Sales Tax - application for summary judgment - agreement - Commissioner's power to make agreement and refund under the agreement - meaning of 'an overpayment' - meaning of 'taxes' - money repayable under agreement - money repayable as money had and received.

M.R. Hornibrook (Pty) Ltd v. Federal Commissioner of Taxation [1939] HCA 29; (1939) 62 CLR 272

New South Wales v. Bardolph [1934] HCA 74; (1934) 52 CLR 455

Queensland Trustees Limited v. Fowles [1910] HCA 51; (1910) 12 CLR 111

Jax Tyres Pty Ltd v. Federal Commissioner of Taxation (1986) 5 NSWLR 329

with Mr P E Hack

Instructed by: Aust Goverment Solicitor

(1) Judgment is given for the applicant against the first respondent in the sum of $488,033.72.

(2) The first respondent pay the applicant's costs of the notice of motion filed 18 June 1992, to be taxed if not agreed.

(1) Judgment is given for the applicant against the first respondent in the sum of $211,353.96.

(2) The first respondent pay the applicant's costs of the notice of motion filed 18 June 1992, to be taxed if not agreed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

These are two applications for judgment under O. 20 r. 1 of the Federal Court Rules.

" (1) Where, in relation to the whole or any part of the

applicant's claim for relief, there is evidence of the facts

on which the claim or part is based, and -

(a) there is evidence given by the applicant or by some

responsible person that, in the belief of the person

giving the evidence, the respondent has no defence to

the claim or part; or

(b) the respondent's defence discloses no answer to the

applicant's claim or part;

the applicant may move on notice for such judgment for the

applicant on that claim or part and the Court may pronounce

such judgment and make such orders as the nature of the case

requires.

(2) Where the Court pronounces judgment against a party

under this rule, and that party claims relief against the

party obtaining the judgment, the Court may stay execution

on, or other enforcement of, the judgment until

determination of the claim by the party against whom the

judgment is directed to be entered.

(3) The Court in any application under this rule may give

such directions, whether for amendment of the pleadings or

otherwise, as may be thought fit."

The question on these applications is whether the applicants have shown that each of them has a good cause of action, and that no plausible ground of defence has been made out by the respondents. Each application raises effectively the same question.

2. In Proceedings No. G89 of 1992, Precision Pools Pty Ltd seeks judgment in its favour against the Commissioner of Taxation and the Commonwealth of Australia or either of them for $408,409.00, together with interest and costs. In Proceedings No. G90 of 1992, Qld Pool and Spa Const. Pty Ltd seeks a similar judgment against the same respondents for $176,722.87 together with interest and costs. Each application is a consequence of the judgment of the High Court in Mutual Pools and Staff Pty Ltd v. Commissioner of Taxation [1992] HCA 4; (1992) 66 ALJR 222, where the High Court held that the 1986 amendment to the Sales Tax legislation to deem a swimming pool as constructed to be manufactured goods or goods manufactured in Australia for the purpose of the Sales Tax legislation to be invalid, the majority holding that the legislation imposed a tax on land and not on goods and, being contained in the same legislation as a tax in the nature of an excise, was contrary to s. 55 of the Constitution.

3. Each of the proceedings was commenced in the High Court by a writ on 15 April 1992 and a statement of claim delivered on 16 April 1992. On 25 May 1992 Deane J. remitted the proceedings to the Federal Court of Australia, Queensland District Registry, by consent of the parties. Since only the monetary amounts are different it is convenient to deal with the issues as they appear in Proceedings No. QG89 of 1992 between Precision Pools Pty Ltd and the two respondents.

4. In each of the proceedings the plaintiffs seek repayment of all the amounts they have paid for sales tax, but the present application for judgment pursuant to O. 20 r. 1 relates only to payments made in the period subsequent to August 1990.

5. Precision Pools Pty Ltd ('Precision Pools') is a company carrying on the business of the construction of swimming pools in situ for reward. The statement of claim alleges that the construction activities of the plaintiff at all material times included those activities which are within the definition of "construction" in s. 3(1) of the Sales Tax Assessment Act (No. 1) (1930) (Cth) ('the Assessment Act No. 1'). At all times material to the proceedings, Swimming Pool and Spa Association of Australia Limited ('SPASA') was and is a company limited by guarantee. Since about 1975 Precision Pools has been a member of SPASA.

6. The evidence on the notice of motion for summary judgment shows that Precision Pools in mid-1990 received advice concerning the validity of the provisions of the Assessment Act No. 1, which purported to impose a tax upon the sale value of so much of those swimming pools constructed by Precision Pools in situ. The advice was that the provisions were constitutionally invalid and that Precision Pools should not continue paying the purported taxes. Precision Pools gave authority to SPASA to conduct negotiations on its behalf with the Commissioner of Taxation to obtain the consent of the respondents to the repayment to the applicant of any money thereafter paid by the applicant for the said sales tax in the event that the provisions which purported to impose the tax were held invalid. Henceforward Precision Pools commenced paying to SPASA levies to cover the cost of such discussions and the cost of the High Court challenges to the validity of the legislation.

