, of the report, page 544, at paragraph 111.

There it was held, of course, the opposite from what we advance here – it would stultify the statutory policy on the point “to allow recovery”. So, there it was disentitling, being a statutory prohibition. If we move to point number 5 on our outline, the Regulations, and the best place to see those, without having to move too much, is in joint book of authorities 1, behind tab 8, at page 48.

GORDON J: Are these the 2010 Regulations?

MR HORTON: I am taking your Honour to the 2012 ones only because I can easily excise what the amendment was, and that way I do not have to take you to two sets.

GAGELER J: We work from reprints, so it is best if you identify the instrument.

MR HORTON: Thank you. It is the 2012 Regulation, and it is at page 78 of the printed version, hopefully, but it is section 98 of that regulation.

GORDON J: Can I ask one final question. Are these the Regulations which are issued relevant to the rate notices issued between – sorry, after 5 December or before 5 December?

MR HORTON: After.

GORDON J: Thank you.

MR HORTON: And they involve the additional words, but we can easily, for the moment, I think, excise them rather than taking your Honour backwards and forwards. And your Honour will see there at section 98 there are the two categories:

levied on land to which the special rates or charges do not apply or should not have been levied.

The feature being here that the target is the rate notice, not the resolution of these. The majority below, and we endorse the reasoning below, consider the first of these formulations, that is “do not apply”, to be concerned with when there is some disconnect, if you like, between the resolution and the rates notice. Now, we have identified, your Honours, what we think is probably a typographical error in his Honours work in paragraph [26].

GAGELER J: Is this the primary judge?

MR HORTON: The majority Justice of Appeal McMurdo, page 47 of the core appeal book. That is, unless we have misunderstood the context, the fourth line down, the word “no”:

but where there had been no effective resolution to levy that rate or charge on any land.

And his Honour might mean where there had been an effective resolution, because his Honour goes on in the next lines to speak of the “valid resolution”. So, as we understand it, the resolution on his Honour’s formulation is valid, but the rates notice has gone outside the resolution.

GORDON J: This is why I put to you before the distinction between the resolution power and the levying power.

MR HORTON: Yes.

GORDON J: So, the principle being that these provisions, section 98, presupposes a valid resolution, but the issuing of the rate notice themselves does not match the resolution. At section 98 it is:

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

So, there is a disconnect in that sense:

or should not have been levied.

Is the second category.

MR HORTON: Yes, which is treated differently by the majority below, as would be warranted, because, as an amendment to the Regulations, they must have sought to have some different effect. That is, that the notice must be directed to land that specially benefits. That is that touchstone in the Act.

Now, there is no suggestion here, of course, that the resolution was valid. The resolution is said to be invalid, so disentitling on the first limb on the case put against us, as found below. No difficulty with a rate notice levying these on land – these charges on land, which will not within the benefit area. That is, all of these properties were accepted to benefit. It was not an anomaly of that kind which could readily occur.

JAGOT J: Sorry, is it the resolution is valid the rates notice is invalid? Is that what you are saying?

MR HORTON: Yes, in the first scenario where the charges do not apply; limb of section 98.

JAGOT J: I am just a bit confused. I thought the problem was there was not an overall plan. Is that the problem?

MR HORTON: Yes.

JAGOT J: But 94(2)(b) says that:

The local government’s resolution to levy special rates or charges must identify—

. . .

(b) the overall plan –

Where is the resolution? Is it in here somewhere?

MR HORTON: It is not in the material.

JAGOT J: But if it did not identify an overall plan then how is the resolution itself not being valid?

MR HORTON: That is right, as with some other provisions, which we will come to, it is invalid.

JAGOT J: Is invalid? Sorry, I had heard you say the resolution was valid, but the rates notice was outside the resolution. Is that ‑ ‑ ‑

MR HORTON: We think there is an error in his Honour’s – typographical error.

JAGOT J: No, I am not just worried about his Honour’s error. I thought you said the resolution is valid, but the rates notice itself – they are outside the resolution.

MR HORTON: It is put against us, the resolution – always been put against us, the resolution is invalid, and that has been accepted.

JAGOT J: So, you did not say what I just ‑ ‑ ‑

MR HORTON: There is not an effective resolution. I am sorry if I misstated that.

JAGOT J: I am going to take it the resolution is invalid because it did not comply with 94(2)(b)?

MR HORTON: No, because it did not do the things which I took your Honours to earlier, in respect of the overall plan.

JAGOT J: I thought was 94(2)(b), is that – no?

GORDON J: It is 94(2)(b), and then you rely upon the fact that it omitted to deal with subsections (3) to (14). Is that not it, is that not the way it works?

JAGOT J: Sorry, I could not pick that up. It is a breach of 94(2)(b), yes, or no?

MR HORTON: Yes, because the overall plan was not an overall plan because it ‑ ‑ ‑

JAGOT J: No, I understand that, but if you were taking it back to what was not done, it is 94(2)(b), because it was not an overall plan, because it was not a document that did all things it was required to do. Okay, that is fine.

MR HORTON: Both limbs of this are aimed at the same mischief, in effect. That is, to make sure that land does not get levied which does not specially benefit directly in the last of those limbs, but more indirectly in the first of them. That is, the resolution identifies it correctly, but somehow the levying and the rates notice has gone awry, and they are the limited circumstances in which these obligations, to repay and save the validity, operate. Presumably to save the validity because the notices might levy other charges at the same time. That was the reasoning of the majority below which we adopt.

GAGELER J: Does that complete point 5?

MR HORTON: Almost. Can we take your Honours to the explanatory material – the extrinsic material, just to show you where it is? In joint book of authorities 8, tab 60, are the explanatory notes for the 2014 amendment. Important to know that it is only from December 2014 on that these explanatory notes apply. But your Honours will see from page 2332 of the book, page 4 of the explanatory notes, that they way we have advanced the construction is consistent with what is there said.

GORDON J: Which part of that page do you rely upon?

MR HORTON: The second half – the last three paragraphs. The first one beginning:

Local government advise it is sometimes difficult to accurately levy special rates and charges –

sometimes:

anomalies occur –

It then gives examples. For example:

if . . . 10 receive a benefit from particular infrastructure, but council only levies the charge on 9 lots, the resolution remains valid.

There were other amendments at the same time. It seeks:

to apply the same policy intent to the converse –

where they:

receive no benefit –

GORDON J: Where is that set out?

MR HORTON: Second‑last paragraph on the page.

EDELMAN J: This is directed to the special leave to cross‑appeal, is it?

MR HORTON: Yes, yes.

GORDON J: So, if we step back from section 94, one has the need to have a resolution to levy special rates or charges, rateable land specified, overall plan set out, overall plan has particular elements which include estimated costs of carrying, estimated time. Subsections (4), (5), (6), and (7), subsections of section 94, identify that you must adopt the overall plan before or at the time of the resolution to levy the charges, it then gives you some ability to levy them one or more years before. So, it tells you what the time period is, and then in (5) you can have an annual implementation plan if it is to be more. Under subsection (14), which was the amendment brought in, was it not?

MR HORTON: Yes.

GORDON J: It says that where you have, in a sense, a resolution which complies with all of that, that is all of those requirements which have just been identified except for it:

(a) does not identify all rateable land . . . or

(b) incorrectly includes rateable land on which the special rates or charges should not have been levied.

MR HORTON: There is that same language again which appears in the second limb of section 98.

GORDON J: The resolution is not invalid only to that very limited extent. In other words, it means that resolution is a critical bit to give rise to an authorised exercise of power.

MR HORTON: Yes. These provisions are late in the piece, that is, from December 2014 and they were enacted at the same time that section 98 is re-enacted and with the words “should not have been levied”, which seem to marry with that which appears in subsection 14 of section 94, paragraph (b).

STEWARD J: Mr Horton, it may not matter, but other than section 98, does a ratepayer have any other statutory rights to repayment?

MR HORTON: No, not of which we are aware of.

STEWARD J: So, if they received the valuation of the property wrong ‑ ‑ ‑

MR HORTON: One can challenge the valuation.

STEWARD J: ‑ ‑ ‑ challenge the valuation separately in QCAT? Yes.

MR HORTON: And then otherwise, one is left with one’s administrative law remedies, which would subsist in Queensland in respect of rates but, of course, commonly invoked. This is otherwise the expression of what we are speaking about in terms of the obligation to return in a statutory sense.

STEWARD J: Thank you.

GORDON J: And am I right that between 2012 and 2014 it had the first limb of 94(14) but not the second limb?

MR HORTON: Yes.

GORDON J: In other words, there was a very narrow ability to have an invalid resolution, but otherwise not, and it was expanded slightly with effect from 5 December 2014.

MR HORTON: Yes, and the explanatory notes, your Honour, apply to that amendment when 98 is re-enacted in that form, not simply amended but re-enacted. So, those explanatory notes can be said to be speaking to the whole of that provision in 98.

EDELMAN J: In one sense this should be the first question on the appeal, should it not? Because if subsection (14) is effectively covering the field then everything else falls away, but if it is not, and if it is confined, then we get into the questions that you raised earlier.

MR HORTON: Yes. The only possibilities for us is, otherwise, as your Honour said, well, it does not apply to money that has been spent because it talks about return of money, or because it did not preclude the operation of common law defences.

EDELMAN J: Yes.

MR HORTON: That is not in the reasoning below, but that is the only way we would not be struck out, if you like, by an adverse ruling about the Regulations.

GAGELER J: Well, the cross‑appeal comes first, logically, is another way of putting it.

MR HORTON: Yes.

GAGELER J: Is there a policy reason why we would read Regulation 98 in the way you have put it?

MR HORTON: Yes, that is articulated in the explanatory note. The difficulty – the objective difficulty of councils in always getting right the special benefit area, and this being a necessary adjustment to that where it is clear they do or do not satisfy that very statutory test, which is so critical, if you like, to everything that has been the base of our submissions.

That is, they must truly specially benefit, and this is a provision which ensures truth in that and a ready means by which a ratepayer can seek to have that corrected to ensure that that special class of persons who specially benefits and therefore being obliged to pay. We did not propose to address the last point orally on Woolwich, for two reasons. One is that we have said something about it in writing which we are content with, and secondly because the interveners speak to that.

GAGELER J: Yes, thank you. So, does that complete your submission?

MR HORTON: That completes our submissions.

GAGELER J: Thank you, Mr Horton.

MR HORTON: Thank you.

GAGELER J: Mr Solicitor, do we go to you next?

MR DEL VILLAR: Do your Honours have the case of Bell Bros Pty Ltd v Shire Serpentine‑Jarrahdale, which I understand has been distributed?

GAGELER J: Not to hand.

MR DEL VILLAR: Well, it will be distributed, your Honour. My apologies for that. I propose to make only a reference to that case later on in the oral submission, your Honour. Your Honours have an oral outline, can I begin with David Securities and why it is that the defence of good consideration, as we would put it, failed in that case.

EDELMAN J: Mr Solicitor, it is a matter for you as to how you structure your submissions, but given the limits of time, you may want to bear in mind that the issue that obviously affects Queensland’s interests is the Woolwich issue.

MR DEL VILLAR: I will come to Woolwich. I will deal with, as briefly as I can, with the issue of good consideration because that may also affect Queensland’s interest in a more general sense. Can I simply indicate this: we have set out, in paragraph 2 of our oral outline, how it is that Queensland conceives of the defence of good consideration, and we have set out in paragraph 2(a) why it is, in David Securities, that particular defence, and it was recognised as a defence, failed. We have also set out in the oral outline why it is that that defence succeeded in the cases of Ovidio and Adrenaline. In my submission, the key point to be derived from those matters is that in David Securities the defence failed because the bank had not provided value in exchange for the payments made by the borrowers under the void contractual clause.

EDELMAN J: What does that mean? The bank certainly claimed, and I do not think it was every adjudicated against it, that it offered an interest rate that was lower than it otherwise would have offered were it not for the payment of the withholding tax.

MR DEL VILLAR: With respect, your Honour, there are two places in David Securities – if I could just ask your Honours to go briefly to that at page 381 of David Securities, which your Honours should find in tab 24 of the authorities. At page 381, the first full paragraph, beginning:

It is necessary to examine closely –

your Honour will see their Honours’ considerations – this is in the majority judgment, their Honours’ consideration of what was meant of the argument that there was good consideration. In my submission, what is apparent from the last few sentences of that paragraph is the basis upon which the defence in that case was rejected. In effect, the appellants had no indebtedness in respect of the withholding tax, the discharge of which could form consideration. So, the suggestion that consideration had been provided by the bank really did not make any sense.

A similar effect is what is said at page 383, in the same reasons. That dealt with a slightly different argument, which was to the effect that one could separate out from the general consideration, or from the general contractual relations, the actual payments which the appellant had sought to recover. That is dealt with in the last full paragraph on page 383 of the report, where their Honours say:

the Bank must prove that the appellants are not entitled to restitution because they have received consideration for the payments which seek to recover.

Again, it did not avail the bank at all because there was no consideration. They had not received any value with respect to those payments.

EDELMAN J: That is because you are reading “consideration” in both of those passages as meaning “value”.

MR DEL VILLAR: Yes, and I am coming to that briefly, your Honour. Because ‑ ‑ ‑

EDELMAN J: Contrary to everything that they had said earlier on.

MR DEL VILLAR: In my submission – I will be candid – the majority of judgments in David Securities do use consideration in a way which, in my respectful submission, is difficult to reconcile with principle.

