HIGH COURT OF AUSTRALIA

                                                        Werrin

                                                           Vs.

                                                   Commonwealth

                            (Latham C.J., Rich, Starke, Dixon and McTiernan JJ)

                                                  14 February 1938

Latham C.J.

This is a special case stated in an action in which the plaintiff seeks to recover a sum paid by way of
sales tax on secondhand goods.

The plaintiff sold certain secondhand goods to a company on 15th September 1931 and the
Commissioner of Taxation claimed that he was liable to pay sales tax on the transaction. The
plaintiff contended that the transaction was not a sale within the meaning of the Act and that he was
not liable to pay. Ultimately, however, he paid, though with reluctance. At the time when the claim
was made and when the commissioner required payment it was believed by the commissioner that
sales tax was payable in respect of the sale value of secondhand goods. The plaintiff did not object
to pay on the ground that the goods in question were secondhand goods. Subsequently, in Deputy
Federal Commissioner of Taxation (S.A.) v. Ellis & Clark Ltd.[1], it was decided that sales tax was
not payable in respect of sales of secondhand goods. The plaintiff alleges that he paid under
compulsion and that he is entitled to recover the moneys paid in an action for money had and
received.

The commissioner defends the action upon the grounds that the payment was a voluntary payment
made under a mistake of law but not under any mistake of fact, and that sec. 12A of the Sales Tax
Procedure Act 1934-1935 in any event provides an answer to the plaintiff's claim.

The general rule, as stated in Leake on Contracts, 6th ed. (1911), p. 63, is that money paid
voluntarily, that is to say, without compulsion or extortion or undue influence and with a knowledge
of all the facts, cannot be recovered although paid without any consideration. In this case there was
no force or fraud or fear, or duress of goods or of person. There was not even a threat of ordinary
legal proceedings to recover the amount alleged to be due, though if there had been a threat of such
proceedings I do not think that would have affected the matter (See Maskell v. Horner[2], per
Rowlatt J.[3], and per Reading L.C.J.[4]). The present is not a case where a person is entitled to the
performance of a duty by a public officer and where the public officer insists upon receiving an
additional payment as the price of performing his duty as in Morgan v. Palmer[5], or Waterhouse v.
Keen[6], or Steele v. Williams[7], or Payne v. The Queen[8].

The case cannot, in my opinion, be distinguished from Whiteley (Ltd.) v. The King[9]. In that case
the plaintiff company sued for the recovery of amounts paid by way of duties demanded under the
Inland Revenue Act 1869 which it had paid for several years in respect of certain male servants who
were in its employment. The plaintiff had objected to pay and had paid only under protest, being
told that in the opinion of the commissioner the duties were payable and that if they were not paid
proceedings would be taken for penalties. At last, in the year 1906, the plaintiff refused to pay, and
proceedings were taken which were ultimately decided in its favour. The plaintiff then claimed to
recover the sums which it had paid in respect of duties for six prior years. Walton J. in a judgment
which is much more fully reported in the Law Times Reports[10] than in the Times Law Reports[11]
examined the whole question and decided against the plaintiff. He said: "There is no doubt as to the
general rule stated in Leake on Contracts to which I have already referred, that money paid
voluntarily--that is to say, without compulsion or extortion or undue influence, and, of course, I
may add without any fraud on the part of the person to whom it is paid, and with knowledge of all
the facts, though paid without any consideration, or in discharge of a claim not due, or a claim
which might have been successfully resisted, cannot be recovered back. There is no doubt, and no
question raised, that that is an accurate statement of the general rule. But, on the other hand, if the
payment is not voluntary a different rule applies which may be stated, perhaps, as it is stated in
Leake on Contracts (5th ed. (1906), p. 61), that money extorted by a person for doing what he is
legally bound to do without payment, or for a duty which he fails to perform, may be recovered
back; as in the cases of illegal or excessive fees and payments extorted in the discharge of an office;
and money paid under duress either of the person or of goods may be recovered back (pp. 58, 59).
In all these cases the payment is not voluntary. The question which I have to decide here is whether
the payments made during the years which I have mentioned--from 1900 to 1905--were or were
not voluntary payments. Was there any duress here?"[12]. The only suggested evidence of duress or
compulsion of any kind was that the commissioner had demanded the duties and had threatened to
take proceedings for penalties if they were not paid. The learned judge had no doubt that the facts
did not show any compulsion or duress or extortion colore officii. The principles laid down in this
case are, in my opinion, precisely applicable to the present case and they show that the plaintiff
cannot succeed.