7. On and from August 1990 Precision Pools ceased paying to the Commissioner of Taxation sales tax purportedly imposed on swimming pools constructed in situ and instead paid the value of such tax to SPASA pending the High Court's determination.

8. The present notices of motion rely on an agreement said to be the consequence of correspondence passing between accountants for SPASA and an officer of the Australian Taxation Office. On 15 November 1990, chartered accountants, Ernst and Young, on behalf of the members of SPASA (of which the two applicants were members) wrote to the First Assistant Commissioner Sales Tax about what might be done by way of interim arrangements pending the determination by the High Court of the validity of the legislation in the Mutual Pools Case. SPASA was the second plaintiff in the hearing in the High Court. Ernst and Young had earlier made a proposal that pending determination by the High Court, moneys claimed by the Commissioner to be payable for sales tax in respect of swimming pools constructed in situ would be paid to a trust fund to be administered by persons representing the payers and the Commissioner and that the trust fund would be paid on the outcome of the case according to that outcome. The letter of 15 November 1990 noted that the Commissioner declined to be a signatory to such a trust fund. Accordingly, in the letter of 15 November 1990, an alternative proposal was put, which was as follows:

"(a) SPASA members will lodge returns and pay the amounts

involved to your Office in the normal way.

(b) Your Office will:

. accept SPASA members' returns/remittances as having been

lodged/paid without in any way prejudicing the High

Court proceedings instituted by SPASA;

. in the event of the constitutional challenge being

successful, return to SPASA members all amounts paid by

them as or for sales tax in respect of swimming pools

constructed in situ plus interest at the rate(s)

specified in the Taxation (Interest on Overpayments)

Act. In other words, the Commissioner will accept that

SPASA members are entitled to recovery of the sums

involved as money had and received by the Commissioner

and to which the Commissioner was not legally entitled

and will not seek to retain any of those moneys on any

basis, including that the payments were made voluntarily

under a mistake of law."

9. In response to a request for any authorities which might support acceptance of this approach by the Commissioner, the letter continued:

"The decision of the High Court in Mason and Anor v The State of

NSW [1959] HCA 5; (1958-59) 102 CLR 108 dealt with a comparable circumstance

where the plaintiffs challenged the validity of a NSW road tax law

and sought to recover the moneys previously paid by them to the

State of NSW as money had and received. The High Court held the

NSW road tax law to be invalid and ordered the return of all money

paid by the plaintiffs. Payment of the moneys by the plaintiffs

was held to be involuntary because of the relevant NSW law's

onerous penalty provisions which, if it was a valid law, would

have threatened the viability of the plaintiffs' businesses, if

imposed to the extent possible.

Section 12A of the Sales Tax Procedure Act acknowledges the

application of common law recovery rights to circumstances not

covered by the Sales Tax Assessment Acts and Regulations. That

Section was enacted, following the decision of the High Court in

DFC of T v Ellis and Clark Ltd (1934) 52 CLR 111 to limit the

common law rights of citizens not party to the proceedings to

recover moneys paid by them in respect of second-hand goods, which

were held to be outside the ambit of the sales tax legislation.

Those paying 'tax' on second-hand goods at that time would have

needed to rely on common law recovery rights as Section 26 of the

Act would not have been applicable to them, their transactions

being beyond the scope of the sales tax law.

In recent times, the Courts have not tolerated well the retention

by Government organizations of moneys to which they were not

legally entitled.

For example, in the decision of the House of Lords in R v. Tower

Hamlets London Borough Council, Ex parte: Chetnik Developments Ltd

(1988) 2 WLR 654, Lord Bridge (with whom Lords Fraser, Brandon,

Ackner and Goff agreed) remarked at p 664 that:-

'...it emerges from these authorities that the retention of

moneys known to have been paid under a mistake of law...is

not regarded by the courts as a 'high-minded thing' to do,

but rather as a 'shabby thing' or a 'dirty trick' and hence

is a course which the court will not allow one of its own

officers, such as a trustee in bankruptcy, to take.'

This decision was quoted with approval in the unreported decision

of Justice Davies of the Federal Court in The Collector of Customs

v. LNC (Wholesale) Pty Limited nos G1444 and 1445 of 1988,

judgment handed down on November 21, 1989 (copy enclosed)."

10. By letter dated 19 November 1990 a further letter from Ernst and Young was sent to the First Assistant Commissioner Sales Tax. It is necessary to set out almost the entirety of that letter:

"SALES TAX: SWIMMING POOL AND SPA ASSOCIATION OF AUSTRALIA LIMITED

("SPASA")

I refer to my discussion with you this afternoon in relation to

SPASA's challenge to the constitutional validity of the sales tax

law as it applies to swimming pools and spas constructed in situ.

