References: (2001) 208 CLR 516
Coram: Gleeson CJ, Gaudron, Gummow, Kirby, Haynes, Callinan JJ
High Court of Australia – Rothmans were licensed to act as wholesalers of tobacco products under a New South Wales statute. They sold products to retailers for a price including licence fees, which were in reality a form of indirect taxation, payable by Rothmans to the New South Wales government. The Act imposing that liability on Rothmans was held by the High Court to be unconstitutional. The retailers then sued Rothmans to recover the amounts which they had paid in respect of the tax which had until then been unlawfully imposed on Rothmans.
The retailers argued unsuccessfully that there was an implied agreement under which they could claim repayment of any unpaid tax. This argument was described in the leading judgment of Gleeson CJ, Gaudron and Hayne JJ, as ‘artificial and unconvincing’. However, the retailers succeeded in restitution.
Gleeson CJ, Gaudron and Hayne JJ, stated that ‘Failure of consideration is not limited to non-performance of a contractual obligation, although it may include that’. They also rejected Rothmans’ argument that the restitution claims failed because there had not been a total failure of consideration, by interpreting the consideration for the total payments made by the retailers as containing severable parts.
Gummow J (concurring), advocated: ‘caution in judicial acceptance of any all-embracing theory of restitutionary rights and remedies founded upon a notion of ‘unjust enrichment’. To the lawyer whose mind has been moulded by civilian influences, the theory may come first, and the source of the theory may be the writing of jurists not the decisions of judges. However, that is not the way in which a system based on case law develops; over time, general principle is derived from judicial decisions upon particular instances, not the other way around.’
After reviewing the authorities Gummow J held that failure of consideration in this area of law may include the collapse of a bargain, which need not be contractual in nature. There had been no failure in the performance by Rothmans of any promise made by them, but there had been a ‘failure of consideration’ in the ‘failure to sustain itself of the state of affairs contemplated as a basis for the payments the appellants seek to recover’.
This case is cited by:
- Cited – Barnes (As Former Court Appointed Receiver) -v- The Eastenders Group and Another SC (Bailii, [2014] UKSC 26, [2014] WLR(D) 194, [2014] 2 WLR 1269, Bailii Summary, WLRD, UKSC 2013/0006, SC Summary, SC)
‘The contest in this case is about who should bear the costs and expenses of a receiver appointed under an order which ought not to have been made. The appellant, who is a former partner in a well known firm of accountants, was appointed to act as . .