Lamesa Holding BV v Commissioner of Taxation

Amendment of Pleadings 8 Lamesa's statement of claim, in its original form, pleaded only that it was entitled to the amount claimed under s 172(1) of the Assessment Act. By a notice of motion, filed on 24 February 1999 (several weeks before the hearing), Lamesa sought leave to amend its statement of claim to plead that it is entitled to recover the amount claimed under the doctrine of unjust enrichment. In essence, Lamesa's claim is that the Commissioner received the benefit of the sum of USD55,155,069.51 at the expense of Lamesa, in circumstances where it would be unjust for the Commissioner to retain the benefit. 9 The Commissioner resisted Lamesa's application to amend its pleadings so close to the hearing, but helpfully prepared a draft defence to the proposed amended statement of claim. The draft defence pleads that the amount of USD55,155,069.51 was paid voluntarily and not under any mistake. It also pleads (par 17(b)) that "if the payment [in response to the notice served under s 255 of the Assessment Act] ought not to have been made... the payment was made because of the negligence or failure of Macquarie [Equities] and/or [of Lamesa's legal advisers] who ought to have advised [Lamesa] that no payment should be made." 10 In the result, I gave leave to Lamesa to file the amended statement of claim incorporating the unjust enrichment claim and to the Commissioner to file his draft defence to the amended statement of claim. Because par 17(b) of the amended defence gave rise to fresh issues of fact and law that could not be addressed at the scheduled hearing, I directed that the hearing proceed on the amended pleadings, save that any factual issues and legal argument in relation to par 17(b) be held over, if necessary, to a further hearing.

The Legislation 11 Section 16(2) of the Assessment Act prohibits an officer of the ATO, subject to certain exceptions, from divulging any information concerning the taxation affairs of a person. This provision serves to explain some of the correspondence sent by or on behalf of Lamesa to the ATO to which reference was made in submissions. 12 Section 17 of the Assessment Act provides that income tax at the rates declared by Parliament is levied and shall be paid upon the taxable income derived during the year by any person. In calculating the taxable income of a taxpayer, the total assessable income derived by him or her during the year of income is taken as a basis and from it is deducted all allowable deductions: Assessment Act, s 48. 13 Section 20(1) of the Assessment Act requires income and expenses to be expressed in Australian currency: "20(1)For all the purposes of this Act, income wherever derived and any expenses wherever incurred shall be expressed in terms of Australian currency." 14 Part IV of the Assessment Act governs returns and assessments. Section 166 of the Assessment Act requires the Commissioner, from returns or any other information in his or her possession, to make an assessment of the taxable income of any taxpayer and of the tax payable thereon. Section 167 empowers the Commissioner to make an assessment of the amount on which income tax ought to be levied, where the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income. Section 169 further provides that where any person is liable to pay tax under the Assessment Act, the Commissioner may make an assessment of the amount of such tax. The Commissioner has power to amend an assessment at any time, subject to certain time constraints: s 170(1). Section 175 provides that the validity of an assessment is not affected by reason that any of the provisions of the Assessment Act are not complied with. The production of a notice of assessment is conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 (Cth) ("Administration Act"), that the amount and all the particulars of the assessment are correct: s 177(1). 15 Any income tax is due and payable on the date specified in the notice, not being less than thirty days after service: s 204(1). Income tax, where it becomes due and payable, is a debt due to the Commonwealth and payable to the Commissioner: s 208(1). 16 Section 172 of the Assessment Act, on which Lamesa particularly relied, governs refunds of tax overpaid. It provides as follows: "172(1) Where, by reason of an amendment of an assessment, a person's liability to tax is reduced: (a) the amount by which the tax is so reduced shall be taken, for the purposes of sections 170AA [payment of interest], 207 and 207A [penalty provisions], never to have been payable; and (b) the Commissioner shall: (i) refund the amount of any tax overpaid...". Section 16(1) of the Administration Act provides the necessary statutory appropriation to enable the Commissioner to make the refund out of the Consolidated Revenue Fund. 17 Section 255 of the Assessment Act empowers the Commissioner to require persons in receipt or control of money belonging to a non-resident to take certain action. Section 255, so far as material, provides as follows: "255(1) With respect to every person having the receipt control or disposal of money belonging to a non-resident, who derives income, or profits or gains of a capital nature, from a source in Australia or who is a shareholder, debenture holder, or depositor in a company deriving income, or profits or gains of a capital nature, from a source in Australia, the following provisions shall, subject to this Act, apply: (a) he shall when required by the Commissioner pay the tax due and payable by the non-resident; (b) he is hereby authorized and required to retain from time to time out of any money which comes to him on behalf of the non-resident so much as is sufficient to pay the tax which is or will become due by the non-resident; (c) he is hereby made personally liable for the tax payable by him on behalf of the non-resident to the extent of any amount that he has retained, or should have retained, under paragraph (b); but he shall not be otherwise personally liable for the tax; (d) he is hereby indemnified for all payments which he makes in pursuance of this Act or of any requirement of the Commissioner. 255(2) Every person who is liable to pay money to a non-resident shall be deemed to be a person having the control of money belonging to the non-resident, and, subject to subsection (2A), all money due by him to the non-resident shall be deemed to be money which comes to him on behalf of the non-resident." 18 Part IVC of the Administration Act provides for taxation objections, reviews and appeals. Division 5 of Part IVC provides for appeals to the Federal Court against "appealable objection decisions" - (the expression 'objection decision' is defined in s 14ZY). Section 14ZZQ(1) provides for the implementation of a Federal Court order in respect of an appealable objection decision: "14ZZQ(1) When the order of the Federal Court in relation to the decision becomes final, the Commissioner must, within 60 days, take such action, including amending any assessment or determination concerned, as is necessary to give effect to the decision." 19 Section 9 of the Interest Act deals with a taxpayer's entitlement to interest. Section 9(1) provides as follows: "9(1) Subject to sections 11, 11A and 12 where: (a) an amount of relevant tax is paid by a person to the Commissioner (in this subsection referred to as the 'amount paid'); and (b) as a result of a decision to which this Act applies, the whole or a part of the amount paid is overpaid by the person and is refunded to the person or applied against any liability of the person to the Commonwealth; interest calculated in accordance with subsections (2) and (3) and sections 10 and 10A is payable by the Commissioner to the person in respect of: (c) in a case where the whole of the amount paid is so refunded or applied - the amount paid; or (d) in a case where a part of the amount paid is so refunded or applied - the part of the amount paid so refunded or applied." The exceptions to s 9(1) are not relevant to this case. "Relevant tax" includes any income tax paid by or on behalf of Lamesa in this case. 20 Regulation 20 of the Taxation Administration Regulations provides as follows: "20(1)A person who pays a debt must pay it: (a) by posting or delivering the amount of the debt to a branch of the Australian Taxation Office that has facilities for the collection of payments; or (b) by delivering the amount of the debt to the Reserve Bank of Australia; or (c) by delivering the amount of the debt to the High Commissioner of the Commonwealth of Australia in the United Kingdom; or (d) by delivering the amount of the debt to the Australian Trade Commissioner for the United States of America; or (e) by depositing the amount of the debt at a branch of the Reserve Bank of Australia in accordance with arrangements made by the Commissioner for paying a debt at the bank; or (f) by paying the amount of the debt in accordance with other arrangements made by the Commissioner."

The Evidence 21 Most of the facts were not in dispute. The key transactions were fully recorded in the documentary evidence and most conversations of importance were either confirmed by correspondence or were the subject of detailed notes by at least one party. 22 Five witnesses were cross-examined. These were the following: · Mr King; · Mr Worthington; · Mr Schneider, the Chief Financial Officer of a limited partnership, now known as Leonard Green and Associates, LP ("LGA") and Managing Director of Lamesa; · Mr Annick, a Principal of LGA who worked very closely with Mr Schneider; and · Mr McWhinnie, the Divisional Director of the Taxation Division of Macquarie Bank Ltd ("Macquarie Bank"), who was also responsible for taxation on issues affecting its subsidiary, Macquarie Equities. 23 Each of the witnesses was, in my opinion, endeavouring to give truthful evidence. None attempted to mislead the Court, although there were differences of recollection on some issues. Mr King was hampered in certain aspects in his recollection because he did not generally keep notes of conversations. Nonetheless, for reasons that I shall give later, I have preferred Mr King's evidence to that of Mr Worthington concerning the conversation of 21 June 1996. As events turned out, the differences between their accounts were relatively minor, but I have concluded that Mr Worthington was mistaken in his recollection that he and Mr King reached what was intended to be a binding arrangement as to the amount the Commissioner would have to repay in the event that Lamesa's challenge to the assessment succeeded.