On SPASA's behalf, I confirm acceptance of our agreement that,

subject to there being no legal barrier to your authority to enter

into such an arrangement;

(a) SPASA members will:-

. lodge sales tax returns each month and pay the amounts

involved to your Office in the normal way from October

1990; and

. in relation to the period to 30 September 1990, where

'sales tax' was paid into the SPASA Sales Tax Trust the

total amount involved will be paid by SPASA to your

Office within 24 hours of your confirmation of our

agreement, together with members' returns currently in

SPASA's possession.

(b) Your Office will:-

. accept SPASA members' returns/remittances as having

being lodged/paid without in any way prejudicing the

High Court proceedings instituted by SPASA and Mutual

Pools and Staff Pty. Ltd.; and

. in the event of the constitutional challenge being

successful, return to SPASA members all amounts paid by

them as and for sales tax in respect of swimming pools

and spas constructed in situ plus interest at the rate

specified in the Taxation (Interest On Overpayments)

Act, without seeking to retain any of those moneys on

any basis, including that the payments were made

voluntarily under a mistake of law.

I understand that you will have the question of your authority to

enter into this arrangement examined and that you will reply to

this letter within 48 hours confirming your acceptance (unless

legally precluded from doing so).

..."

11. By letter dated 27 November 1990 an officer of the Commissioner of Taxation replied to the letters of 15 and 19 November 1990. The letter recited the legal opinion held by SPASA and the contrary view by the Commissioner that the legislation in question was valid. The letter then stated:

"This being our position members of SPASA are required to lodge

monthly returns with the ATO accounting for sales tax due on the

construction of in-ground swimming pools."

"As a result of this decision you have now sought agreement that

should SPASA members lodge returns with the ATO that, in the

event that the challenge to the legislation is successful, all

amounts paid by them as and for sales tax on swimming pools and

spas constructed in situ will be refunded together with interest

at the rate specified in the Taxation (Interest on Overpayments)

Act.

We are prepared to accept these terms as set out in your letter

of 19 November 1990 in relation to the refund of sales tax paid

on swimming pools and spas constructed in situ plus interest

subject to the following qualifications:

. the agreement relates only to sales tax paid to the ATO from

21 November 1990 onwards (this will embrace the August,

September and October 1990 returns because under the

proposed trust fund arrangements these amounts have not yet

been paid to the ATO)

. the agreement will stand separately from any decision

reached by the Court

. all monies outstanding are required to be paid to the ATO by

30 November 1990 and, if this occurs, no penalties for late

payment of sales tax will be imposed.

It follows from this agreement that we will not deny a refund for

the period in question on the basis that the payments were made

voluntarily under a mistake of law. However, acceptance of this

position relates only to the payments which are the subject of

this agreement."

12. In the view I take of the matter, this letter amounted to a counter offer on behalf of the Commissioner of Taxation, since it imposed a requirement that all moneys outstanding were required to be paid to the Australian Taxation Office by 30 November 1990, which was a qualification going beyond the offer made by Ernst and Young on behalf of SPASA. The offer contained in the letter of 27 November 1990 was accepted by conduct.

13. The agreement relied on by Precision Pools is said to be made with the Commissioner of Taxation or, alternatively, with the Commissioner of Taxation for himself and as representative of the Commonwealth of Australia or with the Commissioner of Taxation as representative of the Commonwealth of Australia. The amount paid by the plaintiff pursuant to the agreement to the Commissioner of Taxation totalled $408,509.00 and a schedule of interest, which was not the subject of challenge by the Commissioner of Taxation, shows total interest calculated according to the agreement evidenced by the correspondence as $79,524.72. In Proceedings No. QG90 of 1992 the total amount paid to the Commissioner of Taxation pursuant to the agreement by Queensland Pool and Spa Const. Pty Ltd was $176,722.87 and the schedule of interest, again not the subject of challenge by the Commissioner of Taxation, indicates that the total interest on those payments pursuant to the terms of the agreement evidenced by the correspondence was $34,631.07.

14. The case for each applicant on the notice of motion is a simple one, namely, that the amounts are repayable pursuant to the agreement.

15. The Commissioner, however, says that while there "can be an agreement made in relation to" moneys which are said not to be payable to the Commonwealth "the net effect of which may be to exclude the operation of Section 12A of the Procedure Act", that is, the Sales Tax Procedure Act 1934 ('the Procedure Act'), the power to do what is agreed must exist. In particular, if there is not a power to make the refund then the agreement must be void. In particular, it is said the power to make a refund exists if and only if the requirements of s. 26 of the Assessment Act No. 1 is made out.

16. Section 26 of the Assessment Act No. 1 is headed "Refunds of Tax". For present purposes it relevantly provides:

"(1) Subject to sub-section (1A), where the Commissioner

finds in any case that tax has been overpaid by a person,

the Commissioner shall -

(a) refund the amount of any tax overpaid; or

(b) apply the amount of any tax overpaid against any

liability of the person to the Commonwealth, being a

liability arising under, or by virtue of, an Act of

which the Commissioner has the general administration,

and refund any part of the amount that is not so

applied.

