Roxborough v Rothmans of Pall Mall Australia Ltd

Federal Court of Australia|1999-02-18|Before: Emmett J

REASONS FOR JUDGMENT 1 In 1997, each of the Applicants was a retailer of tobacco products in New South Wales. Each Applicant was the holder of a licence under the Business Franchise Licences (Tobacco) Act 1987 (NSW) ("the Act"). During the period 1 July 1997 to 5 August 1997 inclusive ("the Dispute Period"), the Respondent, Rothmans of Pall Mall Australia Limited ("Rothmans"), supplied tobacco products to each of the Applicants. In this proceeding, each of the Applicants seeks to recover from Rothmans amounts paid to Rothmans in respect of tobacco products supplied by Rothmans during the Dispute Period. 2 The proceeding arises out of a determination made by the High Court of Australia that certain provisions of the Act were invalid. On 5 August 1997 the High Court held that the effect of the Act was to impose a duty or duties of excise, within the meaning of section 90 of the Constitution, to the extent that licence fees payable under the Act were not genuine fees for a licence to carry on a business - Ha v State of New South Wales and Walter Hammond and Associates Pty Ltd v State of New South Wales (1997) 189 CLR 465. The real issue in the proceeding is whether the Applicants or Rothmans should receive the benefit of a windfall, which arises in consequence of the determination of the High Court. 3 There are several alternative bases upon which the Applicants seek to recover the amounts in question. I shall deal with each basis separately. However, it is necessary to have regard first to the statutory framework, consisting of the Act and the regulations made under it, pursuant to which the Applicants and Rothmans carried on business during and before the Dispute Period.

DEALINGS BETWEEN THE APPLICANTS AND ROTHMANS 15 The Minister's Determination made it necessary for Rothmans to publish a wholesale list price for tobacco. Rothmans published a price list which it updated from time to time. The price list that was current during the Dispute Period consisted of a document comprising five columns. The first column was a description of each brand of cigarette. The second column specified the quantity of cigarettes of that brand in a carton. The third column specified the wholesale price per 1,000 cigarettes. The fourth column specified the cost per carton at wholesale, including licence fees. The final column specified the recommended retail price per packet "including State licence fees 100 per cent". A copy of a page of the price list is Schedule 1 to these reasons. But for the provisions of the Act, Rothmans would not have published a price list in such a form. 16 Well before the Dispute Period, each of the Applicants had completed a form of request to Rothmans for a commercial trading account. By such document, each Applicant agreed to comply with Rothmans' trading terms and conditions which relevantly provided as follows: "1. In these conditions of sale: (a) 'Company' and 'Seller' means [Rothmans]. (b) 'Purchaser' means the person, firm or company placing an order with the Seller in respect of the supply of Goods… (c) 'Goods' means all goods and merchandise supplied by Seller pursuant to these Conditions to the Purchaser or as the Purchaser may direct. ……………………………… 4. The prices charged by the Company as set out in the Company's applicable list may be altered without notice and any resulting increase shall be added to the purchase price. Such price or prices quoted on purchases from the Company are subject to any increase in the amount of excise duty, sales tax, freight or insurance between the date of order and the date of delivery and any such amount shall be added to the purchase price and be payable by the Purchaser to the Company. ……………………………… 6. The Purchaser shall pay for all Goods delivered within 7 days from the date of receipt of the Goods ('Due Date')… 7. On the happening of any one or more of the following events, namely: (a) the Purchaser fails to pay the Seller and when due and payable any moneys comprised in the Purchaser's debt (such moneys being due and payable at the time expressly agreed between the Purchaser and the Seller herein and in default of such agreement according to the normal terms of trade of the Seller or, in respect of amounts not covered by the Seller's ordinary terms of trade, on demand by the Seller); ……………………………… the seller may at its option exercise all or any of the following rights… (i) demand payment of the whole of the Purchaser's debt then outstanding, and the Purchaser agrees to pay the same accordingly. ……………………………… 10. …until payment is made in full to the Seller for the Goods: (a) property in the Goods remains with the Seller and the Purchaser agrees to hold the Goods in a fiduciary capacity as bailee for Seller…" 17 Invoices issued to the Applicants by Rothmans during the Dispute Period were in a standard form. The form of invoice specified: (a) the name and address of the purchaser; (b) the date of the sale; (c) the quantity of each brand of tobacco sold; (d) the wholesale price per 1,000, being the sum specified in the third column of the price list in relation to the relevant product. 18 The form of invoice also contemplated other information such as recommended retail price and the contents of a carton of the relevant product. The invoice also showed the quantity of each product to be purchased and the total value of that product. The price list published by Rothmans did not show details of discounts which would be allowed. However, the standard form of invoice showed particulars of any discounts allowed to a purchaser. 19 A summary appeared at the foot of the form of invoice. The following is a sample: "SALES SUB TOTAL 6965.73 INVOICE SALE SUBTOTAL 6965.73 TOBACCO LICENCE FEE $7094.60 @ 100% 7094.60 I ACKNOWLEDGE RECEIPT OF THE PRODUCTS LISTED ON THIS DOCKET. CUSTOMER SIGNATURE………………………….. NET TOTAL $14060.33" 20 The figure shown opposite "SALES SUB TOTAL" and the figure shown opposite "INVOICE SALE SUB TOTAL" were the same. That figure represented the total value of all products shown on the invoice less discounts. The figure shown in the "TOBACCO LICENCE FEE" line was the total of that value before deducting discounts. The figure appearing in the "NET TOTAL" line was the sum of the invoice sale subtotal item and tobacco licence fee item. A copy of an invoice issued to one of the Applicants appears as Schedule 2 to these reasons. 21 Had the ad valorem element of the licence fee not been held invalid, the value of tobacco products sold during July would have been taken into account in calculating the licence fee payable by Rothmans for the licence period commencing on 28 August 1997. That licence fee would ordinarily have been remitted on or just prior to 27 August 1997. The value of tobacco products sold from 1 to 5 August 1997 inclusive, together with the value of products sold during the balance of August, would have been taken into account in calculating the licence fee payable by Rothmans for the licence period commencing on 28 September 1997. That licence fee would ordinarily have been payable on or just prior to 27 September 1997. 22 However, by reason of the determination made in Ha's Case, it was not necessary for any of the Applicants or for Rothmans to obtain renewal of their respective licences under the Act on 27 August 1997 in order to carry on tobacco retailing and tobacco wholesaling respectively after that date. In particular, it was not necessary for Rothmans to pay any fee for a wholesaler's licence on that date and Rothmans made no payment. For the same reason, it was not necessary for Rothmans to make any payment for licence fee on 27 September 1997 and Rothmans made no such payment. 23 Each Applicant paid the amounts shown as "NET TOTAL" in the invoices delivered to that Applicant during the Dispute Period. The Applicants now seek to recover from Rothmans sums equal to the amounts shown as "TOBACCO LICENCE FEE" in these invoices. The amounts involved were as follows: First Applicant ("Roxborough") $14,377.33 Second Applicant ("Alldis") $14,245.48 Third Applicant ("Balatsias") $18,521.99 Fourth Applicant ("Wilkie") $31,716.32 Fifth Applicant ("White") $18,435.68 Sixth Applicant ("Cook") $35,877.19 Seventh Applicant ("Heffernan") $26,456.55 TOTAL $159,630.54