The Facts 24 As stated earlier, Lamesa is a company incorporated in the Netherlands, but ultimately controlled by LGA, which is established in the United States. In 1992, Lamesa acquired shares in a company later known as Australian Resources Ltd ("ARL"), incorporated in the Australian Capital Territory. In January 1994, Lamesa sold a portion of its shareholding in ARL, generating a profit that was later assessed by the Commissioner at approximately A$73.6 million. 25 On 12 January 1996, Macquarie Equities, as agent for Lamesa, contracted to sell the balance of Lamesa's shareholding in ARL. The net proceeds of the sale of those shares was A$138,655,294, producing a profit for Lamesa later assessed by the Commissioner at approximately A$128.1 million. 26 As evidenced by the contract note issued by Macquarie Equities on 12 January 1996, it agreed with Lamesa to account for the net proceeds of the sale in USD. Settlement was to take place on 19 January 1996, when Macquarie Equities was to account to Lamesa for the sum of USD103,076,345.57. In order to cover its position, Macquarie Equities entered a forward exchange contract on 12 January 1996 with Macquarie Bank under which A$138,655,294.02 was to be exchanged for USD103,076,345.57 on 19 January 1996. The exchange rate used (A$1.00 = USD 0.743400) was the market rate on the contract day. 27 On 15 January 1996, it came to Mr Worthington's attention, through reports in the press, that Lamesa had sold a large parcel of shares in ARL at a substantial profit. On the same day, following a conversation with Mr McWhinnie of Macquarie Equities, Mr Worthington sent a notice by facsimile to Macquarie Equities. The notice, which purported to be issued pursuant to s 255 of the Assessment Act was in the following form: "TAKE NOTICE that whereas: 1. Lamesa Holdings BV, a non-resident, is due or will become due to pay tax, and 2. Macquarie Equities Limited have or will have the receipt, control, or disposal of money belonging to Lamesa Holdings BV pursuant to sub-section 255(2) of the Act. You are hereby required pursuant to paragraph 255(1)(b) of the Act to retain the sum of $74,192,991 or such lesser amount which comes to you on behalf of Lamesa Holdings BV." 28 Later that day, Mr Worthington informed Mr McWhinnie that failure to retain the amount set out in the notice or its equivalent would leave Macquarie Equities liable to the extent of the failure. Mr McWhinnie suggested that an account be established to hold the money until the ATO advised that the money should be paid to it or remitted to Lamesa. Mr Worthington indicated that such a course would be acceptable to the ATO. 29 On 16 January 1996, the Commissioner issued two assessments to Lamesa. The first, in respect of the 1994 tax year, was issued pursuant to s 167 of the Assessment Act and was for an amount of A$28,073,923. The second was issued in respect of the 1996 tax year, pursuant to s 168 of the Assessment Act, and was for an amount of A$46,119,068. The total of both assessments was therefore A$74,192,991. Payment was due under the assessments thirty days after service: Assessment Act, s 204(1). 30 As Mr Worthington explained in his evidence, at the time these assessments were issued, the ATO was uncertain as to whether they would be pursued, since the complex legal issues under the Netherlands-Australia Double Tax Agreement had not at that stage been fully analysed. It was for that reason that the s 255 notice, issued on 15 January 1996, merely required Macquarie Equities to retain, rather than pay over, the tax assessed to Lamesa. 31 On the same day, 16 January 1996, Mr King, who had acted as Lamesa's taxation adviser in Australia since 1992, received instructions from Mr Schneider to contact the ATO to discuss the basis on which the s 255 notice had been issued to Macquarie Equities. Mr King thereupon telephoned Mr Worthington, who advised him that s 16 of the Assessment Act prevented an officer of the ATO from discussing the affairs of the taxpayer with a third party without the taxpayer's consent. (Lamesa had never lodged tax returns in Australia and had not previously nominated an agent to the ATO.) Mr Worthington indicated that, in view of s 16 of the Assessment Act, he required written confirmation from Lamesa, stating that Mr King was authorised by Lamesa to discuss the matter with him. 32 Mr King then telephoned Mr Schneider and asked him to confirm to the ATO that he (Mr King) was authorised to discuss the matter on Lamesa's behalf. Mr Schneider sent a letter on Lamesa letterhead by facsimile to Mr Worthington. The letter, which was dated 12 January 1996 but was apparently prepared on 15 January 1996 Los Angeles time, was received by Mr Worthington in the ATO's Newcastle office on 17 January 1996. It read as follows: "Please be advised that Mr Paul King of Greenwoods & Freehills is an authorized representative of Lamesa Holding BV, duly authorized to carry on discussions with you on our behalf." 33 On 17 January 1996, Mr McWhinnie of Macquarie Bank and Mr Worthington of the ATO exchanged letters. Mr McWhinnie's letter included the following proposals: "The current Section 255 Notice specifies the sum of AUD74,192,991 to be withheld pending further advice. You advised that in the circumstances Macquarie Equities Limited should withhold the appropriate number of US dollars instead. Given the above, we would propose to use the 0.743400 rate and retain USD55,155,069.51 (ie AUD74,192,991 x 0.743400). It would therefore be of assistance if you could reissue the Notice specifying that USD 55,155,069.51 should be withheld, as this will remove all doubt as to our obligations. Macquarie Equities proposes to place the retained USD funds in a blocked foreign currency account with Macquarie Bank Limited styled 'Macquarie Equities Limited re Lamesa Holdings BV'. In the event that you instruct us to remit funds to the Tax Office we would propose that you ask us to convert a set number of US dollars in the account to Australian dollars and remit the proceeds to you." The terms of this letter were approved in advance by Mr Schneider and Mr Annick on behalf of Lamesa. 34 The ATO responded to Mr McWhinnie's letter as follows: "It is advised that no provision appears to exist for the withdrawal of a section 255 notice. However, as discussed with you, the requirement to retain $A74,192,991 will be satisfied if an equivalent amount in US dollars is retained. On the basis of the information provided an amount of $USD55,155,069.51 would meet this requirement." 35 Copies of these letters were provided to Mr King. It became apparent to him that, if the Commissioner proceeded to litigation, fluctuations in exchange rates would mean that the USD amount held by Macquarie Equities might be more or less than the amount ultimately required to meet Lamesa's liability under the assessments. Mr King discussed the issue with Mr Annick and Mr Schneider, who advised that hedging of the "Australian dollar liability" (Mr King's words in his affidavit) was not practicable. 36 Mr King was instructed by Mr Annick and Mr Schneider that, because of these difficulties, Lamesa wished to "lock in its liability", so that if the ATO pursued the matter Lamesa would not be required to pay any further amount to the ATO. As Mr King explained it, Lamesa's position was to be "effectively hedged". Mr King's subsequent correspondence and discussion with the ATO were designed to ensure that Lamesa did not have to pay further amounts should the USD weaken against the A$. Should the USD strengthen against the A$ any "up side was for the benefit of the ATO". 37 Mr King had discussions with Mr Worthington on 17 January 1996, during which he explained that he would require instructions from Lamesa before decisions could be made. 38 On 18 January 1996, Mr King wrote to Mr Worthington, confirming the results of earlier telephone discussions: "In accordance with our discussions, I understand that if amounts become payable under the assessments, the Australian dollars received on conversion of the amount held in the account styled 'Macquarie Equities Limited re Lamesa Holdings BV' (USD55,155,069.51) will be paid to the Australian Taxation Office and will fully satisfy the amounts payable under the notices of assessment. It should be noted that the Australian dollar amount received on conversion is not likely to equal AUD74,192,991 and will be greater or less than the amounts specified in the notices of assessment depending upon the movement in the exchange rates." The terms of this letter were also approved in advance by Mr Schneider and Mr Annick on behalf of Lamesa. 39 On 19 January 1996, settlement of the ARL sale took place. The sum of USD55,155,069 was deposited by Macquarie Equities with Macquarie Bank in a trust account. Interest on that account was to accrue and be credited to the account on a daily basis. The interest on the account was to be dealt with in accordance with instructions from Lamesa. The balance of the proceeds of the ARL sale (USD47,921,276) was remitted to Lamesa. On the day of settlement, Mr McCarthy of Macquarie Equities confirmed these arrangements in writing with Mr Annick of LGA. 40 On 22 January 1996, Mr Worthington responded to Mr King's letter of 18 January, as follows: "A letter has issued to Macquarie Equities Ltd advising that the Commissioner will accept the retention of USD55,155,069.51 as meeting the requirement under the section 255 notice to retain AUD74,192,991. In the event that some amount less than that is to be forwarded to the Commissioner in satisfaction of Lamesa Holding BV's taxation liabilities, the amount to be forwarded will be calculated as the same proportion of the Australian dollar amount applicable to the US dollar amount. It is noted that exchange rate fluctuations may cause some variation in the value of the USD amount retained. Regardless of such fluctuations it is considered that the amount retained will be treated as meeting in full, the income tax liabilities of Lamesa Holding BV for the assessments issued. Would you please confirm that this arrangement is amenable to your client." 41 As Mr Worthington explained in his evidence, the ATO was prepared to agree to this arrangement largely because of a concern that, if the assessments to Lamesa were withdrawn and a loss were sustained on the conversion of currencies, the Commissioner might be sued. At this stage, Mr Worthington hoped that the matter would be resolved within a short period. 42 After receiving Mr Worthington's letter, Mr King reported in writing to Mr Schneider. Mr King made these comments in his report: "It seems to me that the letter [of 22 January], although a little unclear, should satisfy our concerns in view of the fact that the ATO has confirmed that: (1) the [USD] amount retained by Macquarie Bank will meet the liability of the assessments in full; (2) if assessments for an amount less than the existing liability are issued, the amount forwarded will be on a proportionate basis". Although there seems to have been no written response by Mr King to the letter of 22 January 1996, it is clear that dealings between the ATO and Lamesa proceeded on the basis that the letter was acceptable to Lamesa. Mr Annick gave evidence (Ts 87) that he understood that the Commissioner had accepted that payment of USD55,155,069 or its Australian equivalent would discharge Lamesa's tax liability as well as discharging Macquarie Equities' obligation to comply with the notice under s 255 of the Assessment Act. 43 On 23 January 1996, Mr McWhinnie, on behalf of Macquarie Equities, wrote to Mr Worthington of the ATO, confirming that a USD account had been opened with Macquarie Bank and that "USD55,155,069.51 has been credited to this account in accordance with the [s 255 notice] and your letter dated 17 January 1996". 44 On 1 March 1996, Mr King sent a memorandum to Mr Schneider recording the effect of discussions with Mr Worthington, relating to interest on the payment due under the assessments. Mr King stated that Mr Worthington had indicated that the ATO would not charge interest on the assessments during the period when the ATO was deciding whether or not to pursue the matter. There was no dispute that this memorandum accurately reflected the discussions. 45 On 26 March 1996, Mr Worthington of the ATO received a letter from LGA, signed by Mr Schneider, as follows: "As you know, Lamesa Holding BV ("Lamesa") is majority owned by Green Equity Investors, L.P., a Delaware Limited partnership, who's [sic] general partner is Leonard Green & Associates, L.P. (formerly Leonard Green & Partners, L.P. - the name was changed on January 1, 1995). As a director of Lamesa, I have previously notified you that Paul King of Greenwoods & Freehills is authorized to act to represent Lamesa in tax matters. This will serve as notification that he is also authorized to represent Green Equity Investors, L.P. and Leonard Green & Associates, L.P. on such tax matters." It was common ground that this letter, like Mr Schneider's earlier letter, had been sent to satisfy the ATO's concerns about the operation of s 16 of the Assessment Act. 46 During the period from January until June 1996, the Commissioner was considering his position in relation to the substantive tax claim against Lamesa. By early June, deliberations within the ATO had reached a stage where it appeared to Mr Worthington that the Commissioner was likely to require payment of the USD amount retained by Macquarie Equities in the blocked account. 