In another very similar and more recent case, namely, National Pari-Mutuel Association Ltd. v. The
King[13], taxes had been paid by the plaintiff in the belief that they were properly payable. The
House of Lords subsequently decided that tax was not payable in such a case as that of the plaintiff.
The plaintiff failed in an action to recover moneys paid for the simple reason that the mistake which
the plaintiff had made was one of law. In each of these cases the money was paid, as in the present
case, to the Crown. In Henderson v. Folkstone Waterworks Co.[14] money was paid under mistake
of law to a water company and the same principles were applied; the money, having been paid
voluntarily, could not be recovered.

The principle appears to me to be quite clear that if a person, instead of contesting a claim, elects to
pay money in order to discharge it, he cannot thereafter, because he finds out that he might have
successfully contested the claim, recover the money which he so paid merely on the ground that he
made a mistake of law. The same principles have been applied to similar cases in New Zealand in
Julian v. Auckland Corporation[15] and in Canada in Cushen v. Hamilton Corporation[16], as well
as in the Victorian cases which were cited in argument; I refer only to Payne v. The Queen[17] and
Kelly v. The King[18]. In my opinion these authorities are conclusive as against the plaintiff.

The respondents also rely upon the provisions of sec. 12A of the Sales Tax Procedure Act 1934-
1935. This section prohibits the repayment by the commissioner of money paid as sales tax in
circumstances such as exist in the present case and permits refund in the circumstances set out in the
section. The validity of this section has been challenged, but as in my opinion the case can be
decided upon general principles of law I do not think it necessary to consider this question.
The question in the case is as follows: "Is the plaintiff in the circumstances set forth in the foregoing
statement of facts entitled to recover from the defendants or either of them the sum of thirty-six
pounds one shilling and nine pence?"

This question should be answered: No. In accordance with the agreement of the parties set forth in
the case judgment in the action should be entered for the defendants with costs of the special case
and of the action.

Rich J.

Even if it be assumed that the payments made on account of sales tax which the plaintiff seeks in
this action to recover would in point of law form a debt due by the Crown to the plaintiff, as a
taxpayer who had mistakenly complied with an unjustifiable demand for tax, it yet appears to me
that the action must fail on the ground that it is barred by sec. 12A of the Sales Tax Procedure Act
1934-1935.

The assumption I have mentioned is perhaps a large one, but as I see no reason to doubt either the
interpretation or the validity of sec. 12A, and as that section on its face appears to have been passed
to meet the very case, I prefer to decide the case on that ground. Sec. 12A was passed after the
decision in Deputy Federal Commissioner of Taxation (S.A.) v. Ellis & Clark Ltd.[19] in order to
deal with the consequences of the decision. The court had declared that no sales tax was payable
under the various Sales Tax Assessment Acts in respect of sales of goods which had previously gone
into use or consumption, i.e., secondhand goods. The judgment was delivered on 13th December
1934. Sec. 12A enacts that where any person has paid any amount as or for sales tax in respect of
any goods he shall not be entitled to any refund of the amount upon the ground that the goods have
gone into use and consumption if the amount was paid before 13th December 1934. The payment
sued for in the present case was made before that date. There is a proviso to the section within
which the facts of this case do not fall. It is, therefore, unnecessary to mention it further. As to the
interpretation of sec. 12A, I can see nothing to justify the view that it does not apply to the present
case. The words "shall not be entitled to any refund of that amount" are not words of art, but they
seem to me clearly to cover any right to repayment of the tax. The remaining words of the section
are quite unambiguous. As to the validity of the section, I should have thought it was clearly within
the competence of the Federal Parliament to say that a sum of money erroneously collected under a
tax Act by administrative officers acting in good faith should be retained. There may be obligations
or liabilities resulting in a money claim which have a constitutional basis, but, if there be such, this
is not one of them. I do not think that anything which was said in The Commonwealth v. New South
Wales[20] was intended to mean that sec. 75 of the Constitution produced the effect of establishing
as constitutional rights incapable of legislative control causes of action to which subjects might
become entitled under the general law against either Commonwealth or State.

