Date: Tue, 16 Jan 2007 09:52:31

From: Charles Mitchell

Subject: Restitution and unlawful taxes in the SCC

Dear Neil

The thesis that claims to recover money paid as tax which is not due should be mediated exclusively through public law actions and should not form the subject matter of private law actions, was recently rejected by the HL in Deutsche Morgan Grenfell plc v IRC [2006] UKHL 49 The most cogent arguments that such claims should be determined by reference to public law principles have been made by Rebecca Williams, whose book on the subject we await with keen interest. For a flavour of her approach you can read her commentary on the CA's decision in DMG. The SCC decision strongly suggests that counsel in DMG missed a trick when he failed to put these arguments to the court in the HL, which largely confined itself to rejecting the empty formalistic reasoning of the CA.

Best wishes
Charles

P.S. I am copying this to Rebecca in case she wants to add anything.

At 11:22 16/01/2007 +1100, Neil Foster wrote:

Dear Colleagues;

I'd be interested to hear from colleagues who know about the law of unjust enrichment, their views on the decision of the Supreme Court of Canada in Kingstreet Investments Ltd. v. New Brunswick (Department of Finance), 2007 SCC 1 (11 Jan, 2007).

The SCC unanimously holds that, where a Province has exacted money through an unlawful indirect tax (a liquor tax where the price was presumably passed on the drinking public), the suppliers who pay the tax can recover the full amount of the tax paid, along with interest, but only for the last 6 years (due to the limitation statute). A defence of "passing on" the tax (ie that the suppliers in fact had passed on the tax to consumer) was rejected, and the tentative views put forward in an earlier Australian case, Commissioner of State Revenue (Victoria) v. Royal Insurance Australia Ltd. (1994) 182 C.L.R. 51, by Brennan J in the HCA, that customers could presumably recover the amounts they paid from the suppliers, seems to have been accepted.

{In fact Australian colleagues will recall that almost precisely the same issues arose after the High Court's decision in Ha v NSW (1997) 71 ALJR 1080 that State alcohol, cigarette and petrol taxes were invalid under s 90 of the Australian Constitution. Unlike the Canadian SC in Re Eurig Estate, [1998] 2 S.C.R. 565 (referred to in Kingstreet at [25]) the HC held that it could not "suspend" its declaration of invalidity or engage in prospective over-ruling. For whatever reason the SCC does not refer to Ha and its sequels - see Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 where retailers were held to be entitled to recover the tax paid, and Campbells Cash and Carry Pty Limited v Fostif Pty Limited; Australian Liquor Marketers Pty Limited v Berney [2006] HCA 41 (30 August 2006) where a "class action" on behalf of various retailers was upheld as valid. As will be seen, 10 years later there still seems to be a lot of work for lawyers in the wake of the HC decision!}

Is the decision of the SCC in Kingstreet relevant to private law? That is precisely one of the interesting aspects of the decision. The SCC effectively seems to say that this issue is not to be dealt with under the private law of "restitution", but is subject to special rules derived from constitutional principles - [32]-[40]. Strikes me that there are a lot of interesting issues there to do with the connections between "public" and "private" law.

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