(1A) Sub-section (1) does not apply in relation to any tax

paid by a person unless the Commissioner is satisfied that

the tax has not been passed on by the person to another

person, or, if passed on to another person, has been

refunded to the other person."

17. Each of the applicants contends that the question of refunds to pool owners was not the concern of any of the respondents.

18. There are, it seems to me, real difficulties as to what precisely the term "passed on" means in s. 26(1A) of the Assessment Act No. 1. In many cases, a price of goods is nominated, it being expressly stated that sales tax is not a component of it, the consequence being that if the purchaser is not exempt from sales tax, the relevant sales tax is added to the advertised price and the purchaser pays the total of the advertised price and the relevant sales tax. In other circumstances where a global price is quoted, (being a price applicable regardless of whether a purchaser is or is not exempt from sales tax), there may be room for dispute whether a person paying that price is a person to whom sales tax has been 'passed on' by the vendor.

19. These concerns are not of present relevance, because it is said on the Commissioner's part that he does not have the satisfaction of which s. 26(1A) speaks; that his obligation to repay pursuant to the agreement evidenced in the correspondence earlier referred to has to be read subject to, or as senior counsel for the Commissioner preferred to describe it, "in the light of Section 26". The submission on behalf of the Commissioner is that there is no power in the Commissioner to make an agreement beyond power and his power to refund tax is dealt with in s. 12A of the Procedure Act and s. 26 of the Assessment Act No. 1 and nowhere else.

20. It is true that there can be no estoppel against the Act.

21. In the present case the Commissioner was asserting that there was an obligation to pay sales tax, which obligation was disputed on the other side. In those circumstances, pending the authoritative resolution of the competing contentions, a sensible arrangement seems to me to have been struck: an arrangement to the effect that the Commissioner accepts that if the contention of SPASA is right, the moneys paid to him plus the statutory rate of interest will be refunded, but if the Commissioner's contention is right, the pool manufacturers will have complied with what the Commissioner has insisted all along is their obligation.

22. The capacity of the Commissioner to return the moneys in the event of a successful challenge to the legislation had been explicitly raised prior to the agreement, and the clear inference from the correspondence is that what is now said to inhibit the capacity of the Commissioner to return the moneys was not the view of the Commissioner at the time of the agreement.

23. The letter of 19 November 1990 commenced in the second paragraph as follows:

"On SPASA's behalf, I confirm acceptance of our agreement

that, subject to there being no legal barrier to your

authority to enter into such an agreement..." (my underlining)

"I understand that you will have the question of your

authority to enter into this arrangement examined and that

you will reply to this letter within 48 hours confirming

your acceptance (unless legally precluded from doing so)."

24. The paragraph in the letter dated 27 November from the Office of the Commissioner of Taxation, which reads:

"It follows from this agreement that we will not deny a

refund for the period in question on the basis that the

payments were made voluntarily under a mistake of law.

However, acceptance of this position relates only to the

payments which are the subject of this agreement"

in my view, indicates that the Commissioner would not in respect of any payments made from 1 August 1990 onwards assert that the payments were made voluntarily under a mistake of law but that that undertaking did not apply to payments made prior to that period. It did not, in my opinion, and did not purport to suggest that it was competent for the Commissioner to take any point he chose in respect of payments for the period subsequent to August 1990, other than that the payments were made voluntarily under a mistake of law. This is reinforced by the words which appear in the initial offer communicated in the letter of 15 November 1990:

"...the Commissioner...will not seek to retain any of those

moneys on any basis, including that the payments were made

voluntarily under a mistake of law." (my underlining)

25. To suggest now, as the Commissioner does, that his obligation to return the moneys paid pursuant to the agreement is subject to his being satisfied that the tax has not been passed on by Precision Pools to another person or, if passed on to another person, has been refunded to the other person, seems to me to be a clear breach of the authority warranted by his conduct as evidenced in the correspondence.

26. If the Commissioner were an ordinary citizen, it would, in my view, be unconscionable for him now to decline to do which he promised to do in 1990. Questions of unconscionability, estoppel and breach of warranty of authority and the principles to be derived from Legione v. Hateley [1983] HCA 11; (1983) 152 CLR 406 and The Commonwealth v. Verwayen (1990) 64 ALJR 540 would be relevant.

27. But the question here is whether in truth s. 26 of the Assessment Act No. 1 is the sole source of the authority in the Commissioner to return the moneys paid by the applicants to the Commissioner.

28. It was submitted by the applicants that s. 26 did not apply in the circumstances of this case, in that s. 26 deals with the refund of tax which has been "overpaid". The focus of the submission is on what constitutes "an overpayment". It was submitted that s. 26 applies only when there is a liability to pay some tax but an amount in excess of the amount required to be paid has been paid. In circumstances where no tax at all is payable (as is the case here), it was submitted s. 26 has no application.