In my opinion the question in the special case should be answered in the negative.

Starke J.

Special case stated by the parties for the opinion of this court upon the question whether the plaintiff
is entitled to recover a sum of £36 1s. 9d. paid as and by way of sales tax.

The tax was paid in respect of the sale price of certain goods which, by agreement dated 15th
September 1931, the plaintiff had sold to James Werrin & Co. Ltd., and was all paid before 13th
December 1934, except a sum of three pence which was paid on 1st April 1935.

On 13th December 1934 this court held in Deputy Federal Commissioner of Taxation v. Ellis &
Clark Ltd.[21] that sales tax was not payable on goods that had gone into use and consumption in
Australia, e.g., secondhand goods. The goods which the plaintiff sold and upon which he paid tax
had all been used in carrying on his business and in this way had gone into use and consumption. On
19th January 1935 the plaintiff, relying upon this decision, claimed a refund of the amount of the
tax paid by him, and, upon refusal of the Commissioner of Taxation to accede to his claim, he, on
13th September 1935, commenced an action to recover the amount, and the special case is stated in
this action.

But in the meantime the Parliament intervened and passed a Sales Tax Procedure Act 1935, which
was assented to on 11th April 1935. It enacted by sec. 3:--"After section twelve of the Principal Act
the following section is inserted:--12a. (1) 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--(a) if the amount was
paid prior to the thirteenth day of December, One thousand nine hundred and thirty-four--upon any
ground to the effect, expressly or impliedly, that those goods had gone into use or consumption in
Australia prior to that transaction, act or operation ... Provided that where any person has paid any
amount either as sales tax or for sales tax by reason of the sale of any goods which prior to that sale
had gone into use or consumption in Australia and the commissioner, upon the production of such
evidence ... as the commissioner considers sufficient, is satisfied--(a) that the amount was paid
within one month after the close of the month in which the sale took place ... and (b) that the
amount has not been passed on by that person to the purchaser of the goods in the total sum paid by
the purchaser to the vendor in respect of the sale, the commissioner may refund to that person the
amount so paid by him."

In my opinion the amount claimed by the plaintiff falls precisely within the terms of the section and
is not recoverable if the section be valid. But the plaintiff insists that the section is beyond the power
conferred upon Parliament by the Constitution. The Parliament has plenary powers to make laws for
the peace, order and good government of the Commonwealth with respect to taxation but so as not
to discriminate between States or parts of States and with respect to matters incidental to the
execution of any powers vested by the Constitution in the Parliament. It is argued that the provision
above set forth is not a law with respect to taxation or incidental thereto but a mere confiscation of
the moneys of the subject in respect of which the Parliament cannot give to the Commonwealth
immunity from suit (Constitution, secs. 51 (xxxi.) and 75). The prompt collection of revenue is of
the utmost public importance both for the performance of the functions of government and the
meeting of public liabilities. It would upset public finance unless some safeguards were provided
against mistakes in assessment or the illegal exaction and collection of taxes. Generally a system is
provided for the correction of such errors by appeal and so forth. It may be found in a board of
review and an appeal to a court as in the present case (Cf. Sales Tax Assessment Act (No. 1,) 1930-
1935, Part VII.). But Parliament is not so confined; its power is plenary. Public mischief might
easily result if taxpayers on some legal decision, which they might themselves have obtained if
sufficiently alert, were allowed to reclaim taxes paid by them. It might be necessary, as in the
present case, where apparently large sums of money were involved, to safeguard revenue that had
been paid and collected and protect it in the manner prescribed by sec. 12A, and of that Parliament
alone can judge.
But the provision, if not a tax, is, in my judgment, clearly a law with respect to taxation and within
the competence of Parliament. In the view I take it is unnecessary to consider whether the argument
on the part of the Commonwealth that a tax voluntarily paid cannot be recovered back is right or
not. The Chief Justice has discussed the English cases, and a full citation of American authorities
may be found in Cooley on Taxation, 3rd ed. (1903), pp. 1495 et seq.

