Unjust enrichment [2nd edition.] 9780409344981, 0409344982

Table of contents :
Dedication
Full Title
Copyright
Preface
Acknowledgements
Table of Cases
Table of Statutes
Table of Contents
1 Unjust enrichment: history, concepts and alternative liability models
Introduction
History
The common law forms of action
The implied contract fallacy
Equity's historical contribution
The concept of unjust enrichment
Elements of an unjust enrichment claim
The role(s) of the unjust enrichment concept
Alternative models of restitutionary liability
Unconscionability (unconscionable retention of benefit)
Unjustified enrichment and 'absence of basis'
2 Locating unjust enrichment in private law
Introduction
Foundational aims
Corrective justice
Distributive justice
Summary and reflections
Taxonomy — mapping private law
Approaches to taxonomy
The scope of unjust enrichment law as a category — the broad view
Criticisms of the broad view — the challenge of diversity
Unjust enrichment law as a category — modern views
Unjust enrichment as a 'Subsidiary' Doctrine
Unjust enrichment and contract
Unjust enrichment and property
Subsidiarity arguments
3 The elements of an unjust enrichment claim
Introduction
Benefit
A broad conception
Positive and negative
Legal and factual
Examples of types of benefit
Objectivity, subjectivity and freedom of choice
Legal 'tests' of benefit
Valuing the benefit
Unjust
A recognised reason for restitution
Defendant has no right to the benefit
At the plaintiff's expense
The minimum requirement: causation and the 'but for' test
Recovery from indirect recipients: 'leap frogging'
Claims in respect of assets never owned: interceptive subtraction
4 Defects in legal capacity
Introduction
The effect of incapacity on the passing of title
The incapacity of minors
Minors' contracts at common law
Recovery at common law of benefits conferred by a minor
Statutory rights of restitution
The mentally disordered
Ultra vires transactions
Private bodies
Public bodies
5 Mistake
Introduction
The meaning of mistake
The reason(s) for recovery
Mistakes of fact
The requirement of causative mistake
What test of causation?
Mistaken gifts
Mistakes of law
Abolition of the mistake of law 'bar'
Difficult issues: uncertain law, invalid law and changes in the law
Limitations on recovery
'Voluntary submission to an honest claim'
'Good consideration' — payments to meet a valid obligation
Contradiction of statutory regime
Mistakes and contract
Non-Monetary benefits
6 'Ignorance' or 'Absence of Consent'
Introduction
The Argument from Mistake
Rival property analyses
The Common Law Position
The Position in Equity
The 'rule in Re Diplock'
Personal liability for knowing receipt
Personal liability for benefits knowingly 'retained'
Liability in equity for the receipt of company assets withoutauthority
7 Failure of Basis
Introduction
The concept of a 'Basis' ('Consideration')
Proving 'Failure' of the Basis
Identifying the basis of a benefit's provision
Proving that the basis has failed
The requirement of 'Total' Failure
Example 1 — Contracts Discharged by Frustration
Example 2 — Contracts Terminated for Breach
Claims by the innocent party
Claims by the party in breach
Example 3 — Unenforceable and Void Contracts
Example 4 — Incomplete or Anticipated Contracts
Example 5 — Performances under Valid Contracts
Escaping Bad Bargains
8 Coercion
Introduction
The Concept of Coercion
A preliminary definition
Coercion distinguished from compulsion
Threats distinguished from warnings
Duress at Common Law
The rationale of recovery
The first requirement: 'illegitimate' threat
The second requirement: causation
A possible third requirement: absence of reasonable alternatives
Equitable Duress (Actual Undue Influence)
Legal Coercion and Compulsion
Reimbursement
Contribution
9 Defects in personal capacity
Introduction
Constraints on relief
Undue Influence
Classes of undue influence
Actual (relational) undue influence
Presumed undue influence
Relationships proven to be of influence
A transaction requiring explanation
Undue influence and third parties
Rebutting the presumption
Unconscionable Bargains
A Special Disadvantage
Knowledge of the special disadvantage
The Basis of Equitable Intervention: Impaired Judgmental Capacity or Wrongdoing?
10 Wrongdoing
Introduction
Terminology and Taxonomy
Foundational aims
Corrective justice?
The protection of important social institutions?
Deterrence and punishment?
The Current Pattern of Recovery
Torts and intellectual property infringements
Equitable wrongs
Breach of contract
Quantification
11 Restitution from public authorities
Introduction
The Woolwich Principle
12 The change of position defence
Introduction
Different Models for the Defence
Model 1 — An enrichment-related defence
Model 2 — A detriment-related defence
Model 3 — A hardship-related defence
Elements of the Australian Defence
The basic model iterated
Detriment
Causation ('on the faith of the receipt')
Good faith, fault and wrongdoing
Proprietary claims
England and Wales
New Zealand
The statutory defence
The defence at common law
13 Other defences
Introduction
Estoppel
The basis of estoppel
The elements of estoppel
The extent of the defence
Estoppel and change of postion
Bona fide purchase
Land registration as a defence to restitutionary claims
The Defence of Incapacity
Counter-restitution
Ministerial Receipt
The doctrinal basis of ministerial receipt
Making out the defence of ministerial receipt
The defence of Passing On
Delay and limitation
The limitation statutes
Delay in equity — laches, acquiescence and delay
Illegality
14 The nature and basis of tracing
Introduction
The Nature of Tracing
Common Law and Equitable Tracing
A unitary law of tracing?
The Reasons for Tracing
The Prerequisites for Tracing
The Effect of Tracing
The Rules of Tracing
Tracing at common law
Tracing in equity
Tracing into discharged debts
Tracing and Unjust Enrichment
15 Proprietary restitution
Introduction
Types of proprietary remedy
Operational differences
Advantages and motivations
Proprietary remedies and insolvency law
Rival Models of Proprietary Relief
Model 1 — No proprietary remedies
Model 2 — 'Proprietary base'
Model 3 — 'Initial' injustice
Model 4 — 'Plaintiff does not take the risk of the defendant's insolvency'
Model 5 — Remedial flexibility and discretion
Discretionary Remedialism
Proprietary remedies
Constructive trusts and 'proportionate share' remedies
Resulting trusts
Rescission
Subrogation
Equitable liens
Index

