On 13 March 2024 the High Court handed down the decision of Redland City Council v John Michael Kozik & Ors [2024] HCA 7.
The plurality of Gordon, Edelman and Steward JJ – Gageler CJ and Jagot J dissenting – dismissed the appeal.
The claim was a class action by the plaintiff ratepayers levied by the defendant local authority with and paid invalidly raised special charges. The plurality found against the appellant authority in respect of the respondent ratepayers’ claim in restitution at common law.
The plurality said (at [179] – [181]):
Unjust enrichment
- In Australian common law, unjust enrichment has a “taxonomical function referring to categories of cases in which the law allows recovery by one person of a benefit retained by another”.[170] During the historical period in which cases were pleaded by forms of action, these categories of case were forced, by the use of fictions, into forms (rather than causes) of action, including counts of money had and received, quantum meruit and quantum valebat.[171] Today, as causes of action, the categories include unjustified payments of money or performance of services that benefit another in circumstances where the benefit was the result of mistake, undue influence, duress, or an absence or failure of consideration.[172] Since unjust enrichment expresses only the conclusion that follows the exposed process of reasoning within these categories of case, it has repeatedly been said in this Court that “unjust enrichment” is not a premise that is capable of direct application.[173]
- 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.[174] 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.[175] 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. Those matters were not controversial in this Court.
- The issue that arises consequent upon the respondents’ prima facie claim at common law is whether the Council has a defence of good consideration based on the Council’s performance of the relevant works. In short, the Council submits that it can resist restitution because: (i) the “consideration” or basis for its receipt of the payment was that it confer a corresponding benefit upon the respondents and group members, and (ii) that it did so. As will be seen, both submissions are wrong. It is convenient to begin with the concept of “benefit” and the concept of “consideration” in the context of failure of consideration as a ground for a prima facie claim for restitution of unjust enrichment before considering “good consideration” as a defence to restitution.
As to the Council’s defence of good consideration, the plurality said (at [204] – [212]):
- 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.
(1) No failure of the basis for the relevant works
- The Council’s defence does not satisfy the requirement for the defence of good consideration that restitution of the special charges must cause the basis of the Council’s performance of the relevant works to fail. At certain points in the submissions of the Council and the State of Queensland this requirement was accepted, and described as being a requirement that the relevant works were “correlate[d]” with or provided “in exchange for” the payment.
- The Council’s performance of the relevant works was not done objectively on the basis that the works would be funded by the special charges because, as explained in the background section above, it was admitted at trial that the Council was obliged by statute to perform the relevant works. The Council’s obligation to perform the works was independent of the levying or receipt of special charges. On this appeal, the Council ultimately accepted that this admission had been made at trial and did not seek to re-open the admission. Indeed, as also explained above, for each of the Aquatic Paradise works, Sovereign Waters works and Raby Bay works the special charges had only been used to defray, respectively 66 per cent, 78 per cent, and 26 per cent of the cost.
- At one point in oral submissions, the Council appeared to deny any requirement for the defence of good consideration that the performance by the Council was in “exchange” for, or on the basis of, the payment of the special charges. The acceptance of that submission would require recognition of a different defence, or an adaptation of the defence of good consideration by reference to a broad notion of counter-restitution. However, even if the requirement were not one of exchange but were more broadly one of sufficiently close connection,[237] it was common ground that the defence would still require that the respondents or group members obtained a benefit in the sense recognised by the common law. They did not.
(2) No benefit to the respondents or group members
- It may be accepted, consistently with the primary judge’s unchallenged finding, that the respondents and other group members, or their land, “specially benefit[ed]” from the relevant works within the meaning of that phrase in the Local Government Act. But the relevant works did not benefit the respondents or other group members in the sense in which benefit must be established to satisfy a defence of good consideration. As explained above, it is usually sufficient for a benefit that a person merely performed non-gratuitous services that the other party had requested, or for which the other party freely accepted a liability to pay.[238] Conversely, it is not generally a benefit to receive a service that is not requested and is not freely accepted with an opportunity to reject.[239] As Pollock CB said in argument in Taylor v Laird,[240] “One cleans another’s shoes; what can the other do but put them on? … The benefit of the service could not be rejected without refusing the property itself.”