The question stated should be answered in the negative.

Dixon J.

The sums which the plaintiff seeks to recover in this action were paid to the Commissioner of
Taxation before 13th December 1934 as and for sales tax in respect of goods. The ground upon
which the plaintiff claims that he is entitled to repayment of such sums is that the goods had gone
into use or consumption in Australia before the sale by reason of which the sums were paid as tax,
and that he made the payments in circumstances entitling him to repayment. Sec. 12A of the Sales
Tax Procedure Act 1934-1935 provides, in effect, that no one shall be entitled to a refund of
payments made as sales tax on the ground that the goods had gone into use or consumption in
Australia before the transaction, act or operation by reason of which the payments were made for
sales tax, if the payments were made before 13th December 1934.

As a matter of interpretation I think this provision applies although the taxpayer seeking to recover
the tax that he has mistakenly paid on secondhand goods is able to go further than the mere fact that
the goods had gone into use or consumption in Australia and can show, in addition, circumstances
which in a transaction between subject and subject would disentitle the payee to retain money paid
under a mistake on the part of the payer as to the existence of a liability to pay.

The provision is framed upon the assumption that the mere payment of money as and for sales tax
when no tax is in truth payable would or might, apart from statutory enactment, entitle the person
paying it to have it refunded to him by the Commonwealth. In the view I take of this case it is
unnecessary to consider the correctness of the assumption. For, in my opinion, sec. 12A intends to
extinguish any right which the plaintiff might otherwise have to repayment, and he, therefore,
cannot recover unless the provision is invalid; and I think that it is clearly valid.

Probably more than one head of power may be relied upon as enough to enable the Commonwealth
legislature to bar a liability otherwise resting upon the Crown in respect of tax mistakenly levied
upon the subject under the provisions of a taxing statute. But however this may be, I think that sec.
12A is clearly a law with respect to a matter incidental to the execution of a power vested by the
Constitution in the government of the Commonwealth within the meaning of sec. 51 (xxxix.) of the
Constitution. For the enforcement of the taxation laws, as of other laws, is the function of the
government under sec. 61 and it is a matter incidental to that function or power to receive payments
on account of tax including sums which, through some mistake of fact or law, are collected although
not strictly payable. Unless, therefore, the Constitution contains some provision which fetters the
power of the Federal Parliament to bar an existing cause of action against the Commonwealth, I
should unhesitatingly say that sec. 12A was a valid enactment making the failure of the present
action inevitable.

There is, I think, no constitutional provision preventing the Parliament from extinguishing a cause
of action against the Commonwealth, unless implications be discovered in sec. 75 which do so. This
action, or the right asserted in it, is a matter in which the Commonwealth is a party and, therefore,
falls within the third paragraph of that section of the Constitution.