47 On 5 June 1996, Mr Worthington had a conversation with Mr Neligan of the Complex Recoveries Unit in the ATO. By that time the A$ had appreciated against the USD, so that the amount of A$ likely to be received on conversion of the USD sum in the blocked account was substantially less than Lamesa's liability under the assessments issued to it in January. Mr Worthington sought advice as to how to handle a payment by Macquarie Equities to the ATO and, in particular, how to avoid the prospect that the ATO would become liable for any exchange fluctuation, should the matter go to litigation and the ATO lose. Mr Neligan referred to reg 20 of the Taxation Administration Regulations and advised that the ATO should require Macquarie Equities to make any payment in AUD, either taking conversion costs out of the payment or recording a charge to the ATO separately. 48 On 5 and 6 June 1996, Mr Buckley of the ATO made inquiries about the mechanics by which Macquarie Equities could make payment. These included inquiries of the Reserve Bank, which advised that Australian banks do not hold physical USD, but that Macquarie Equities could pay the amount held in USD to the Reserve Bank's USD account with the Federal Reserve Bank in the United States. The Reserve Bank would then be able to credit the ATO's local account with the A$ equivalent of Macquarie Equities' USD payment. 49 On or about 19 June 1996, the Commissioner decided to maintain the assessments issued to Lamesa. On 19 June 1996, Mr Worthington requested the Deputy Commissioner in Newcastle to sign a notice under s 255 directed to Macquarie Equities. The memorandum recorded the following: "Arrangements have been made with the Reserve Bank of Australia to receive the USD amount into its account in New York with the Federal Reserve with subsequent crediting of the Australian Dollar equivalent to the Newcastle ATO account in Australian Dollars. This ensures that the fees on the conversion go to the Reserve Bank rather than to Macquarie Equities or its agent. Instructions from the Reserve Bank confirming the arrangement have been received in writing." 50 The same day a further notice, purporting to be issued under s 255 of the Assessment Act,was sent to Macquarie Equities, in the following form: "You are hereby required pursuant to paragraph 255(1)(a) of the 'Act' to pay the tax due and payable by Lamesa Holdings BV of $74,199,875.00 or such lesser amount held by you on behalf of Lamesa Holdings BV. Instructions for payment are as follows: Please pay Amount into Federal Reserve Bank New York, New York Account Name: Reserve Bank of Australia Sydney Account Number: 021-083-116." The covering letter said this: "The amount is requested in Australian Dollars as required under the Income Tax Provisions. Reference is made to your letter dated 17 January 1996 to Michael Worthington of the Australian Taxation Office Newcastle. The letter requested that Macquarie Equities Limited be permitted to hold US dollars instead of Australian Dollars in satisfaction of the original notice. Acceptance of the retention in US dollars was also made to you on the same date. Remittance of the amount of USD55,155,069.51 plus any other amounts accruing to the account will be accepted as satisfying the attached notice. Payment should be made to the Federal Reserve Bank of New York, New York for credit to the account of the Reserve Bank of Australia, Sydney, account number 021083116. Confirmation of the deposit should be made immediately." Mr Worthington accepted in evidence that the reference to "other amounts accruing to the account" had been an error, since it had previously been agreed that Macquarie Equities would not be obliged to pay interest accruing on the USD amount to the ATO. In fact, Macquarie Equities caused approximately USD 1.2 million in interest to be paid on the USD sum held on deposit with Macquarie Bank to Lamesa during the currency of the deposit. 51 Later on 19 June 1996, Mr McCarthy of Macquarie Equities wrote to Mr Annick advising of receipt of the s 255 notice and of the separate letter whereby the ATO had agreed to accept a remittance in the sum of USD55,155,069 in satisfaction of the notice. Macquarie Equities' letter stated that it was obliged to comply with the notice and that it proposed to remit the funds as directed on Friday, 20 June 1996 (presumably a mistake for Friday, 21 June 1996). The letter asked for written confirmation from Lamesa that the payment was to take place on the following Friday. On 21 June 1996, Mr King advised Mr Walshe of Macquarie Equities that Lamesa had verbally confirmed that Macquarie Equities could remit the amount of USD55,155,069 to the ATO in accordance with the s 255 notice. 52 In the meantime, on 20 June 1996, G & F lodged notices of objection on behalf of Lamesa against each of the 1994 and 1996 assessments, claiming that each should be reduced to nil, on the ground that the profits derived from the sales of shares in ARL were exempt from Australian tax. On 21 June 1996, the Commissioner issued amended assessments to Lamesa assessing tax in a total amount of A$74,199,875. This amount varied from that in the original assessments only by some A$7,000. 53 In a telephone conversation on 21 June 1996, Mr McWhinnie of Macquarie Bank told Mr Buckley of the ATO that Macquarie Equities recognised that, although at that stage it had not been able to contact the client, it had a legal liability to remit "the money" to the ATO and would do so. Shortly thereafter, in separate conversations, Mr McWhinnie advised that the money would be transferred to the ATO's New York account on Friday, 21 June 1996, New York time, while Mr Buckley advised that the amount to be transferred was USD55,155,069. 54 During the morning of 21 June 1996, a conversation took place between Mr King and either Mr Worthington or Mr Buckley of the ATO. Mr King raised the question of interest on the funds in USD held by Macquarie Equities on behalf of Lamesa. Mr Worthington or Mr Buckley advised that the ATO would only look to recover USD55,155,069 from Macquarie Equities. 55 Probably a little later on the morning of 21 June 1996, Mr King and Mr Worthington had a telephone conversation upon which the Commissioner placed considerable reliance. In his evidence, Mr Worthington acknowledged that the record he made of the conversation at about noon on 21 June on his computer was the best evidence of the words involved in the conversation and that he had no better recollection of the conversation than the record (which he had printed in hard copy). It is therefore convenient to reproduce that record: "Phone discussion with Paul King re treatment of monies. A concern from Kevin [Buckley] was that they may seek to treat the amount now received under 255 as equating to $74M, rather than the actuallity [sic] of it now being only $69.8M. I outlined to Paul that we envisaged that we would accept the retention of the USD55M as meeting the 255 notice and as meeting the income tax liability of $74M. This meant that the balance difference received from the USD receipt would be written off as not collectable in our accounts if it did not convert to at least $74M and any gain would be the revenue's good fortune. The situation is now changing because the monies are now being forwarded in, the conversion to AUD occurs and a loss of $4-5M crystallising from the appreciation of the AUD. What happens though if a repayment is due to Lamesa of some or all this money. The most likely outcome is a simple win/loss situation. If the ATO wins no difficulty arises. If Lamesa wins then the amount of $69.8M is available for refund. Paul agreed that his understanding was that they now assume the exchange risk, and that they would not be expecting AUD74M to be repaid, only the amount actually paid in being AUD69.8M plus interest as statutorily payable. I pointed out that this problem arose because we had agreed to allow retention in USD at their request. What occurs if a lesser amount is repayable to Lamesa. I suggested that a similar calculation to that employed in my letter dated 22/1/96 be employed, such as say the amendment reduces the income tax liability from $74M then we refund 69.8x24M/74M=22.6M. Paul will consider this last point and get a discussion paper back to me on it." The reference in the second paragraph to a "concern from Kevin" is to a concern expressed by Mr Buckley that it could possibly be argued that the Commissioner was bound to treat the receipt of A$69.8 million as full satisfaction of Lamesa's obligation to pay A$74 million under the assessments and, in the event that the assessments were set aside, the Commissioner was bound to repay A$74 million. 56 At 3.40 pm on 21 June 1996, Mr Worthington of the ATO sent a letter to Macquarie Equities, in the following terms: "Reference is made to our letter dated 19 June 1996 to The Public Officer, Macquarie Equities Limited, concerning remittance of funds under a Section 255 notice. After discussions with Mr Paul King it is mutually agreed that the remittance of the amount of USD55,155,069.51 will be accepted as satisfying the said Section 255 notice. The balance of any amounts held may be treated at the direction of Lamesa Holding BV. Payment directions as per previous advice should otherwise be followed." Mr Worthington said in his evidence that this letter was merely intended to reflect the understanding between Mr King and himself, reached on the morning of 21 June 1996, that the letter of 19 June 1996 had been in error when it referred to Macquarie Equities being obliged to remit interest on the USD amount to the ATO. 57 The amount of USD55,155,059 was transferred by Macquarie Equities on 21 June 1996 (New York time) to the Federal Reserve Bank in New York, to the credit of the Reserve Bank of Australia. On 24 June 1996, the Reserve Bank of Australia purchased this sum from the ATO and credited the ATO's account with the Reserve Bank with the sum of A$69,860,759, reflecting an exchange rate of A$1 = USD 0.7895. 58 On 3 July 1996, Lamesa lodged notices of objection in respect of each of the amended assessments, claiming that each should be reduced to nil. 59 On 18 September 1997, the time expired for the filing of an application for special leave to appeal to the High Court from the decision of the Full Court in FCT v Lamesa. It was common ground that on that date the decision of the Federal Court at first instance, which included a declaration that no tax was payable by Lamesa in respect of the 1994 and 1996 tax years, became "final" within the meaning of s 14ZZQ(1) of the Administration Act. The Commissioner was therefore obliged to take such action, including amending any assessments, as was necessary to give effect to the decision. On 3 October 1997, the Commissioner issued an amended assessment for each of the relevant years, showing Lamesa's taxable income and the gross tax due to be nil. 60 As soon as the time for filing a special leave application expired, Lamesa's solicitors requested immediate payment of the full amount paid to the Commissioner on 19 June 1996, namely, USD55,155,069, together with interest. The letter of 18 September 1997 requested that the principal be refunded in USD, but that the interest be paid in Australian currency. 61 On 3 October 1997, the Australian Government Solicitor forwarded a cheque for $A69,860,759.35, together with a further amount of $5,436,655.11, being interest on the overpayment of A$69,860,759.35, less ten per cent withholding tax. Lamesa accepted these amounts as the "first instalment" of the full amount said to be due. It commenced the present proceedings on 21 November 1997. The Statutory Claim Lamesa's Submissions 62 Lamesa submitted that it had an entitlement, pursuant to s 172(1)(b)(i) of the Assessment Act, to a refund of the amount the Commissioner agreed to accept and the amount actually paid in discharge of Lamesa's tax liability, namely USD55,155,069.51. It was this amount which had been paid into the account of the Reserve bank for the credit of and at the direction of the Commissioner. 63 Mr Slater QC, who appeared with Mr Ryan for Lamesa, argued that reg 20(1)(f) of the Taxation Administration Regulations contemplated an arrangement for the payment of a debt due by a taxpayer by means of a payment in a foreign currency. He contended that the Commissioner's letters of 19 and 21 June 1996 to Macquarie Equities and the latter's payment in USD constituted an arrangement whereby Macquarie Equities had paid the debt due by Lamesa in USD. The Commissioner had accepted payment of Lamesa's indebtedness in USD. Accordingly, it was this sum in USD which was paid to the Commissioner and which constituted "tax overpaid" for the purposes of s 172(1)(b)(i) of the Assessment Act. Similarly, the amount of "relevant tax" paid by or on behalf of Lamesa, for the purposes of s 9(a) of the Interest Act, was the sum of USD55,155,069. It followed that Lamesa was entitled to interest calculated in accordance with the Interest Act on that sum. 64 Mr Slater conceded that the argument was only open to Lamesa because Macquarie Equities had not converted the USD sum into A$ prior to payment to the Commissioner. Had conversion taken place beforehand, as was contemplated in Mr King's letter of 18 January 1996, Mr Slater accepted that Lamesa could not rely on s 172(1) of the Assessment Act to recover more than the amount repaid by the Commissioner on 3 October 1997.