EDELMAN J: But entirely consistent to reconcile with 300 years of authority.

MR DEL VILLAR: If their Honours were correct, then that would mean that in a case of mistaken payment – and this was one of those – one would effect – let us put it this way, your Honour. In the case of mistaken payment, restitution is allowed simply because prima facie the mistake makes it just to recover the money. Where a person argues that they have provided good consideration, the effect of this analysis – if one regards consideration as meaning the state of affairs or something of that sort – would mean that it would be necessary, in the case of mistaken payment, to show that there had effectively been a total failure of consideration.

EDELMAN J: No. No.

MR DEL VILLAR: If the defence ‑ ‑ ‑

EDELMAN J: For good consideration is the defence. You look at it from the point of view of the defendant. It is the basis of what the defendant is providing, not the basis of what the plaintiff has provided. The difficulty in David Securities is that there are payments going both ways. There are payments of loan moneys, and payments of the loan itself, and the withholding tax.

MR DEL VILLAR: In my submission, we are not saying that David Securities is wrong, but we say it can be properly understood as being based upon the matters at pages 381 and 383. If your Honours could turn to page 382 of David Securities, bearing in mind that this was considering the defence, their Honours nonetheless state that:

the “state of affairs” –

This is the last sentence before the paragraph beginning, “So, in the context of failure of consideration”. Their Honours say:

the “state of affairs” existing in the appellants’ minds was that the withholding tax was their liability.

EDELMAN J: That is in the context of considering the statement which they had made earlier, that maybe the basal considerations for a mistake is failure of consideration. Of course, it is talking about the appellants in that circumstance.

MR DEL VILLAR: Your Honour, to deal with that point, in my submission, if in fact one had to show that there was, as it were, a total failure of consideration because consideration is used in the same sense, then that would be conflating the vitiating factor of mistake and the different vitiating factor of total failure of consideration.

Now, my learned friends at paragraph 6 of their reply say, well, this is simply a case where you would have an overlapping set of factors, but if they are correct, then in at least many cases where one is talking about restitution of a mistake in payment, the plaintiff will also have to show a failure of consideration, or their claim will be barred. They will not be allowed to rely on the defence of good consideration. That, in my submission, was certainly the view taken by one of the judges, his Honour Justice Nettle in the case of Ovidio, at paragraphs 27 and 29. But, in my submission, the better view is that expressed by his Honour Justice Brennan. If I could go ask your Honours to turn to page 388 of the David Securities judgment.

EDELMAN J: This is in dissent?

MR DEL VILLAR: Not in dissent, your Honour, because I think everyone agreed on the relevant orders ‑ ‑ ‑

EDELMAN J: I see.

MR DEL VILLAR: ‑ ‑ ‑ but his Honour’s analysis was not the same as that of the other joint judgment. Your Honours will see at the end of page 388, his Honour distinguishes:

Payments made under a mistake and payments made for a consideration that has totally failed –

He says that they:

are distinct categories –

Then, starting at page 389, his Honour then discusses what the term “consideration” means. If one turns over the page to page 390, his Honour does distinguish between consideration in these two types of cases, concluding ‑ ‑ ‑

EDELMAN J: I think you will find Justice Brennan did differ in the orders. He wanted to remit a slightly different question.

MR DEL VILLAR: But on this – with respect to your Honour, to the extent that it is necessary, we would urge the Court to adopt his Honour’s analysis – and that is, his Honour concludes that it is:

a fallacy to conflate the two categories and to find a total failure of consideration to be an element common to both.

In my submission, that is correct, save for one qualification which is probably not pertinent here, which is, in our submission, provided that the value can be provided after the payment, provided that one can say that it is exchange for the payment, then that is sufficient. For instance, in the case of the lease in Ovidio and the use of the circuit in Adrenaline, one can probably say that these were provided after payment of the rent and the fees, which would normally be the case in those sorts of cases. Our point is simply that one cannot equate these two things and assume that they have the same effect and purpose.

EDELMAN J: Was that not being said by Justice Brennan in the context of recognising a defence to a mistake of law of honest belief? So, in other words, his Honour recognised the much broader defence, and would not have confined it in the same way as the other members of the Court would.

MR DEL VILLAR: In my submission, your Honour, that comes up later on in his Honour’s judgment, in particular, at page 396 and onwards. His Honour is not dealing with that situation here.

GAGELER J: Do you confine “consideration” in the first category as his Honour did, or do you give it a wider meaning?

MR DEL VILLAR: We give it a wider meaning in the sense that the present purpose is to be equated with value. We do not say, as his Honour does, that it has to be a benefit given at, or prior to, the receipt by the payee. Because, as I have indicated, it is fairly common, in contractual and other cases, for the benefit to be provided after money is handed over. It would be a strange situation if that were not encompassed.

GORDON J: Just so I am clear, you put to us that we were to adopt the reasoning in Brennan, but you actually seek to have us to vary it and adopt it?

MR DEL VILLAR: Subject to that one qualification, yes. But the key point on which we would urge the Court to adopt his Honour’s reasoning is that there is a distinction in the meaning of “consideration”. Can I deal next with Woolwich, your Honour? Our first proposition, your Honour, is that there is no authority of this court in favour of the Woolwich principle, and there is much authority which is difficult to reconcile with the Woolwich principle.

Can I ask your Honours to turn to paragraph 6(a) of our oral outline where we have set out that it is accepted, as a general principle, that restitutionary claims against governments, in respect of overpayments of tax, are subject to the same principles as claims between private citizens. Could I ask your Honours to turn the case of Mason, which your Honours will find in volume 5 of the joint bundle of authorities, tab 30. If your Honours could turn to about a third, or a quarter of the way down the page, the words, “But English authority”.

GAGELER J: It would be useful if you give the CLR reference.

MR DEL VILLAR: Sorry, your Honours. It is page 117 of the report.

GAGELER J: It is 102 Commonwealth Law Reports.

MR DEL VILLAR: It is [1959] HCA 5; 102 CLR 108, at page 117. His Honour there accepts that:

English authority seems now to say that moneys paid to the Crown –

and I will not read out the rest. But that proposition, that one has to show particular vitiating factors and so on, is picked up in the case which I have had it handed up to the Court, which is the case of Bell Bros in the judgment of this Honour Justice Kitto, which was the majority judgment. If I could ask your Honours just to turn to page 145. Your Honours will see in the passage beginning:

In a passage in the judgement of Dixon C.J. –

and this is his Honour Justice Kitto agreeing with that statement of principle that his Honour Chief Justice Dixon indicated in Mason. His Honour also explains the outcome in the reasoning in Mason v New South Wales and points out that the case where it was reasonable for the plaintiffs there, or the appellants:

to apprehend, as they did, that seizure of their vehicles would follow any exercise of the right to make their journeys without permits –

and so on. Now, Mason v New South Wales ‑ ‑ ‑

GORDON J: Sorry, where are you reading that from?

MR DEL VILLAR: Sorry, your Honour. It is just above the passage to which I took the Court, where his Honour Justice Kitto is summarising the effect of Mason v New South Wales. And we have provided a number of other references in paragraph 6(a), your Honours, to make that point that these principles do not suggest that claims against governments are going to be treated differently. In my submission, the case of Mason v New South Wales, which is discussed there in Bell Bros, is difficult to reconcile with the notion that one has, as it were, a particular Woolwich claim against governments. Had there been such a Woolwich claim, the reasoning of the High Court in Mason would have been completely unnecessary.

EDELMAN J: Why, if that is right, would not Woolwich just be a context‑specific example of the ordinary claim for absence of consideration when money is paid by subject to subject, subject to government – anyone – and it is paid on a basis that immediately fails because it was not due?

MR DEL VILLAR: Your Honour, we accept that one can analyse the cases in which Woolwich has been applied in terms of total failure of consideration, like Roxborough, and we would say that is the appropriate way in which the Court should deal with those cases – or one of the appropriate ways.

EDELMAN J: That may be what Woolwich itself – at least on Lord Browne‑Wilkinson’s approach – that may even be what Woolwich itself decides.

MR DEL VILLAR: It may. But his Honour was one member of the majority and Lord Goff took a different approach, with respect, and, in my submission, the approach his Honour Lord Goff took cannot necessarily be equated with total failure of consideration cases. We have no difficulty – in fact, one of the reasons, we would submit, that Woolwich is unnecessary for adoption into Australian law, is because cases like Roxborough already recognise total failure of consideration. All that would happen if Woolwich were adopted, is one would come up with a new principle which would then have to be subject to qualifications and applications in cases where Australian law already provides for remedies on the basis of mistake of law and fact, and on the basis of total failure of consideration.

EDELMAN J: It is not really a failure – it is an absence of consideration. It is a consideration of a basis that never arose because there was no obligation right from the start.

MR DEL VILLAR: Indeed. But, in my submission, the point remains – one can rely upon total failure of consideration cases to deal with the problems that emerge. There is no need for a separate Woolwich principle. All that will happen is if one is tempted to go down the Woolwich route, is that there will be further complications in trying to fit it in with the remaining body of principle that the Court has recognised. We have indicated – and we have referred in our written submissions at paragraph 53, and the Commonwealth has also referred to some of the issues to which the Woolwich principle might give rise – we have set those out in paragraph 8 of our oral outline.

GORDON J: Before you leave that, do you wish to say anything about this idea of the analogy of developing some common law principle by reference to statute in circumstances where there are a number of Acts in most States and Territories which prescribe, with very great precision, not only the categories of tax that are recoverable but impose time limits under limitation periods. Do you propose to address any of those issues? Are they relevant at all to these kinds of – sorry ‑ ‑ ‑

MR DEL VILLAR: It is all right. Only in this respect, your Honour. The dissenting judges in Woolwich gave as one of the reasons why that particular step should not have been taken in 1992, the fact that there had been various limitations on recovery of taxes imposed under British statutes. In my submission, the same sorts of considerations would make it
even less – or, at least, give greater force to the notion that a Woolwich – a separate Woolwich defence is not needed under Australian law.

EDELMAN J: That may be right, but if that is right, that may also militate against your argument that there should be a separate or new type of value‑received defence that applies in the special public law sphere against governments.

MR DEL VILLAR: With respect, your Honour, we would say it is a defence – we would say it is a defence of good consideration, and that it can explain the cases that have decided positively in favour of good consideration, such as Ovidio, and Adrenaline, and the failure in David Securities. But there are two factors, in our submission, why it is that this is not necessarily some new defence which would only apply. The point is – as we point out in paragraph 9 of our oral outline, the plaintiff payer – depending on the circumstances, of course, but the plaintiff payer will enjoy a windfall at the public authority’s expense and indirectly at the public’s expense, and there are requirements to make out a case of good consideration that value has to have been provided in good faith, and in exchange for the payment.

That ensures that the defence operates. It is confined, but it operates in a way to ensure that it is not unjust to require payment in those circumstances. We would submit that is consistent with one of the basic principles of unjust enrichment – which is that it should not be unjust in the circumstances to require payment. Your Honours, unless I can be of further assistance, those are my submissions.

GAGELER J: Thank you. Ms Higgins.

MS HIGGINS: Your Honours, the Commonwealth Attorney‑General intervened to address three matters. I propose to address each of those only in respect of issues that supervene in our written submissions. The first submission the Commonwealth makes is that the Court should only decide the status of Woolwich as a matter of Australian law, including whether or not the resulting principle derives any support from the Constitution, if it is necessary to do so. Otherwise, the Court should decide no more than what needs to be decided.

GAGELER J: What do you take Woolwich to stand for, in making that proposition?

MS HIGGINS: In terms of the principle there identified, your Honour, that tax paid pursuant to ultra vires Regulations is prima facie recoverable from the revenue as a right, including in circumstances in which mistake and duress are absent. Two issues arise in this connection. First, we submitted that the need to decide Woolwich in order to resolve the judicial controversy in this case arises in a narrow set of circumstances. It arises only if the Court decides that the respondents are not entitled to statutory restitution, while they are prima facie entitled to restitution on the basis of their mistake, and that the appellant can rely upon a value‑received defence.

Against this, the respondents submit, in their reply to interveners at paragraph 13, that the Court should decide the status of Woolwich because, if it were recognised, its “persuasive force” would be relevant to determining whether the novel defence asserted by the appellant is available. However, in order to resolve the Council’s appeal, the Court must decide whether a defence of good consideration is available to meet the claim based on mistake.

Consistently with this Court’s decision in David Securities Pty Limited v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, especially at page 379, the question is whether the circumstances to which the Council points would make an order for restitution unjust. If the Council fails to establish all of the elements of the defence, no question of denying the defence on policy grounds – such as stultification – will arise. Nor, in our submission, will the status of Woolwich.

If an equivalent to the Woolwich principle were to be recognised in Australia, it would supply a policy‑based reason for restitution, which sits outside the transaction between plaintiff and defendant, and is supported by a different normative justification than that which underpins the existing qualifying and vitiating factors. The respondents appear to accept this, referring in their reply to interveners to a policy‑based vitiating factor. The availability of a novel, policy‑based ground for restitution has no immediate bearing on whether a defence of good consideration – albeit rebadged as value received – is available in respect to an existing unjust factor, being a payment under what is an accepted mistake of law. Each of these categories of case will give rise to its own particular issues.