THE CONTENTIONS OF THE APPLICANTS 24 As I have said, the Applicants relied on several distinct bases for recovery of the amounts in question. The Applicants claimed to be entitled to recover the amounts on the following alternative bases: · Breach of an implied promise to refund the amounts if Rothmans did not subsequently pay a licence fee. · Restitution for total failure of consideration by reason of failure by Rothmans to perform an implied promise to pay a licence fee. · Restitution of payments made under invalid legislation giving rise to unjust enrichment of Rothmans. · Constructive trust in respect of the amounts in question. · Restitution for payments made under a mistake. · Contravention of section 52 of the Trade Practices Act. I shall deal separately with each of those bases, but not necessarily in the order in which each basis was dealt with in argument.

Implied Term to Refund 25 The Applicants argued that it was a term of the contract between Rothmans and each Applicant that if Rothmans did not pay a licence fee calculated by reference to the sales made in any relevant period, Rothmans would refund to the Applicant the amount shown as "TOBACCO LICENCE FEE" in any invoice relating to the sale of tobacco products during that relevant period. The Applicants contended that the failure by Rothmans to repay the amounts in question was a breach of that implied term. 26 Clearly, there was no express term to the effect alleged. However, the Applicants contended that the term should be implied from the whole of the terms of, and the nature of, the contract and the provisions of sections 41(1)(c) and 41(3) of the Act. The basic matter relied upon by the Applicants for the implication was that the term was said to be necessary to avoid the possibility that the Applicants could be required to pay the same amount twice. 27 The effect of sections 41(1)(c) and 41(3) is critical to that question. The Applicants contended that the scheme of section 41 was designed to ensure that, in respect of all tobacco which was sold in New South Wales, an amount was payable in respect of that tobacco, either by the retailer or by the wholesaler involved in the distribution of the tobacco. The Applicants argued that the intention of the parties was that all of the tobacco purchased from the holder of the wholesaler's licence, namely, Rothmans, would be disregarded under section 41(1)(c) such that the only licence fee payable by an Applicant would be $10. 28 If Rothmans did not pay a licence fee calculated by reference to the tobacco products which were the subject of the invoices, an Applicant, in order to renew his or her retailer's licence, would have been required to make a payment in respect of the tobacco products which the Applicant sold during the relevant period for the intended licence period, notwithstanding that a payment made by the Applicant in respect of the supply of tobacco products included the amount specified in the invoice as "TOBACCO LICENCE FEE". The Applicants contended that the consequence, in those circumstances, would be that the Applicant would, in substance, be paying twice. Therefore, a promise by Rothmans should be implied to refund the amounts in question if it did not pay those amounts in respect of a licence fee. 29 The Applicants began with the proposition that the Act displayed three key features. The first was that the licence fee was manifestly a revenue raising measure imposed on the sale of tobacco during each relevant period. That characterisation was said to be strengthened by the presence of section 41(3) of the Act providing that the value of tobacco purchased by the retailer from the holder of a wholesaler's licence was to be disregarded only if the wholesaler had paid or was liable to pay a licence fee in respect of that tobacco. 30 The second feature was that tobacco retailers who purchased all their tobacco products from a licensed wholesaler were not required to pay any amount to the Commissioner in respect of the variable component of a licence fee, provided that the wholesaler from whom the tobacco was purchased had paid or was liable to pay a licence fee in respect of those tobacco products. Thus, the primary liability to pay the licence fee fell on the wholesaler who was expected, in the ordinary course, to include an appropriate amount as part of the selling price charged to a retailer. The retailer would be liable to pay an ad valorem amount for a licence only if for some reason the wholesaler was not liable to pay a licence fee in respect of the tobacco sold to the retailer. 31 The third feature was that the tax imposed on the sale of the tobacco during a relevant period was to be remitted to the Commissioner after the end of that period. It was said that the substantive operation of the Act required that amounts collected by a licensed wholesaler on sales made to a retailer during a calendar month were to be remitted to the Commissioner by the 27th day of the following month. 32 The Applicants argued that a person who held a wholesaler's licence at the time of selling a quantity of tobacco to a retailer would only pay or be liable to pay a licence fee in respect of that tobacco if the wholesaler chose to engage in tobacco wholesaling during the month commencing on the 28th day of the month after the month in which the sale to a retailer took place. The retailer was primarily liable, on renewal of his licence, to pay licence fees in respect of tobacco sold by the retailer if the wholesaler had not paid or become liable to pay licence fee in respect of that same tobacco when sold to the retailer. 