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ROXBOROUGH V. ROTHMANS
PALL MALL AUSTRALIA
FACTS Retailers bought tobacco products from licensed wholesalers under a series of contracts on terms that the invoiced "cost" comprised the wholesale price of the products and a further amount, representing a licence fee imposed by State law. After the decision of the High Court in Ha v New South Wales (1997) 189 CLR 465 that the licence fee was a duty of excise within s 90 of the Commonwealth Constitution, and hence was invalid, retailers sued a wholesaler to recover the amount paid for the licence fee and which the wholesaler had not remitted to the taxing authority by the date of the Court's decision. On 5 August 1997, when the taxing legislation was declared invalid, amounts had been paid by the appellants, to the respondent, in respect of tobacco products supplied by the respondent since 1 July 1997, which had been identified on the respondent's invoices as "tobacco licence fee". The part of the net total paid to the respondent by reference to the tax was thus shown separately from the wholesale price of the products sold. The nature of the tax, and the method by which it was imposed and collected, explain why that was done. The tax was an ad valorem tax on goods. The value of the goods had to be distinct from the tax. The tax was to be passed on to the retailer, and was to form part of the cost to the retailer of the goods. HOLDING GLEESON CJ Meaning of Consideration Failure of consideration is not limited to non-performance of a contractual obligation, although it may include that. The authorities referred to by Deane J, in his discussion of the common law count for money had and received in Muschinski v Dodds, show that the concept embraces payment for a purpose which has failed as, for example, where a condition has not been fulfilled, or a contemplated state of affairs has disappeared. Deane J, referring to "the general equitable notions which find expression in the common law count", gave as an example "a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it". In the case of money paid pursuant to a contract, it would involve too narrow a view of those "general equitable notions" to
limit failure of consideration to failure of contractual performance. In the present case, the amount of the net total wholesale cost referable to the tax was, from one point of view, part of the money sum each appellant was obliged to pay to obtain delivery of the tobacco products. But there was more to it than that. The tax was a government imposition, in the form of a fee payable under a licensing scheme. The nature of the scheme was such that the licensed wholesaler, or, if not the wholesaler, then the licensed retailer, would pay the amount referable to particular tobacco products. The respondent, anticipating liability for the fee, required the appellants, when purchasing products by wholesale, to pay an amount equal to the fee. The appellants, in turn, had an interest in the respondent paying the fee to the revenue authorities, for they were thereby relieved of a corresponding liability. There was a purpose involved in the making of the requirement that the appellants pay the amounts described as "tobacco licence fee", and in the compliance with that requirement. To describe those amounts as nothing more than an agreed part of the price (or, to use the language of the parties, cost) of the goods, is to ignore an important aspect of the facts. Severability of the License Payments But there are cases, of which the present is an example, where it is possible, both to identify that part of the final agreed sum which is attributable to a cost component, and to conclude that an alteration in circumstances, perhaps involving a failure to incur an expense, has resulted in a failure of a severable part of the consideration. Here, the buyers, the retailers, were required to bear, as a component of the total cost to them of the tobacco products, a part of the licence fees which the seller, the wholesaler, was expected to incur at a future time, and which was referable to the products being sold. It was in the common interests of the parties that the fees, when so incurred, would be paid to the revenue authorities by the seller, and it was the common intention of the parties (and the revenue authorities) that the cost of the goods would include the fees. In the events that happened, the anticipated licence fees were not incurred by the seller. The state of affairs, which was within the contemplation of the parties as the basis of their dealings, concerning tax liability, altered. And it did so in circumstances which permitted, and required, severance of part of the total amount paid for the goods. The same idea may be expressed by saying that, in the present case, the failure of the tax involved the failure of a severable part of the consideration for which the net total amounts shown on the invoices were paid. It accords with the basis of dealing, and contractual arrangements, between the appellants and the respondent to regard that part of
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