COMMISSIONER OF STATE REVENUE (VIC) v ROYAL INSURANCE AUSTRALIA LIMITED

Judges: Mason CJ
Brennan J

Dawson J
Toohey J
McHugh J

Court:
Full High Court

Judgment date: Judgment handed down 7 December 1994

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Dawson J

The respondent, Royal Insurance Australia Limited (``Royal''), carried on an insurance business in Victoria. It was registered under s. 96 of the Stamps Act 1958 (Vic.) and was obliged, in accordance with Pt II, Div. 3, Subdiv. 11 of that Act, to lodge with the Comptroller of Stamps monthly returns of premiums received by it. Under s. 97 it was required to pay stamp duties upon those returns.

One class of business carried on by Royal was workers compensation insurance. In 1985 a new scheme, known as WorkCare, was introduced in Victoria to replace the existing workers compensation scheme. ^[80] See Accident Compensation Act 1985 (Vic.). Under the new scheme the Accident Compensation Commission became the sole insurer for workers compensation liabilities and it became necessary to phase out stamp duties on workers compensation insurance. To this end a number of sub-sections were added to s. 99 of the Stamps Act , ^[81] See Accident Compensation Act 1985, s. 276; Sched. 2, `` Stamps Act ''. the most significant of which was sub-s. (3) which was as follows:

``For the purposes of section 97, premiums for workers compensation insurance in respect of the issue, renewal or taking out of policies that take effect at or after four o'clock in the afternoon on 30 June 1985 or the extension of which takes effect from that time are not chargeable with stamp duty.''

Sub-section (4) provided for the payment of stamp duty on a pro rata basis in respect of premiums payable on policies for a period commencing before and expiring after 30 June 1985. Sub-sections (5) and (6) provided for application to be made for a refund of stamp duty previously paid in respect of premiums for workers compensation insurance for a period commencing before and ending after 30 June 1985: a situation commonly referred to as ``straddle''. Sub-section (7) provided:

``Where an application is made in accordance with sub-sections (5) and (6), the Comptroller of Stamps shall make a refund to the applicant accordingly.''

Sub-sections (8) and (9) provided for the insurance company to pass on to an insured person any part of the refunded stamp duty which had been paid by the insured to the insurance company.

Further amendments were made to s. 99 of the Stamps Act by s. 11 of the Stamps and Business Franchise (Tobacco) (Amendment) Act 1985 (Vic.). New sub-ss. (5) and (6) were inserted providing for application to be made for a rebate or refund. A substituted sub-s. (7) was as follows:

``Where an application is made in accordance with sub-section (5) -

• (a) if the application is for a rebate, the amount of the rebate shall be deducted from the amount payable as stamp duty on a return lodged with the Comptroller of Stamps under section 97(2) or, if the amount of the rebate exceeds that amount of stamp duty, from the amount so payable on two or more returns; and
• (b) if the application is for a refund, the Comptroller of Stamps shall make a refund to the applicant accordingly.''

In 1987 it was realized that the exemption provided in 1985 did not cover stamp duty payable in respect of premiums upon a particular type of workers compensation insurance policy known as a cost plus policy. Under a cost plus policy the annual premium was paid in arrears and was recalculated after the close of the relevant period of insurance so as to form, in effect, a reimbursement of claims made and paid during that period plus the cost of handling those claims. In order to extend the exemption from duty to premiums paid upon cost plus policies, s. 99(3) was amended by s. 8 of the Taxation Acts Amendment Act 1987 (Vic.) to embrace premiums received after 30 June 1985 in respect of liabilities incurred before 1 October 1985. The amendment was made retrospective to 30 June 1985. ^[82] Taxation Acts Amendment Act 1987, s. 2(4). Unlike the 1985 amendment to s. 99 which contained a ``straddle'' provision, the 1987 amendment exempted from duty all premiums received after 30 June 1985 in respect of liabilities insured before 1 October 1985, irrespective of when the liability was incurred.