Considerations of coherence will bear upon the acceptance or rejection of the appellant’s defence, including the longstanding aversion of the common law to permitting benefits to be conferred on persons against their will, but the respondents’ submissions at paragraph 51 in terms submit that adoption of the Woolwich principle would provide another reason to reject the proposed defence. If the Court is able to resolve the case without resort to another reason – that is, the status of Woolwich – that is, we submit, the preferable course where it is not necessary to resolve the dispute and constitutional considerations are invoked.

The second matter that arises in this connection concerns the various sub‑issues that we suggested in writing at paragraphs 10 to 16. They only arise if it were necessary for the Court to decide the status of Woolwich. The respondents have suggested in their reply to interveners at paragraph 14 that those sub‑issues either:

do not all arise in this case –

or arise only by reason:

of the controversy before the Court.

One issue that we identified is not contested. At paragraphs 13 to 16 of our written submissions, we had made a prudential submission concerning the question of whether the special charges levied by the Council would properly be characterised as a tax or a fee for services, that being a matter not expressly addressed in the judgments below or in the submissions of the parties in this Court to that point.

The appellant’s reply at 16, and the respondents’ reply to interveners at 14, indicate that the parties are ad idem that the special charges are a tax. Accordingly, this case concerns only whether a narrow form of the Woolwich principle – one that applies only to taxes – should be recognised. The respondents appear to accept that in their reply to interveners at paragraph 15. The question of whether that principle would also apply to other kinds of impost, such as a fee for services, does not fall to be decided.

Your Honours, we identified various issues which now do arise for determination on this appeal if Woolwich were to be considered. They are identified at subparagraphs (a) to (d) of paragraph 8 in our written outline. We identify the context in which they arise in the submissions of the appellant and the respondents. The fact that the Court would need to resolve these various consequential issues provides, we submit, a further reason not to decide the status of Woolwich unless it is necessary to resolve a dispute between the parties.

Your Honours, the second submission the Commonwealth makes is that if the Court decides the status of Woolwich, the Constitution neither provides support for, nor stands against the recognition of the Woolwich principle as part of the common law of Australia. In particular, we submitted in writing at paragraph 30 that section 83 of the Constitution does not support the Woolwich principle, given it concerns the payment of moneys out of the Consolidated Revenue Fund, and not payments of money into it. In the reply to interveners at paragraph 15, the respondents submit that while:

It is true that s 83 of the Constitution reflects common law principle . . . that principle gains weight . . . from its inclusion in the Constitution.

Even accepting that the Auckland Harbour Board principle gains weight from section 83, it is, we submit, irrelevant to the question whether a taxpayer is prima facie entitled to restitution of invalidly imposed taxes paid into the consolidated revenue. Section 83 says nothing on that topic.

Your Honours, the third and final submission the Commonwealth makes is that if an equivalent to the Woolwich principle were to be recognised in the common law of Australia, the starting point is that the ordinary restitutionary defences are available, but that Court need only decide the existence of the value‑received defence for the purposes of this case. The respondents accept that latter submission in their reply to interveners at paragraph 16. And there is no occasion here to consider the defence of change of position, which the appellant has disavowed.

Your Honours, unless you had any questions, those are the submissions of the Commonwealth.

GAGELER J: Thank you.

MR GLEESON: If your Honours have our outline, I am tempted to say this case is both simple and profound. It is simple because what happened is the landowners did what a citizen or subject is expected to do, which is pay their tax when they were asked to pay it. They paid it in circumstances where, in law, the tax was never payable. They had a prima facie right to restitution from the moment of payment. That is agreed. The only question ‑ ‑ ‑

GAGELER J: And that is because of the mistake of law they made.

MR GLEESON: Agreed. Because of the mistake of law. The only question raised is whether they had it for a reason, which is more simple and more profound. The simple reason, expressed in Woolwich, as Dr Higgins accurately expressed it to your Honour, that money paid to the government in response to an ultra vires demand for taxation is prima facie recoverable. Why? Because that coheres with fundamental principle going back to the Bill of Rights 1688 and 300 or 400 more years of constitutional – that is lower‑case c constitutional law embodied across the whole of Australia.

GAGELER J: Mr Gleeson, I have a couple of problems. Are you starting now with Woolwich?

MR GLEESON: No, no, I was just starting with ‑ ‑ ‑

GAGELER J: Just an introduction, is it?

MR GLEESON: This is just the haka.

GORDON J: Or the framework.

GAGELER J: Okay. Well, can I tell you two problems I have with Woolwich. One is, if you are talking about small‑c constitutionalism, there is the whole history of claims against the government in Australia, which resulted in provisions of the Judiciary Act which have no English equivalent, or no historical English equivalent, directed towards governments and individuals being, basically, on the same playing field when it comes to the enforcement of monetary obligations. That is one point.

The second point is, when you look at David Securities [1992] HCA 48; 175 CLR 353 at 372 to 373 and you look at the explanation there given on Werrin, South Australian Cold Stores and another Federal Court case, it is very hard to reconcile that explanation of those cases with Woolwich. What I am saying is, if the proposition to be taken from Woolwich as articulated by Ms Higgins, is treated as part of Australian law, it is hard to see how those cases could have been correctly decided. I just raise those – I mean, you are only in your introduction, so when you get to it, you might address those points.

MR GLEESON: Yes, yes. Thank you, your Honour. I will do that. But I will also say, as part of the simple yet profound, Woolwich is explicable as – and this is in our outline, as Justice Edelman put it in argument – it is simply an instance of failure of consideration. So, it is simple in the sense that the money was paid. Why? To discharge a statutory debt being presented to the person by way of taxation. The statutory debt did not exist; the basis for the payment failed at the outset.

EDELMAN J: That may be the assumption that is, or the underlying rationale, that is being built upon in Werrin and South Australian Cold Stores, and so on.

MR GLEESON: It is why Chief Justice Dixon, with respect, in Mason, said, in the passage just before that which the learned solicitor chose to start with about modern English authority, which is now no longer modern English authority – he had never been able fully to reconcile himself to the proposition that you should need anything more, in those simple circumstances, than to say, I paid the money to you as and for my debt by way of taxation. There was no debt by way of taxation. From the moment of receipt, you were never entitled to keep my money. That is failure of basis, failure of reason, failure of purpose, failure of consideration within the entire history of the law of restitution, whether it is private law or public law, as the appellants wish to put it. There is nothing novel about it.

GORDON J: You do not need Woolwich.

MR GLEESON: You do not need Woolwich, and the learned Solicitor for Queensland has said you do not need Woolwich because we have a failure of consideration case, and we agree with him, to that extent.

EDELMAN J: Well, within the majority in Woolwich, there is Lord Browne-Wilkinson saying that ‑ ‑ ‑

MR GLEESON: That is my next proposition. Lord Browne-Wilkinson clearly said that is a way of understanding it and Lord Goff, at the very beginning of the passage we will come to, said this can be viewed simply as failure of consideration. So that is why I say it is, in a sense, simple. And what is interesting is that we gave section 78B notices, perhaps out of extra caution, because views could be taken whether this is lower-case c or upper‑case c constitutional values involved.

You have had two polities come and intervene, and you have heard precautionary arguments: do not go there if you do not need to. But you have not heard a full-blooded defence which says, when the government takes your money as tax when there is no tax which the Parliament has lawfully imposed, what is the reason why the government is not required to hand your money back there and then, subject to any possible defence?

Now that is what one would have expected the Commonwealth or Queensland to come along and say here is why, consistent with our tradition, not just English tradition, consistent with the cases your Honour puts to me, consistent with constitutional principle, not forgetting the Bill of Rights, what is the justification for the government to say, I can keep your money, even though I claimed it as tax, and no tax was authorised by statute. You have not heard it. And it is for that reason that on the very simple basis that it is an incidence of failure of consideration, appropriately tailored to the profound principle of no taxation without Parliament, that your Honours should adopt Woolwich.

And, in that sense, to come back to the first part of your Honour’s question, it is perfectly consistent with the trend over a hundred years in Australia, more pronounced than in the United Kingdom, of putting claims between citizens and government on the same footing as citizens and citizen, because it is a failure of basis in that particular circumstance. And your Honour Justice Gordon’s question: yes, with respect, it is a perfectly appropriate concern; how does this sit with the body of law, particularly at state level – myriad of law, different provisions, different limitation periods, et cetera, et cetera – how does it sit with it?

It sits with it, quite clearly, in that this is a common law/equity principle of restitution which is wholly amenable to Parliament, State or Federal, regulating the cause of action – and I say “regulating” because there could be a point where, if the Parliament says, I can demand tax from you and, even if the tax is not truly payable, you cannot have any right of recovery from me under common law or statute, that statutory provision would be likely to be invalid under the same fundamental principles that we are relying upon. And that is why it is profound, because those principles will tell you, as we know from some statements in the cases, there are some limits beyond which the Parliament cannot go.

So, the Queensland Parliament here could not have said, if a local government levies special rates without lawful authority, the moneys can never be recovered under statute or common law. That, we submit, would have been inconsistent with the fundamental principle, and that, in another case, would strike down the statute. But we do not have that problem here. But that is why there is no offence to restating the common law consistently with knowing that the Parliament, within limits, can regulate the action. So, your Honours, in that sense ‑ ‑ -

GORDON J: If one takes your proposition, which is that the trend over 100 years has been to put claims between citizen and government on the same basis as citizen and citizen, that is not a justification, though, for this new Woolwich principle. That just means that one looks at David Securities and looks at the underlying principle in David Securities as it applies in the way in which those cases have dealt with it, is it not?

MR GLEESON: It says ‑ ‑ ‑

GORDON J: Why is it that we need to go further than that?

MR GLEESON: It says, you do not need to travel very far, other than ‑ ‑ ‑

GORDON J: Do you need to travel at all? That is my question.

MR GLEESON: All you need to do is to recognise – here is the short answer – in the present case, the plaintiffs won on two grounds. They one on operative mistake of law, and they won on the ground of failure of basis.

GORDON J: But that is David Securities.

MR GLEESON: And that is consistent with – well, David Securities was pure mistake of law.

GORDON J: But the mistake of law basis is – if failure of basis is another way of looking at total failure of consideration, then there is no difference, is there?

MR GLEESON: The practical difference is this, your Honour. If we are correct, you do not need to call witnesses to go into the witness box and explain their state of mind. You simply identify objectively the money was paid as and for a tax, which ‑ ‑ ‑

EDELMAN J: But it does not need to be a tax.

MR GLEESON: It does not need to ‑ ‑ ‑

EDELMAN J: It could be a contract that is void, and where the objective circumstances show that the money was paid under a contract that was thought to be valid – it could be a trust, it could be a statute, it could be a tax.

MR GLEESON: It could be anything your Honour, I accept that. But the reason ‑ ‑ ‑

GORDON J: That is why the question about basis is the question which might be asked.

MR GLEESON: Exactly. We are not urging you to do anything more than you need to do. What we do ask you to do is to say the plaintiff succeeded in this case on failure of basis. It was asked for them as tax, and tax was never payable. And, to the extent the plaintiffs proved a subjective fact, that fact was strictly not necessary to establishing prima facie restitution.

GAGELER J: Why are you starting with Woolwich? Are you saying that the defence ‑ ‑ ‑

MR GLEESON: Well, your Honour provoked me, I am sorry. I was in the haka ‑ ‑ ‑

GORDON J: That is the most perfect answer.

GAGELER J: I may have provoked you, but you have not told me ‑ ‑ ‑

MR GLEESON: Why I am starting with Woolwich?

GAGELER J: ‑ ‑ ‑ why is Woolwich significant, because you say Woolwich does not or cannot carry the defence that is put?

MR GLEESON: Yes. This is the order of the outline, ignoring the haka. After the luncheon break, I will deal first at paragraph 1 with the facts, matters and circumstances which have been debated this morning, but we want to get clear – so, I will deal with that. I then will move to the prima facie right to restitution for the reason – to answer your Honour’s question – that it is important to understand what was the ground of the restitutionary right before one looks at defences. It is important to understand what the unjust factor was which led to the prima facie restitution to then understand the defences. At that proposition, which is 2, 3 and 4 ‑ ‑ ‑

GORDON J: Paragraphs 3 and 4 are Woolwich.

MR GLEESON: Paragraphs 3 and 4 are Woolwich. So, 2 is common ground – there was operative mistake of law. Paragraphs 3 and 4 is to say the plaintiffs and the group succeeded on a simpler ground than appeared in the judgment, which is they paid the money on a basis which wholly failed.

EDELMAN J: But that is not Woolwich in the sense of Lord Goff’s broader approach to Woolwich – that is really your citizen to citizen, citizen to government principle that there was no consideration, no basis. To call it a Woolwich principle might suggest that there is something new being introduced into Australian law.

MR GLEESON: Yes.

GORDON J: I mean, to put it bluntly, you could go from 2 to 5.

MR GLEESON: No, your Honour. I can go from 2 to 5, provided you strike out 3 and 4 and you replace them with, there was a failure of basis irrespective of what was in the minds of the payers. And the reason that is important – it does not make a difference in this case – but the reason it is important is if you do not have to prove mistake, you do not have to call people to say what I believed, you just say ‑ ‑ ‑

GORDON J: But we know from 2 that it is accepted there was a payment under mistake.

MR GLEESON: Can your Honour bear with me? The reason it is important for your Honours in settling the principle here, is the very reason that Woolwich came to the House of Lords. In Woolwich the payer said, I am paying under protest. I am not under mistake – I believe this taxation law is invalid, but, as a citizen, I have to pay because that is my obligation, and then I want to recover the money back under restitution. So, in Woolwich they could not win under mistake of law or fact. So, they had to put it on the basis argument, which is what led to the whole case.

