Dear Colleagues;

The High Court of Australia today handed down its decision in Redland City Council v Kozik [2024] HCA 7 (13 Mar 2024) https://eresources.hcourt.gov.au/downloadPdf/2024/HCA/7 . A divided 5-member bench, by 3-2 (Gordon, Edelman & Steward JJ; dissent from Gageler CJ  & Jagot J) held that where money had been paid by landowners to the local Council under a Council resolution which was invalid, the Council was obliged to refund all the money paid by way of restitution on the ground of a mistake of law. Despite the fact that some of the work which had been the justification for the levy had been carried out, the Council's asserted defence of "good consideration" was refused.

This area (unjust enrichment) is not my main area, so my note here should be read with more than the usual care (some on this list have published on these very issues.) But hopefully this will provide a starting point for discussion.

 

The facts as relevant were that the landowners here owned land in an area which enjoyed access to canals. Statute obliged the Council to service and maintain the canals; in order to fund the work Council resolved (as they had general power to) to levy the landowners along the canal to at least partly defray the cost of the work which would be of special benefit to those landowners. These levies were paid but it turned out that the resolution authorising the levies was invalid (this was not disputed). Council refunded funds it still held which had not been expended, but when asked to refund the full amount declined, on the basis that the money it had spent had provided a benefit to the landowners (either increase in land values or arresting a decline in land values) and hence the Council had provided “consideration” for the money.

 

The landowners tried to rely on a statutory provision for repayment, but the High Court all agreed with the Qld CA that this provision was not engaged. The majority decision held that there was a prima facie entitlement to a refund of the full amount as paid under an invalid resolution but rejected the defence of good consideration. Of course, it seems likely that Edelman J, acknowledged as an academic expert in this area, wrote the majority opinion. (And this would explain why the court does not cite his Honour’s academic work, which otherwise would have been expected.)

 

The majority notes that unjust enrichment is not in Australia “a premise that is capable of direct application” (at [179]), and in each case any liability will depend on the specific common law remedy sought. They note at [180]:

 

At a high level of generality, it can sometimes assist when considering the boundaries of a particular category of case to structure a common law enquiry into whether a defendant has been unjustly enriched by asking what benefit a defendant has received, whether the benefit is at the plaintiff's expense, whether the circumstances render the provision of that benefit unjust, and whether any defences apply. But these well-known concepts such as "benefit" or "unjust" are not to be applied in the abstract, divorced from the rules that have been developed in particular categories of case. In this category of case, the relevant benefit is the receipt of money by the Council and the "injustice" arises because the payments by the respondents and other group members were made by mistake of law and without obligation to do so. (footnotes omitted)

 

Here the defence of “good consideration” was not applicable. (Noting that the concept was “difficult” and could have different meanings in different areas of law- [183]). Later they summarise why the defence is not available here as follows, at [204]:

 

There are three independent reasons why the Council's defence of good consideration must fail. First, restitution of the special charges by the Council would not cause any failure of the basis upon which the relevant works were performed by the Council. Secondly, the particular individual respondents and other group members did not benefit from the relevant works in the sense in which the concept of benefit operates in the law of unjust enrichment. Thirdly, to recognise a defence of good consideration based on a benefit to the respondents would stultify the operation of the Local Government Act.

 

In short, the landowners did not request that the work should be done; there was a real factual doubt whether the work had actually led to any financial benefit; and to allow recovery when the facts did not satisfy the statutory remedy for recovery would interfere with the statutory scheme. The majority also rejected the application of a “wider” defence suggested by the minority- see below and [213] ff for majority discussion.

 

In stark contrast, the minority decision held that there should have been recovery. The minority stress the origins of “unjust enrichment” doctrines in the courts of equity, and argue that equitable principles generally should inform the courts in considering defences today (see [60]-[65]). In particular the minority examine in great detail examples given in the US Restatement (Third) of Restitution and Unjust

Enrichment (from [91] and ff) and suggest that, while a defence of consideration may not apply here (see [90]), another defence should apply which they label “Recipient Not Unjustly Enriched” ([91]), which would apply where “payment is not "unjust" in view of the larger transactional and related context within which the payment has occurred”- [98]. Here the Council, they say, should have had such a defence.

 

A further point to note is that both the majority and the minority say that it is not necessary to consider whether the decision in Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70 should be followed in Australia, to the extent that it goes beyond establishing a prima facie case of unjust enrichment based on payment of an unlawful tax: see majority [188], minority [14].)

 

I’m sure there’s lots more to be said!

 

Regards

Neil