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ATC 4979

Royal remained unaware of the 1985 amendments, or of their significance, for some years. It was also unaware of the 1987 amendments for about two years. It continued to include in its monthly returns the amounts of premiums which it received in respect of workers compensation insurance policies issued or renewed after 30 June 1985 and paid stamp duty upon those amounts.

It seems that the Comptroller of Stamps (now described as the Commissioner of State Revenue although it is convenient to continue describing her here as the Comptroller of Stamps) ^[83] See Administrative Arrangements Act 1983 (Vic.), s. 3(10)(a); Administrative Arrangements Order (No. 106) 1992, Orders 4 and 5 and Schedule; Victorian Government Gazette , 29 April 1992 at 1003-1004. gave advice to Royal which caused it to cease the payment of stamp duty on workers compensation insurance premiums. It then made a demand for a refund of the payments of stamp duty which it had made in ignorance of the statutory provisions and, when the demand was not met, commenced these proceedings seeking a refund of the relevant amount or, alternatively, a finding that the respondent had overpaid stamp duty and a refund of the amount found to have been overpaid. The relief sought was in the nature of mandamus by way of originating motion. Royal also sought a declaration that the amount in question had been overpaid and that it was entitled to a refund of that amount. The explanation for the alternative relief sought is to be found in s. 111(1) of the Stamps Act which in its form at the relevant time was a general provision for the refund of overpaid stamp duty. Section 111(1) provided:

``Where the Comptroller finds in any case that duty has been over-paid, whether before or after the commencement of the Stamps Act 1978 he may refund to the company, person or firm of persons which or who paid the duty the amount of duty found to be overpaid.''

Since these proceedings commenced, s. 111(1) has been amended to provide that the Comptroller ``must refund the amount of the overpaid duty'' upon an application made within three years of overpayment. ^[84] Section 111(1) was amended by s. 36 of the State Taxation (Amendment) Act 1992 (Vic.).

At the time these proceedings were commenced it was the respondent's belief that the Comptroller had made no finding that duty had been overpaid. Two days after the commencement of proceedings the Comptroller made a decision not to refund the overpaid duty. It was not in dispute before the trial judge or on appeal to the Full Court of the Supreme Court that an amount of stamp duty in the sum of $1,907,908.10 had been overpaid by Royal in respect of premiums for workers compensation insurance and that the Comptroller had decided not to refund any part of that amount.

The overpaid duty comprises three amounts. The first amount is $1,674,301.94 paid in respect of premiums received by Royal for cost plus policies. This amount may be divided into a figure of approximately $1,370,000 by way of duty paid on premiums received during the period from 30 June 1985 to the commencement date of the legislation which retrospectively removed the liability to pay duty in respect of that period and a figure of approximately $300,000 paid by way of duty on cost plus premiums subsequently received, being paid by Royal in ignorance of the 1987 repeal of duty on cost plus premiums.

The second amount is $95,426.95 overpaid by Royal upon overestimates of premiums for cost plus policies received by it before 1 July 1985 in respect of liabilities incurred up to 1 October 1985. These payments in respect of overestimates were never owing under the system which prevailed and would have been the subject of an adjustment when identified even if the amendments to the legislation had not taken place in 1985 and 1987.

The third amount is $138,179.21 paid as duty on premiums received by Royal for extensions after 4.00 pm on 30 June 1985 of policies (other than cost plus policies) taken out before that date.

Royal was unsuccessful before the trial judge, who reached the conclusion that the use of the word ``may'' in s. 111(1) gave the Comptroller a discretion whether or not to refund overpaid tax. The Full Court on appeal came to a contrary conclusion, holding that the context in which the power to refund overpayment of stamp duty was given to the Comptroller called for its exercise when the requirement upon which its exercise was conditioned - a finding of overpayment by the Comptroller - was satisfied. I am of the view that the Full Court was correct in reaching that conclusion.