EDELMAN J: But where this goes, really, is just to say, if there is going to be a new value‑received defence, then that defence could not – it might apply to a case of mistake, but it could not apply to a case where something is paid where there is no basis for that payment.

MR GLEESON: Where there is no basis and where the person propounding the brand new defence, for which they candidly admit they cannot identify a case, say the place they get it from is public law – and we should put contract and bargain aside – it is a public law defence. In assessing whether your Honours would recognise that new defence, you would surely bring to account the public law values which are at play.

Therefore, the long answer to your Honour Justice Gageler’s question is, you would not recognise the new defence for a myriad of reasons, but one of those reasons is that the new defence is being recognised in a context between the citizen and the State where it is tax that is being demanded – demanded without authority – and to allow the State to say, although I breached the statute, I chose to give you something which I say you should regard as valuable, would be to recognise a defence which stultifies fundamental constitutional values. So, in short, yes, the real importance of it is, it is yet another reason why the new defence should not be recognised.

GAGELER J: We will adjourn now for lunch.

AT 12.44 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.14 PM:

GAGELER J: Yes, Mr Gleeson.

MR GLEESON: Thank you, your Honours. In terms of our paragraph 1(a), the first proposition is that the appellant imposed the special levies and disregarded statutory requirements, such that its demand was ultra vires. In support of that, in volume 1 of the authorities, we commence with tab 4, which is the Constitution of Queensland. We rely upon sections 64, 65, 66, which have their parallels in the Commonwealth Constitution, and reflect the Bill of Rights that one cannot impose taxes and the like, except for the statute.

In terms of the statute, tab 5, we have the Local Government Act 2009 (Qld), current as at 28 June 2023. If your Honours have that, in section 91(2), we have the definition of “rates and charges”, being:

levies that a local government imposes—

(a) on land; and

(b) for a service, facility or activity that is supplied or undertaken by—

(i) the local government –

relevantly. “Imposition” connotes a compulsory exaction for a public purpose, which has the positive attributes of a tax within the Air Caledonie decision. There is no fee for service, which is an agreed position between the parties. The Commonwealth has acknowledged that. Under section 92, there are four types of rates. In addition to general rates, there are “special rates and charges”, each of which are then explained. Each of general rates, and special rates and charges:

are for services, facilities and activities –

the difference being, to be a special rate, they must:

have a special association with particular land –

for one of several reasons, which may include special benefit but extend beyond that category. Pausing there, special association does not connote exclusive association. Many – perhaps most or all – special rates and charges will have a special association with particular land, but also benefit the broader community. The first example that is given is a good illustration of that. The result of this is we are immediately in territory of non-exclusive benefit. The people being asked and required to pay the special rates and charges comparatively may receive more benefit, but they are not the only people in the community who benefit from the work. Under section 93, the rates are levied on rateable land, and under section 94 ‑ ‑ ‑

EDELMAN J: Sorry, just before you move from section 92, is the word “benefit” being used in light of special rates and charges in the same sense as it would be used in unjust enrichment?

MR GLEESON: No, no. The genus is “special association”, which is a comparative statement. It recognises that the services, facilities, and activities will be undertaken for the benefit of the community as a whole in part, but then they have a special association. The special benefit, if you take the example of maintaining the road in an industrial area, is simply to say perhaps more people come to your industrial plant for your purposes than might travel down an ordinary street, but equally, quite a few people travelling down the street may be going to the big box discount centre located in the industrial area. So, you are being asked to pay more because of special association but not because benefit is exclusive, and certainly not because of any concept of incontrovertible benefit.

GAGELER J: Mr Gleeson, is it (a), (b), or (c) that is relevant here?

MR GLEESON: It is (a)(i).

GAGELER J: I see, (a)(i). Is there anything in the materials that identifies the benefits within the statutory conception?

MR GLEESON: Yes. I will come to them under proposition (1)(d). Essentially, they are, if you are on the lakefront, and, for example, a canal is better‑maintained, it might improve your visual amenity – as well as the visual amenity of anyone who walks down the canal, but because you live next to it, you might enjoy it more hours a day. It is at that very diffuse level of benefit. They are benefits in terms of amenity.

GORDON J: Can I ask one question about that. It was put to us by Mr Horton that the benefit was that identified by the primary judge as being this one to two per cent increase in value. This probably reflects my background as a lawyer, including as a trial judge, but one to two per cent increase in value on any valuation there within the margin of error, is that the only finding we have of benefit? That is, are they the findings that are made? I mean, it is ‑ ‑ ‑

MR GLEESON: It is at the margin.

GORDON J: Yes, that is a good way of putting it.

MR GLEESON: I am coming to the evidence, but it is, in fact, even weaker than that, because what the expert said was not that it was an increase in value, but he said on a counterfactual, where none of the works were carried out, your property might have decreased in value. In his report, he said it was difficult to quantify what the avoided decrease was. In his cross‑examination that I am going to seek to give the Court, when pressed, he said perhaps it was an avoidance of a one to two per cent decrease in value. Your Honour Justice Steward’s question, and I think your Honour Justice Edelman, about where is the benefit in these sort of works in the terms of land value, it is, in fact, a counterfactual finding of the most speculative kind that if work had not have been done, your land might have sold for a bit less.

STEWARD J: It was not a benefit that the Council conferred, in the sense that the Council may have taken away the mangroves, but the increase in value is a consequence of that.

MR GLEESON: Yes, yes, it is ‑ ‑ ‑

STEWARD J: Whether it happens or not is neither here nor there.

MR GLEESON: It is at the margin of the margins of the margins conceptually and quantitatively.

EDELMAN J: One of the examples that seems to be dotted all the way through the restitution literature is the example of the gratuitous window washer who turns up and washes someone’s windows while they are not home, and the consensus – at least now – among almost all of those that write on this point is that the window washer does not get paid. This case looks like it is a local government window washer.

MR GLEESON: Who gets paid and says, well, I get at least the rates that I unlawfully charged you. Now, that literature, your Honours, with respect, deals with two questions. One is, can you identify a benefit in the case of the window washer at all, and, secondly, are the problems with valuation so imponderable that restitution should be denied. Both those problems are present here.

GORDON J: Well, I think they are inextricably linked because one has to identify what is the benefit that constitutes the unjustness.

MR GLEESON: Yes.

GORDON J: So, I have taken you out of order, and I apologise, but ‑ ‑ ‑

MR GLEESON: Can I give your Honours that evidence. So, if your Honours have the appellant’s book of further material at tab 3, Mr McGowan, who was the expert in amenity ‑ ‑ ‑

STEWARD J: Do you have a page number?

MR GLEESON: Yes, page 14 to 15.

STEWARD J: Thank you, Mr Gleeson.

MR GLEESON: I invite your Honours to review paragraphs 32 to 34.

GORDON J: And this is the evidence of the valuer?

MR GLEESON: This is the underlying amenity expert upon which the valuer at the next tab relied, at tab 18. But 32 and 33 deal with your Honour Justice Gageler’s question, I think. What was the benefit? It was a “visual amenity” benefit which you enjoyed more, but not exclusively from others who enjoyed the same benefit on a short‑term basis when they visited the canal ‑ ‑ ‑

GAGELER J: There is no statutory instrument or explanatory document that ties the levy or the resolution to the statutory language by identifying the benefit? That is really what I was asking.

MR GLEESON: I am sorry, your Honour, I missed the question. The answer is no, but the reason lies in the invalidity of the plan when we come to the regulation, because part of what the plan was meant to do was to identify the land, the work, the time and the cost. The appellant says all that is mere procedural, it is not fundamental, ignore it for restitution. But, to understand what was intended to be the statutory benefit, one needed to look at what the scheme demanded, which was never done.

STEWARD J: Paragraphs 32 and 33 really went to the question I asked Mr Horton; that is, how close must the relationship or correlation be, and what findings of fact were laid between the actual payment of the this purported rate and the receipt back of something of benefit.

MR GLEESON: The answer seems to be, on the facts, not very close because everyone received the benefit, it is just that these people are said, perhaps, to have received it more hours a day.

GORDON J: Can I ask one more question about this – I am sorry – and that is, in answer to Justice Gageler, if one is identifying the benefit by reference to the statutory scheme, is it because the elements of the plan are missing that one has difficulty identifying the benefit, or if you had a proper statutory plan – an overall plan – consistent with the statute, it would be easier to identify the benefit?

MR GLEESON: It is the plan that is the statutory link. It identifies the benefit because it will tell you – it will describe the service, facility or activity.

GORDON J: So here we had a plan, we just did not have cost or time. They were the elements missing from – that is why I am asking the question.

MR GLEESON: Yes. Cost and time were said to be the missing elements, but they are fundamental to the plan. If you do not know what you are spending and how long you are going to spend it over, you do not have the benefits defined in the way the statute contemplated. To complete that expert report at paragraph 34, it gets worse for the appellant because the expert candidly says:

the specific extent of benefit for each maintenance tasks would be difficult to determine.

And says, some of the benefits “may go largely unnoticed”. So, in terms of identifying a benefit here, there was no statutory linkage and there was no factual linkage of any concrete character. Then, when one comes to tab 4, Mr Kamitsis, page 18, who relied upon an affidavit of Mr Ehrsam – which you do not have, but he is just the Council engineer talking about the works – and the report of Mr McGowan. He then engages in the counterfactual:

absent the works, the property values . . . would have experienced some amount of diminution . . . difficult to quantify.

EDELMAN J: Which paragraph is this?

MR GLEESON: Paragraph 28. So, it is not that the works have increased the value, it is that they have, in a difficult to quantify way, avoided a diminution on a counterfactual basis. As of 32, he makes the same point. At that stage, he does not even identify the one to two per cent figure, he just comes up with a hypothetical figure – if it was a five per cent diminution avoided, that would be more than the rates you paid. At 37, “difficult” to quantify. So, 39, when he says:

due to the Works, there is likely . . . some enhancement in value –

he is, in fact ‑ ‑ ‑

GORDON J: Where is that, please?

MR GLEESON: Paragraph 39, page 19. He, in fact, means, due to the works, on a counterfactual basis, you avoided what would otherwise have been a small but unquantifiable diminution. Where the one to two per cent figures comes from, we have sought to hand up a respondents’ third book of further materials which simply has the cross‑examination of this witness. It is pages 8 to 11 of the book. The examination at pages 8 and 9 simply demonstrates that he was in fact speaking about an avoided diminution in value.

GORDON J: Where do we find that, please?

MR GLEESON: So, I will use the pages in of book, it is page 8, lines 35 to 40, and then, line 46 over to line 10 on page 9, and then page 9, line 40 over to page 10, line 10. And on page 10, lines 30 to 36. He says he sees:

the two things to be linked primarily by reference to the fact that charges, as I saw them, were quite a small sum relative to the value –

And the “one or two per cent” comes on page 11, lines 40 to 45. In his report, he had said, hypothetically, if it was five per cent that would have been more than the rates. In his evidence he says he is “comfortable” that it – he believes it was more than one to two per cent, that is it.

EDELMAN J: So that is saying that if the Council had not done the work that they were obliged to do, the properties broadly might be worth one to two per cent less?

MR GLEESON: Yes. That is the entire evidence and finding on the existence of the benefit and its valuation. And it shows all the reasons why the window washer example has always been rejected as calling for restitution.

GORDON J: Is there a second point which sits with that, and that is the top of page 12 and that is that:

objectively qualifying enhancement is not possible.

MR GLEESON: Not possible.

GORDON J: We have two – in effect, the positive and a negative.

MR GLEESON: Yes. Not possible on a ratepayer‑by‑ratepayer basis – and never attempted by the Council. So, completing our proposition 1(a), in answer to your Honour Justice Gordon’s earlier questions this morning, the effect was that the resolution was invalid in law, and the levy was invalid in law. So, to take, for example, the 2010 Regulation – which is tab 6 of volume 1, the reprint of 1 July 2012, under the then‑section 28(3)(b) – the resolution was invalid because it failed to identify an “overall plan” complying with subsection (4), particularly (4)(c) and (4)(d). So, that was one ground of invalidity.

There was a second related ground, section 28(5), that an overall plan complying with the requirements of subsection (4) was not adopted before, or at the time of, the first resolution to levy – the different aspects are the same breach. There is a consequent then breach of (6), (7), (8), and (9), which is that you need to have an overall plan which you then turn into an annual implementation plan if it is going to take more than a year. In the present case, it took six years. So, for six years, they passed a resolution each year which was invalid, and they levied the moneys, which were invalid.

Your Honours, proposition 1(b) is common ground that the respondents and all group members paid the special levies under the mistaken belief that they were legally obliged to. That is made clear at paragraph 43 of the court of appeal decision. It is accepted here by the appellants that the finding of mistake applies not just to individual respondents, but to the whole group.

Proposition 1(c) is the appellant was legally obliged to undertake the works and would have done so even if it had not imposed the special levies. The question this morning has elicited that what we put in paragraph 24, footnote 28, about the admissions on the pleadings is accepted now by the appellants. So, I do not need to go back over those pleadings or the underlying statutes. The acceptance is the case was conducted on the footing that the whole of the works in question were required to be performed under one or other of the statutory provisions we have adverted to.