33 If a retailer wished to continue to carry on tobacco retailing lawfully after the expiry of a licence, he must, on or before the expiry of his licence, pay to the Chief Commissioner the fee payable for a further licence. Thus, it should have been possible to know, prior to the 28th day of any month, the value of tobacco sold during the relevant period, including the value of such tobacco purchased from the holder of a licence who has paid or is liable to pay a licence fee in respect of that tobacco. If "in respect of" means that the value of the tobacco has been taken into account in calculating a licence fee, that requirement will not have been satisfied because sale of that tobacco will only be taken into account for the purpose of calculating the licence fee for a future period. The holder could not have paid or been liable to pay in respect of that tobacco at that time. 34 That could have created what, on one view, might have been an intolerable situation for a retailer. A retailer would never know, before the expiry of his licence, whether the wholesaler from whom he was purchasing tobacco intended to make a payment of the fee payable for a further licence. A retailer in such a position could have enquired of the wholesaler whether the wholesaler intended to pay a licence fee for a renewal of his licence. The response of the wholesaler might give rise to a contractual or other obligation to the effect of the alleged implied term. Indeed, the inclusion of the item for "TOBACCO LICENCE FEE" might be taken as an indication by Rothmans of its intention to apply for renewal of its licence by paying the relevant licence fee at the appropriate time. 35 The vital question, however, is whether, in those circumstances, a term should be implied that Rothmans would refund the amount in question if it did not make such a payment. Such a term could only be necessary if the consequence of a wholesaler's not paying a licence fee on renewal of its licence was that a retailer would then be required to pay an ad valorem amount as a licence fee for renewal of his retailer's licences, notwithstanding that he had paid the amount shown in an invoice for "TOBACCO LICENCE FEE". 36 Section 41(3) is an interpretive and explanatory provision in relation to the last phrase of section 41(1)(c). The reference to "such tobacco" means any tobacco sold during the relevant period, purchased from a licensee who was a wholesaler. The expression "paid or is liable to pay" does not refer to an obligation to have a licence or an obligation to get a licence in the future. Liability arose by having had a licence but with an underpaid fee in relation to which there was a reassessment or by engaging in tobacco wholesaling without being the holder of a licence. 37 The tobacco upon which the fee for a retailer's licence was to be calculated was tobacco sold by the retailer during the relevant period. The calculation was to disregard any such tobacco sold by the retailer during the relevant period that had been purchased from a licensee. In the nature of things, that purchase may have occurred at an earlier time than the relevant period. It did not have to have been purchased from the wholesaler during the relevant period. Depending on the day of the month and freshness of the stock and speed of turnover, it may have been sold by the wholesaler during an earlier time. There was no relationship between the amount shown in an invoice for "TOBACCO LICENCE FEE" and the tobacco in respect of which a retailer would be required to pay an ad valorem licence fee. 38 Amendments were made to the Act in 1996 by inserting sections 50A and 33A. Those amendments resulted from recognition of the possibility that a licensee who decided to cease trading would be free from the commercial necessity to collect from purchasers money on account of future payments of licence fees in the last two months of trading. The Minister's speech on the second reading of the bill for that amendment gave the following explanation for the intended operation of the new provisions: "Proposed section 50A is directed at retiring licensees, who, because of the nature of the licensing legislation, and constitutional restrictions on the power of State governments to impose direct taxes on goods, are able to avoid paying licence fees in respect of sales made in the last two months of trading prior to surrendering a licence. The proposed section will limit the extent of discounting of tobacco products by a retiring wholesale licensee. This will not have a direct impact on revenue since no licence fees are payable in respect of sales in the last two months of operation by a retiring licensee. However, the provision will assist the public health objects of the Act by restricting the supply of discounted tobacco." (Hansard, Legislative Assembly, 13.11.96, p.5855). 39 Under section 50A, wholesalers were required to declare their future trading intentions for the next three months at the time of applying for renewal of a licence. Section 33A required tobacco sellers to sell tobacco at a price not less than 195% of its wholesale value during the last two months of trading. Without such provisions, a wholesaler who had decided to cease trading would know that it would not need to make a payment in advance to renew its licence. Accordingly, it would be open to the wholesaler to discount the price of the tobacco sold in the last month of trading. Retailers who purchased tobacco from a wholesaler in those circumstances would be free to pass on the discount to their customers because the licence fees had been paid on that tobacco. Hence it was thought necessary to amend the Acts to prevent the possibility of such discounting. 40 The scheme of sections 50A and 33A, which were enacted against the background of the Minister's Determination, suggests that the Parliament did not contemplate that a retailer might be paying twice in such circumstances. That, of course, may not be decisive of whether the retailer would, in fact, be paying twice. Nevertheless, it is a matter which is relevant to whether or not a term such as alleged should be implied. 41 Even if there was a possibility of a retailer, in substance, paying twice, the only term which would need to be implied would be a term that the amounts in question would be refunded if such a circumstance eventuated. That, of course, is not the circumstance that has arisen in the present case. There can be no suggestion that any of the Applicants has been required to pay an ad valorem licence fee in order to obtain renewal of a licence. Following Ha's Case, none of the Applicants appliedfor renewal of their licences. None of the Applicants has in fact been required to pay twice. 42 Further, there would be a difficulty in determining whether and when a wholesaler had paid or was liable to pay a licence fee in respect of tobacco that was sold by a retailer. Because of the absence of any relationship between the tobacco sold by a retailer and the licence fee paid or payable by a wholesaler, it would not be possible to determine whether and when a licence fee had not been paid so as to give rise to a liability to make a refund. In the circumstances, I do not consider that a term such as alleged by the Applicants is to be implied in the contracts between the Applicants and Rothmans.

