Redland City Council v Kozik & Ors

This case arose out of special charges which had been invalidly levied by a Council. The respondents brought a representative action seeking repayment. The Court of Appeal concluded that the respondents should succeed on the basis of a claim for monies paid under mistake. The Council opposed the repayment in full on the ground that repaying the charges in full would unjustly enrich the respondents because some of the money had already been spent on the provision of services to the respondents’ benefit. The Court of Appeal rejected the Council’s argument.

McMurdo JA and Boddice and Callaghan JJ

26 August 2022

Background

The respondents in this case are plaintiffs in a representative action against the Redland City Council. [1]. They seek the return of monies paid to the Council for “special charges” purportedly levied over a six year period, to fund work related to certain waterways. [1], [18]. It was common ground that the resolutions authoring those charges were prima facie invalid, due to failures to comply with requirements in the Local Government Regulation 2012 (“the Regulations”). [11]–[12], [17].

Council argued (as they had at first instance) that full repayment to the respondents would unjustly enrich them, as some of the funds had already been expended for their benefit. [48].

McMurdo JA (Boddice J agreeing) considered that the Council should succeed on its ground concerning the proper construction of the Regulations. However, his Honour considered that the Council would fail on its general law argument and would therefore still be required to repay the invalidly levied charges in full to the respondents. [33], [63]. Writing separately, Callaghan J said he would have affirmed the primary judge’s decision (based on the construction of the Regulations). [100].

Whether the Regulations required repayment

Section 32 of the Regulations, in force at the time the first special charge was purportedly levied, provided that:

(1) This section applies if a rate notice includes special rates or charges that were levied on land to which the special rates or charges do not apply.

(2) The rate notice is not invalid, but the local government must as soon as practicable return the special rates or charges to the person who paid the special rates or charges.

Bradley J had, at first instance, concluded that the Council was obliged to repay the monies to the respondents in full. [5]. However, McMurdo JA considered that, on its proper construction, this Regulation (and its successors) applies only where there is “a special rate or charge which by the terms of a valid resolution [emphasis added] was able to be levied on some ratepayers” (albeit that the notice might include land to which the rates or charges do not apply). In comparison, it did not apply “where there was no charge which could be levied” – which was the case here. [27]. Accordingly, his Honour considered that the case fell to be determined according to general law principles. [35].

Writing separately, Callaghan J considered that s 32 of the Regulations (and its successors) should be given a broader construction (compared to that favoured by McMurdo JA and Boddice J). His Honour agreed with the primary judge that the section was applicable and required the return of monies to the respondents. [100].

The claim for monies paid under mistake / the unjust enrichment defence

At first instance, the respondents’ had also pleaded an alternative claim for monies had and received. They contended that they had paid the Council the special charges in “the mistaken belief that they were obliged to pay the same as being lawfully charged and demanded”. [36]. However, at first instance Bradley J concluded that the respondents had not been mistaken, because the rates were valid (due to his construction of s 32). [40]. However, as noted above, McMurdo JA reached a different view on this point, holding that the Regulations did not ensure the validity of the charges (nor require their return). [41].

McMurdo JA accepted that the respondents had made their payments to the Council in the mistaken belief that they were legally obliged to do so. [43]. That was a mistake of law that prima facie entitled them to recover the monies. [44]. As a majority of the High Court said in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 275 CLR 353:

“[T]he payer will be entitled prima facie to recover moneys paid under the mistake if it appears that the monies were paid by the payer in the mistaken belief that he or she was under a legal obligation to pay the moneys or that the payee was legally entitled to payment of the moneys.”

The Council pleaded in defence that some of the monies had already been applied for the benefit of the respondents, so that to repay those monies “would unjustly enrich the claimants”. [48]. The Council noted that in David Securities it was said that a claim for monies paid under a mistake may fail if the payment was made “for good consideration”. [49]. The Council argued that the provision of its services, benefitting the respondents, was good consideration for the monies paid. [50].

McMurdo JA considered that the Council’s unjust enrichment defence failed. [63]. His Honour observed that, in David Securities, the issue of whether there was “good consideration” for the monies paid under mistake had to be judged “from the perspective of the payer” and that “consideration means the matter considered in forming the decision to do the act, ‘the state of affairs contemplated as the basis or reason for the payment’”. [52]. Expressed another way, “consideration in this context means the matter considered by the payer informing the decision to pay, rather than any benefit to the payer which subsequently ensued”. [61].

In this case, the “state of affairs” existing in the respondents’ minds was that they were obliged to pay the charges; there was no suggestion that they were minded to pay the monies “regardless of whether they had to do so” because their land would benefit from the expenditure of their monies. [60]. Accordingly, his Honour considered that there was “a failure of consideration for the payments”, and “they were not made for good consideration in the relevant sense”. [60]. Accordingly, the respondents could not be said to be unjustly enriched by the repayment of the monies in dispute. [63].

In the result, the appeal was allowed in part. The respondents were still entitled to repayment of their monies, albeit on a different basis to that as found by the primary judge. [65].

W Isdale