The predecessor of s. 111(1) first appeared as s. 34 of the Stamps Act 1892 (Vic.) and was as follows:

``If after any duty has been paid under the provisions... relating to annual licences it

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ATC 4980

shall be found within three months after the payment of such duty that too much duty has been paid the Collector of Imposts shall upon being satisfied that such overpayment has been made apply to the Treasurer of Victoria for a refund to such company person or firm of persons of the duties overpaid, and the Treasurer shall without further or other authority than this Act refund the amount thereof to the company person or firm by whom the over-payment has been made or to any person acting in its his or their behalf.''

It is to be noted that, under this provision, once he was satisfied that an overpayment had been made, the Collector of Imposts had no discretion whether to apply to the Treasurer for a refund: he was required to do so. And the Treasurer was required to make the refund. There was, however, a time limit for making an application for a refund. This provision remained unchanged in substance in successive re-enactments of the Stamps Act , including several consolidations, until 1958 when it appeared as s. 111 in the following form:

``If after any duty has been paid by any company person or firm of persons under the provisions of this subdivision the Comptroller of Stamps, on application made to him within twelve months after such payment, is satisfied that such overpayment has been made shall apply to the Treasurer of Victoria for a refund to such company person or firm of persons of the duties overpaid, and the Treasurer shall without further or other authority than this Act refund the amount thereof to the company person or firm by whom the overpayment has been made or to any person acting in its his or their behalf.''

Again, neither the Comptroller of Stamps nor the Treasurer had any discretion once the Comptroller was satisfied that an overpayment had been made: the steps resulting in a refund were required to be taken.

By an amendment made in 1978 the provision was recast to appear in the form which is relevant to these proceedings. That form is to be found in previous legislation, both Commonwealth and State. ^[85] See Pay-roll Tax Assessment Act 1941 (Cth), s. 24; Pay-roll Tax Act 1971 (Vic.), s. 19. There is nothing in the explanatory memorandum accompanying the 1978 legislation to suggest an intention to convert the obligation imposed by the previous provisions into a discretion to refund overpayments and if such a significant change in policy were intended, it might be expected to have received some attention. What is evident is that the new provision was intended to remove the requirement that the Comptroller of Stamps should make application to the Treasurer for the refund of overpayments and to allow the Comptroller herself to make the refund. In that context the use of the word ``may'' is explicable in terms of enabling the Comptroller to do something which she was previously unable to do, rather than in terms of replacing an obligation with a discretion.

The word ``may'' is frequently merely facultative, leaving open the question whether the faculty bestowed must be exercised when the occasion prescribed for its exercise has occurred or whether its exercise is discretionary. The answer to that question is to be determined by reference to the nature of the provision and its context in the relevant legislation. ^[86] See Ward v. Williams (1954-1955) 92 CLR 496 at 505-506. As Lord Selborne said in Julius v. Lord Bishop of Oxford : ^[87] (1880) 5 App Cas 214 at 235.

``The question whether a Judge, or a public officer, to whom a power is given by such words, is bound to use it upon any particular occasion, or in any particular manner, must be solved aliunde , and, in general, it is to be solved from the context, from the particular provisions, or from the general scope and objects, of the enactment conferring the power.''

In Finance Facilities Pty. Ltd. v. FC of T ^[88] 71 ATC 4225 at 4228; (1970-1971) 127 CLR 106 at 134. Windeyer J. pointed out that the word ``may'', when used of a person having an official position, ``is a word of permission, an authority to do something which otherwise he could not lawfully do''. But the word ``may'' merely confers the authority and whether the authority must be exercised in the prescribed circumstances or whether its exercise is discretionary depends upon the nature of the authority itself. ^[89] See Macdougall v. Paterson (1851) 11 CB 755 [ 138 ER 672] .