Total Failure of Consideration 43 Alternatively, the Applicants contended that, on the proper construction of the invoices, the sale price for the tobacco was limited to the amount shown in each invoice as "INVOICE SALE SUBTOTAL" and that the sale price did not include the amount shown as "TOBACCO LICENCE FEE". Thus, they argued that the different elements of consideration payable under the contract could be treated as severable notwithstanding that they formed part of what might be regarded as a single commercial transaction. 44 The Applicants contended, therefore, that it was a term of the contract between Rothmans and each Applicant that, in consideration of the Applicant paying to Rothmans the amount referred to in each invoice as "TOBACCO LICENCE FEE", Rothmans would pay that amount by way of licence fee under the Act. Since no amount was paid by way of licence fee calculated by reference to the tobacco products which were the subject of the invoices, there was said to have been a total failure of consideration for that payment and, accordingly, the Applicants were entitled to restitution of the amounts paid in consideration of the promise by Rothmans to pay licence fees. 45 Where money is paid under a contract, it can only be claimed back on the basis of a failure of consideration where the contract is ineffective in some way, such as where it is terminated for breach or discharged for frustration -Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Limited [1943] AC 32 at 64. The Applicants argued that there were, in effect, two contracts evidenced by each invoice - namely, a contract for the sale of tobacco for which the price was the "INVOICE SALE SUBTOTAL" and a contract whereby Rothmans promised to pay a licence fee in respect of that tobacco sold in consideration of payment of the "TOBACCO LICENCE FEE." However, there was no express term by which Rothmans made such a promise. Further, it would be artificial to analyse the contracts in such a fashion. 46 A contract arose every time an order from a retailer was accepted by Rothmans. It may be that, in practice, that acceptance was not communicated until delivery to the retailer with the invoice, which was to be signed by way of receipt. In one sense, each contract was initially executory because, although delivery had been effected, the price still had to be paid before title passed. However, the contracts in question could only be regarded as executory after such payment, such that there could be a termination as to the future, if the alleged term is to be implied. In the absence of the alleged term, none of the contracts in question remained executory after payment of the "NET TOTAL". 47 The relevant basis on which the Applicants would be entitled to restitution is total failure of consideration. Receipt of any part of the agreed return for the contract price would render the failure of consideration merely partial. Restitution has no room to operate where the contract in question remains on foot - Bell v Lever Bros [1932] 1 AC 161. The principle may operate where specific and identifiable portions of the contract price are paid in return for discrete portions of the agreed return - see, for example, in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457. However, I do not consider that the documents which evidenced the contract between Applicants and Rothmans should be construed as dividing the consideration into two parts. The price payable for the supply of tobacco was the "NET TOTAL" shown at the foot of the invoice. The reference to the "TOBACCO LICENCE FEE" is explained by the statutory scheme. 48 It is clear that Rothmans had to have a licence in order to continue conducting its business of selling tobacco and carrying on tobacco wholesaling. If it did not have a licence but carried on tobacco wholesaling, it committed an offence under the Act. It paid a licence fee for the renewal of its licence each month in order to enable it to continue carrying on its business lawfully. Rothmans made its decision to pay a licence fee and obtain a licence, not because of any promise made to any retailer such as the Applicants, but because it was legally necessary for it to do so. 49 Nothing in section 41(3) alters the fact that there is no obligation as between retailer and wholesaler to obtain a licence. The criminal law sanction required the licence. It was self interest that generated the moral certainty that a wholesaler who wished to carry on business would obtain a licence. That moral certainty is a reason why there was no need to imply a promise to do that which is certain to occur in any event. It is also a reason, incidentally, why there would be no need to impose a trust with respect to any particular part of the price payable under the contract. 50 The Applicants did not have to pay a licence fee to Rothmans. Nor was Rothmans paying on behalf of the Applicants what they were required to pay to obtain a licence. Nor were the Applicants paying what Rothmans had to pay to obtain its licence. There was no obligation on a wholesaler to recoup the licence fee any more than there was an obligation on a wholesaler to recoup his raw material costs, wages or electricity expenses. The total price that Rothmans required retailers to pay would be whatever Rothmans thought was necessary to recoup its costs to make and sell tobacco together with some return on its capital. The only one of those costs specified in the invoices is "TOBACCO LICENCE FEE'. 51 However, the combination of regulation 14(1) and the Minister's Determination, both of which are part of the statutory scheme, explains the form of the invoice and the reference to "TOBACO LICENCE FEE" in the invoices. It has nothing to do with Rothmans' promising that it will keep paying a licence fee even when it does not need to. I do not consider that the reference to the fee in the invoice is a basis for implying a term that Rothmans would do so. It follows that there has been no breach of the contract alleged and, therefore, no issue of restitution on the basis of total failure of consideration can arise. 52 It may be correct to say, as the Applicants did, that there was a benefit for them in having an obligation from Rothmans to pay or be liable to pay a licence fee. That would have the effect of eliminating the ad valorem element from their licence fees. However, without more, that would not be sufficient to give rise to the implication that there were severable promises made by Rothmans and the Applicants. Properly construed, the contract was for the payment of the total price in return for the transfer of title to the tobacco. Accordingly, it follows that there was no failure of consideration such as would justify an order for restitution.