The result of that is that being obliged to conduct all of the works, and failing to impose a valid special rates levy, the appellant was required to fund the works through general rates. As we have framed proposition 1(c), it is not only that they were legally obliged to undertake the works – they would have done so even without the special levies. That is for the reason we advance at paragraph 24 of our submissions, that the appellant did not plead and lead no evidence to prove that but for invalid levies it would not have undertaken the works.

Your Honours, proposition 1(d), which follows from my analysis as the statutory framework, is that the works were carried out for the benefit of, and did benefit, the general public in the Council area, not just the respondents and group members. That follows as a matter of common sense when one thinks about the nature of the works and the fact that we have public and non‑waterfront property owners in play, but it is also evident from the following facts. The first is that the Council funded the works partly from special charges and partly from general rates. The references are in paragraph 24 of our submission at footnote 29 – again that, is an admission.

In effect, what happened was the Council said this work benefits everyone, we think it benefits some people more than others, and we will therefore allocate part of the cost to general rates and part of it to special rates. As to how that was done, if your Honours have the respondents’ book of further materials, at page 14 of tab 1, which is the first further amended counter‑claim, this was the plea of the nature of the benefit – it is a long plea, from page 14 over to page 16, but at bottom of page 15, in paragraph vii – this is just taking the first works – the Aquatic Paradise Works – the works were said to be approximately $3 million worth of works, of which $1 million was paid for through general rates and $2 million was going to be paid for through special rates which then were allocated between individual people.

So, the Council’s conduct in allocating part of the cost to general rates is further evidence that the benefit was not exclusive to this group of landowners. I do not need to go to it, but we have provided your Honours with a second book of further materials. For this purpose, it is to give you Annexures A to D of this document – the first further amended counter‑claim.

Your Honour Justice Gordon this morning asked in the pleadings about the Aquatic Paradise Works, and just to understand one group of works, Annexures A to D are pleaded as the “works” – and you will see from that document, which runs to about five or six pages, there was a whole program of works which went over five or six years which were then interrupted when the Council said it had discovered its mistake. And again, in terms of the benefit, it is impossible from that to identify benefit received by individual landowners, let alone to value it individually.

Our fifth proposition is that there is no finding in the record, or available evidence, of any available request for the appellant to carry out the work, or any free acceptance of that work with an opportunity to reject it. I will just pause at that point. That much of the proposition seems accepted by the appellant in the way it has presented its argument this morning, because it agrees that there is no request and there is no bargaining – that is paragraph 1 of its outline – it is also paragraphs 56(a) and 63 of the appellant’s written submissions, and so the final aspect of the proposition is that there was no finding of fact, and no inference available in this Court that the group paid the levies in exchange for, or to obtain the benefit of, the appellant’s works.

Can I pause on that part of the case, because the appellant has not squarely asked you today or in its written submissions to make a finding that the moneys were paid in exchange for the works, and that is correct, because the way the appellant pleaded and ran the case, it never asked for a finding of an exchange, what it asked for was some looser finding of correlation or connection, which the appellant has been asked about this morning.

But what has happened in the course of this case – which is why we objected to some of Queensland’s submissions – is that Queensland has run its intervention on the basis that this Court should find that the moneys were paid in exchange for the works, and you will see that in Queensland’s submissions in numerous places, including in the outline this morning, paragraphs 2, 3, 4 and 5 are set up on the basis that the relevant defence is a defence of providing value in good faith in exchange for the payment. Paragraph 5 seeks a finding that by reason of the statutory scheme, the services were provided in exchange for the payments.

STEWARD J: Do you go as far as saying this, that as a factual proposition, and as a conceptual proposition, the imposition of the true Air Caledonie tax, which is not a fee for service, will never exhibit a sufficient relationship with the provision of a benefit to a taxpayer or ratepayer?

MR GLEESON: We do, your Honour. There will never be this defence available.

STEWARD J: The connection is just too generalised?

MR GLEESON: That is right.

EDELMAN J: There is also a difficulty. Even if one were to accept that there is an exchange, that switches the analysis of benefit, because the relevant benefit then would be the value of the services that are provided, not the ultimate outcome of the visual amenity or anything like that. So, what would be required to be paid for would be the value of the services, not some assumption that the property value had increased by a certain amount.

MR GLEESON: Yes, that would have to be the benefit, and then you would have to value it. There has been no attempt in this case to engage in that valuation exercise. I need to say little about the good faith element of the Queensland approach, other than no finding of that sort was sought by the appellants or obtained at any point in the trial, because the appellants called no officers of the Council to say why they did the works.

GORDON J: It was also a part of Mr Horton’s argument this morning as well.

MR GLEESON: Yes, and it is simply not available to them because they did not tender that as an issue, did not call any witness, and they disavowed change of position, which is where the state of mind of the Council would have been relevant. So, it is a little rich, we would submit, for them – that is, the appellants or Queensland – to be asking you to make findings of in exchange for, but to the extent it is based on the statutory scheme, that you somehow discern the exchange from the statutory scheme, we say what the payments were made in exchange for was the discharge of the debt – the tax debt. The discharge failed, and therefore the exchange failed. The payments were never made in exchange for services which the Council chose to provide having invalidly levied special rates.

GORDON J: Can I just test that. If you had a proper overall plan with all of the elements attached to it, that submission would not be able to be made, would it?

MR GLEESON: Exactly. If you had a proper overall plan with all of the elements, you would have a valid rate, and you would have a statutory debt which was due and payable.

GORDON J: But you would also have the connection identifying the basis upon which the works were to be conducted.

MR GLEESON: Yes. You would have no restitution claim. That is quite consistent with all of this. The other way to test it is: what is the position of the Council against those people who have chosen not to pay the rates? Does it have a restitutionary claim against someone who says, I think this rate is invalid and I refuse to pay it? Can the Council say, hold on, I went ahead and did all of this canal work, you should be grateful I have done it, please pay me a reasonable sum for the canal work?

Now, that would meet monstrous difficulties as to whether it is a benefit, and whether it can be valued. But a person who did not freely accept that work and did not request it would, presumably, defeat a restitutionary claim by the Council. And, of course, that is part of Justice Nettle’s reasoning in Ovidio, which we will come to, which is, you can usually test these good consideration defences by reference to a counter‑restitutionary claim.

EDELMAN J: That is really just saying that the good consideration defence is really in the nature of a set‑off, and so consideration means exactly the same thing as it would if the claim were brought by the Council.

MR GLEESON: Yes. If the Council were to sue people who did not pay their rates for the benefit of these works, the Council would fail in restitution on multiple grounds, and it cannot succeed in a defence to the people have paid. So, your Honours, proposition 1(f) is now agreed, and not disputed by the Commonwealth, that the rates under the statutory scheme, whether special or general, constitute taxation rather than a fee for service.

Can I then move to the prima facie right to restitution? Proposition 2, it is common ground that all members of the group paid the levies under an operative mistake of law, so as to found a prima facie right to restitution. As to proposition 3, can I put our narrower proposition about Woolwich, that it is a case evidencing a failure of basis. Woolwich is in volume 7, tab 55. The key parts for this submission are in Lord Goff’s judgment, [1993] AC 70 at page 166, letter C. The argument he is addressing is:

that money paid to a public authority pursuant to an ultra vires demand should be repayable, without the necessity of establishing compulsion, on the simple ground that there was no consideration for the payment.

Citing Birks, Cornish, and then a series of cases. So, everything Lord Goff said was set up against no consideration as being a conceptual ground for this form of recovery. Next, page 167 at letter H, Lord Goff – we submit, correctly – read Chief Justice Dixon obiter in Mason v New South Wales [1959] HCA 5; 102 CLR 108 at 117, the passage we referred to this morning, as being support for the proposition that the money is recoverable if the demand is invalid without more, and again, refers to Sir Owen Dixon’s obiter as well as Lord Aitkin at 166, letter D, as being important pointers to a correct statement of the law.

Then, at 171, letter G, through to 172, letter C, there is the essence of why, in this particular instance, the failure of basis or absence of consideration approach is appropriate. They are the reasons I advanced this morning. When Lord Goff then goes to the various objections, he identifies the importance of the Bill of Rights at 172, letter E and at 172, letter F, over the page, Lord Goff makes the point that:

when the revenue makes a demand for tax, that demand is implicitly backed by the coercive powers of the state and may well entail (as in the present case) unpleasant economic and social consequences if the taxpayer does not pay.

And then cites the classic passage from Justice Holmes in Atchison, which your honours might cross‑refer was also cited by Justice Kitto in Mason at page 126. In an interesting passage over on page 173, when Lord Goff analyses what happened in this Court in Mason, it is not the approach which Queensland have urged upon you, that Mason shut down this line of thinking forever. It is rather that, reading Mason correctly, what this Court did that number of decades ago was to take an expanded approach to compulsion in order to ensure recovery. The essential choice made by Lord Goff at 173, letter E is that while you could get the result by expanding compulsion appropriately:

logic appears to demand that the right of recovery should require neither mistake nor compulsion, and that the simple fact that the tax was exacted unlawfully should prima facie be enough to require its repayment.

This is an area where we submit that the law, through simplification over time, has reached a more perfect state.

GAGELER J: Mr Gleeson, the reference to Justice Holmes prompts me to ask what the position is in the United States.

MR GLEESON: Yes. Can I come back to that, your Honour? We have an answer to that. If I can come back to that – just to complete Lord Goff, at 177, point B, we have the proposition that we have advanced that to recognise the prima facie right of recovery is consonant with the Auckland Harbour Board principle for money paid:

out of the consolidated fund without authority –

Then, at letters F to H on that page, we have the concluding principle. So, our submission is that Lord Goff, while he ‑ ‑ ‑

GORDON J: So, where is the concluding principle, did you say, sorry?

MR GLEESON: Letters F to H.

GORDON J: On 177?

MR GLEESON: Yes. That is, you do not need to prove, subjectively, the person paid:

under a mistake of law.

That is letter H. You get there because the money was wrongly extracted by the public authority. That, we submit, is all through the prism which was set up at 166, letter C that:

there was no consideration for the payment.

in these circumstances. Then Lord Browne‑Wilkinson at 197, at letters E to F, identifies two streams of authority which could justify recovery. The first is that the:

ultra vires demand for a tax –

leads to payment without consideration. The second is compulsion. He then identifies the “without consideration” approach, at letters F to H as being “attractive”. It says at H:

There is . . . a close analogy to the right to recover money paid under a contract the consideration for which has wholly failed.

So, that is one of two key strands and that, we submit, is sufficient to justify the principle. He then deals with the second strand, which is compulsion. He cites Justice Holmes in Atchison. At 198, letters G to H, he explains how both strands come together.

GORDON J: If you take the Browne‑Wilkinson approach to it, then, at least on one, if not arguably both of those strands, that is no extension to the current principles for which this Court set out in David Securities.

MR GLEESON: No extension at all, it is just recognising ‑ ‑ ‑

GORDON J: I ask a different question. What is different from that set out in David Securities?

MR GLEESON: There is nothing different, save to expressly recognise you do not have to prove subjectively operative mistake by the payer.

EDELMAN J: Or that it is an alternative.

MR GLEESON: It is an alternative to that.

GAGELER J: What do you have to prove?

MR GLEESON: You have to prove 198, letter G:

The money was demanded and paid for tax, yet no tax was due: there was a payment for no consideration.

EDELMAN J: Or, at a higher level of generality, you have to prove that whatever the basis was – whether it be tax, contract, trust – that basis upon which the payment was made did not exist.

MR GLEESON: Yes.

GORDON J: That last bit, what has just been put to you with Justice Edelman, is not inconsistent with what is said in David Securities.

MR GLEESON: It is not inconsistent, and it is exactly what this Court actually said in Roxborough v Rothmans that I am coming to. When the payment is made, on a basis for a purpose, and that purpose has failed – for example, the law is invalid under the Constitution – prima facie right to recovery. As simple as that.

GORDON J: So, although this sits under outline 3 and 4 as the Woolwich principle, it is not really Woolwich, is it? I mean, at least to extent that you are relying on this aspect of these passages.

MR GLEESON: Yes. This is our proposition 4(a), your Honour, that it is either instance of, or so closely analogous to the recognised grounds of restitution for failure of consideration or payment under compulsion that the Court adopts – it is no large step in that circumstance, and perfectly consistent with our constitutional framework.

GAGELER J: You will explain at some stage the David Securities explanation of South Australian Cold Stores?

MR GLEESON: Yes, can I do that now, your Honour? David Securities [1992] HCA 48; 175 CLR 353, it is also volume 3, tab 24. At page 372 ‑ ‑ ‑

GORDON J: Did you say 372?

MR GLEESON: Page 372, point 3, the first case discussed is Werrin v Commonwealth (1938) 59 CLR 150. In that case, the majority decided the matter on the basis of the fix‑up statute.

GORDON J: So, in that case, there was sales tax imposed. It was held not to cover the field, and they passed another statute.

MR GLEESON: It was the other statute, the fix‑up statute, the majority said answered the question. So, nothing in the majority’s decision is affected by this debate. The minority would have said that you fail because your mistake of law does not ground a right to restitution. The minority’s view is overtaken by David Securities. Neither the majority nor the minority for their different reasons addressed the case on the failure of basis, failure of purpose, and neither the majority nor the minority addressed squarely the considerations in Woolwich.

Now, the South Australian Cold Stores Case was a case of payment for electricity charges which were excessive under the statute. That looks like we are in fee for service territory, not tax territory. The case was decided on the basis that the relevant mistake was a mistake of law, not fact, as had been alleged, and that in the light of mistake of law not being available, the claim failed.