Reasoning 65 There was a good deal of common ground between the parties concerning Lamesa's claim pursuant to s 172(1) of the Assessment Act. The Commissioner accepted that the amended assessments, issued on 3 October 1997 in consequence of the decision of the Federal Court setting aside the objection decision, reduced Lamesa's liability to tax under the amended assessments issued on 21 June 1996 (by reducing the tax liability from A$74,199,875 to nil). Accordingly, the Commissioner did not dispute that the introductory words of s 172(1) of the Assessment Act had been satisfied. 66 For its part, Lamesa conceded that the tax due by a taxpayer pursuant to an assessment is an amount in Australian currency. This concession reflects the observations of Emmett J (with whom Wilcox and Tamberlin JJ agreed) in Deputy Federal Commissioner of Taxation v Conley (1998) 158 ALR 229 (FC), at 235: "The Assessment Act recognises the necessity for money to be expressed in terms of a unit of account. The unit of account for the Assessment Act is Australian currency and an assessment made under the Assessment Act will be expressed in Australian currency. Thus, section 20(1) of the Assessment Act provides that, for all purposes of the Act, income wherever derived and expenses wherever incurred must be expressed in terms of Australian currency." Section 20 is, in terms, confined to income and expenses, but Mr Slater also accepted that the Commissioner's obligation was to issue assessments expressed in Australian currency. 67 The question is, then, the meaning of the expression "tax overpaid", as used in s 172(1) of the Assessment Act. Mr Slater, on behalf of Lamesa, identified three possible amounts as being the "tax overpaid" for the purposes of s 172(1)(b)(i) of the Assessment Act. These amounts were: (i) USD55,155,069, paid by Macquarie Equities into the account of the Reserve Bank in New York for the credit of the Commissioner; (ii) A$74,199,875, being the amount of Lamesa's tax debt which the Commissioner accepted had been discharged by payment of the amount of USD55,155,069; or (iii) A$69,860,795, for which the Reserve Bank, at the request of the Commissioner, sold the amount of USD55,155,069. 68 Mr Slater did not press option (ii) and, indeed, the relief sought by Lamesa is not consistent with that option being correct. Rather, Mr Slater contended that the "tax overpaid" was the amount of USD55,155,069, which was the sum "agreed and accepted" by the Commissioner. He said that the "tax overpaid" could not have been A$69,860,795, because neither Lamesa nor Macquarie Equities had ever paid that amount to the Commissioner. In fact, the Commissioner had sought and received a sum in USD and had subsequently sold that sum in order to obtain Australian currency. The amount of tax paid by the taxpayer could not depend on the Commissioner's choice of time at which an asset (in this case a sum of USD) was converted into Australian currency. 69 It seems to me that the flaw in this argument is that it focuses on what the taxpayer (or in this case a person holding funds on behalf of a taxpayer) pays to the Commissioner, rather than on the statutory expression "tax overpaid". It has long been recognised in Australian income tax law that the calculation of the assessable income of a taxpayer requires conversion into Australian currency. Payne v Deputy Federal Commissioner of Taxation [1936] AC 497, was decided under the Income Tax Assessment Act 1922 (Cth), an Act which had no equivalent to s 20 of the Assessment Act. Their Lordships, in upholding the decision of the High Court (Payne v Federal Commissioner of Taxation (1934) 51 CLR 197) said this (at 508-509): "The income tax payable by a taxpayer to the Australian revenue is to be fixed by means of a calculation which involves the multiplication of an ascertained number of one kind of units of Australian currency by the scheduled number of another kind of units of Australian currency, the produce being the resultant number of Australian pence. It seems necessarily to follow that to enable this calculation to be made, the assessable income of the taxpayer must, whatever be the currency in which he derives it, all be expressed in terms of Australian currency; in other words if any portion of his assessable income is derived by him in French or Belgian currency, it must, before he can be properly assessed to Australian income tax, be converted into its equivalent, at the time it was derived, in Australian currency. In exactly the same way, any income derived by him in British currency must be converted into its equivalent in Australian currency. In short, when an Australian statute tells the taxpayer to state his derived income in order that a fraction thereof (ie, so many pence in the pound of derived income) may be taken as tax, this can only mean that his derived income is to be stated and dealt with in terms of Australian currency." 70 As I have noted, Mr Slater conceded, correctly in my view, that the tax payable by the taxpayer is to be calculated in Australian currency. That is, a taxpayer's liability to tax must be assessed in Australian currency. It follows, in my opinion that, unless the Commissioner has power to and does implement some other arrangement, the tax paid by a taxpayer can only be an amount of A$. If the taxpayer pays to the Commissioner an amount in foreign currency, a calculation must be made to enable the amount of the tax paid to be expressed in terms of Australian currency. 71 It also follows, in my opinion, that the "tax overpaid" by a taxpayer, in consequence of the issue of an amended assessment can only be an amount expressed in Australian currency. This is because of the nature of the refund required by s 172(1). As Latham CJ said in Shell Company of Australia Ltd v Federal Commissioner of Taxation (1949) 78 CLR 439, at 452: "It [the refund under s 172] is a repayment to the taxpayer of tax which he should not have paid.... The "refund' is made because of a discovered absence of assumed liability." The only tax which Lamesa paid, but should not have paid, was a sum expressed in Australian currency. Thus the "tax overpaid" by Lamesa was also a sum which can be expressed only in Australian currency. 72 Although Lamesa contended that the "tax overpaid" by it was a USD sum, it did not dispute that, if that submission were rejected, the amount of tax overpaid by Lamesa was the amount of Australian currency realised by the Commissioner on conversion of the amount in USD paid by Macquarie Equities. Accordingly, the "tax overpaid" by Lamesa, for the purposes of s 172(1)(b)(i) of the Assessment Act is the amount of A$69,860,759 obtained by the Commissioner on conversion of the sum of USD55,155,069 paid to him by Macquarie Equities (with Lamesa's approval). 73 This conclusion receives support from the terms of the Interest Act. It is clear that the statutory entitlement to interest assumes that the Commissioner is obliged to refund a sum of A$. This is shown by the fact that the interest entitlement is to be calculated by reference to Treasury yields, as published in the Gazette: Interest Act, s 10(1)(b); Assessment Act, s 214A. If the "tax overpaid" can be an amount in foreign currency, such as USD, how is the statutory entitlement to interest to operate? Presumably, on Lamesa's argument, it would be necessary to calculate interest by reference to a notional A$ figure which, by hypothesis, is not the amount of tax overpaid by it. It is difficult to reconcile this result with the statutory scheme which, in my opinion, plainly contemplates that the interest is payable only on an amount of tax paid in A$. 74 There may be a question as to whether the Commissioner has power to enter into an arrangement with a taxpayer whereby the tax due is paid in a foreign currency and the tax is treated for all purposes as having been paid in that currency. The only source of such a power identified by Mr Slater was reg 20(f) of the Taxation Administration Regulations, which provides that a person who pays a debt must pay it "by paying the amount of the debt in accordance with other arrangements made by the Commissioner". 75 I think that there are difficulties with the suggestion made by Mr Slater. Regulation 20(f) is framed in terms of arrangements for paying the amount of "the debt". In the case of a taxpayer who has received an assessment, the debt comprises the income tax due and payable on the date specified in the notice: Assessment Act, ss 204(1), 208(1). For the reasons I have given, the debt is due in Australian currency. Regulation 20(f) contemplates that it is that debt - that is, the tax due in Australian currency - which will be paid in accordance with the arrangements between the Commissioner and the taxpayer. In other words, the tax will be paid in Australian currency and thus any tax ultimately found to be overpaid will also be calculated in Australian currency. 76 Even if reg 20(f) could be interpreted in the way suggested by Mr Slater, or some other source of power can be identified (such as s 8 of the Assessment Act, to which I refer shortly) I do not think that any arrangement in this case was made between Lamesa and the Commissioner for the payment of the income tax due by Lamesa in USD. 77 It is of course true that on 21 June 1996 Macquarie Equities, with the prior approval of Lamesa, paid or caused to be paid to the Commissioner an amount in USD. However, Lamesa had proposed, in Mr King's letter of 18 January 1996, that the "Australian dollars received on conversion" of the USD amount held with Macquarie Bank would be paid to the ATO and would satisfy the amounts payable under the notices of assessment. Mr Worthington's letter of 22 January 1996 in substance accepted this proposal. Until Macquarie Equities received the ATO's letter of 19 June 1996 (a copy of which was seen by Mr Annick), it was clearly accepted by Lamesa that Macquarie Equities would pay an amount in Australian currency to the ATO, being an amount converted from the sum of USD held in the blocked account. As Mr Annick confirmed in his evidence, it was a matter of complete indifference to Lamesa in what currency the ATO would be paid, since (Ts 70) "we had an agreement, as I understood it, that moneys held would be in satisfaction of the tax that was presumably owed, so...the mechanics [didn't matter]." 78 Even after the letter of 19 June 1996, Mr King understood that the amount of tax "actually paid" by Lamesa would be A$69.8 million. His comment to this effect (as to which there was no dispute) was recorded by Mr Worthington in his note of their conversation of 21 June 1996. I shall deal later in more detail with the conversation, but it is clear enough that Mr King saw Lamesa as having paid tax of A$69.8 million, not tax of USD55.2 million. 