Payment under Invalid Legislation 53 The Applicants contended that there had been unjust enrichment of Rothmans because the payments in question were requested by Rothmans and made by the Applicants by reference to an Act which was later to be found invalid in part. Reliance was placed on the observations made by the House of Lords in Woolwich Equitable Building Society v Inland Revenue Commission [1993] AC 70 at 171-172. The principle in the Woolwich Case, however, relates to recovery from the State of an ultra vires exaction. That is to say, where, under colour of invalid legislation, the State exacts money from a subject, the subject may recover that money. The principle in the Woolwich Case may have been applicable if a claim was made against the State of New South Wales for recovery of licence fees paid. That, of course, is not this case. 54 The reasoning in the Woolwich Case has no application to payments made pursuant to a valid contract, notwithstanding that the payments may be made "by reference to" an enactment which was later held to be invalid. That will be so even where the contracting party which receives the payment is an instrumentality of the State - Esso Australia Resources Limited v Gas and Fuel Corporation of Victoria [1993] 2 VR 99 at 108. I do not consider that the principle in the Woolwich Case assists the Applicants.

Constructive Trust 55 The Applicants contended that each of them paid the "NET TOTAL" shown in each invoice on the basis that Rothmans was legally obliged to pay an amount as licence fee and that Rothmans intended to pay the licence fee. They argued that, since Rothmans had not paid licence fees calculated by reference to the tobacco which was the subject of the invoices, Rothmans holds an amount equal to the amounts specified in the invoices as "TOBACCO LICENCE FEE" on trust for the relevant Applicants. 56 The Applicants relied on observations made by Mason CJ in Commissioner of State Revenue (Vic) v Royal Insurance Australia Limited (1994) 182 CLR 51 referring to the dissenting judgment of Judge Learned Hand in 123 East Fifty-Fourth Street v United States (1946) 157 F Rep (2d) 68. There, a restaurant owner, in accordance with advice received from revenue authorities that it was liable to cabaret tax, paid amounts as and for that tax. The Court held that the tax was not payable because the restaurant was not a cabaret. The restaurant owner had charged the tax to its patrons so that items on the patrons' bills were actually part of the price paid by them and the money became that of the restaurant owner. The majority of the Court considered that that was no bar to recovery by the restaurant owner because the money, when paid to the Treasury, belonged to and was the property of the restaurant owner. 57 However, Judge Learned Hand was prepared to infer that the restaurant owner had added the tax as a separate item to the bills and described it as a tax that it must pay and was collecting it from patrons in order to pay it to the Treasury. His Honour regarded as crucial the distinction between passing on the tax in that form and merely including in the bills the amount of the tax without saying anything about it. According to his Honour, a constructive trust attached to the claim for recovery of the money so that if the restaurant owner recovered the payments it would hold as trustee for the patrons. That would be no answer to the claim if the restaurant owner could and would distribute the recovery to the patrons. However, that did not appear to be the case so that, in the result, the equities being equal, the legal title should prevail. 58 In Decorative Carpets Inc. v State Board of Equalisation (1962) 373 P. (2d) 637, the Supreme Court of California followed the dissenting opinion of Judge Learned Hand. The Court held that the mistake of law made by the plaintiff in that case gave rise to an involuntary trust in favour of customers but that the plaintiff could recover only if it submitted proof that any refund would be returned to the customers from whom the payments were erroneously collected. 59 The restaurant patrons in the case considered by Judge Learned Hand were analogous to the customers of the Applicants in the present circumstances. All of the Applicants sold tobacco for prices in excess of the "NET TOTAL" shown in any invoice. Thus, they have, as retailers, recouped all amounts paid to Rothmans in respect of "TOBACCO LICENCE FEE" in the invoices. Judge Learned Hand considered that any constructive trust must be subject to an obligation on the part of the Applicants to repay to their own customers amounts referable to the tax. That, in the circumstances of the present case, would not be practicable. There has been no suggestion by the Applicants that they would refund to their customers any amounts recovered in this proceeding. 60 Mason CJ would have accepted so much of Judge Learned Hand's analysis as led to the conclusion that the restaurant owner was a constructive trustee of the amount of tax received from its patrons if the owner charged the separate amount of the tax to its patrons. Mason CJ said (at page 77-8): "The tax so received was received by the owner as a fiduciary on the footing that it would apply the money in payment of the tax. If that purpose failed or could not be effected because the tax was not payable then the owner held the moneys for the benefit of the patrons who paid the moneys." 61 The critical element in the observation made by Mason CJ is that the money was received "on the footing" that it would be dealt with in a particular way. It is not entirely clear what his Honour meant by that expression. It appears that his Honour made an assumption that was necessary for the conclusion that he reached. That assumption, of course, is the very question that arises in this proceeding. That is to say, it is necessary to determine whether the amounts referred to in the invoices as "TOBACCO LICENCE FEE' were paid by the Applicants or received by Rothmans "on the footing" that some payment would be made by way of tobacco licence fee. I have, for the reasons indicated above, rejected the contention that there was an implied term to such an effect. In the absence of such a term, I do not consider that it can be said that payments were made on a "footing" to that effect. 62 Rothmans was not under any obligation to hold separately from its own money any amounts which were described in invoices as referable to "TOBACCO LICENCE FEE". Nor was there any intention or obligation on the part of Rothmans to pay those amounts over to the Chief Commissioner in specie as it received them. There was no arrangement between Rothmans and the Applicants that would prevent Rothmans from mixing the money paid by Applicants with its own money and doing with that money as it pleased. The absence of such an arrangement is an indication that no trustee/beneficiary relationship was intended - Cohen v Cohen (1929) 42 CLR 91 at 101 per Dixon J. 63 In the absence of a term such as was alleged by the Applicants, there is no basis for imposing a constructive trust upon Rothmans in respect of the amounts shown as "TOBACCO LICENCE FEE". So far as the Applicants were concerned, they were paying the sums of money specified in the invoices to obtain the quantity of tobacco shown in them. There is no express indication by either Rothmans or the Applicants that the Applicants were intending to do anything other than pay the full amount of the NET TOTAL shown in the invoice in order to obtain ownership of tobacco products which could then be sold to customers. I do not consider that any other intention should be implied. 64 Further, an obligation on the part of Rothmans to pay over to the Chief Commissioner the amounts described in invoices as referable to "TOBACCO LICENCE FEES", as Rothmans received them, would not be consistent with the scheme of the Act. That is to say, the fee payable on renewal of a licence was assessed by reference to an earlier period. Accordingly, the tobacco referred to in an invoice will be taken into account in the calculation of the licence fee for a future period. 65 The scheme of the determination by the Minister assumes that the price charged by a wholesaler to a retailer will include an amount referable to the licence fee that the wholesaler will in due course have to pay in order to obtain renewal of its licence. Even so, there is no equivalence or any relationship between amounts stated in invoices to be referable to TOBACCO LICENCE FEE and paid by Applicants on the one hand and the amount paid by Rothmans to renew its licence for the period of the sales covered by that invoice, on the other hand. 66 I do not consider that the Applicants have established any principled basis on which they are entitled to recover payment from Rothmans on the basis of any constructive trust.