29. Support for the submission is found in obiter dicta of Hunt J. in Jax Tyres Pty Ltd v. Federal Commissioner of Taxation (1986) 5 NSWLR 329 at 334, where his Honour said:

"...s. 26 deals with the refund of tax which has been

'overpaid'. To overpay something is to pay more than is due

(SOED). Section 26 assumes a liability to pay some tax, and

addresses the right to a refund of that amount of tax which

has been overpaid."

30. In my respectful view, if nothing at all is due, then the entirety of what is paid is an overpayment. While it is under a different statute and in a different context, the observations of Latham C.J. in M. R. Hornibrook (Pty) Ltd v. Federal Commissioner of Taxation [1939] HCA 29; (1939) 62 CLR 272 are apposite. His Honour said at 280:

"It was objected by the commissioner that the board of review

had no jurisdiction to determine the objections raised in

the present case because those objections were not merely

objections to the amount or value upon which the

commissioner had assessed sales tax but were objections that

sales tax was not payable at all.

...

The contention of the commissioner is that only objections

to 'amount or value' can be dealt with under these

provisions, and that an objection that no tax at all is

payable must be dealt with, if at all, in a proceeding for

the recovery of the tax. In my opinion this objection is

not well founded. A contention that the commissioner is

seeking to tax a transaction which does not involve any

dealing in 'goods' within the meaning of the Act, or that

the alleged goods have no sale value within the meaning of

the Act, is a ground for an objection to the amount or value

upon which the commissioner requires the taxpayer to pay

sales tax. The objection of the taxpayer is that there is

no amount or value upon which he is bound to pay tax, that

is, that the alleged amount or value should, for the reasons

relied upon by him, be reduced to nil."

31. In the view I take of it, "overpayment" is not confined to a situation where some tax is payable but more than that sum has been paid, but can encompass the situation where no tax is payable, with the consequence that the entirety of that which has been paid is an overpayment.

32. Notwithstanding my view as to what constitutes an "overpayment", s. 26 has no application in the present circumstances because, in my opinion, payments made by SPASA pursuant to the agreement were not "taxes" within s. 26.

33. The concession by senior counsel for the Commissioner that the intent of the parties to the agreement was to waive the requirements of s. 12A(3) of the Procedure Act sits unattractively with the submission that there is no power to make the refund because the Commissioner was not entitled other than by s. 26 of the Assessment Act No. 1 to make a refund. The Commissioner appears to have been prepared to waive the requirements of the Procedure Act but is now insisting that he was not able to comply with the obligations of the agreement, absent satisfaction of the matters referred to in s. 26(1A).

34. Section 12A is headed "REFUNDS" and s. 12A(1) relevantly provides:

"Notwithstanding the provisions of any Sales Tax Assessment

Act (other than provisions relating to objections and

appeals) or of any regulations made under any such Act,

where any person has paid any amount either as sales tax or

for sales tax in respect of any goods, by reason of any

transaction, act or operation effected or done in relation

to those goods, that person shall not be entitled to any

refund of that amount -

...

(b) ...upon a prescribed ground as defined in this

section, unless that person finally succeeds in an

action, upon that ground, brought, in pursuance of

this section, for the recovery of that amount:"

35. Section 12A(2) provides that where an amount has been or is paid as specified in sub-section (1) and the payment has been made under protest as is provided for in s. 12A(3), a person may, within six months after the date on which the amount was paid, bring an action upon that ground against the Commonwealth,in any Commonwealth or State Court of competent jurisdiction, for the recovery of the amount so paid.

36. Section 12A(3) provides that an amount will not be deemed to have been paid under protest unless, at the time of payment a statement in writing, bearing the endorsement "Paid under protest" and stating the prescribed ground upon which the protest is made, is lodged.

"(a) in relation to any amount paid by a person either as

sales tax or for sales tax payable under the Sales Tax

Assessment Act (No. 1) 1930 or that Act as amended

from time to time - any ground to the effect,

expressly or impliedly, that the goods in respect of

which the amount was paid were not, within the meaning

of that Act, or of that Act as amended from time to

time, goods manufactured in Australia by that person;"

38. In my opinion, the stringent regime for recovery provided by s. 12A of the Procedure Act does not apply in the circumstances of the present case. So far as the Assessment Act No. 1 is concerned a prescribed ground includes any ground to the effect that the goods were not goods manufactured in Australia by the payer. The complaint of Mutual Pools and the members of SPASA, including the applicants, was that swimming pools in situ were not "goods".

39. In Jax Tyres Pty Ltd v. Federal Commissioner of Taxation (supra), the Commissioner argued that s. 12A gives to a taxpayer a right to sue for a refund only in those cases where the plaintiff is able to establish that the Commissioner would otherwise have been empowered to make a refund pursuant to the Assessment Act No. 1, s. 26. Hunt J. concluded that in order to succeed in its action pursuant to s. 12A of the Procedure Act, the plaintiff does not have to establish that the Commissioner would have otherwise been empowered to make a refund pursuant to s. 26 of the Assessment Act No. 1. In particular, he concluded at 335-6:

"(I)t is not necessary for the plaintiff to establish that

the sales tax which it seeks to recover had not been passed

on (or had been refunded) by it to its customers."

