Statutory Duties, Good Consideration and Unjust Enrichment: Redland City Council v. Kozik [2024] HCA 7

From the High Court of Australia, an interesting case at the intersection between public law and private law: Redland City Council v. Kozik, [2024] HCA 7.

Here, the Council undertook substantial public works on waterways within its area. The Council was statutorily obliged to undertake these works. It was also statutorily entitled to levy special charges on land that specially benefited from the works. And so it did, imposing charges on land close to the waterways.

However, there was a prescribed statutory process for levying special charges. It involved setting out a detailed plan for the works and proposed expenditure. The Council did not follow the prescribed process. This fact was discovered only after the works had been completed and the charges paid.

Once they realized that the Council had failed to follow the prescribed process, the landowners sought to recover the charges they had paid. In part, they claimed that they had paid the charges under a mistake of law (relating to the Council’s entitlement to levy the charges without following the prescribed process). This was a classic case of unjust enrichment (see para. 186). The Council’s response was to refund the charges, minus the monies spent on the works carried out, on the basis that it had provided ‘good consideration’, a classic defence to a claim of unjust enrichment (see paras. 189-191, 200-202).

A 3-2 majority of the High Court of Australia held that the Council should pay back all the money. The majority reasons were written by Gordon, Edelman and Steward JJ.

They concluded that the Council’s defence of good consideration could not succeed, for three reasons.

First, the restitution of the special charges would not cause the basis of the Council’s performance of the works to fail. This was because there was an independent statutory basis for the Council’s performance (indeed, a statutory obligation):

The Council’s performance of the relevant works was not done objectively on the basis that the works would be funded by the special charges because, as explained in the background section above, it was admitted at trial that the Council was obliged by statute to perform the relevant works. The Council’s obligation to perform the works was independent of the levying or receipt of special charges (at para. 206).

Second, although the landowners who paid the charges could have been said to have specially benefited from the works in the sense the term ‘special benefit’ was used in the statutory scheme, they did not constitute a benefit for the purposes of the common law of unjust enrichment. There was no request for, or free acceptance of, the benefit by the landowners:

[I]t is usually sufficient for a benefit that a person merely performed non-gratuitous services that the other party had requested, or for which the other party freely accepted a liability to pay.^[238] Conversely, it is not generally a benefit to receive a service that is not requested and is not freely accepted with an opportunity to reject.^[239] As Pollock CB said in argument in Taylor v Laird,^[240] “One cleans another’s shoes; what can the other do but put them on? … The benefit of the service could not be rejected without refusing the property itself.” (at para. 208)

In addition, there was no actual benefit to the landowners in any event (at para. 209).

Third, recognizing a defence of good consideration would have been contrary to the statutory scheme:

The Resolutions to levy the special charges were invalidbecause the Resolutions did not comply with the requirement in the Regulations to identify an overall plan which stated the estimated cost of carrying out, and the estimated time for carrying out, the overall plan. As the respondents submitted, the purpose of these cost and time safeguards in a plan is to ensure that care is taken by a local council before incurring substantial costs that will ultimately be borne by a section of the community. In the course of allowing a claim for restitution in Kiriri Cotton Co Ltd v Dewani,^[243] a case to which the joint judgment referred on this point in David Securities,^[244] the Privy Council said that “[t]he duty of observing the law is firmly placed … on the shoulders of the landlord for the protection of the tenant”.^[245] So too, in this case, the duty of compliance with the Regulations in respect of the cost and time safeguards in a plan is firmly placed on the shoulders of the Council for the protection of those members of the community within its area of government. The common law defence of good consideration, if it applied here as a defence to restitution of the payments, would need to be excluded to avoid undermining the purpose of the Regulations (at para. 212).

Gageler CJ and Jagot J dissented. They summarized their views on the defence of good consideration in the following passage:

In sum: the moneys the Landowners mistakenly paid to the Council as special charges were in amounts which the Council had a statutory entitlement to levy for the purpose of funding the works, which the Council had a statutory obligation to undertake; the Council spent so much of those moneys as remain unrefunded for that purpose and none other; and the Landowners have received a special benefit from that expenditure of the moneys in accordance with the requirement of s 92(3)(a)(i) of the Local Government Act. For the Council now to be compelled to make restitution to the Landowners of the unrefunded portion of the moneys it has so spent would be unjust.

I do not have a dog in this particular fight, but if pushed I think I would side with the majority, especially because of their third point about the statutory scheme. The dissenters relied on the fact that the Council had acted in good faith (at para. 125) but for my part I think the proper operation of the statutory scheme should trump good faith. Indeed, I am inclined to think that the issue of good faith should be kept separate from the interpretation of the statutory scheme. Acting in bad faith is an independent ground of liability (or so I assume to be the case in Australia) and, to my mind, the presence or absence of good faith and bad faith should accordingly be addressed separately. Overall, the majority’s approach seems to me to be more in keeping with the raison d’être of the statutory scheme.

In any event, I think this is an interesting case at the public/private intersection, in the ever fascinating area of unjust enrichment.

PS The majority did not find it necessary to address the applicability of the Woolwich principle in Australian law:

The common ground between the parties in this Court that mistake of law provides the respondents with a prima facie ground for restitution, together with our conclusion that the asserted defence to this claim cannot succeed, also means that it is not necessary to consider the related submission by the respondents that Australian law should recognise the Woolwich principle, set out by Lord Goff in Woolwich Equitable Building Society v Inland Revenue Commissioners.^[197] One strand of Lord Goff’s reasoning might be readily accepted as part of Australian law to the extent that it describes recovery for an absence or failure of consideration as described above, namely, his Lordship’s comment that restitutionary recovery in that case might rest “on the simple ground that there was no consideration for the payment”.^[198] But the dispositive part of his Lordship’s reasoning, which reflects the present English law,^[199] involves the different approach of a new common law ground for restitutionary recovery unique to a claim for restitution of taxes unlawfully exacted.^[200] In the United States, such claims have therefore been said to take “on a significant federal constitutional dimension”.^[201] There are large questions that would need to be confronted before that policy-based ground could be accepted as part of Australian law.

For their part, Gageler CJ and Jagot J were sceptical about Woolwich, although their observations on this point were obiter (at paras. 78-83). Notably, they remarked that in Woolwich itself Lord Goff left open the possibility that there might be potential defences to a Woolwich claim (at para. 80).

This content has been updated on May 24, 2024 at 16:09.