I refer to your memorandum of 27 September, 1950, in which you ask—

1.  whether, in the absence of any specific provision in the law, it would be in order for you to accept payments of the charge ‘under protest and without any admission of liability and on the understanding that if the wool contributory charge legislation is held by the Court to be invalid, the amounts will be refunded’?

2.  whether amounts accepted under such conditions would be refundable in the event specified?

(2)  In my opinion, the answer to each question is ‘Yes’.

(3)  In Whiteley Ltd v. The King (1909) 101 L.T. 741, Walton J. held that a taxpayer is not entitled to recover back taxes which he was not legally liable to pay where they were paid voluntarily, i.e. without compulsion, extortion or undue influence and without any fraud on the part of the taxation authorities. A mere demand for payment or a threat to take legal proceedings does not destroy the voluntary character of the payment.

(4)  A similar decision was given in National Pari-Mutuel Association v. The King (1930) 47 T.L.R. 110 but the Court of Appeal (Scrutton, Greer and Romer L.J.J.) did not refer to Whiteley’s case.

(5)  These decisions were followed by Latham C.J. in Werrin’s case, (1937) 59 C.L.R. 150. McTiernan J  adopted the reasons of the Chief Justice. The other members (Rich, Starke and Dixon JJ.) rested their judgments exclusively on section 12A of the Sales Tax Procedure Act 1934–1935.

(6)  In Sebel Products Ltd v. Commissioners of Customs and Excise, 1949 1 Ch. 409, the plaintiff was held to have a right to recover back amounts paid as purchase tax. The plaintiff had sought a declaration that it was not liable to purchase tax in respect of a particular product and this suit was set down for trial on 6 May, 1948. On 11 May, 1948, the plaintiffs paid the tax in dispute to the defendant Commissioners. Vaisey J. held that it must be inferred from these facts that the plaintiff paid the amount and the defendants received it on the common understanding that it would be refunded if the plaintiff succeeded in its action. Consequently, he found an agreement by implication. But he expressly recognized the authority of the cases referred to in paragraphs 3 and 4 above.

(7)  It follows that, if the brokers were to pay the wool contributory charge to you as Commissioner of Taxation they would have no right to a refund in the event of the legislation being declared invalid unless, in the circumstances surrounding the payment by the brokers and the receipt by you, there can be found an express or implied agreement that there shall be a right to such a refund.

(8)  Accordingly, if you agreed to accept payment on the terms set out in paragraph 8 of your memorandum, the brokers would have a legal right to recover the tax back in the event of the legislation being held invalid.

(9)  In my opinion, you have authority to agree to such an arrangement pursuant to the power of general administration, conferred on you by section 5 of the Wool (Contributory Charge) Assessment Act 1945–1950. I can find nothing in the Act which prevents you accepting on those terms.

(10)  There is the possibility that (1) the legislation or part of it might be held invalid on some ground which is curable, and (2) Parliament might pass curative legislation expressed to operate retrospectively. In this event, refund of the tax might not be desired.

(11)  Accordingly, the terms of the reservation accompanying payment of the charge will need very careful consideration and, I think, might be expanded to read:

paid under protest and without admission of liability and on the understanding that, if the wool contributory charge legislation is held by the Court to be invalid, the amount will be refunded to the extent that it is determined by the Court that the taxpayer is not liable to pay tax under the Wool (Contributory Charge) Assessment Act 1950 or under the Wool (Contributory Charge) Act (No. 1) 1950 or the Wool (Contributory Charge) Act (no. 2) 1950 or any Act or Acts in substitution for or amendment of any one or more of those Acts.

(12)  Before the terms of reservation are finally settled, I suggest that you might perhaps discuss the matter further with me.

[Vol. 39, p. 324]