Citation preview

Unjust Enrichment 2nd edition

In memory of my brother Alan and his spirit of passionate inquiry. KB Matthew, one can never have too many books. RG

Unjust Enrichment 2nd edition Kit Barker MA (Oxon), BCL (Oxon) Professor of Law T C Beirne School of Law University of Queensland

Ross Grantham LLM (Auck), BCL (Oxon), LLD (Qld) Professor of Commercial Law T C Beirne School of Law University of Queensland

LexisNexis Butterworths Australia 2018

AUSTRALIA

ARGENTINA AUSTRIA BRAZIL CANADA CHILE CHINA CZECH REPUBLIC FRANCE GERMANY HONG KONG HUNGARY INDIA ITALY JAPAN KOREA MALAYSIA NEW ZEALAND

LexisNexis LexisNexis Butterworths 475–495 Victoria Avenue, Chatswood NSW 2067 On the internet at: www.lexisnexis.com.au LexisNexis Argentina, BUENOS AIRES LexisNexis Verlag ARD Orac GmbH & Co KG, VIENNA LexisNexis Latin America, SAO PAULO LexisNexis Canada, Markham, ONTARIO LexisNexis Chile, SANTIAGO LexisNexis China, BEIJING, SHANGHAI Nakladatelství Orac sro, PRAGUE LexisNexis SA, PARIS LexisNexis Germany, FRANKFURT LexisNexis Hong Kong, HONG KONG HVG-Orac, BUDAPEST LexisNexis, NEW DELHI Dott A Giuffrè Editore SpA, MILAN LexisNexis Japan KK, TOKYO LexisNexis, SEOUL LexisNexis Malaysia Sdn Bhd, PETALING JAYA, SELANGOR LexisNexis, WELLINGTON Wydawnictwo Prawnicze LexisNexis,

POLAND SINGAPORE SOUTH AFRICA SWITZERLAND TAIWAN UNITED KINGDOM USA

WARSAW LexisNexis, SINGAPORE LexisNexis Butterworths, DURBAN Staempfli Verlag AG, BERNE LexisNexis, TAIWAN LexisNexis UK, LONDON, EDINBURGH LexisNexis Group, New York, NEW YORK LexisNexis, Miamisburg, OHIO

National Library of Australia Cataloguing-in-Publication entry Author: Title: Edition: ISBN:

Barker, Kit. Unjust enrichment. 2nd edition. 9780409344981 (pbk). 9780409344998 (ebk). Notes: Includes index. Subjects: Unjust enrichment. Other Authors/Contributors: Grantham, Ross (Ross Bruce). © 2018 Reed International Books Australia Pty Limited trading as LexisNexis. First edition 2008. This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Typeset in Helvetica Neue LT Std and Palatino.