In The Commonwealth v. New South Wales[22], the joint judgment of Isaacs, Rich and Starke JJ.
placed the decision of that case upon the ground that sec. 75 (iii.), in conferring original jurisdiction
in all matters in which the Commonwealth is a party, enabled the Commonwealth to sue a State in
tort without the aid of legislation under sec. 78 of the Constitution. The joint judgment regards sec.
78 as not being supplementary to sec. 75 but as enabling the Parliament in other matters within the
judicial power, i.e., in matters within sec. 76, to do the same as sec. 75 does by its own force and
also to give rights of suit in Federal courts other than the High Court[23]. It would appear that the
joint judgment decided that, in the kinds of matter which sec. 75 of the Constitution enumerates,
that section, binding State and Commonwealth alike, imposed a liability in tort upon the Crown in
either right and gave a means of enforcing it. This conclusion was founded upon the fact that the
word "matters" includes actions of tort and that, upon the reasoning of Farnell v. Bowman[24], the
creation of a jurisdiction to entertain such actions is enough to impose upon the Crown an effective
liability. It is, of course, true that the word "matters" includes actions of contract as well as actions
of tort, and logically it should follow that sec. 75 has the same operation in relation to liability ex
contractu. If sec. 75, a constitutional provision, operates as a source of liability, it is not easy to see
how parliamentary legislation could extinguish, qualify, or limit the liability thence arising. And the
joint judgment contains two statements which together appear to show a recognition of this result.
In one place their Honours say: "It is, of course, unthinkable that a State can defeat sec. 75 by
declining to be liable for its torts against the Commonwealth or another State"[25]. In another: --
"The jurisdiction conferred by sec. 75 is beyond the power of the Parliament to affect. It can aid it
and direct the method of its exercise; but it cannot diminish it"[26]. It is, therefore, possible to argue
that the reasoning on which their Honours' judgment proceeds involves the consequence that the
delictual and contractual liability of the Commonwealth as well as, within Federal jurisdiction, of
the States is imposed by sec. 75 of the Constitution and cannot be discharged, barred or otherwise
affected by any law of the Parliament, as for example by an Act indemnifying the Crown. The
actual decision arrived at in The Commonwealth v. New South Wales[27] may be justified and
explained on either of two grounds, viz., (a) that the case came before the court upon motion to set
aside the writ for want of jurisdiction and, therefore, no question of substantive liability arose, but
only a question whether the court had jurisdiction to entertain the suit and determine the question of
liability, a jurisdiction which it clearly had under sec. 75; (b) that the State of New South Wales had
by legislation abandoned the immunity of the Crown for liability for tort, although, it is true, subject
to and under a special procedure. Knox C.J. in his judgment scarcely went further than the first of
these grounds, and Higgins J. based his judgment on the ground that sec. 58 of the Judiciary Act
enabled the Commonwealth as "a person" to sue a State in tort, an interpretation with which Isaacs,
Rich and Starke JJ. disagreed. Higgins J. expressly held that sec. 75 "does not change the substantive
law, it is a mere procedural" (i.e., jurisdictional) "section"[28]. If it were not for the views expressed
in the joint judgment, I should have felt little or no hesitation in saying that the Federal Parliament
had complete authority over all ordinary causes of action against the Commonwealth and over the
remedies for enforcing them. I should have thought that the right of the subject to recover from the
Crown in right of the Commonwealth, whether in contract or in tort, is the creature of the law which
the Federal Parliament controls. No doubt when a jurisdiction is conferred like that given by sec. 75
(iii.) and (iv.) the source whence the substantive law is to be derived for determining the duties of
the governments presents difficulties; a matter which has received but little consideration except in
the posthumous paper of the late Sir Harrison Moore (Journal of Comparative Legislation, vol. 17,
p. 163). But I should not have thought that sec. 75 itself could be the source of the substantive
liability.
Probably the joint judgment of Isaacs, Rich and Starke JJ. was not intended as a pronouncement that
the liability of the State within Federal jurisdiction and of the Commonwealth was imposed directly
by the Constitution so as to be unalterable and indestructible by legislation. It must be remembered
that the question to which the material parts of the judgment are directed is the actionable liability
of the Crown for tort and this is a subject upon which the distinction between procedure and
substantive law has never been steadily maintained, at all events in the manner in which the Crown's
immunity has been stated and explained. For one traditional mode of expressing and indeed
accounting for the absence of any liability on the part of the Crown for the torts of its servants has
been to say that the Crown cannot be sued except by its own consent and no fiat will be granted for
a petition of right for tort. Farnell v. Bowman[29] is based upon the view that the grant of a general
remedy against the Crown makes the torts committed on its behalf actionable. Implicit in this view
appears to be the assumption that the Crown's substantive responsibility existed in contemplation of
law but had not been the subject of legal remedy. If this mode of reasoning is applied, it is easy to
understand how sec. 75 should be considered enough to expose the State and the Commonwealth to
a remedy for tortious liability. It treats the liability as already existing in abstracto as a duty of
imperfect obligation and made perfect by the creation of a jurisdiction in which the Crown may be
sued without its consent. But it would not mean that the substantive liability was itself created and
imposed by the Constitution. At all events, I am not prepared to interpret the joint judgment as
deciding that sec. 75 provides a source of substantive liability so that no Act of the Commonwealth
Parliament can extinguish a cause of action which has accrued against the Commonwealth.