Mistake 67 Alternatively, the Applicants alleged that each Applicant paid to Rothmans the total of the amounts shown as "TOBACCO LICENCE FEE" in the invoices on the basis of mistaken beliefs, which mirror the alleged representations, as follows: (a) the amount was an amount lawfully required to be paid as licence fee under the Act; (b) the Applicant was legally obliged to pay the set amount to Rothmans; (c) Rothmans was legally entitled to receive payment of the set amount from the Applicant; (d) Rothmans was legally obliged to pay the set amount as licence fee under the Act; (e) Rothmans intended to pay the set amount by way of licence fees under the Act; (f) Rothmans would pay the set amount by way of licence fee under the Act. The Applicants repeated the allegation that Rothmans: (i) has not paid the amount by way of licence fee under the Act; (ii) has retained the set amounts; (iii) has refused to refund the set amounts to the Applicants. It was alleged that, in the circumstances, Rothmans has been unjustly enriched and is obliged to give restitution to each Applicant of the amounts in question. 68 So far as the Applicants' claims are based on actual mistake, it would be necessary for each Applicant to establish, as a matter of fact, that that Applicant had the beliefs alleged and that the payments were made by reference to those beliefs. It is necessary, therefore, to consider the circumstances relating to each Applicant. I shall say something about each individual witness:

· Roxborough Mr Roxborough believed in July 1997 that it was possible that the constitutional challenge to the tobacco licence fee system might succeed. He had known since 1994 that some people thought there were doubts about the constitutional validity of the system and that the challenge might succeed. He always understood that the total of the so called "VALUE" and the "TOBACCO LICENCE FEE" requirement would be "the bottom line price" which he had to pay for his cigarettes, subject to any discounts which Rothmans might allow from time to time.

· Alldis Mr Alldis understood from 1994 onwards that it was possible eventually that the constitutional challenge to the tobacco licence fee system might succeed in the High Court. While Mr Alldis understood that the figure that had to be paid was an amount that Rothmans collected on his behalf to give to the Government, he did not get that understanding from the invoice. He never read the invoices closely in order to work out what messages were being sent from Rothmans, apart from the figure which had to be paid. While Mr Alldis held a strong belief that the tobacco licence fee would be impregnable against constitutional challenge, that belief was not in any way induced by conduct of Rothmans. In any event, he paid the amounts shown in the invoices in order to obtain a supply of tobacco.

