Restitutionary claims, in the context of Australian law, are actions aimed at reversing unjust enrichment. So, how does this apply to the restitution of improperly collected taxes and other levies? A recent High Court decision illustrates the significance of restitutionary claims. However, the decision appears to be misguided as improperly collected taxes should be returned because of the demands of the rule of law, not because of the private doctrine of unjust enrichment. The public appears to support this approach.
What are restitutionary claims?
Restitutionary claims arise commonly in transactional settings and business activities. They include mistaken payments, paying another’s debt, mistaken improvements to property, restitution following an invalid contract, and profits obtained through wrongdoing. Arising across diverse social and commercial contexts, these claims occur frequently, often determining the outcomes of legal disputes and guiding both consumer behaviour and basic commercial planning.
The so-called “law of unjust enrichment” is said to provide the organising framework for the majority of restitutionary claims. What might trigger the restitution of a benefit received by a defendant from a plaintiff? According to the unjust enrichment formula, the defendant must return the benefit if they were ‘unjustly’—namely, without legal justification—enriched at the plaintiff’s expense. There are several variations of this formula in countries such as the United Kingdom, Australia, Germany, and Canada, and it has received widespread recognition in judicial decisions and legislative provisions. Supporters of the doctrine generally agree that it is the defendant’s enrichment which underpins restitutionary claims.
This focus on the defendant’s enrichment also explains the availability of certain ‘disenrichment’ defences, such as when a defendant argues they spent the benefit in good faith. Consider the widely known example of mistaken payments: under the unjust enrichment formula, the plaintiff must demonstrate that the defendant received a payment and that the transfer was unjust. The defendant may then resist the claim by arguing that they were not enriched—for instance, because they spent the money in good faith.
The Redland City case
Recently, in Redland City Council v Kozik [2024], the High Court of Australia reaffirmed that restitutionary claims are underpinned by the unjust enrichment framework, albeit somewhat vaguely, referring to it as an “analytical framework”. The Court also endorsed the prevailing scholarly view that restitution of improperly collected taxes is based on the principle of unjust enrichment. In Redland City, landowners argued that a public authority should not retain improperly levied charges, as this would amount to enrichment at their expense. The authority countered by arguing it had not been enriched, having spent the funds on other public projects.
However, classifying the restitution of improperly collected taxes under the private doctrine of unjust enrichment appears misguided. The High Court arguably asked the wrong question. Instead of asking whether the public authority was enriched, the court should have considered a more appropriate question: would denying restitution be consistent with the fundamental public value of the rule of law? Had this question been asked, the material facts of whether the authority had benefited, suffered a loss, or remained financially unchanged would have been irrelevant.
The unjust enrichment formula belongs to the realm of private law, which governs interpersonal relationships and focuses on specific plaintiff-defendant dynamics. In contrast, the collection of taxes and levies epitomises the functioning of public institutions and reflects a different kind of relationship—between the state and individuals/taxpayers. These public relationships are governed by stricter standards of fairness, casting doubt on whether public authorities should be able to deny restitution in cases of improperly collected taxes. In such contexts, the private doctrine of unjust enrichment is displaced, as restitution should be governed by public law principles reflecting liberal democratic values.
The public’s view
Indeed, a recent empirical survey strongly supports this view. A clear majority of respondents indicated that improperly collected taxes and other levies must be returned unconditionally due to public justice and rule of law concerns. Public authorities should not retain such funds, even if they have been ‘disenriched’ by spending the money on other worthwhile projects. In short, private law doctrines should not govern public law issues. Improperly collected taxes should be returned not because of unjust enrichment, but because of the demands of the rule of law.
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