The condition prescribed for the exercise of the authority conferred by s. 111(1) is a finding of overpayment and it is, in my view, not to be concluded that when such a finding is made there is a discretion conferred, rather than a duty imposed, upon the Comptroller to refund the overpayment. Section 111(1) is a remedial provision and, even without an historical explanation, it should be construed, so far as its language will allow, to the advantage of those whom it was intended to benefit. ^[90] See Bull & Ors v. The Attorney-General for New South Wales (1913) 17 CLR 370 at 384 per Isaacs J. But when

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ATC 4981

regard is had to the history of the provision, I do not think that it is possible to regard the section as replacing a previous obligation to refund overpayments with a discretion, particularly when the use of the word ``may'' is wholly explicable by an evident desire to confer upon the Comptroller an authority which was previously exercisable only by the Treasurer. To borrow the words of Windeyer J. in Finance Facilities Pty. Ltd. v. FC of T , ^[91] 71 ATC 4225 at 4228; (1970-1971) 127 CLR at 134. the scope of the permission or power given to the Comptroller is circumscribed in this instance both by context and circumstances.

No significance can be attached to the use of the word ``shall'' in s. 99(7) of the Stamps Act in relation to the making of a refund in both that sub-section's original and amended forms. Sub- section (7) (which does not apply in the present case) was added in 1985 after the commencement of the Interpretation of Legislation Act 1984 (Vic.). Section 45 of that Act provides that, where in an Act passed after the commencement of the Interpretation of Legislation Act the word ``may'' is used in conferring a power, that word shall be construed as meaning that the power so conferred may be exercised, or not, at discretion, and, where in such an Act the word ``shall'' is used in conferring a power, it shall be construed as meaning that the power must be exercised. Section 45 has no application to s. 111(1) in its relevant form which pre-dates the Interpretation of Legislation Act , but it serves to explain the choice of the word ``shall'' in s. 99(7).

The Comptroller argued that a number of considerations might justify her withholding a refund of overpaid stamp duty and submitted that the possibility of these situations arising explains why it was the intention of the legislature in s. 111(1) to confer a discretion rather than impose an obligation. Chief among these considerations - indeed it was said in argument to be the relevant consideration in this case - was the impossibility of ensuring that, where the duty had been passed on to some other person, any refund should be similarly passed on. It was said in the present case that the unlikelihood of Royal's passing on any refund would result in a windfall to it because the burden of the duty had in fact been borne by its customers. But that is a situation for which the legislature might have provided had it wished to do so and its failure to do so does not indicate an intention to give to the Comptroller a discretion to retain payments of stamp duty which were not made pursuant to any legal obligation. Section 99(8) and (9) when enacted in 1985 provided for an insurance company to pass on the amount of any refund to those who actually bore the burden of the overpayment and, indeed, a provision such as s. 111(1) is capable of adaptation to meet that situation. An example is provided by s. 26(1) of the Sales Tax Assessment Act (No. 1) 1930 (Cth) which, as amended in 1933, provided:

``Where the Commissioner finds in any case that tax has been overpaid and is satisfied that the tax has not been passed on by the taxpayer to some other person, or, if passed on to some other person, has been refunded to that person by the taxpayer, the Commissioner may refund the amount of tax found to be overpaid.''

The absence of any qualification of this kind in s. 111(1) suggests to my mind an obligation to refund the overpaid duty rather than a discretion to withhold repayment in situations which the legislature might have specified but did not.

It must be borne in mind that the occasion for the exercise of the authority conferred by s. 111(1) is the finding of an overpayment of stamp duty; that is to say, a finding that the Comptroller received moneys to which she had no entitlement. The sub-section must be read either as requiring her to refund the overpayment or as conferring a discretion upon her to keep the moneys notwithstanding that she had no entitlement to receive them. The principle that a statute will not be read as authorizing expropriation without compensation unless an intention to do so is clearly expressed has been described as a ``firmly established rule of law''. ^[92] See C.J. Burland Pty. Ltd. v. The Metropolitan Meat Industry Board (1968) 120 CLR 400 at 406 per Kitto J. It is at least an analogous proposition that clear words are required to authorize the retention of moneys received without any entitlement and I, for my part, would not construe a statute as conferring a discretion to do so unless such an intention were made explicit.