- Perhaps due to the absence of any request for, or free acceptance of, a liability to pay for the relevant works by the respondents, the Council submitted that the benefit to the respondents and other group members was not the value of the service but was, effectively, a net accretion to the wealth of the respondents and group members by an asserted increase in the value of their land by one to two per cent. Apart from the problem that this misunderstands the relevant meaning of benefit, the Council’s submission is factually inaccurate. As explained in the background section of these reasons, the relevant works were performed on public land. The evidence was that any incidental benefit for the land of the respondents and group members was not an increase in the value of that land but an avoidance of a diminution in value on the basis that no work was carried out. Even then, the enhancement was not uniform and the evidence was that objectively quantifying the enhancement was not possible for any individual respondent or group member. Even assessed by reference to the colloquial, and incorrect, meaning of “benefit” as a net accretion to the wealth of a recipient, no individual respondent or group member was shown to have benefited.
- Furthermore, the Council could not justify the law of unjust enrichment treating as a benefit an increase in the value of an owner’s land and dwelling, in circumstances in which the owner has no intention to sell the land or to use it in order to obtain a loan. It was not suggested, for example, that the Council should be limited to a lien over the land of each respondent or group member, realisable only upon sale of the land.[241]
(3) A defence of good consideration would stultify the operation of the Regulations
- The final reason that the Council has no defence of good consideration is that the application of such a defence would stultify the operation of the Regulations, just as the joint judgment and Brennan J in David Securities considered that allowing the bank a defence of good consideration would stultify the purpose of the statutory provision that rendered void any contractual obligation that required a borrower to pay withholding tax.[242]
- The Resolutions to levy the special charges were invalidbecause the Resolutions did not comply with the requirement in the Regulations to identify an overall plan which stated the estimated cost of carrying out, and the estimated time for carrying out, the overall plan. As the respondents submitted, the purpose of these cost and time safeguards in a plan is to ensure that care is taken by a local council before incurring substantial costs that will ultimately be borne by a section of the community. In the course of allowing a claim for restitution in Kiriri Cotton Co Ltd v Dewani,[243] a case to which the joint judgment referred on this point in David Securities,[244] the Privy Council said that “[t]he duty of observing the law is firmly placed … on the shoulders of the landlord for the protection of the tenant”.[245] So too, in this case, the duty of compliance with the Regulations in respect of the cost and time safeguards in a plan is firmly placed on the shoulders of the Council for the protection of those members of the community within its area of government. The common law defence of good consideration, if it applied here as a defence to restitution of the payments, would need to be excluded to avoid undermining the purpose of the Regulations.
[170] Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 at 516 [30].
[171] Bullen and Leake, Precedents of Pleadings in Personal Actions in the Superior Courts of Common Law, 3rd ed(1868) at 35-37, 44-50. See Baker, “The History of Quasi-Contract in English Law”, in Cornish et al (eds), Restitution: Past, Present and Future (1998) 37 at 37-56.
[172] See Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662 at 673; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 374, 379; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 156 [150]-[151]; Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 at 516 [30].
[173] Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129 at 141 [7]; Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269 at 299 [85]; Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 253 CLR 560 at 579 [20], 618 [139].
[174] Mann v Paterson Constructions Pty Ltd [2019] HCA 32; (2019) 267 CLR 560 at 648-650 [212]– [213]. See also Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 at 516 [30].
[175] Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 at 256-257; Mann v Paterson Constructions Pty Ltd [2019] HCA 32; (2019) 267 CLR 560 at 598 [81]. See also at 648-649 [212].
[237] See School Facility Management Ltd v Governing Body of Christ the King College [2021] EWCA Civ 1053; [2021] 1 WLR 6129 at 6163 [83].
[238] Chief Constable of the Greater Manchester Police v Wigan Athletic AFC Ltd [2008] EWCA Civ 1449; [2009] 1 WLR 1580 at 1597 [47].
[239] Lumbers v W Cook Builders Pty Ltd (In liq) [2008] HCA 27; (2008) 232 CLR 635 at 663 [80], quoting Falcke v Scottish Imperial Insurance Co [1886] UKLawRpCh 230; (1886) 34 Ch D 234 at 248; Stewart v Atco Controls Pty Ltd (In liq) [2014] HCA 15; (2014) 252 CLR 307 at 326-327 [47]– [48]. See also Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 at 542 [106].
[240] [1856] EngR 648; (1856) 25 LJ Ex 329 at 332.
[241] Mitchell, Mitchell and Watterson (eds), Goff & Jones on Unjust Enrichment, 10th ed (2022) at 97-98 [4-39]; Cooney, “Restitution for Unrequested Improvements to Land” (2023) 139 Law Quarterly Review 179 at 183.
[242] [1992] HCA 48; (1992) 175 CLR 353 at 384, 400.
[243] [1960] AC 192.
[244] [1992] HCA 48; (1992) 175 CLR 353 at 384.
The link to the full decision is here.