Accordingly I hold that sec. 12A of the Sales Tax Procedure Act 1934-1935 is a valid enactment.

In my opinion the question in the special case should be answered in the negative on the ground that
sec. 12A bars the cause of action supposed and judgment should be entered for the defendants with
costs including the costs of the special case.

McTiernan J.

I agree that the special case should be answered: No.

The sums sued for, as the special case shows, were paid by the plaintiff upon the demand of the
Commissioner of Taxation, who required the plaintiff to pay them as sales tax due by him in respect
of the sale of secondhand goods although, as a decision of this court subsequently showed,
secondhand goods were not within the scope of the Sales Tax Acts (Deputy Federal Commissioner
of Taxation (S.A.) v. Ellis & Clark Ltd.[30]). The plaintiff was at liberty to refuse the demand. But
he gave up his right to refuse to pay. The payment of the sums demanded has the character of a
voluntary payment made by the plaintiff under a mistake of law about his liability to pay the sums.
The decisions cited in the judgment of the Chief Justice, with whose reasons for answering the
question in the negative I agree, clearly show that the plaintiff cannot recover the money paid by
him in these circumstances. It is also made clear that it is erroneous to regard the moneys sued for as
moneys extorted from the plaintiff by the commissioner colore officii. In my opinion the plaintiff
has no right of action to recover the moneys, and in this view it is unnecessary to determine by
what, if any, of the legislative powers of the Commonwealth sec. 12A of the Sales Tax Procedure
Act 1934-1935 may be supported.

Question in the special case answered: No.

Solicitor for the plaintiff, P. F. Galvin.
Solicitor for the defendants, H. F. E. Whitlam, Commonwealth Crown Solicitor.
[1] [1934] HCA 54; (1934) 52 C.L.R. 85.
[2] (1915) 3 K.B. 106.
[3] (1915) 3 K.B., at p. 109.
[4] (1915) 3 K.B., at pp. 121, 122.
[5] [1824] EngR 553; (1824) 2 B. & C. 729; 107 E.R. 554.
[6] (1825) 4 B. & C., at p. 208; 107 E.R., at pp. 1033, 1034.
[7] [1853] EngR 556; (1853) 8 Ex. 625; 155 E.R. 1502.
[8] (1901) 26 V.L.R. 705; 22 A.L.T. 143, 205.
[9] (1909) 101 L.T. 741; 26 T.L.R. 19.
[10] (1909) 101 L.T. 741.
[11] (1909) 26 T.L.R. 19.
[12] (1909) 101 L.T., at p. 745.
[13] (1930) 47 T.L.R. 110.
[14] (1885) 1 T.L.R. 329.
[15] (1927) N.Z.L.R. 453; (1927) G.L.R. 359.
[16] (1902) 4 Ont. L.R. 265.
[17] (1901) 26 V.L.R. 705; 22 A.L.T. 143, 205.
[18] (1902) 27 V.L.R., at p. 532; 23 A.L.T., at p. 215.
[19] [1934] HCA 54; (1934) 52 C.L.R. 85.
[20] [1923] HCA 23; (1923) 32 C.L.R. 200.
[21] [1934] HCA 54; (1934) 52 C.L.R. 85.
[22] [1923] HCA 23; (1923) 32 C.L.R. 200.
[23] (1923) 32 C.L.R., at p. 213.
[24] (1887) 12 App. Cas. 643.
[25] (1923) 32 C.L.R., at p. 214.
[26] (1923) 32 C.L.R., at p. 216.
[27] [1923] HCA 23; (1923) 32 C.L.R. 200.
[28] (1923) 32 C.L.R., at p. 217.
[29] (1887) 12 App. Cas. 643.
[30] [1934] HCA 54; (1934) 52 C.L.R. 85.

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