· Balatsias Mr Balatsias understood that it was "the bottom line figure" on the invoices that had to be paid in order to obtain supplies of tobacco. He understood that the bottom line figure was arrived at after taking into account the item for "TOBACCO LICENCE FEE" and allowances for discounts or rebates. He understood that the "bottom line" was the price he always had to pay to get his tobacco. He considered that what Rothmans did with the money it received from him was a matter for Rothmans and the legal obligations which it owed to various people including governments.

· Wilkie Nothing in any of the invoices ever gave Mr Wilkie any belief one way or another about the validity of taxes. Mr Wilkie had always believed that how Rothmans dealt with its money, which it had got from him or from any other source, was a matter for Rothmans to decide according to its business decisions and its legal obligations. He believed that how Rothmans was in a position to pay its licence fee was no more his business than how it was in a position to pay its electricity bill. In July 1997, Mr Wilkie formed the view that it was possible that the constitutional challenge to the tobacco licence scheme might succeed.

· White Mrs White had heard of the constitutional challenge to the tobacco licence fee system from trade journals and from conversations. She knew from what she had heard that there were some people who believed that the scheme was unconstitutional although she herself did not know what would happen in the High Court. She thought it was possible that the challenge might succeed. Mrs White expected Rothmans to pay for its wholesale licence in the same way as it paid for all of its expenses of doing business, namely, from its own money. Mrs White understood that in order to get supplies of tobacco from Rothmans, she had to pay the bottom line price at the foot of the invoice. She did not regard Rothmans as paying a licence fee on her behalf. Nor did she regard herself as paying Rothmans' licence fee.

· Heffernan Mr Heffernan was aware from June 1997 that some people thought that the constitutional challenge to the tobacco licence fee scheme might succeed and he believed that it was a possibility that it would succeed. He believed that Rothmans did not pay for his licence. He also believed that the licence that Rothmans held was paid for by it for its own benefit just as it paid for its other business expenses. Nothing in the invoices ever told Mr Heffernan that the law required him to pay Rothmans' licence fee or that the law required him to pay money to Rothmans that Rothmans had to pay by way of licence fee.

· Cook Mr Cook knew that "the bottom line", the net total figure on the invoices, was the price which he had to pay to get and own cigarettes. He did not think that he was buying Rothmans' licence for Rothmans. Mr Cook thought that the real taxpayer was the consumer. That understanding was not derived from anything on the invoice but from his own understanding of the system of indirect taxation. 69 There must be some causal connection between the payment said to constitute the unjust enrichment and the mistaken belief. If the payments would have been made, notwithstanding that the relevant Applicant knew the true position, there would be no unjust enrichment - David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 376. A payment is voluntary and not the result of an operative mistake if the payer chooses to make the payment despite believing that a particular law or contractual provision requiring the payment is, or may be, invalid, or if the payer is prepared to make the payment irrespective of the validity or invalidity of the obligation rather than contesting the claim for payment - David Securities Pty Ltd at 373-4, 396-7 and 403 and Kleinwort Benson Ltd v Lincoln City Council [1998] 3 WLR 1095 at 1149. 70 The payments made by the Applicants to Rothmans were required by the terms of the contracts made between them relating to the supply of tobacco. If the Applicants wanted tobacco, it was necessary to pay the amounts shown as "NET TOTAL" in the invoices. If the full amount had not been paid, Rothmans would simply not have supplied tobacco. Even in evidence in chief, none of the Applicants said that, but for the alleged beliefs, however induced, he or she would not have paid to Rothmans the full amount shown on the invoices. The Applicants knew that they would be able to pass on the whole of that amount to their customers by charging customers the recommended retail price per packet shown in the final column of the Rothmans price list. The Applicants were prepared to pay the "NET TOTAL" in order to obtain title to the tobacco. They would have received nothing if they had not been prepared to pay the "NET TOTAL". 71 The Applicants doubtless believed that they were legally obliged to pay the amounts shown in the invoices as "TOBACCO LICENCE FEE". That belief was not mistaken. The invoices evidenced, in part, the contracts made between Applicants and Rothmans. The contract required payment of the "NET TOTAL" as consideration for the supply of tobacco described in the invoice. In the circumstances, I do not consider that any of the Applicants has established that payments were made under any operative mistake. Payment was made in satisfaction of a legally enforceable obligation to pay the "NET AMOUNT" shown in the invoices. That was the total consideration payable for the supply of tobacco. In the circumstances, there was no unjust enrichment of Rothmans at the expense of any of the Applicants.