40. Subject to the view as to the meaning of "overpayment" and "tax" or "taxes" in s. 26, I respectfully agree with his Honour's conclusion and the reasoning therefor.

41. In my opinion, a similar conclusion follows where the basis of recovery is not s. 12A (inapplicable because the ground on which the payment is disputed is not a prescribed ground within the meaning of that section) but is on the basis that the legislation seeking to impose the obligation to pay is invalid. In Jax Tyres, Hunt J. said at 333:

"Neither does s. 12A itself expressly establish a taxpayer's

entitlement to recover the amount paid as or for sales tax.

What it does express is the extinction of any right which a

taxpayer may otherwise have to recover such an amount

(Werrin v. The Commonwealth [1938] HCA 3; (1938) 59 CLR 150 at 161,

164. unless he succeeds in an action brought pursuant to

that section for its recovery, which is restricted to very

limited circumstances. (I will refer to the terms of the

proviso to s. 12A(1) later.)

Section 12A assumes the existence of a right to have such

payments refunded when made as or for sales tax when in

truth no tax was payable: Werrin v. Commonwealth (at 160,

164). Notwithstanding the views expressed by the minority

judges in that case (at 157-160, 168-169), it is now

accepted by the High Court that a common indebitatus count

for money had and received by the defendant for the use of

the plaintiff lies to recover taxes wrongly exacted when

paid under compulsion. Mason v. New South Wales (1959) 102

CLR 108 at 117, 129, 133-135, 139, 145-146. That was a

case where the taxing statute was itself invalid, but there

would be in my view no difference in principle when the

Commissioner invalidly seeks to levy an otherwise valid tax

as he did in the present case by ST 2606 and money is paid

as or for tax under compulsion. Whether or not the payments

would have been so recoverable at common law in the present

case was not investigated in the hearing before me."

42. Whether recovery is available at common law is the nub of the present case.

43. First, in my opinion s. 26, unlike s. 12A of the Procedure Act, is not expressed in terms limiting a right to recover. It is expressed in terms of facilitating a refund in certain circumstances and conferring a discretion on the Commissioner to refund an amount of tax in certain circumstances. One would expect clearer words if the section were to have the effect of limiting a right under the general law to be repaid moneys either pursuant to an agreement or in circumstances where the payments were not made voluntarily but under compulsion, the recovery being sought as money had and received.

44. While all of the references given by Hunt J. to passages in Mason v. New South Wales have, in my opinion, a present relevance, it is necessary only to refer to the observations of Dixon C.J. at 117, where his Honour said:

"We are dealing with the assumed possession by the officers

of government of what turned out to be a void authority.

The moneys were paid over by the plaintiffs to avoid the

apprehended consequences of refusal to submit to the

authority. It is enough if there be just and reasonable

grounds for apprehending that unless payment be made an

unlawful and injurious course will be taken by the defendant

in violation of the plaintiff's actual rights."

45. In the present case, the payments in issue were not made under a mistaken view of the law, nor were they made in any relevant sense voluntarily.

46. It is clear from correspondence that several interim proposals pending the decision of the High Court were the subject of discussion and negotiation between the Australian Taxation Office and SPASA. I infer that in the letter of 29 October 1990 the Commissioner had declined to be a signatory to a trust fund established by SPASA to collect sales tax allegedly payable by its members on swimming pools constructed in situ whilst SPASA's challenge to the relevant legislation was determined by the High Court. The letter of 15 November 1990 from Ernst and Young to the First Assistant Commissioner Sales Tax stated:

"In your previous letter of 17 September 1990 you confirmed

approval of, inter alia, the establishment of the SPASA

sales tax trust. Consequently, SPASA has devoted

considerable time and expense to ensuring that its members

are fully aware as to the trust's operations and of their

obligations in respect of the payment of moneys into it."

47. The letter complained that the dismantling of such an arrangement after such a short period would cause considerable inconvenience to SPASA but would also "diminish the respect that SPASA members currently have for the Commissioner of Taxation". One of the reasons for the alteration in the Commissioner's position appears to have been the Commissioner's view that there were sufficient avenues of appeal open to SPASA which did not require the establishment of a trust fund and that there was nothing different in the case of SPASA which warrants such a fund. The letter of 15 November 1990, referring to an agreement reached on 13 September 1990, stated that one of the concerns of the Commissioner in the negotiations was a concern "to ensure that his interests were safeguarded such that, in the event of the matter being determined in his favour, all necessary returns were lodged and full payment was received".

48. I hold that the applicants are entitled to judgment in respect of the claims for payments made from 31 August 1990 and interest pursuant to the Taxation (Interest on Overpayments) Act 1983. In my opinion, this entitlement is pursuant to the agreement evidenced by the correspondence between Ernst and Young and the Commissioner in November 1990. In my view, the applicants are also entitled to recover the amounts claimed as money had and received, the circumstances being such that the payments were not made voluntarily but under compulsion.