Nor do I think it can be said that s. 111(1) confers a discretion which must then be exercised in accordance with the law relating to restitution, for that would be to confer no discretion at all. Clearly the sub-section authorizes the making of a refund, and is not confined merely to conferring capacity upon the Comptroller should she otherwise be under a

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ATC 4982

duty to do so. The occasion for the exercise of the authority is identified. The only question which arises is whether the authority must be exercised when the necessary finding of overpayment has been made or whether its exercise is discretionary. If the common law, rather than the sub-section, were to govern the Comptrollers obligation to make a refund, then no doubt a refund would now be required. That would be the result of applying the decision of this Court in David Securities Pty. Ltd. v. Commonwealth Bank of Australia ^[93] 92 ATC 4658; (1991-1992) 175 CLR 353. where it was held that the principle of restitution upon the basis of unjust enrichment extends to moneys paid under a mistake of law as well as moneys paid under a mistake of fact. However, as the law stood, or at least was believed to have stood, before David Securities , moneys paid under a mistake of law were not recoverable and Royal was not entitled to recover upon the basis of a mistake of law. And, if the common law of restitution governed the Comptroller's obligation under s. 111(1), that result must have been intended by the legislature, because s. 111(1) came into force before the decision in David Securities and the legislature cannot be taken to have anticipated that decision.

Moreover, assuming that the common law was intended to govern the Comptroller's obligations under s. 111(1) and even assuming that the effect of that sub-section changed following David Securities , the bulk of Royal's claim was not paid under a mistake of law or fact. Of the total amount of $1,674,301.94, some $1,370,000 was paid in respect of premiums received for cost plus policies between 30 June 1985 and the commencement of the retrospective legislation in 1987. That amount of duty was payable according to law at the time it was paid and only became an overpayment when the legislation was retrospectively amended. It does not seem to me that the retrospective amendment converted the payments of duty making up the amount of $1,370,000 into payments made under a mistake of law, however much the amendment retrospectively removed the Comptroller's entitlement or authority to receive those payments. As Deane J. observed in The University of Wollongong v. Metwally & Ors : ^[94] (1984) 158 CLR 447 at 478.

``A parliament may legislate that, for the purposes of the law which it controls, past facts or past laws are to be deemed and treated as having been different to what they were. It cannot, however objectively, expunge the past or `alter the facts of history'.''

It need hardly be added that the legislation in question did not deem the payments made by Royal to have been made under a mistake of fact or law.

No question such as that which arose in Air Canada v. British Columbia ^[95] (1989) 59 DLR (4th) 161. would arise in the present case. In the Canadian case a majority of the Supreme Court held that, whilst moneys paid under a mistake of law might be recovered upon the basis of unjust enrichment, that doctrine did not extend to moneys paid under unconstitutional legislation. No question of unconstitutionality arises in this case. The application of the common law would also raise the question whether the principle of unjust enrichment can be invoked when moneys paid under a mistake of fact or law constitute an expense which has been passed on to someone else, as the respondent insurer is said to have passed on the overpayments of stamp duty to its insured in this case. The better view would seem to be that it is the unjust enrichment of the payee rather than loss suffered by the payer which should govern entitlement to restitution, but, having regard to the view which I take, it is unnecessary to determine that question in these proceedings.