Trade Practices Act 72 Finally, the Applicants seek damages under the Trade Practices Act 1974 (Cth) on the basis that the Respondent has engaged in misleading or deceptive conduct in contravention of section 52 of the Trade Practices Act. The Applicants contended that, by identifying in each invoice an amount of licence fee referable to the sale, Rothmans represented to each Applicant that: (a) the amount was an amount lawfully required to be paid as a licence fee under the Act; (b) the Applicant was legally obliged to pay that amount to Rothmans; (c) Rothmans was legally entitled to receive payment of that amount from the Applicant; (d) Rothmans was legally obliged to pay that amount as a licence fee under the Act; (e) Rothmans intended to pay that amount by way of licence fee under the Act; (f) Rothmans would pay that amount by way of licence fee under the Act. 73 It was alleged that Rothmans did not, at the time of delivery of each invoice and before payment by each Applicant of the amount shown in the invoice, intend to pay the relevant amount by way of licence fee under the Act or have reasonable grounds for representing that it would pay that amount by way of licence fee under the Act. Further, it was alleged that Rothmans had not paid the amounts by way of licence fees under the Act but had retained the amounts and refused to refund them to the applicants. 74 The separate identification in the invoices of the two items "SALES SUB TOTAL" and "TOBACCO LICENCE FEE" reflects section 66(2)(a) of the Act and regulation 14(3)(c)(iii). That is to say, the prescribed records to be kept by Rothmans included a separate record in relation to each invoice showing the quantity and value of each brand of tobacco sold. That requirement could be satisfied by Rothmans retaining a copy of each of its invoices. Since, as a matter of business necessity, Rothmans passed on to its customers, including the Applicants, an amount representing the amount which, in the ordinary course, would be payable in respect of the renewal of its licence, a means of complying with the Act was to show separately the two elements in the total amount payable. 75 The invoices showed nothing as the amount of the actual licence fee that had been paid by Rothmans in order to obtain the licence that authorised it to make the sales in question. Nor does it say anything about the fees which might be payable by Rothmans or what Rothmans intended to do with any moneys paid to it in respect of the sale of the tobacco products. 76 There can be no suggestion that, if the challenge to the validity of the Act in the High Court had failed, Rothmans would not have applied for renewal of its wholesaler's licence by tendering the amount of the relevant licence fee. The most that can be said from the evidence is that Rothmans was aware that, if the challenge succeeded, it would not be required to obtain renewal of its licence in order to carry on its business and, accordingly, would not, in that event, need to make any such payment. Rothmans proceeded on the basis that, unless the Act were held to be invalid, it would continue to be bound by it and would therefore continue to renew its licence each month by payment of the requisite licence fee. The fact that licences have been held by Rothmans continuously since the Act came into effect gives rise to the inference that Rothmans intended to continue to renew until it was determined authoritatively that it need not do so. 77 Representations (a), (b) and (d) do not arise from the invoices. There was no suggestion that the form of invoice had changed by reason of the challenge in the High Court. Any recipient of the invoices must be taken to be familiar with the scheme of the Act. There is no representation that any amount has to be paid as a licence fee under the Act. The inclusion of the amount for "TOBACCO LICENCE FEE" is no more than an indication by Rothmans that it is passing on to its customers, namely the Applicants, an amount which it expects it will have to pay in order to renew its licence for a subsequent period. 78 In so far as the invoices contain representation (c) that Rothmans was legally entitled to receive payment of the amounts in question from the Applicants, the representation was true. The contract made between Rothmans and the Applicants was that the Applicants would pay that amount. Once that contract was made, Rothmans was legally entitled to receive payment. 79 So far as representations (e) and (f) are concerned, as I have indicated, Rothmans intended to make those payments, subject only to the outcome of the challenge in the High Court. I do not consider that it was misleading or deceptive for Rothmans not to inform the Applicants that, if the challenge succeeded, there would be no need to make any payment in order to renew a licence. Failure to disclose information in circumstances where there would be a reasonable expectation that such facts, if in existence, would be disclosed may constitute "misleading and deceptive conduct" - Demagogue v Ramensky (1992) 110 ALR 608. However, Rothmans was not giving legal advice to the Applicants. Further, the evidence disclosed that the Applicants were all aware of the possibility of a High Court challenge. I do not consider, in all the circumstances, that it was misleading or deceptive for Rothmans not to have informed its customers that a challenge to certain provisions of the Act might succeed and that Rothmans might not have to renew its licence. 80 Even if the Applicants were able to make out a breach of s52, which I consider they are not, the issue of the remedy to which they are entitled then arises. The Applicants must establish that they have suffered damage by the conduct of Rothmans. That is to say, there must be a causal connection between some alleged loss of the Applicants and the conduct complained of. Such causal connection is usually, although perhaps not necessarily, dependent upon reliance by the claimant on the conduct in acting to the detriment of the claimant. It was not suggested on behalf of the Applicants that any of them suffered any detriment by reason of entering into the contracts for the purchase of tobacco. Rather, the Applicants contended that detriment was suffered because they paid out the amounts shown in the invoices as "TOBACCO LICENCE FEE". They contended that they are out of pocket to that extent. 81 However, that contention ignores the fact that there would simply not have been any transaction at all had the Applicants refused to pay the full amount shown in the invoices. Under the terms and conditions of trading, property in tobacco referred to in an invoice did not pass until the total of the amount of that invoice had been paid. All Applicants would not have obtained ownership of tobacco products if that Applicant had failed to pay the amount shown as "NET TOTAL" in any relevant invoice. In addition, each of the Applicants has acknowledged, in answers to interrogatories, that all of the tobacco in question was sold by such Applicant who derived proceeds from such sale in excess of the net total shown in each invoice. 82 In those circumstances, none of the Applicants can point to any loss or damage that could found any order under the Trade Practices Act. None of them has suffered any loss by the conduct complained of. Accordingly, the Applicants' contentions on this basis must be rejected. CONCLUSION 83 I consider that each basis upon which the Applicants rely for recovery of the amounts in question is unsound. Accordingly, the proceeding should be dismissed with costs. I certify that the preceding eighty three (83) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate: Dated: 18 February 1999 Counsel for the Applicant: S.J. Gageler; R.A. Dick

Counsel for the Respondent: B.W. Walker SC; I.M. Jackman

Trade Practices Act 1974(Cth)

Business Franchise Licences (Tobacco) Act 1987(NSW)

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Judgment (19 paragraphs)

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Legislation Cited (2)

Cases Cited (6)