49. I reject the suggestion that there is no power in the Commissioner to agree to receive moneys on the basis that, if it were to be held subsequently that he had no right to be paid those moneys, the Commissioner would repay them. By s. 4 of the Assessment Act No. 1 the Commissioner is given the general administration of that Act. That administration has to be bona fide and for the purposes of the Act, but it is a grant of a wide power and would encompass, for instance, the power to compromise proceedings in which he was a party or to make agreements or arrangements concerning the efficient management of a dispute in which he was involved. The agreement here was not an agreement to dispose of Commonwealth funds but was an agreement to repay moneys once it was established against the payee that the Commonwealth had no entitlement to those moneys.

50. Not only is the agreement evidenced by the letters a sensible one but, in my opinion, it is within power. It is not to be read as "subject to" or "in the light of s. 26" of the Assessment Act No. 1. This conclusion is supported by the reasoning of the High Court in Queensland Trustees Limited v. Fowles [1910] HCA 51; (1910) 12 CLR 111. In that case, one Tyson had died intestate and the plaintiffs were appointed administrators. Mr Tyson's estate consisted largely of station properties and it was found impossible to value it satisfactorily in accordance with the provisions of the Succession and Probate Duties Act 1892 (Qld). An interim assessment was made on certain valuations which had proved unsatisfactory to the plaintiffs, and duty was paid on that basis, it being agreed in letters passing between the Chief Commissioner of Stamps and the plaintiffs, that a final adjustment should be made after the whole estate of the intestate in Queensland had been realised and that, in the event of the real and personal property realising more than the value disclosed in the previous accounts, additional duty should be paid in respect of such increase and that, in the event of the estate realising less than such estimated value, a proportion of part of the sum paid in respect of succession duty should be refunded. The estate realised less than the estimated value and the plaintiffs sued for a refund.

51. Section 37 of the Succession and Probate Duties Act 1892 provided, inter alia, that when "any duty has been paid on account of a succession, and it is afterwise proved to the satisfaction of the Commissioners that...for any...reason it ought to be refunded, the Colonial Treasurer shall refund" it. It was not disputed that proof to the satisfaction of the Commissioners was a condition precedent to a right to enforce payment under that section.

52. At first instance, Real J. held that, while the agreement was made with the authority of the Government, it was invalid and for that reason dismissed the action but without costs. At 117 Griffiths C.J. said of the judgment of the primary judge:

"As I understand his judgment, he thought that when money has

once been received on account of succession duty and paid

into the Consolidated Revenue it can only be recovered under

sec. 37, i.e., upon proof to the satisfaction of the

Commissioners that it ought to be refunded. But, with

respect, no question of a refundment under that section

arises in this case. The Government are sought to be made

liable under an express agreement which is not contra bonos

mores and is not forbidden by any positive law. The

question is whether that agreement was within the express

powers of the Commissioners under the Act, or, if not, was

within the general powers of the Government. The latter

question depends, as I pointed out in O'Keefe v. Williams

[1907] HCA 64; (1907) 5 CLR, 217, at p 226, upon the general authority

of the officers of the Executive Government to make ordinary

contracts relating to the administration of public affairs."

53. The Chief Justice then held that the agreement in question was within the express powers conferred on the Commissioners by s. 39 of that Act to compound for the succession duty payable on such terms as they may think fit, in cases when the value of the succession cannot be fairly ascertained, and to enlarge the time for payment of duty. However, on the question of whether the agreement was within the general powers of the Government, Griffiths C.J. said at 118:

"Further, and apart altogether from sec. 39, I think that the

agreement was within the general power of the Executive

Government. The obligation to return duty overpaid under a

mistake as to value, although a duty of imperfect

obligation, is nevertheless an honourable obligation to

which a Government is not forbidden to give effect, and it

appears to me that a promise that if a sum of money is paid

provisionally by way of duty, and it shall afterwards appear

that the amount is excessive the surplus shall be returned,

is a lawful promise.

Moreover, in the present case there never was any assessment

of the duty within the meaning of sec. 7 until the

realisation was complete, so that the question of returning

duty paid in pursuance of an assessment does not arise."

54. To like effect was the judgment of O'Connor J. At 122 his Honour said:

"...the question arises is such agreement beyond the powers

of the Commissioners or of the Government? I shall first

take it to be the agreement of the Government made by the

Treasurer on its behalf. It may be conceded that the

Treasurer, as much, if not more than any other officer of

Government, is bound to see that duty is collected according

to law. The Government have no power to remit or relieve

from taxation, or to collect more taxation than the Act

imposes. But in the powers of administration there must be

included a power in the Government to make any agreement

which is necessary for fair and reasonable administration.