Printed by Griffin Press, Australia. Visit LexisNexis Butterworths at www.lexisnexis.com.au

Preface The modern law of unjust enrichment is unique in many respects. In one sense, it is the newest and most significant development in the private law for a very long time. Although it has ancient roots, it has only evolved as a discrete body of law in England and Australia in the last 30 years. It is also unique in that its development has come to be shaped as much by academic, as by judicial, influences. It is still not fully understood. The second edition of this work comes at an important time. The subject has recently undergone its Third Restatement in the United States of America (2011) and is now experiencing rapid evolution in Australia. This is not before time. Although the High Court first recognised the unjust enrichment principle the mid-1980s (Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221), the last part of the twentieth century and the early part of the twenty-first were characterised by a degree of hostility to the subject and vocal preferences on the part of some members of the High Court bench for more traditional, historical analyses of restitutionary claims based upon ancient forms of action and broad-brush principles of ‘equity’ or ‘good conscience.’ The High Court is now entering a new era of cautious acceptance and development, acknowledging both a taxonomic and guiding role for the unjust enrichment principle and recognising for the first time the existence of the key restitutionary defence of change of position in the landmark case of Australian Financial Services and Leasing Pty Ltd v Hills

Industries Ltd [2014] HCA 14. The development of this defence will have crucial implications for the scope and understanding of unjust enrichment claims in Australia, as it has elsewhere in the common law world. We predict that the next decade will be a particularly fertile and critical period. In this edition, we maintain the view, which we stated in the first edition 10 years ago, that the principle of unjust enrichment is a superior and more coherent rationalisation of this area of law than any other so far suggested, and certainly more so than accounts based on notions of unconscionability or bad conscience. Nevertheless, we do not regard the idea of unjust enrichment as describing a single rule or cause of action capable of being applied, without more, to the disposition of a particular case. Rather, we continue to understand it as a higher order legal principle which can assist courts in organising, understanding and developing particular legal rules. As such, it informs and shapes the content of those legal rules without displacing them or ignoring the different contexts in which they were originally developed. It is not a ‘top down’ principle, but rather one which derives its meaning and force from existing precedents both at common law and in equity. Our aim in this book is to offer students and practitioners a structured, theoretically coherent account of the law of unjust enrichment and its place in the wider private law. To this end, we include a wide range of materials positing a variety of competing arguments, analyses and viewpoints. The second edition has been substantially rewritten, with a new chapter on the defence of change of position and increased coverage of the vexed topic of proprietary restitutionary claims. It incorporates up-to-date references to

the Australian and English law, but also draws in debates about the subject in the United States, Canada and some civilian jurisdictions where these are perceived to be relevant to choices that courts will in future be required to make. Unjust enrichment is a challenging subject. It requires consideration of difficult questions. This book does not shy away from that task. While it is designed with ease of access — to both the materials and the issues — in mind, it is not a lazy person’s guide to the field. Any scholar, practitioner or student working in this area must engage with concepts, doctrines, principles and policies in their search for understanding. The book is offered as a tool in that complex engagement. There are many people whose assistance and encouragement we must acknowledge. We are most grateful to LexisNexis for the opportunity to write a second edition of this work and to all of those involved in the project: particularly, to Jocelyn Holmes, for her constant encouragement and patience, and Georgia O’Neill, for her scrupulous editing. The book was completed on 8 August 2017, and we have endeavoured to be accurate in stating the law as at that date. Kit Barker Ross Grantham 8 August 2017

Acknowledgements The extracts from cases and publications in this work have been reprinted with the permission of the copyright holders as detailed below. In all cases, copyright is retained by the publishers and authors, and all rights have been reserved. While every care has been taken to establish and acknowledge copyright, we apologise for any accidental infringement. American Law Institute: Restatement of the Law of Restitution (1937). Blackwell Publishing: R Grantham and C Rickett, ‘Tracing and Property Rights: The Categorical Truth’ (2000) 63 MLR 905. Cambridge Law Journal: D Fox, ‘Bona Fide Purchase and the Currency of Money’ [1996] CLJ 547; J O’Sullivan, ‘Rescission as a Self-help Remedy: A Critical Analysis’ [2000] CLJ 509. Cambridge University Press: H Dagan, The Law and Ethics of Restitution (2004); P Birks, ‘At the Expense of the Claimant: Direct and Indirect Enrichment in English Law’ in D Johnston and R Zimmermann (eds), Unjust Enrichment: Key Issues in Comparative Perspective (2002). Canadian Bar Association: D Paciocco, ‘The Remedial Constructive Trust: A Principled Basis for Priorities Over Creditors’ (1989) 68 Can Bar Rev 315.