79 The change of approach by the ATO in June 1996 came about, not because of a freshly negotiated arrangement between the ATO and Lamesa, but simply because the ATO wished to minimise fees on conversion of the USD amount into Australian currency. The ATO's letter of 19 June 1996 to Macquarie Equities requested payment of the tax due by Lamesa of A$74,199,875, but indicated that remittance of the USD amount would be accepted as satisfying the s 255 notice. The letter did not say that Lamesa would be treated as having a tax liability in USD, nor that it would be treated as having paid tax in USD. 80 In my opinion, nothing the ATO did or said was inconsistent with the Commissioner treating Lamesa as liable to pay income tax assessed in Australian currency. Nor did the ATO do or say anything that was inconsistent with Lamesa having paid income tax in Australian currency. In January 1996, the ATO agreed that an amount in Australian currency, obtained on conversion of a fixed sum of USD, would be accepted as discharging Lamesa's tax liability (that liability also being assessed in Australian currency). Both the ATO and Lamesa recognised that, depending on exchange rate movements, the quantity of A$ received by the ATO on conversion of the USD amount might ultimately be greater or less than the sum of A$74,199,875 due under the amended assessments issued to Lamesa. Although the parties did not identify the source of power to enter into this arrangement, presumably it was s 8 of the Assessment Act, which provides that the Commissioner shall have general administration of the Assessment Act: Precision Pools Pty Ltd v Commissioner of Taxation (1992) 37 FCR 554 (Spender J), at 557; Grofam Pty Ltd v Federal Commissioner of Taxation (1997) 97 ATC 4656, at 4665 (FC). 81 The only change to the agreed arrangements in June 1996 was, to use Mr Annick's word, in the "mechanics" of the arrangements. The ATO's officers decided that the Commissioner should arrange conversion of the USD amount, in order to minimise transaction costs. As I have said, by requesting Macquarie Equities to forward the USD in the blocked account, Mr Worthington did not say or suggest that the Commissioner would treat Lamesa's tax liability as having been calculated in USD, nor that the Commissioner would treat Lamesa as having paid tax in USD. The Commissioner's intention at all material times was to convert the USD received from Macquarie Equities into Australian currency as soon as practicable and his officers followed precisely that course. As Mr Worthington said in evidence (Ts 217), he saw the course proposed as quite consistent with the requirement that the ATO receive only Australian currency in discharge of taxation liabilities. From Lamesa's perspective, its only concern was to "hedge" or "lock in its liability" to pay tax in Australian currency, so that it would not be adversely affected by exchange rate movements. It achieved this objective by the Commissioner's agreement to accept the quantity of Australian currency received on conversion of the fixed USD amount as satisfying Lamesa's tax liability. 82 I should add one further point on this aspect of the case. Contrary to Mr Slater's submission, the conclusion I have reached does not mean that a taxpayer is at the mercy of the Commissioner's whim as to when he chooses to convert foreign currency into Australian dollars. In this case, there was never any suggestion other than that the Commissioner would convert the USD sum paid by Macquarie Equities into A$ as soon as the conversion could be arranged. Lamesa had the protection of the agreement that the Commissioner would not seek to recover any tax beyond the amount yielded from the conversion of the USD in the blocked account. Moreover, the Commissioner's decision to require payment of the moneys held on behalf of Lamesa in the blocked account had nothing to do with any speculative endeavour on his behalf, but simply reflected a decision to persevere with and enforce the disputed assessments issued to Lamesa. The Restitution Case The Submissions 83 Lamesa submitted that the Commissioner had received and had the use of USD55,155,069.51, of which sum part only had been restored to it. According to Mr Slater, the Commissioner's receipt and retention of the sum was wrongful on two distinct grounds: (i) the USD sum was not one to which the Commissioner was properly entitled, as was demonstrated by the decision of Einfeld J and of the Full Court on appeal; and (ii) the sum was extracted from Macquarie Equities in reliance on a provision (s 255 of the Assessment Act) which did not authorise the Commissioner to require payment from Macquarie Equities, together with express and implied threats that Macquarie Equities would be held liable if the Commissioner's demand was not complied with. 84 Lamesa's first ground rests on the proposition that money exacted as a tax pursuant to a demand not authorised by or founded on an incorrect interpretation of the tax statute is recoverable as of right: Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70, at 177, per Lord Goff of Chieveley. Lamesa contended that the payment was made in consequence of a claim for tax which it always (and correctly) disputed. According to Mr Slater, money paid to the Commissioner in consequence of an unjustified demand is repayable immediately it is paid. What is to be restored is that of which Lamesa was deprived and by which the Commissioner was unjustly enriched, viz, the USD sum paid to the Commissioner by Macquarie Equities. 85 The second way of putting Lamesa's case rests on the proposition that moneys paid in consequence of a mistake of law are prima facie recoverable: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353. According to Lamesa, Macquarie Equities retained for the Commissioner's benefit and then paid to the Commissioner the USD sum in the belief that the Commissioner was entitled, by virtue of s 255 of the Assessment Act, to require it so to do. Macquarie Equities' belief was mistaken because the only moneys held by it for Lamesa were in USD and s 255, on its proper construction, only applies to "money" held in Australian currency. While there was no authoritative decision to that effect at the time, it has since been decided by this Court in DCT v Conley that this is the correct construction of a comparable provision, namely s 218 of the Assessment Act (which permits the Commissioner, inter alia, to require a person by whom "any money is due...to a taxpayer" to pay the money to the Commissioner). In these circumstances, Mr Slater contended that the Commissioner had received the benefit of the USD sum in consequence of Macquarie Equities' mistake of law and had thereby been unjustly enriched by the USD sum which he was bound to resolve in full. 86 On the second aspect of the restitution case, Mr Slater relied on the uncontested affidavit evidence of Mr McWhinnie to the following effect: "I made the arrangements....for Macquarie Equities Limited to effect payment to the Commissioner of Taxation of the USD55,155,069.51 (as the USD equivalent of A$74,192,991) in the belief that the section 255 notice which I received from the ATO on 19 June 1996 required Macquarie Equities Limited to make such payment and that failure to make such payment would render Macquarie Equities Limited personally liable for the applicant's tax debt to the ATO." 87 Mr Pagone QC, who appeared with Mr Payne on behalf of the Commissioner, advanced a number of answers to Lamesa's restitution case. In summary, these were as follows: (i) The Assessment Act, Administration Act and Interest Act constitute an exclusive code for determining the liability of the Commissioner to repay amounts of income tax overpaid and interest thereon. There is accordingly no room for parallel remedies of restitution and unjust enrichment to operate. (ii) In any event, the first limb of Lamesa's restitution argument is misconceived. The effect of Lamesa succeeding on its appeal to this Court against the objection decision was not to render Lamesa's liability to pay tax void ab initio, but was limited to the consequences specified by the statutory regime. Otherwise neither s 172 of the Assessment Act nor the Interest Act could operate according to their terms. (iii) Lamesa is estopped from relying on or asserting that funds paid to the Commissioner in June 1996 were paid under a mistake of law. This is so because, when the first s 255 notice was served, Macquarie Equities (which was then soon to receive A$ from the purchaser of the ARL shares) represented that if it were permitted to convert the Australian currency into USD, it would transfer USD55,155,069 to a blocked account and would convert and pay that amount in Australian currency to the Commissioner when required to do so. The Commissioner relied to his detriment on the representation in allowing the Australian currency sum to be converted to USD. (iv) Lamesa had made no causative mistake, either of law or fact, in paying funds to the Commissioner. The only mistake referred to in the evidence was that of Macquarie Equities, and that mistake related to its own liability. There was no evidence that Lamesa had operated under any mistake in consenting to the payment by Macquarie Equities of the USD. (v) The Commissioner had not been enriched or benefited by the payment of the USD sum. That sum was applied by the Commissioner, as he was bound to do, to satisfy (at least in part) a debt presently due and owing by Lamesa under the notice of assessment. A fortiori, there was no unjust enrichment. (vi) The second notice under s 255 of the Assessment Act was not unlawful, nor had Macquarie Equities or Lamesa applied to set it aside. By this submission, I understood Mr Pagone to contend that Conley did not necessarily apply to a notice under s 255 of the Assessment Act, although he did not explain why it does not apply. (vii) Lamesa had elected to challenge the assessments in the Federal Court, rather than to set aside the second s 255 notice. It had therefore chosen one of two inconsistent rights and must be taken to have waived any right to assert that the s 255 notice was invalid. (viii) By converting the USD into Australian currency, the Commissioner had changed his position on the future of the payment made by Macquarie Equities. This change of position precluded Lamesa availing itself of any restitutionary remedy otherwise available.