Were the Comptroller to be governed by the common law rather than s. 111(1) with regard to her obligation, if any, to refund the overpaid stamp duty, the remedy available to the respondent would be of a quite different nature. The respondent would then have an action for money had and received based upon a right to restitution. On the other hand, were the Comptroller's exercise of her authority discretionary under s. 111(1), the remedy available to Royal would be confined in the first place to requiring the Comptroller to exercise her discretion and then to contesting the validity of its exercise by way of judicial review. The confined grounds upon which an administrative decision may be reviewed by a court would preclude the substitution of a decision based upon restitutionary principles. Of course, a court would require the discretion to have been exercised having regard to the scope and purpose of the relevant legislation and to be within the confines formulated in Associated Provincial Picture Houses Ltd. v. Wednesbury

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ATC 4983

Corporation ^[96] [ 1948] 1 KB 223. with regard to reasonableness. But that is something different from an application of the common law relating to restitution. That may be seen from the decision in R v. Tower Hamlets London Borough Council; Ex parte Chetnik Developments Ltd. ^[97] [ 1988] AC 858. where it was held that the purpose of legislation, which conferred a discretion upon a borough council to refund overpaid rates, extended to the repayment of rates paid under a mistake of law. The exercise by the council of its authority was, however, discretionary notwithstanding that it was to be governed by the scope and purpose of the legislation in question, as well as the principle of reasonableness as applied to administrative discretions. True it is that Lord Goff of Chieveley pointed out that the general principles of the law of restitution should be of assistance in the exercise of the discretion, but it is clear that he did not regard those principles as necessarily determining the outcome.

However, as I have said, I do not regard s. 111(1) as conferring a discretion. Once the Comptroller found that duty had been overpaid, she was under an obligation to refund it. The necessary appropriation to enable her to do so was to be found in s. 166D of the Stamps Act which provided:

``If the Comptroller of Stamps becomes liable to pay amounts in accordance with the provisions of this Act, those amounts shall be paid from the Consolidated Fund which is hereby to the necessary extent appropriated accordingly.''

It may be observed that, in the light of s. 166D, if the Comptroller's obligation to refund overpaid tax were dependent upon the common law, there would seem to be no work for s. 111(1) to do and its existence would be superfluous.

It is necessary then to turn to s. 20A(1) of the Limitation of Actions Act 1958 (Vic.). That sub- section provides: ^[98] A new s. 20A has since been substituted into the Limitation of Actions Act 1958 (Vic.) by s. 4 of the Limitation of Actions (Amendment) Act 1993 (Vic.).

``No action shall be brought to recover, from the Crown or the State of Victoria or any Minister of the Crown, or from any corporation officer or person or out of any fund to whom or which it was paid, the amount or any part of the amount of any tax, fee, charge or other impost paid under the authority or purported authority of any Act, after the expiration of twelve months after the date of payment.''

It was pointed out on behalf of Royal that s. 20A was inserted in the Limitation of Actions Act in 1961 to afford protection to the State of Victoria against its taxing Acts being found to be unconstitutional. ^[99] cf. Mason & Anor v. The State of New South Wales (1958-1959) 102 CLR 108. However, even accepting that to be the reason for the legislation, its ambit clearly extends beyond taxes paid under unconstitutional legislation and there is no occasion to read down its express words in that regard. Nevertheless, the sub-section is confined to taxes etc. paid ``under the authority or purported authority of any Act'' and those words are not apt to describe the overpayment of duty in this case. Accepting, as I do, that the retrospective legislation in 1987 removed any requirement to pay or authority to receive duty on premiums received in respect of cost plus policies during the period from 30 June 1985 until the commencement of the legislation, none of the duty overpaid by Royal could be described as paid ``under the authority or purported authority of any Act''. There simply was no Act conferring or purporting to confer authority with respect to the duty overpaid by Royal. Assuming, without deciding, that s. 20A(1) was capable of applying, directly or indirectly, in proceedings by way of judicial review, that sub-section had no application in the circumstances of this case. It was not contended that any limitation period otherwise prescribed by the Limitation of Actions Act had any application in the present circumstances.

For these reasons, I would dismiss the appeal.