David Securities, at 374, point 4, the last sentence in the first paragraph, has read down South Australian Cold Stores to be a case justifiable on a narrower principle that, on the particular facts of the case, the payments were made by a person as a part of a compromise, and for that reason, restitution would not be available. You can see that again at the top of page 376. The case is being justified on a narrower basis, which leads the Court to say, at 376 – this is the ratio:

the rule precluding recovery of moneys paid under a mistake of law –

is not:

part of the law in Australia.

So, in effect, the ratio expressed in South Australian Cold Stores has been overturned by David Securities, and the decision has been justified on a narrower basis. Again, nothing in South Australian Cold Stores addressed failure of basis, and it could not have addressed the Woolwich principle, because it was not a case about tax; it was fee for service.

So, that is what we would say about that part of David Securities. Can I deal with the rest of the case while your Honours have it, even though this is moving forward to the defence issues.

GAGELER J: I am sorry to dwell on this, but:

the emphasis placed on voluntariness or election –

at the bottom of page 373 and the top of 374, I had read that as the majority’s explanation of the continuing relevance of South Australian Cold Stores and Chief Justice Latham’s judgment in Werrin. Am I misreading it?

MR GLEESON: It is a reinterpretation of the ratio of the case, because the case was decided on mistake of law equals you lose. This is decided on ‑ ‑ ‑

GAGELER J: Of course. I am more interested in the reinterpretation, and the continuing authority of those cases on that reinterpretation.

MR GLEESON: On that reinterpretation, it is really identifying a separate defence.

EDELMAN J: It is a defence of compromise, is it not?

MR GLEESON: It is a defence of compromise. So, while payment of money as and for tax, which is tax not due, is prima facie recoverable, we say, there is a defence of compromise available on the facts. And no such defence, of course, is asserted here.

EDELMAN J: Well, if the ratepayers and the Council had entered into a contractual agreement to withdraw this litigation on particular terms, it would not be open to the ratepayers to claim restitution.

MR GLEESON: Yes.

GORDON J: Is that why you took us to the end sentence on page 374 – the top of 374?

MR GLEESON: Yes, yes.

GORDON J: That is the reinterpretation and explanation.

MR GLEESON: Yes. So, perhaps I will come back to the rest of it on the defence. I will just complete where we are. I dealt with Lord Goff, and I had discussed Lord Browne‑Wilkinson. Suffice to say about Lord Slynn that he sees the second strand – that is, the payment under compulsion strand – as the explanation for why if you pay money as and for tax which is not due, you have a prima facie right of recovery.

It is interesting that in the Lord Slynn approach – I should go to page 201, letter H of Woolwich. When he builds his ratio from a stream of cases, one of the cases he relies upon is Morgan v Palmer, which was Chief Justice Abbott, I think about 1824. That took the broader view of compulsion, which is when we are in the context of the relationship between the citizen or the subject and the state, and the state demands money as tax, the compulsion arises very much from the relationship between the parties and the statute; namely, if you do not pay, as a good citizen you can be sold up.

Now, we have given your Honours as a separate bundle some other provisions of the Local Government Regulation. I do not need to go to them, but they tell you the obvious, which is that if you do not pay your rates, you not only pay interest at 11 per cent, but there can be a charge entered on your home, and your home can be sold. So, on the Lord Slynn approach, which gets to the same conclusion as to the principle but draws support through compulsion, the compulsion comes from the statutory scheme. Interestingly, at the foot of 202, point H, Lord Slynn draws support from what Justice Kitto said in Mason, that:

“the plaintiffs had quite enough compulsion upon them from the terms of the Act itself, apart altogether from anything that may have been said or done by officers of government. Under that compulsion they parted with their money.”

As part of this simplification of the law, through these two streams – one is failure of basis and the second is the compulsion comes through the statutory scheme – which we have in spades in both cases – you get to the simple proposition that we have expressed. To complete this part of the submissions, could we refer your Honours to the more recent statement in the United Kingdom, at volume 7, tab 52, of the principal from the Supreme Court – this is in the Test Claimants FII Group Litigation[2012] UKSC 19; , [2012] 2 AC 337.

The principle – it is adequately restated in the head note, page 338, letters F to G as to the content of the principle. I will take the Court, if I can, to the two key passages where that head note is found. The first is in Lord Walker. At paragraphs 74 to 75, he explains that constitutional basis for the principle, citing Professor Mitchell in English Private Law. They are twofold: firstly, the Bill of Rights that I have referenced, but secondly, the:

wider public law principle of legality, that bodies invested with power by the state must respect the rule of law, and adhere to the limits of the jurisdictions conferred upon them.”

That second principle is as strong if not stronger in our modern law than in the law of the United Kingdom and provides for justification for the rule. Then that leads to the particular step taken – in this case, it is 75 – that the principle applies even if it is a self‑assessment regime. But then at 79 is his Lordship’s statement of the principle, which we embrace:

where tax is purportedly charged without lawful parliamentary authority, a claim for repayment arises regardless of any official demand –

and then I will note the parentheses:

(unless the payment was, on the facts, made in order to close the transaction).

That, your Honours, is the recognition of the South Australian decision.

GORDON J: You mean it is a carving‑out of those situations where there is either compromise or some other basis which underpins the payment, i.e., whatever it is. Is that what you mean by that?

MR GLEESON: Yes. There is consistency ‑ ‑ ‑

GORDON J: I will put it in different terms. If, on the facts, there is a different basis – either fact or in law – separate from that which gives rise to the invalidity.

MR GLEESON: It covers two areas. It covers your Honour’s area. If, on the facts, there was a truly separate basis for the payment, which has not failed, or ceased to come into existence, then you are then in the territory of good consideration defence. Secondly, it covers in particular the types of cases where there is a compromise or a payment made on terms that it will bring the relation between the parties to the end irrespective of whether the money is truly payable.

Clearly enough, if BHP enters a formal arrangement with the Commissioner of Taxation to pay 50 million dollars in claimed tax irrespective of the true debt, the law respects the compromise.

GORDON J: I am being a bit slow. The two scenarios you just put to us, is the second not subsumed within the first?

MR GLEESON: It may be, your Honour.

GORDON J: I will ask a different question. What is in the second category that would not be covered by the first? In other words, you said to me that there are facts which provide a separate basis for payment having not failed or ceased to come into existence. If those facts are sufficient to give rise to the compromise, which is an agreement, or some other basis upon which you could identify the basis for the payment, then ‑ ‑ ‑

MR GLEESON: I accept that, your Honour. The second is the more obvious example of the first.

GORDON J: Thank you.

MR GLEESON: It is difficult to think of other examples other than the compromise of the claim.

GAGELER J: The next sentence, beginning “The same effect”, says:

the simpler and more direct course is to put the matter in terms of a perceived obligation to pay –

Is that looking to the mind of the payer?

MR GLEESON: I think not, your Honour, by reason of the extract from Justice Wilson in the well‑known dissent in Air Canada that follows. It is an objective imputation of the mind of the reasonable taxpayer, which is that if I am asked to pay my rates, I know that I am expected to pay my rates, and I pay them as in full my rates. So, it is not requiring the person to get in the witness box and say, I had all those thoughts in my head. It is the law attributing a reasonable expectation to the citizen or subject, in the light of the force of the power of the state. That is very much the way we put it.

That is why we get a little more out of this part of the case than merely traditional mistake of law. You do not need to call witnesses to say that I went through the process of thinking at letters G to H. The law assumes that that is the relationship between the citizen and the state. Then, Lord Sumption ‑ ‑ ‑

GAGELER J: So, just completing that, the re‑statement of Woolwich that appears on the next page, about letter B, is an entirely objective inquiry, is it?

MR GLEESON: Yes. The slight step being taken in this case is that if it is a self‑assessed tax, unlike our case, you have not received the notice from the government saying, please pay $142 for the charge for the particular works, but that does not affect the underlying principle because of the objective approach.

EDELMAN J: Would it be any different outside the tax context of all of the older cases that say money paid under a void contract objectively gives rise to a prima facie right of restitution?

MR GLEESON: Yes. In one of our footnotes in the reply to interveners, we have tried to grapple with Queensland’s point about are we collapsing mistake and failure of basis. With respect, we are not. There will always still be some cases which are pure mistake cases, and there will always be some cases which are pure failure of basis cases objectively, and there will be some cases which happen to be both.

So, the classic example Justice Gummow gave in Roxborough, of you pay the money to the person as subpoena money and the case settles, is a classic example of the failure of basis case. Viewed objectively, you get your money back. You do not need to call subjective evidence about what was in your head. You look at the objective basis of the payment. That overlap is dealt with by Lord Sumption at page 414, paragraph 186.

EDELMAN J: FII had to be a mistake case, though, did it not, because without the mistake they would not have got within section 32(1)(c) of the Limitation Act?

MR GLEESON: That led to whether you can pursue either or both remedies, yes. But conceptually, we rely upon paragraph 186 for the relationship between the mistake, cause of action, and the failure of basis cause of action. There is a good example given by Lord Sumption at the end of 186 where the unlawful exaction failure of basis will not be available but there could be a mistake case. If you self‑assess and you pay $1 million dollars when you owed $10 dollars, you have paid under a mistake, and you would be relying upon that basis.

GORDON J: I had read that paragraph as, in effect, working against the extension of Woolwich to the facts we have presently here. Because what Lord Sumption is pointing out is that, I think – he says, on the face of it, the only case where the cause of action is probably not available and where the claimant may therefore need a right of restitution for mistake is the case where there is no unlawful exaction, whereas here we have an unlawful exaction. In other words, it is unnecessary.

MR GLEESON: Well, if there is no unlawful exaction, you do not get Woolwich, you have to rely upon mistake. In our case, we have an unlawful exaction.

GORDON J: But the flipside must also work, does it not? And that is, where we have an unlawful exaction and the necessary requirement to prove the mistake is objectively available without even calling the necessary taxpayers.

MR GLEESON: With respect, your Honour, we think the first sentence of 186 is our case. The tax has been charged unlawfully and it does not matter whether there are overt threats or demands. It does not matter whether you are mistaken or not, Woolwich applies. That is where you get your money back, because the reason you paid it, objectively, was as and for tax and tax is not due. Your Honours, in terms of our proposition 4, I will otherwise rely upon our written submissions.

Can I come then to the defences, and we seek to deal with this in two stages. Firstly, there was no error in the Court of Appeal’s rejection of the good consideration defence in the manner in which it was advanced below. And that is because the state of affairs which formed the basis for the payments, whether viewed subjectively or objectively, was the Council’s assertion of a legal obligation to pay the special levies, and that state of affairs failed and conversely, the relevant state of affairs was not the landowner obtaining the benefit of the works.

Now, on that aspect of the case, I need to go back to David Securities and then deal with Ovidio and Adrenaline. So, in David Securities [1992] HCA 48; 175 CLR 353, volume 3, tab 24, commencing at the bottom of page 379, we read this decision of this Court very differently to Queensland and the appellants. At the foot of 379 and over the page, the plurality cites Justice Goff in Barclays, in the context of mistake of fact, identifying two defences. The second defence is:

the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt a debt owed to the payee –

for example. Now, that is not an exhaustive statement, it is an in particular statement. But Justice Goff there was identifying as the classic instance of the good consideration defence where I paid the money to discharge a debt and it has in fact discharged the debt, I have therefore got what I paid for, and so there is a good consideration defence even if there was otherwise a mistake of fact which would have justified prima facie restitution.

Now, that is the statement within which this Court, in this judgment, dealt with the issues in the case. The next paragraph, after raising the question whether mistake and failure of consideration are one and the same thing does not pursue that question, because it says:

the more traditional approach, exemplified by the judgment of Goff J. in Barclays Bank and the decision of this Court in Westpac Banking Corporation, specifically provides for the “defence” of valuable consideration.

So, everything being said from point 7 on page 380 over to point 3 on page 382, is about the defence. It is not about a prima facie right of recovery for total failure of consideration. In that context, at point 7, the Court deals with the essential argument that your Honour Justice Edelman raised with both counsel this morning. The bank said, well, I gave you good consideration. Why? Because, if I had known I had to pay the withholding tax, I would have charged you a higher interest rate. So, the benefit you got is the benefit of a lower interest rate. Now, that is the type of argument the appellants and Queensland embrace; that that is value, ergo that is consideration, ergo there is a good defence. That argument fails. At 381, point 3, the Court says:

It is necessary to examine closely the terms of the loan agreement and the course of events preceding its signing in order to discover what the payer gave and expected to receive by way of consideration. It is only by doing this that it can be ascertained whether the payment of the additional amounts was absolute or conditional.

So, pausing there, the Court is saying, a customer paid a certain amount, as and for the withholding tax component. We have to inquire what you gave and what you expected to receive in consideration for that payment. If that payment was absolute, then you have no right of recovery. If it was conditional, then if the condition has failed, you have your right of recovery. In this case, the evidence suggests the appellants agreed to pay, and actually paid, the amounts representing the withholding tax because the respondent represented the withholding tax on interest payments must be met by the appellants. That is why they paid.

Then, at the foot of the paragraph, the true situation was that section 261 imposed the withholding tax on the lender and avoided any attempt to pass it on to the borrower:

The appellants thus had no indebtedness in respect of withholding tax, the discharge of which could form consideration for the payments . . . therefore not made for good consideration within the terms of the defence outlined in Barclays Bank and Westpac Banking Corporation.