What Benefit Did the Commissioner Receive? 88 Lamesa's argument relies on what has been recognised in Australia as the "unifying legal concept" of unjust enrichment: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, at 256-257, per Deane J; David Securities, at 375, per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ. Within the framework of this unifying legal concept, there are categories of cases "in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment". Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, at 673, per curiam. Those categories include a payment made in consequence of a "causative mistake", whether of fact or law (David Securities, per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ at 378), and the payment of money by a citizen in the form of taxes or other levies paid pursuant to an ultra vires demand by the authority: Woolwich Building Society v IRC, at 177, per Lord Goff. 89 It is a necessary part of Lamesa's case that the Commissioner received a benefit in the form of a USD sum, and that Lamesa suffered a corresponding detriment. In support of that claim, Mr Slater referred to some observations of Robert Goff J (as he then was) in BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, at 839-840: "a claim [for an award of restitution], being founded on the principle of unjust enrichment, presupposes three things: (1) receipt by the defendant of a benefit, (2) at the plaintiff's expense, (3) in such circumstances that it would be unjust to allow the defendant to retain the benefit. In such cases the law is concerned with restitution in respect of the benefit obtained by the defendant. The award is therefore related to that benefit. The plaintiff's expense is a prerequisite of his claim; but it does not limit or control the award of restitution. In assessing an award of restitution, it is the defendant's benefit which has to be identified, in order that restitution may be ordered in respect of that benefit. Accordingly, in selecting (where necessary) the currency for the award, attention must be concentrated on the defendant's benefit rather than on the plaintiff's expense. Of course, when the benefit consists of money, there will usually be little difficulty in identifying the benefit, or in selecting the appropriate currency for the award. Indeed, in such a case, the plaintiff's expense and the defendant's benefit will generally be equal, subject to matters such as change of circumstances on the part of the defendant. So far as currency is concerned, the benefit will have taken the form of a payment of money in a certain currency; and no doubt an award of restitution will generally take the form of an award for repayment of a like sum in the same currency." 90 It will be seen that Goff J was careful to qualify his comments in BP Exploration by use of words such as "usually" and "generally". In order to identify the benefit obtained by the Commissioner in this case it is necessary, in my opinion, to go beyond the fact that a payment was made and received in USD and to consider the circumstances in which that payment came to be made and received. 91 First, it must be recognised that, at the time Macquarie Equities paid the USD sum to the Commissioner with Lamesa's prior approval, Lamesa (as it knew) was indebted to the Commissioner by virtue of the assessments that had been issued on 16 January 1996. While the enforcement of the assessments remained in "limbo" until June 1996, Mr Slater did not dispute that the effect of ss 204 and 208 of the Assessment Act was to create a debt due to the Commonwealth and enforceable by the Commissioner. No suggestion has ever been made that the assessments were issued in bad faith. Had the Commissioner chosen to pursue recovery proceedings against Lamesa, he could have relied on s 177 of the Assessment Act (the "conclusive evidence" provision) to prevent Lamesa from going behind the assessment in those proceedings notwithstanding its challenge to the assessments pursuant to Div 5 of Part IVC of the Administration Act: F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360; Sunrise Auto Ltd v Commissioner of Taxation (1995) 61 FCR 446 (FC), at 471-472, per Beaumont and Beazley JJ; Deputy Commissioner of Taxation v Collie [1998] 2 VR 106 (McDonald J). That the objection decisions upholding the assessments (as slightly amended in June 1996) were ultimately set aside does not alter the fact that on 21 June 1996 Lamesa was indebted to the Commonwealth in respect of the amount of tax then assessed. 92 Secondly, Lamesa's indebtedness pursuant to the assessment (as it knew) was an amount calculated in A$. It was obliged to pay the tax due in Australian currency, whether from the USD sum held in the blocked account or some other source available to it. 93 Thirdly, in January 1996, the ATO and Lamesa had agreed that payment of the USD sum held by Macquarie Equities on Lamesa's behalf, or its Australian currency equivalent, would discharge Lamesa's tax liability, regardless of any exchange rate movements after that time. Moreover, it had been agreed between the ATO and Lamesa that, if sums became payable under the assessments, the A$ received on conversion of the USD sum held by Macquarie Equities in the blocked account would be payable to the ATO. In fact the sum of A$69,860,759.35 ultimately received by the ATO was considerably less than the sum due under the assessments because of the appreciation of the A$ against the USD between January and June 1996. 94 Fourthly, the ATO never resiled from its position that the tax due under the assessment was an amount in Australian currency. The decision to accept the USD sum and to convert that sum immediately into Australian dollars was made merely to minimise transaction costs. It was a matter of complete indifference to Lamesa whether the course was adopted or whether Macquarie Equities converted the USD sum into Australian currency before payment to the ATO. Lamesa's concern was simply to protect itself against adverse currency movements, which it did successfully by virtue of the January agreement. I infer that Lamesa, through Mr King, was aware that the ATO would convert the USD sum into Australian currency as soon as practicable (as it did). 95 In ANZ v Westpac, the High Court dealt with a case where the payee of funds paid by mistake (a bank) claimed to have received them merely as an intermediary, thus displacing the payee's prima facie liability under principles of restitution or unjust enrichment. The Court said (at 674) that, in answering the question, it would pay regard to the substance, rather than the form of what has occurred. 96 In my opinion, the same approach should be taken to the present case. In substance, having regard to the circumstances I have identified, any "benefit" received by the Commissioner was in Australian currency, not USD. This is what the parties had contemplated throughout their dealings. The fact that the conversion into Australian currency was undertaken by the ATO, rather than Macquarie Equities, was simply a matter of mechanics. The last minute change in plans was not seen as significant by either the ATO or Lamesa. Similarly, if it be relevant, the detriment to Lamesa, in substance, was the payment of a sum in A$, which was required to discharge its liability to pay income tax in Australian currency. As it happens, Lamesa had incurred the liability (which was ultimately set aside in consequence of the proceedings in this Court) as the result of transactions in Australia which yielded proceeds paid in Australian currency (until converted into USD at Lamesa's direction). 97 Mr Slater relied on a passage in the joint judgment in David Securities (at 385). Their Honours said that the availability of the defence of change of position "[did] not mean that the concept of unjust enrichment needs to shift the primary focus of its attention from the moment of enrichment. From the point of view of the person making the payment, what happens after he or she has mistakenly paid over the money is irrelevant, for it is at that moment that the defendant is unjustly enriched". I do not think that the passage is inconsistent with the conclusion I have reached. In the present case, the question turns on what, in substance, was the payment made by Lamesa and received by the ATO. Their Honours, in David Securities, were not concerned with a question of that kind, but with the place of a particular defence within the principles of unjust enrichment. Nor were they concerned to address whether benefit and detriment, in relation to a foreign currency payment, must always be assessed by reference to the foreign currency in which payment was made. 98 It follows, in my opinion, that the Commissioner is correct in his contention that he had not been enriched, otherwise than by the receipt of the sum of A$69,860,759.35, received on conversion of the USD paid by Macquarie Equities. That sum, together with interest, has been repaid to Lamesa. Thus, even if it be assumed that Lamesa can satisfy all other elements of a claim in unjust enrichment, it has not demonstrated an entitlement to a repayment beyond the refund which it has already received. 99 This conclusion makes it unnecessary to consider other defences raised by the Commissioner to Lamesa's claim founded on unjust enrichment. I think it appropriate, nonetheless, to identify additional obstacles in the path of Lamesa's claim. Is Lamesa Able to Rely on Unjust Enrichment By Reason of the Assessments Being Unfounded? 100 The first limb of Lamesa's unjust enrichment argument assumes that a remedy based on principles of unjust enrichment is available to a taxpayer where an assessment is set aside. Mr Slater contended that the statutory scheme is not inconsistent with the relief sought by Lamesa. He accepted that restitutionary relief cannot be pursued while there is extant an assessment which has not been set aside. He acknowledged that, pending success in proceedings under Part IVC of the Administration Act, a taxpayer is likely to be confronted with the conclusive evidentiary effect of the assessment conferred by s 177 of the Assessment Act. Further, during the pendency of the assessment, the debt to the Crown arising from ss 204 and 208 of the Assessment Act subsists (or is properly discharged by payment) and there can be no demonstrated overpayment. But on the making of an order under Part IVC (Mr Slater did not make clear whether he meant an order by the AAT or the Court, or the issue of an amended assessment), the original assessment is shown always to have been excessive and the tax never to have been exigible. 101 In my view, it is very difficult to reconcile these submissions with the structure of the legislation. In F J Bloemen v FCT, Mason and Wilson JJ (with whom Stephen and Aicken JJ agreed) identified (at 375) the policy which underlies and is manifest in the statutory provisions: "The effect of this policy is that, once the Commissioner takes advantage of s 177(1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt V. Although s 190(b) places the onus on a taxpayer upon a reference or appeal of proving that the assessment is excessive, it enables him to contest his substantive liability to tax. It is then for the board upon a reference or the court on an appeal, within the framework of the taxpayer's objection, to ascertain whether he is liable to tax and, if so, in what amount. The Pt V procedures accordingly protect the taxpayer and enable him to have his liability to tax determined." (Part V of the Assessment Act, since repealed, dealt with objections and appeals, while the terms of s 190(b) are now found in Part IVC of the Administration Act: ss 14ZZK(b); s 14ZZO(b).) 102 In consequence of the High Court's subsequent decision in Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168, there are limited circumstances in which an assessment can be challenged in the Federal Court, pursuant to s 39B of the Judiciary Act 1903 (Cth). None of those circumstances is said to be present in this case. In any event, the judgments in Richard Walter do not undercut the general policy of the legislation identified in F J Bloemen. 103 A taxpayer wishing to challenge an objection decision must follow the path prescribed by Divisions 3, 4 and 5 of Part IVC of the Administration Act. Where, as in the present case, the Federal Court hears an appeal against an appealable objection decision, the Court has power to make such order as it thinks fit, including an order varying the decision: s 14ZZP. When the order of the Court becomes final, the Commissioner must, within sixty days, take such action as is necessary, including amending the assessment as is necessary to give effect to the decision: s 14ZZQ(1) (see s 14ZZL(1) in relation to AAT decisions). 104 Section 172(1) of the Assessment Act applies where, by reason of an amendment of an assessment, a person's liability to tax is reduced. In this situation, the Commissioner must refund or credit the amount of tax overpaid. Section 172 therefore contemplates that the mechanism by which a taxpayer objecting to a decision will secure a refund of tax overpaid is by the amendment of an assessment. The taxpayer has a statutory entitlement to a refund of tax overpaid and an entitlement under s 9 of the Interest Act to interest on the "amount of relevant tax" paid, in accordance with the formula in s 10(1)(b). Contrary to what seems to be implied by Lamesa's submissions, s 172(1) does not provide that, upon the issue of an amended assessment reducing a liability to tax, the amount by which the tax is so reduced must be taken as never to have been payable. It is only taken never to have been payable for the purposes of provisions relating to the payment of interest and penalties by the taxpayer. 105 As in Chippendale Printing Co Pty Ltd v Commissioner of Taxation (1996) 62 FCR 347 (FC), at 366, per Lehane J, it is appropriate to start with the presumption stated in Comptroller-General of Customs and Anor v Kawasaki Motors Pty Ltd (No 2) (1991) 32 FCR 243 (FC), at 258, namely that a statute is not presumed to take away a common law right unless the right is taken away expressly or by necessary implication. Nonetheless, I think that the elaborate statutory scheme I have briefly described necessarily implies that unjust enrichment remedies are not available to a taxpayer where (to use the words of Brennan J in Richard Walter, at 197) there is a "disconformity between the amounts assessed and the amounts properly assessable under the general provisions of the Act". 106 The factors that lead me to this conclusion are as follows: · Mr Slater's own submissions recognise that the principles of unjust enrichment are inconsistent with the statutory scheme. He acknowledged that the taxpayer's entitlement to a restitutionary remedy does not arise on payment of the tax incorrectly demanded (as it would under the general law), but only when the assessment is set aside. It was not made clear why some unjust enrichment remedies are capable of surviving the statutory scheme for objections and appeals, but not others. · Section 172 of the Assessment Act imposes a duty on the Commissioner to refund tax overpaid in certain circumstances - that is, where by reason of an amendment of an assessment, the taxpayer's liability to tax is reduced. This language suggests an intention to provide an exclusive remedy for the recovery of overpaid tax, within the framework of the objection and appeals process. · If the taxpayer can recover tax incorrectly assessed under principles of unjust enrichment before the assessment is amended, s 172(1) is rendered nugatory. If, on the other hand, the taxpayer can only claim a remedy founded on unjust enrichment once the assessment is amended, the general law remedy has been curtailed by the statutory scheme to the point where it is unrecognisable. · If a taxpayer can rely on restitionary remedies, the statutory limitations on the recovery of interest might be circumvented by more generous provision for interest under the general law: cf The Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285, at 316-317, per McHugh and Gummow JJ; Federal Court of Australia Act, 1976 (Cth), ss 51A(2)(b), (d). 107 For these reasons, I consider that, even if Lamesa could demonstrate that the Commissioner had received a benefit in USD, it could not rely on remedies in unjust enrichment to obtain more than its statutory entitlements pursuant to s 172(1) of the Assessment Act.

