Unjust enrichment insufficient to defend a refund of special charges levied as a result of the invalid resolutions of a Queensland local government

In brief

The case of Redland City Council v Kozik & Ors [2022] QCA 158 concerned an appeal to the Queensland Court of Appeal (Court of Appeal) against the decision of the Supreme Court of Queensland (Supreme Court) in the case of Kozik & Ors v Redland City Council [2021] QSC 233 (Supreme Court Judgment) which found that the Redland City Council (Council) was required to repay monies paid for levied special charges (Levied Charges) by the Respondent ratepayers.

A summary of the Supreme Court Judgment is available in our February 2022 article.

Whilst the Court of Appeal ultimately agreed with the determination in the Supreme Court Judgment that the Levied Charges were required to be repaid to the Respondents, the majority of the Court of Appeal did so for different reasons and rejected the Supreme Court's application of the relevant legislation.

Background 

The Council had between June 2011 and July 2016 passed resolutions to levy special charges to fund capital and operational expenditure on land adjacent to the Aquatic Paradise Canal Reserve, the Sovereign Waters Lake Reserve, and the Raby Bay Canal Reserve (Services). Following the passing of the resolutions, the Council issued rates notices to the Respondents for the Levied Charges which were paid by the Respondents.

The land of each Respondent would benefit from the Services and would increase in value by more than one to two per cent (at [18]).

The Council did not expend all of the Levied Charges on the Services, and relevantly refunded to the Respondents the percentage of the Levied Charges not expended plus interest.

The Council's resolutions to levy special charges to fund the Services did not comply with section 28 (Levying special rates or charges) of the Local Government (Finance, Plans and Reporting) Regulation 2010 (Qld) (2010 LGR) and section 94 (Levying special rates or charges) of the Local Government Regulation 2012 (Qld) (2012 LGR) in that the resolutions did not contain the estimates of the costs of or timeframe for carrying out the Services and therefore did not identify an "overall plan" as required by the respective provisions. It was common ground between the parties that the Council's resolutions were invalid.

The Respondents submitted that the Council was required to repay the unrefunded portion of the Levied Charges in accordance with the 2010 LGR and 2012 LGR, or alternatively under the general law of restitution because the Respondents paid the Levied Charges under a mistake of law that the Council was entitled to levy the special charges and they were required to pay them.

The Council submitted that it was not obliged to refund the unrefunded portion of the Levied Charges under the 2010 LGR and 2012 LGR nor under the general law, and that the Respondents were precluded from such a refund on the basis that the enjoyment and value of their lands had been enhanced by the Services and to return the unrefunded Levied Charges would cause the Respondents to be unjustly enriched.

Issues to be determined

The Court Appeal considered the same issues as the Supreme Court, which can be summarised as follows (see [32]):

1. Issue 1 – Did any rate notice issued before 14 December 2012 under section 32(1) (Returning special rates or charges incorrectly levied) of the 2010 LGR include special rates or charges that were levied on land to which they did not apply?

2. Issue 2 – Did any rate notice issued on or after 14 December 2022 under section 98(1) (Returning special rates or charges incorrectly levied) of the 2012 LGR include special rates or charges that were levied on land to which they did not apply?

3. Issue 3 – Did any rate notice issued after 5 December 2014 under section 98(1) of the 2012 LGR include special rates or charges that were levied on land to which they did not apply or should not have been levied?

4. Issue 4 – If Issue 1, Issue 2, or Issue 3 is answered in the affirmative, was the Council liable to the levied landowner under a cause of action in debt, and if so, is recovery of the debt obviated or diminished by the Council having expended the unrefunded amount in carrying out works?

5. Issue 5 – If Issue 1, Issue 2, and Issue 3 is answered in the negative, was the Council liable to the levied landowner under a cause of action for moneys had and received to the use of the landowner and if so, is recovery of the amount obviated or diminished by the Council having expended the unrefunded amount in carrying out works?

Determination of the issues

The Supreme Court and the majority of the Court of Appeal relevantly determined the issues as shown in the below table.

The minority of the Court of Appeal observed that it would have dismissed the appeal to the Court of Appeal and affirmed the Supreme Court's reasoning in the Supreme Court Judgment (at [100]).

Principles relevant to restitution claims 

In deciding Issue 5, the majority of the Court of Appeal relevantly noted the following general law principles:

• Restitution claims are subject to the following principle (see [45] to [46] and David Securities v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, pages 378 to 379 and Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd [1994] HCA 61; (1994) 182 CLR 51 at 75):

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

• There is, subject to defences, a general right to the recovery of money paid in response to an invalid demand for tax (see [47] and Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70).

• The recovery of money paid under a mistake of fact may fail if the payment is made for good consideration (see [49] to [52] and Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677 at 695). What amounts to "good consideration" does not need to involve a contract (at [51]), and requires a consideration of the "state of affairs contemplated as the basis or reason for the payment" (at [60]).

• The failure of consideration is judged from the perspective of the payer (at [61]).

• "Australian law does not recognise a general right to remuneration for work that increases the value of another's property, without a request, actual or implied, to do so" (see [62] and Stewart v Atco Controls Pty Ltd (In liq) [2014] HCA 15; (2014) 252 CLR [47]).

Conclusion

The Court of Appeal allowed the appeal and held that the Council was liable under a cause of action for moneys had and received to refund the entirety of the Levied Charges to the Respondents. The Council was unsuccessful in its defence that were it to refund the Levied Charges, the Respondents would be unjustly enriched by, and received good consideration being, the Services.