So, that is a case where the attempt to allege value conferred, on the foot of page 380, was treated as irrelevant to establishing a defence, because what happened was the customer paid the money in order to discharge a debt when it turned out no such debt existed. That is the type of precise and confined and careful analysis that the good consideration defence requires, whether one is in contract, quasi‑contract, or in the shadow of a statute. That is not the appellant’s approach.

EDELMAN J: It may not make much of a difference, given your submission that the analysis is objective, but would another way of expressing the same point be to say that, from the perspective of the person raising the defence, in this case, the bank in David Securities, the basis for any performance by the bank had not failed, or the consideration, in the technical sense, for any performance by the bank had not failed. In other words, that the bank had not set the interest rate specifically by reference to, or for the purpose, of receipt of the withholding tax.

MR GLEESON: Your Honour, it is possible that is a way to view it, and it would produce the same result. It is not the way in which the judgment in fact reasoned to it, because as we see from the top of 382, the focus was very much, line 5:

in order to decide whether the appellants in this case have received consideration for payment of the additional moneys, we must ask what these particular appellants, in all the circumstances, thought they were receiving as consideration.

EDELMAN J: But that would still be, because it is objective, what they thought they were receiving would also be the basis upon which the bank is paying.

MR GLEESON: Yes. So, this judgment is focusing very much on the state of affairs, or the basis, from the perspective of the payer. If one approaches it including the perspective of the payee, one gets exactly the same result in this case as you do in our case. But what is significant, with respect, is in the next paragraph on 382, which commences:

So, in the context of failure of consideration –

There is then a discussion which runs down that page over to page 383, point 7, which is lining up the approach in the good consideration defence exactly with the approach in the failure of consideration cause of action.

EDELMAN J: That is why I asked the question, because if it is going to be a perfect symmetry then, strictly, it should be from the perspective of the bank in this case. The Court does seem to go on to say, well, the bank was the one that chose how it structured the arrangement and decided to have a separate compartment for the payment of the withholding tax.

MR GLEESON: And it is possible there are strands of that in this reasoning, as well as some very strong statements that it is about the perspective of the payer.

EDELMAN J: Yes.

MR GLEESON: And it is possible that it is really the objective state of affairs which is the true thing that matters, both for the cause of action and for the defence. If the Court had to decide whether it is objective or subjective, we would say it is primarily objective. Failure of consideration as the cause of action and good consideration as the defence is primarily an objective inquiry into the state of affairs which formed the basis for the payment, and then becomes a very simple principle to apply.

GAGELER J: How do you explain the last sentence at the top of page 382, immediately before the paragraph beginning:

So, in context –

MR GLEESON: Which page, your Honour?

GAGELER J: You see the words:

And, as we have stated, the “state of affairs” existing in the appellants’ minds –

MR GLEESON: Yes. I am trying to recognise there is an issue here because on a straightforward reading of it we are in the territory of the defence, and the Court is saying it is the payer’s mind that matters, and then they go on to say that is exactly the same as what happens under the cause of action. If that is how your Honours read David Securities and hold in this case, we have no difficulty. What I am trying to grapple with is your Honour Justice Edelman’s question – is the payee’s position at all relevant? If it is, what we are commending is that, ultimately, the “state of affairs” – which is a common consensual matter – will be best guided by an objective conclusion.

GORDON J: Can I just take this in five steps, really, in this page? You have got the passage before the sentence raised with you by Justice Gageler where they are referring to asking whether the appellants – you must ask whether the particular appellants thought they were receiving – what they thought they were “receiving as consideration” – which seems to be, arguably, subjective – reinforced by the next sentence.

Then, in a sense, do you read what then follows as, in effect, a qualification for those questions by recognising that, arguably, if one looks at it by reference to the perspective of the payer then, in a sense, it becomes irrelevant – one puts them to one side because one is asked objectively, what the position is. The reason why I ask is because you then have:

On the other hand, there has been an insistence that the failure of consideration be total –

which would require both ways.

MR GLEESON: Yes – unless one can find a severable component of the consideration which – and when one finds a severable component as per Roxborough v Rothmans – which is, in a sense, a slight development from David Securities ‑ ‑ ‑

GORDON J: Yes.

MR GLEESON: ‑ ‑ ‑ the Court is necessarily taking something of an objective view of the arrangements to say, I can identify that the extra bit paid for the licence fee is different to what I am paying for the cigarettes.

GAGELER J: Certainly in Roxborough the Court was holding that total failure of consideration is an objective inquiry. It did not depend on the states of minds of the retailers who paid the amount for sales tax in that case.

MR GLEESON: Yes, and if one matches that summary of Roxborough with page 382, the paragraph commencing:

So, in the context of failure of consideration, the failure is judged from the perspective of the payer –

there is some degree of reconciliation that is needed.

GORDON J: Is that how you also read the next paragraph?

MR GLEESON: In the next paragraph, an objective element starts to come in because in the Rover case you pay the money for the car, you are not aware it had been stolen, you get several months’ use of the car, but it is held – top of page 383 – you have not received any part of what you contracted to receive, namely, property and the right to possession. That is an objective assessment of the bargain.

GORDON J: It is the middle of that page, that last paragraph in 382, where they quoting from Rover, say:

the notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact.

In other words, looking for the basis of it.

MR GLEESON: Yes, but we embrace that sentence because that is directly contrary to the appellant’s approach, which is you receive some value, in fact, you therefore suffer a good consideration defence. This passage is saying that you look to the benefit bargained for by the plaintiff. Now, if you are in the territory of contract, that is the bargain. If you are not in the territory of contract, you are still looking at what is the basis upon which the payment was made, and has that basis failed?

Whatever be those difficulties in David Securities, it is clear that the bank’s argument that we would have given you a higher interest rate was treated as not making out a defence, and that is expressly dealt with at 383, point 8. At 384, point 6, where the Court comes to a policy argument, the policy of section 261 would be defeated, were the position otherwise. That is a presage of the proposition in Equuscorp that you were taken to this morning, that it is at least an element when a party seeks to say it would be unjust to make us disgorge that which, prima facie, we are obliged to disgorge, to see how it sits with a statute.

In this case, the Court was saying that the policy of 261 was the lender must pay the withholding tax, you cannot try and pass that on to the purchaser, so you cannot say there is anything unjust in being ordered to disgorge it. That policy approach, we submit, is strongly against the appellants on this appeal because the policy of the Local Government Regulation, while it is diminished by the appellant – the appellant says transparency, accountability, they are nice things, but they are not fundamental – the policy is you are not to impose the burden of any of your rates upon a subset of your community unless you have gone through a discipline which is designed to ensure their money is spent properly.

If you have not gone through that discipline – which they have not – to turn around and say, but we did the work anyway, you got value, you should not complain about the illegitimately extracted rates, defeats the purpose of the Local Government Regulation.

EDELMAN J: They are two different points though, strictly, are they not? One point translated to this context would be to say that the basis upon which the Council provided the services was that it was obliged to do so.

MR GLEESON: Yes.

EDELMAN J: It was not that it had received the rates – and that basis never failed. But a separate argument is to say, well, the basis upon which the Council provided the services, even if that could somehow be said to fail, to allow the Council effectively a set‑off or a claim of good consideration would stultify the statutory policy. But they are actually two separate points, are they not?

MR GLEESON: They are, and we make both of them. That is our proposition 6(a) and (b) is the first point, and (d) and (e) are the second point.

GORDON J: Do you mean 6 or 7, I am sorry?

MR GLEESON: Proposition 7 – 7(a) and (b) is that there is no failure even if one takes it from the Council’s perspective, and 7(d) and (e) are the stultification argument that why would this Court say, we will allow the Council through the defence to inflict upon the community the very thing the statute says was not to occur?

EDELMAN J: And (c) is a third point that, even if there were a failure of basis and even if there were not any stultification, there is no benefit in the strict sense, because it has not been chosen or accepted.

MR GLEESON: Yes, and that is a pure restitution point that it just does not sit with the whole law of restitution to treat this as a relevant benefit, let alone one that can be valued.

Your Honours, that is the main judgement. There was then an attempt by Queensland to rely upon Justice Brennan, who is certainly dissenting on some issues and proposing different orders, but the passage relied upon, pages 389 to 390, it turned out did not assist Queensland on analysis because the point his Honour seemed to be making at 389, point 6, and then 390, point 4, was, if you were in the area of repayment under mistake, the right to restitution accrues at the date of the payment and:

at that moment –

this is 390, at point 4:

it can be determined whether and to what extent the payee has been unjustly enriched.

and if you are going to try and bring benefits to account, they must be benefits:

given at or prior to the receipt –

That led to the Solicitor‑General from Queensland saying they need to go beyond Justice Brennan to advance their arguments. We would submit there is nothing in this judgement that supports their approach. Could I then go to Roxborough v Rothmans, which is volume 5, tab 33, and [2001] HCA 68; 208 CLR 516. Firstly, Justice Gummow’s discussion of failure of consideration at paragraphs 101 to 104. At 102, directly answers the ‑ ‑ ‑

STEWARD J: Which pages are those?

MR GLEESON: Page 555 of the Commonwealth Law Report.

STEWARD J: Thank you.

MR GLEESON: Paragraph 102 directly answers the appellant’s argument that the term “consideration” has been locked in the world of contract. His Honour says the bargain:

need not be contractual in nature.

And the example from Martin v Andrews, from 1856, is the subpoena case. Martin v Andrews adequately demonstrates how the concept of consideration, whether used in the cause of action or in the defence, is adequate to the task and does not require to be jettisoned and replaced with value. His Honour then explains that over at page 557 at the top. And at 104, last sentence, his Honour identifies the “failure of consideration” by reference to page 382 of David Securities as:

the failure to sustain itself of the state of affairs contemplated as a basis for the payments the appellants seek to recover.

Now, our submission is that that description of “failure of consideration” is adequate whether one is dealing with the cause of action or the good consideration defence.

GORDON J: That is what I put to you before, here, that once anyone understands that as the basis of both the cause of action and the defence, you would say that is a complete answer on both aspects.

MR GLEESON: Yes. And so, in the case here of the defence, the onus being on the Council, when the Council says we have given you good consideration, they have to say X, Y, and Z was the state of affairs contemplated as the basis for you paying me the money, and that state of affairs has sustained itself.

GAGELER J: Well, they kind of say that, do they not? They say, if you look at the statute, the state of affairs contemplated as a basis for the payment was that the money was going to be used for works which would benefit the landholders, not exclusively, but provide them with a benefit. And that is exactly what happened. In fact, their property would have gone down in value but for this money being spent in this way. That is their case, effectively.

MR GLEESON: The statute is their case. Their problem is they fillet the statute.

GAGELER J: They what?

MR GLEESON: They fillet the statute.

GORDON J: Fillet – like filleting a fish.

MR GLEESON: They take the bit they like, and they jettison the bit they do not like.

GAGELER J: Yes. Okay. Let us just talk about the principle that they are applying. They seem to me to be applying – seeking to apply this principle as you have stated.

MR GLEESON: Yes. But how do they do it. What they do is to say, the statute tells me that in a world which does not exist, a world where you, the Council, have gone through the discipline of a plan which identifies the time and the cost of the works, and therefore the works, and have then validly imposed a rate on me. In that world which does not exist there might have been a statutorily identified correlation between the benefits described in the statute and the things that I gave you in the real world. Ex hypothesi, none of that world has been engaged by the Council. The Council says, notwithstanding, I have not engaged that world, our relations should be governed as if I did.

EDELMAN J: Is it not a bit simpler than that? I mean, the pleaded case is that the Council performed the works because it was obliged to do so. So, why would one get into the particular statutory regime concerning the payment of rates when the obligation is independent on the way this case was run. The Council’s obligation was independent of what it might receive in terms of special rates.

MR GLEESON: Well, we have relied upon that as an independent reason the defence cannot succeed. They may try and put it in the statutory box. It cannot succeed for at least that reason; that one of many reasons it cannot succeed. But I was trying to answer your Honour Justice Gageler. Even if one was looking at the statute, a narrower reason they cannot succeed is you cannot pick up a statute and say, it tells me that, in other circumstances I have never lawfully engaged, there might have been a statutory correlation between the benefit the statute had in mind and the benefit conferred in fact, and say, from that, therefore in a restitutionary action you must pay me as if all that had occurred.

The reason you cannot do it is it would lead to the absurdity that the person who has not paid the rates would presumably be subjected to the same – I am tempted to call it the three-card trick, the same argument. We have gone through a process, it is invalid. Had it been valid, you would have had to pay rates, therefore restitution should treat you by making you pay. And that – so, my filleting argument is: if they are going to treat the statute as the bridge, they have to respect the statute.

GAGELER J: You would not have ultra vires and you would not have the claim in the first place, so it is effectively saying that the defence is not available.

MR GLEESON: And you almost heard a word of that this morning. Well, from their argument, almost heard a word of it; the ultra vires has done its work at the prima facie stage, we are now in the defence stage, we are just talking about value, forget the reason we are here, is the way the appellants are approaching it.

You should now be grateful you have your canal improved. In a different world we could have lawfully charged you a rate for it. You should be treated as if you got that which you bargained for. So, we have moved so far from what Justice Gummow was contemplating as the bargain, whether contractual or non-contractual, we have moved so far from the state of affairs ascertained subjectively or objectively as to not match restitutionary principles. And then if I could go back to –

GORDON J: Could I put three propositions to you to make sure I understand this before you do that? The first is, if you are looking at Justice Gummow’s statement about basis, as I understand the way you now put it, and it may be that I misunderstood it earlier, one has a lack of basis because the Councils were obliged to do it statutorily themselves anyway. So, that the end of the analysis.