Was There a Causative Mistake? 108 The second limb of Lamesa's unjust enrichment argument identifies the relevant mistake as that of Macquarie Equities. The principle endorsed by the High Court in David Securities is that a person paying money to another person is prima facie entitled to recover the money if the payment was brought about by a mistake of law or fact; hence the expression "causative mistake" (at 378). 109 The only evidence of a mistake of law in this case was that given by Mr McWhinnie of Macquarie Equities. He said that he made the arrangements for payment of the USD sum (as the USD equivalent of A$74,192,991) in the belief that the second s 255 notice required Macquarie Equities to make the payment and that failure to do so would render Macquarie Equities liable for Lamesa's tax debt. Prior approval to the payment by Macquarie Equities was given by Lamesa. Neither Mr Schneider nor Mr Annick gave evidence that the approval was given under any mistake of fact or law on their part. Nor did they suggest that the reason Lamesa gave approval for the payment was its concern about Macquarie Equities' exposure under the Assessment Act if the sum in the blocked account were not paid to the ATO. 110 Indeed, the evidence shows that Lamesa's advisers specifically considered challenging the first s 255 notice, on the ground that at the time it was issued (15 January 1996), Macquarie Equities did not have the "receipt control or disposal of money belonging to a non-resident" (settlement of Lamesa's share sale not taking place until 19 January 1996). In May 1996, Mr King sought advice about the validity of the notice from senior counsel. He gave evidence as to Lamesa's reasons for not pursuing a challenge (Ts 188-189): "But the general concern was, wasn't it, that it wasn't much point knocking out the section 255 notice, the real fright was about the assessments?---That's right and in terms of timing, you would have seen a strategy paper, but in terms of timing, it was thought that it was better to adopt the appeal procedures - appeal process. Yes, because knocking out the 255 notice, if it was successful, would at best delay the process?---That was the view taken after consultation with various.... And indeed your concern was that in any event the commissioner could get the money in some other means, perhaps a Mareva injunction?---At that time it wasn't just my view, it was the view of Freehills and counsel. But that was the view that you were reporting back to Lamesa, was it not?---The view, yes and...included at the time. And that was the view that was accepted by Lamesa was it not?---Yes." 111 There was no evidence as to whether Lamesa specifically considered challenging the second s 255 notice, nor as to whether its officers formed any view as to the validity of that notice. However, the evidence suggests - and I find - that Lamesa gave its approval to Macquarie Equities paying the funds in the blocked account because it had formed the view that the most effective method of proceeding was to challenge the assessments under the appeal procedures provided by Part IVC of the Administration Act, rather than to dispute the validity of any notices issued to Macquarie Equities under the Assessment Act. 112 In my view, Lamesa did not approve the payment made by Macquarie Equities to the ATO because of any mistake as to the effectiveness of the s 255 notice. Lamesa was motivated by other considerations. In these circumstances, Lamesa has not established that the payment of the USD sum in the blocked account was caused by mistake of the kind that would satisfy the elements of an unjust enrichment claim. It may be that, on the evidence, Macquarie Equities paid the USD sum to the ATO in consequence of a mistake of law on its part. Macquarie Equities might have been able to rely on the mistake as against the Commissioner if, for example, Lamesa had taken action against it for wrongfully paying the USD to the Commissioner under an invalid notice. But no such issue arises in the present case.