That is the kind of power referred to in O'Keefe v. Williams

[1907] HCA 64; (1907) 5 CLR, 217, at p 226, mentioned by my learned

brother the Chief Justice, who said in that case, referring

to an agreement made by a Minister for Lands in New South Wales:-

'The question of the authority of Minister does not arise

under the Crown Lands Act at all, but depends upon the

general authority of the officers of the Executive

Government to make ordinary contracts relating to the

administration of public affairs.'

In the present case the subject matter of the agreement was

the administration of the Stamp Act; the agreement itself

was merely a means for enabling the value of the succession

at the time when it became subject to the tax to be fairly

arrived at, and I have no doubt that it was within the power

of the Treasurer, as representative of the Government, to

enter into an agreement so obviously essential under the

special circumstances for securing the fair administration

of the Act. I agree with the learned Judge in the Court

below that there was ample evidence that the contract made

by the Commissioners was made on behalf of the Government."

55. In New South Wales v. Bardolph [1934] HCA 74; (1934) 52 CLR 455, an officer of the Premier's Department on the authority of the Premier, entered into a contract with one Bardolph, a newspaper owner in South Australia for advertisements to be placed in that newspaper which related to the Tourist Bureau of New South Wales. There was no express authorisation of the contract by the Legislature nor was it sanctioned or approved by any Order in Council or Executive minute. In the Supply Acts and Appropriation Acts for the financial years affected (the contract extending over more than one financial year) provision was made under the heading "Government advertising" for expenditure of sums much larger in amount than the amount involved in the contract. Shortly after the making of the contract, a change of Government took place and the new Administration refused to use or pay for any further advertising space in the newspaper. Nonetheless the plaintiff continued to insert the advertisements, and, at the conclusion of the period named in the contract, sought to recover the total unpaid amount of the agreed advertising rates.

56. The Full Court of the High Court affirmed the decision of Evatt J. at first instance, concluding that the contract was a contract of the Crown and, subject to the provision by Parliament of sufficient moneys for its performance, was binding on the Crown. Although the contract must be regarded as containing an implied condition that payments under it by the Crown should be made only out of moneys lawfully available for the purpose under parliamentary appropriation, that condition did not go to the validity of the contract, and under the Judiciary Act the contract might be sued on whether or not sufficient moneys had been so appropriated.

"The question whether the transaction was within the

competence of the Crown cannot be answered simply by

considering the statutory authority for it. Apart from the

question whether parliamentary appropriation of moneys is a

prerequisite of the Crown's liability to pay under a

contract made by it, the Crown has a power independent of

statute to make such contracts for the public service as are

incidental to the ordinary and well-recognized functions of

Government. When the administration of particular functions

of Government is regulated by statute and the regulation

expressly or impliedly touches the power of contracting, all

statutory conditions must be observed and the power no doubt

is no wider than the statute contemplates."

"...of course expenditure upon this particular contract as a

specific obligation was not referred to in any of the items

or heads (under the Supply Acts and Appropriation Acts).

Accordingly it is contended on behalf of the Crown that

there is no sufficient parliamentary appropriation of funds.

In my opinion this contention is founded upon a

misunderstanding of the principle invoked. Such a

misunderstanding arises from too literal an application of

some of the expressions used in judicial pronouncements

which state with much force the necessity of parliamentary

control of public moneys."

58. At 497 his Honour said, dealing with the effect of the Judiciary Act 1903:

"The only judgment to which the Crown is liable is one which

requires the Treasurer of the Commonwealth or State, upon it

being certified to him, to satisfy it out of moneys legally

available (secs. 64, 65). The object of such a provision is

to enable the subject to establish his claim that he is a

person who would be entitled to a contractual right to

payment out of moneys available for that purpose. It leaves

completely in the hands of Parliament the question whether

moneys shall be made available for the purpose. "

"No statutory power to make a contract in the ordinary course

of administering a recognised part of the government of the

State appears to me to be necessary in order that, if made

by the appropriate servant of the Crown, it should become

the contract of the Crown, and, subject to the provision of

funds to answer it, binding upon the Crown. "

"It is a function of the Executive, not of Parliament, to

make contracts on behalf of the Crown."

60. For the reasons I have given, in my opinion, each applicant is entitled to judgment as claimed, pursuant to O. 20 r. 1. There were no submissions directed as to whether it was appropriate to give judgment against the first or second respondents, or both. It seems to me to be sufficient if judgment is given against the first respondent in each proceeding.

61. In Proceedings QG89 of 1992 I give judgment for Precision Pools Pty Ltd against the Commissioner of Taxation in the sum of $488,033.72. I order the first respondent to pay the costs of Precision Pools Pty Ltd of the notice of motion filed 18 June 1992, to be taxed if not agreed.

62. In Proceedings QG90 of 1992 I give judgment for Qld Pool and Spa Const. Pty Ltd against the Commissioner of Taxation in the sum of $211,353.96. I order the Commissioner of Taxation to pay the applicant's costs on the notice of motion filed 18 June 1992, to be taxed if not agreed.