The second is, alternatively, even if that is not right, then they have lost the basis because the statute prescribed the necessary steps to be taken to create the correlation between the payment and the works. And that failed, so one does not, in effect, go to the end and say, well you got a benefit therefore one has to identify what the correlation is. This morning we had a discussion about what the correlation on the basis was, and I think I put to Mr Horton it seemed to be he was removing any need for basis and just focusing on value.

And then, third, even you are wrong about that, here one has the difficulty identifying what is the, I will put it in neutral terms for the present purposes, the thing that the ratepayers got which would be unjust for them to keep by reference to the things we were talking about just after luncheon adjournment, and that is it is difficult to identify what is the benefit and how to quantify it, given the evidence you took us to.

MR GLEESON: Yes, it is all of those.

GORDON J: Have I missed something?

MR GLEESON: I would not suggest that, your Honour. Our paragraph 7 – it is really aspects of what your Honour has summarised.

GORDON J: Sorry, I did not hear that.

MR GLEESON: It is aspects of what your Honour has summarised that one could still speak about for some time, which I will try to avoid doing, but to take your Honour’s third point, the problems with the value, they are inseparable for this appellant, but what they illustrate is the more general proposition of restitutionary law over centuries. The reason it does not award restitution, or recognise this type of valued offence, is it is inevitably going to lead to these types of difficulties, and this case just illustrates the difficulties of proving it.

GORDON J: I think, to be fair, what is set out in 7 is much more articulate than what I just put to you. But, for example, 7(d) is a flip of what I put to you in relation to the statutory source question.

MR GLEESON: Yes.

GORDON J: So, my second proposition is, in effect, that (d) is the same proposition put in different terms.

MR GLEESON: Yes.

STEWARD J: But you would agree, though, in contrast, that if this had been a fee‑for‑service, it would be entirely different.

MR GLEESON: Yes. That is the reason why in Adrenaline Justice Leeming did not take many paragraphs to find there was good consideration. So, you take that case – it starts out a little similarly about a local council charging a fee, but it is a fee‑for‑service for use of the racetrack. The customer, in a voluntary transaction, decides they want to hire the racetrack. So, we are immediately not in the area of impost, we are in the area of request and acceptance, and that generates a contract, a freely‑entered contract, and in the Adrenaline Case Justice Leeming, and it only takes a few words, says, what was I paying my licence fee for? I was, really, paying it for two things: I was paying it to discharge my contractual debt, and that failed, but I was also paying it, voluntarily, to get use of the racetrack. The second basis did not fail. So, Adrenaline illustrates in a setting, whether it be contractual or otherwise, where there is voluntary action, request and free acceptance ‑ ‑ ‑

STEWARD J: Does that mean that, really, that word “correlation”, it is to bite in the field of unjust enrichment, we are really talking about exchange, a bargain?

MR GLEESON: We are talking about bargain. It does not have to be contractual. We either have request, express or implied, or we have free acceptance with an opportunity to reject, or we have the incredibly narrow category for incontrovertible benefit, and this is not put as an incontrovertible benefit case, so I do not address your Honours on that narrow category. Your Honour Justice Edelman referred to it in BMW v Brewster. The Supreme Court of Canada referred to it in Peel. They are both in the authorities. But put that aside. Quasi‑contract, then restitution has recognised request for acceptance. Query, incontrovertible benefit. What it has never recognised is something is imposed upon you unlawfully, but it is said you got a benefit from it, and that is why there is no case that has been identified to support it.

But, your Honour, just to complete on Adrenaline, that is why Justice Leeming was able to be so succinct, and it does illustrate that in the bargain territory, the courts will sometimes find a dual aspect to the bargain. The first aspect is, I am paying it to satisfy an obligation, it turns out the first obligation has failed, but the second aspect, I am paying it to get a benefit, has not failed, and therefore the defence can be available. Your Honours, could I just give you the paragraph 16 of Roxborough.

JAGOT J: Did you say 116?

MR GLEESON: Paragraph 16 on page 525 also clearly rejects the appellant’s case that consideration is hopelessly mired in the world of contract – and it is an expressed adoption of Professor Birk’s in the 1995 edition, it:

embraces payment for a purpose which has failed as, for example, where a condition has not been fulfilled, or a contemplated state of affairs has disappeared.

That is sufficient to embrace the way we have put the Woolwich principle. So, the whole of that paragraph 16, we submit, displays how consideration is used both at the stage of the cause of action and the defence. I wanted to go to Justice Nettle’s decision in Ovidio, which is in volume 6 at tab 47.

Your Honours may have picked up that Queensland says Justice Nettle made some errors of thinking which we have been infected by. I want to respond to that proposition. It is the proposition put by Queensland at paragraphs 26, 27 and 28. The error they allege is that Justice Nettle has conflated mistake with failure of consideration. They have said at the end of paragraph 27 this cannot be correct; and, at 28, we have made the same mistake.

That leads them to say, in the defence of good consideration, “consideration” means the value provided by the recipient of the payment in exchange for the payment. And they say that is a different meaning to “failure of consideration”, where it means:

the state of affairs contemplated as the basis or reason for payment.

So, the submission is that Justice Nettle, and therefore we, have misunderstood, that consideration is, in fact, used in two very different ways, and would thereby conflate different causes of action. Ovidio was the case where, you will see from paragraph 2, there was a requirement of a disclosure statement to the tenant of retail premises, failing which, rent could not be recovered. And no such statement was given.

The tenant paid the rent and got the use of the premises, and thereby asked for the money back. Justice Nettle, commencing at paragraph 25, proceeded by these steps: firstly, at paragraph 26, he construed the statute, and he discerned the statute only went a certain distance. The statute prevented the lessor recovering rent without a disclosure statement, and:

it vitiates the tenant’s contractual obligation to pay rent –

But it did not:

prohibit the lessor from receiving or retaining the payment of an amount for use and occupation of the demised premises.

So, that is discerning the purpose and object of the statute to see that it vitiated the contractual obligation but did not bar a general law claim. Then, in paragraph 27, his Honour briefly but correctly analyses David Securities and brings together the whole of David Securities, which is that while you may have prima facie recovery for mistake:

the liability may be displaced by pointing to circumstances –

where you have received:

some part of the “benefit” provided for in the bargain, be the bargain contractual or of another kind.

That is a compendious and accurate statement of many paragraphs of the plurality judgment in David Securities. Then, at paragraph 28, his Honour refers to the passages in David Securities about consideration being the matters forming the state of affairs:

forming the decision to make the payment –

looks to the perspective of the payer, that is the passages we have been over, and then in 29, his Honour, in a compendious statement says, you will not win in a mistake case if you in fact get that which you bargained for. Now, Queensland criticises paragraph 29 and says his Honour got it all wrong, mixes up mistake with failure of consideration as separate causes of action. His Honour is not doing that. His Honour is looking at the totality of the mistake action in which a prima facie mistake is defeated by a defence that you got what you bargained for. In this case, paragraph 33, his Honour distinguishes David Securities and Roxborough on the ground:

the respondent got the benefit of the use and occupation of the demised premises in return for the rent –

his Honour says the tenant did not get a discharge of the obligation to pay rent but got the more fundamental benefit, which is use of the premises. So, it is an example of a dual character case, where the same payment – the rent – is made for two purposes. One is to discharge a contractual debt, the second is to get use of the premises. Both of them are voluntary. There is request, there is acceptance. One fails but the other basis sustains itself and therefore there is a good consideration defence.

Now, we submit that is perfectly correct reasoning. And what his Honour then does at 34 is to say a further way of looking at it is, would the landlord have a counter-restitutionary claim? Answer: it is not prohibited by the statute. Further analysis, conclusion at 41, yes, there is a counter-restitutionary claim because you provided occupation of the premises, it was not intended as a gift, and you can recover in quasi-contract to force the contract. And then, paragraph 50, it can be valued by reference to the rent subject to any other evidence as to reasonableness.

EDELMAN J: So, that is effectively saying that the landlord has got a set-off or, in Justice Leeming’s words, the tenant would itself be unjustly enriched.

MR GLEESON: Yes.

EDELMAN J: Does that mean, though, that good consideration is not necessarily an entire defence? Justice Nettle says that, here, there was no evidence that the use an occupation, or the value of use and occupation was any different from the rental payments, but had it been different, the good consideration defence may then be a partial defence, but not an entire defence.

MR GLEESON: That is correct. In the simple case where the good consideration, Lord Goff is discharge of a debt, necessarily, it is the same amount. But, where the good consideration is provision of use an occupation of the premises, the question is: what was the reasonable value to place on that benefit? We would commend to your Honours that Ovidio and Adrenaline are good law, Queensland’s attempt to map themselves onto these cases fails and, by contrast, the appellant’s frank recognition that it cannot map itself onto these cases and needs some broader defence is a good recognition of where the landscape lies.

Your Honours, Equuscorp 246 CLR 498, which is volume 4, tab 25, is important for two reasons. Firstly, on page 517 of the CLR, paragraphs 31 to 32, there is a clear statement of the content of failure of consideration, relying upon Professor Birks and Justice Gummow in Roxborough – and coming back to your Honour Justice Gordon, that is the meaning we attribute to “consideration”, whether in the cause of action or in the defence.

The second aspect of the case is the discussion referred to this morning between 34 and 38 about stultification, particularly the adoption of Professor Birks at paragraph 37, and we submit adapting that question to the present case, allowing the defence of so‑called “value received” to be maintained would make nonsense of the Local Government Regulations’ refusal to allow a subset of the community to be charged special rates unless the requisite procedures are followed. And so, the result in our case – and this is just one of many grounds – would be the same as the result in Equuscorp, in terms of stultification.

Finally for my part, your Honours, Royal Insurance [1994] HCA 61; 182 CLR 51 – which is volume 3, tab 22 – is useful for these reasons. Firstly, at page 68 of the CLR, in Chief Justice Mason’s judgment in rejecting the defence – which, to be fair, the appellant does not run in this case; life would be too difficult – Chief Justice Mason adopts what Justice Wilson said in the Air Canada case, which is the passage I took you to in support of the Woolwich principle. Secondly, at page 69, it is helpful conceptionally that in asking whether the passing on defence would be recognised:

the levels of public law and restitutionary law.

were distinguished. And, in a sense, that is the way we are approaching the appellant’s defence. Does it meet the goals of public law? No. Does it meet the goals of restitutionary law? No.

Then his Honour cites the Bill of Rights principle. Admittedly, writing 30 years ago, his Honour has built causative mistake into the principle. What we are putting to you today on this part of the case was, in effect, you put the blue pencil through the words “by way of causative mistake”. Whether your Honours take that step or not, Chief Justice Mason’s judgment has shown how, in this instance of restitution, it is the Bill of Rights which ultimately is the great‑grandfather of the principle. But what his Honour then interestingly says is:

It would be subversive of an important constitutional value if this Court were to endorse a principle of law which . . . authorized the retention . . . of payments which it lacked authority to receive and which were paid as a result of causative mistake.

So, this is the stultification argument recognised by Chief Justice Mason, and that is why belabouring your Honours with the Bill of Rights principle is important as one of the many reasons why this defence should not be recognised by the Court.

Finally, at page 71 at about point 6, one of the many reasons why his Honour denies the change of position defence is that an inquiry into the matter would be “a very complex undertaking”. So, it is similar here to the problem of an inquiry into the value received in the way the appellant’s command is going to take one into the complexities which the common law has never identified.

Your Honours, I said finally, for me there is one other case I need to mention, which is volume 7, tab 53. This is Justice Henderson’s decision, one of many in the Test Claimants FII Case, the 2014 decision. On the question of stultification, the passage that is relevant is page 2057 of the book, paragraphs 309 to 315. It perhaps comes back to a question your Honour Justice Steward asked me about is there any scope for the defence in the circumstances we are talking about, and I said no. It is for the same reasons that Justice Henderson said there is no scope for the change of position defence.

His Honour, having been criticised by various people, including Professor Burrows, who then turned up as counsel in the case, said that he revisited the reasons for his conclusions but did not alter his conclusion that the reason you cannot have a change of position defence to Woolwich claims is because it would undermine the very constitutional values which have led to no taxation without Parliament. Our submission would be ‑ ‑ ‑

EDELMAN J: That may be too blunt, though. It may depend upon a particularly statutory taxing regime as to whether or not, for example, a local authority in good faith relying upon the receipt of a payment can claim a change of position defence or not.

MR GLEESON: Your Honours do not need to decide change of position in this case, but I am referring you to it as what we think is a relevantly up‑to‑date statement of the law of the United Kingdom on the importance of
the constitutional values being respected when one determines the limits of the defences.

Your Honours, the position we have reached is that, tomorrow, Mr Hochroth will deal with the cross‑appeal, which is propositions 9 and 10 on our document.

GAGELER J: You were going to say something about the American position. You can do that tomorrow, Mr Gleeson.

MR GLEESON: I will do it tomorrow morning, your Honour. Thank you.

GAGELER J: The Court will adjourn until 9.30 am for the pronouncement of orders, and otherwise to 10.00 am.

AT 4.15 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 14 SEPTEMBER 2023