The Affirmative Defences and Cross-Claim 113 In view of the conclusion I have reached on Lamesa's claim against the Commissioner, it is not strictly necessary to address the affirmative defences pleaded by Lamesa, nor its cross-claim against Mr King. However, since evidence relevant to these issues was given and the witnesses were cross-examined, it is appropriate that I record my findings in case the matter goes further. The findings also may have some bearing on the nature of the arrangements agreed between Lamesa and the Commissioner. 114 It will be recalled that the Commissioner pleads in his defence that on 21 June 1996, Lamesa and the Commissioner entered into a contract for valuable consideration, whereby it was agreed that, if Lamesa became entitled to a refund of income tax, that that refund would be constituted by the amount of Australian currency received by the Commissioner under the June notice, together with interest, in full satisfaction of Lamesa's obligations. In the alternative, it is pleaded that Lamesa expressly made a representation to this effect. The contract or, alternatively, the representation, are said to have been made by Mr King on behalf of Lamesa in the conversation with Mr Worthington on 21 June 1996. Lamesa's reply pleads that, if Mr King purported to make a contract or representation on its behalf, Mr King had no authority to do so. 115 The Commissioner's cross-claim against Mr King pleads that Mr King represented in the same conversation that he had authority from Lamesa to enter into the contract or, alternatively, to make the representation alleged in the defence. The cross-claim further pleads that, if Mr King had no authority to make the contract or representation on Lamesa's behalf, Mr King was in breach of a warranty of authority given by him in relation to the contract or representation. 116 The key question, then, so far as the affirmative defences and cross-claim are concerned, is whether Mr King purported to enter into a contract on behalf of Lamesa in the 21 June 1996 conversation or, alternatively, whether he represented to Mr Worthington that, if Lamesa became entitled to a refund, it would accept in full satisfaction of the Commissioner's obligations the amount in Australian currency paid to the Commissioner in satisfaction of the June s 255 notice. 117 Mr King denied that Mr Worthington had sought any agreement about the amount that the Commissioner would have to refund to Lamesa in the event that Lamesa succeeded in the litigation. Mr King accepted that, as Mr Worthington's record of the conversation suggested, he (Mr King) had probably expressed his understanding or opinion that, if Lamesa won, the amount of A$69.8 million, plus interest, would be the amount that would have to be repaid to Lamesa. But he denied that he purported to make any binding agreement on Lamesa's behalf or to make a representation to Mr Worthington as to the course of action Lamesa would adopt with respect to the repayment. He said his observations were made simply in the course of exchanging opinions, as he and Mr Worthington had done on other occasions. 118 Mr Worthington's contemporaneous record of the conversation is consistent with Mr King's evidence. Mr Worthington's recollection of the conversation in his affidavit was, however, different from his contemporaneous record. In his affidavit, Mr Worthington recalled Mr King saying: "I agree that Lamesa would not be expecting A$74m to be repaid, only the amount actually paid in, being A$69.8m plus interest." [Emphasis supplied.] In cross-examination, Mr Worthington accepted that his contemporaneous record was the best evidence of the conversation and that his recollection was no better than the record. He also agreed that the omission in his affidavit of Mr King's use of the word "understanding" was an "oversight". 119 Mr Worthington, in his cross-examination, came very close to agreeing with Mr King's version of the conversation, as the following extract shows (Ts 224-226): "What you're there doing was expressing your opinion as to the consequences of the receipt of that sum in the two possible scenarios identified, correct?---Yes. And you sought from my client whether he was of the same view, correct?---I believe so, yes. What my client told you is that he agreed that his understanding was that they now - they being Lamesa - now assume the exchange risk?---Yes, that rings a bell. And that they would not be expecting to [repay] $A74 million, correct?---Yes. What you understood my client to be doing is expressing his opinion as to the legal consequences of what was the subject of discussion, correct?---Yes. ... The subject of the discussion was whether, in the event that Lamesa were successful in its challenge to the assessment, it would be entitled to receive from the Commissioner the sum of $A69.8 million or $A74 million Australian, correct?---Yes, I believe so. It was clear to you that all my client was telling you was his understanding, correct?---Yes. That's why you used the word understanding, that's correct, isn't it?---Yes. That betokens opinion to you, doesn't it?---Or agreement, yes. It betokens opinion to you, doesn't it, Mr Worthington?---And agreement. ... I put it to you that you knew when writing that and choosing the word "understanding" that my client was only expressing his opinion as to the legal effect of the receipt of the $69.8 million, correct?---It's a likely understanding from the words, likely meaning of my note." 120 Other factors support Mr King's version of events. As Mr Worthington acknowledged, he and Mr King had exchanged views in previous conversations on matters in issue, without there being any suggestion of a binding agreement being reached or any representations being made on behalf of Lamesa. Mr King had been meticulous in seeking approval from Mr Annick or Mr Schneider on any important issue concerning Lamesa's taxation liability or its entitlements. It is highly improbable that Mr King would have purported to enter an agreement or to make an important representation on Lamesa's behalf without seeking prior authority from Mr Annick or Mr Schneider. Yet there is no suggestion that he did so in this instance. Similarly, it is highly improbable that Mr Worthington would have understood Mr King to be purporting to bind Lamesa and yet have failed to follow his usual (if not invariable) practice of confirming the arrangement or understanding in correspondence. 121 I accept Mr King's evidence. I find that Mr Worthington was mistaken when he suggested in his evidence that Mr King had purported to make a contract or representation on Lamesa's behalf as to the amount it would accept in the event of a refund of tax becoming due. Mr Worthington was also mistaken when he suggested that he had believed at the time of the conversation that a binding agreement had been reached or a representation made on Lamesa's behalf. 122 It follows that, if it were necessary to address the Commissioner's affirmative defences, they would have failed. Similarly, had it been necessary to address the Commissioner's cross-claim that, too, would have failed.

Conclusion 123 The application must be dismissed, as must the Commissioner's cross-claim. I shall hear the parties on costs. I certify that the preceding one hundred and twenty-three (123) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville.

Counsel for the Applicant: Mr T Slater QC with Mr D E J Ryan

Solicitor for the Applicant: Freehill Hollingdale & Page

Counsel for the Respondent/ Cross Claimant: Mr G T Pagone QC with Mr A J Payne

Solicitor for the Respondent/ Cross Claimant: Australian Government Solicitor

Counsel for the Cross Respondent: Mr N Hutley SC

Solicitor for the Cross Respondent Allen Allen & Hemsley

Date of Hearing: 15-18 March 1999

Date of Judgment: 12 May 1999