Current Legal Problems: K Barker, ‘Riddles, Remedies and Restitution: Quantifying Gain in Unjust Enrichment Law’ (2001) 54 CLP 255; P Birks, ‘Mixing and Tracing: Property and Restitution’ (1992) 45 CLP 69. Federal Court of Australia: FCA. Hart Publishing Ltd: J Baker, ‘The History of Quasi-contract in English Law’ in W Cornish, R Nolan, J O’Sullivan and G Virgo (eds), Restitution, Past, Present and Future (1998); K Barker, ‘Understanding the Unjust Enrichment Principle in Private Law: A Study of the Concept and its Reasons’ in J Neyers, M McInnes and S Pitel (eds), Understanding Unjust Enrichment (2004); S Degeling, ‘Undue Influence and the Spiritual Economy’ in K Barker, S Degeling, K Fairweather and R Grantham (eds), Private Law and Power (2016); J Edelman, Gain-Based Damages: Contract, Tort, Equity and Intellectual Property (2002); J Edelman and E Bant, Unjust Enrichment (2016); R Grantham and C Rickett, Enrichment and Restitution in New Zealand (2000); S Hedley, ‘Unjust Enrichment: A Middle Course?’ (2002) 2 OUCLJ 181; D Klimchuk, ‘Unjust Enrichment and Corrective Justice’ in J Neyers, M McInnes and S Pitel (eds), Understanding Unjust Enrichment (2004); A Lodder, Enrichment in the Law of Unjust Enrichment and Restitution (2012). Harvard University Press: E Weinrib, The Idea of Private Law (1995). High Court of Australia: HCA. Incorporated Council of Law Reporting for England and Wales: Appeal Cases; Chancery; Chancery Division; Queen’s Bench, Queen’s Bench Division; King’s Bench, King’s Bench

Division; Weekly Law Reports. Informa Law: J Phillips, ‘Equitable Liens: A Search for a Unifying Principle’ in N Palmer and E McKendrick (eds), Interests in Goods (2nd ed, 1998); W Swadling, ‘A Claim in Restitution?’ [1996] LMCLQ 63. International and Comparative Law Quarterly: G Samuel, ‘Can Gaius Really be Compared to Darwin?’ (2000) 49 ICLQ 297. Law Book Co (Thomson): E Bant and M Bryan, ‘A Model of Proprietary Remedies’ in E Bant and M Bryan (eds), Principles of Proprietary Remedies (2013); S Hedley, ‘Rival Taxonomies within Obligations: Is There a Problem?’ in S Degeling and J Edelman (eds), Equity in Commercial Law (2006). LexisNexis Australia: K Barker, ‘Coping with Failure: ReAppraising Pre-Contractual Remuneration’ (2003) 19 JCL 105. LexisNexis New Zealand: New Zealand Law Reports. LexisNexis United Kingdom: All England Law Reports. Longmans: N Dearle, Economics: An Introduction for the Student and for Everyman (1939). Michigan Law Review: E Sherwin, ‘Rule-Oriented Realism: The Law and Ethics of Restitution’ (2005) 103 Michigan L Rev 1578. Oxford Journal of Legal Studies: K Barker, ‘Unjust Enrichment: Containing the Beast’ (1995) 15 Oxford JLS 457; R Bigwood, ‘Contracts by Unfair Advantage: From Exploitation to Transactional Neglect’ (2005) 25 Oxford JLS

65; P Birks, ‘Rights, Wrongs, and Remedies’ (2000) 20 Oxford JLS 1. Oxford University Press: P Birks, An Introduction to the Law of Restitution (1985); P Birks, Unjust Enrichment (2nd ed, 2005); P Birks, ‘Definition and Division: A Meditation on Institutes 3.13’ in P Birks (ed), The Classification of Obligations (1997); H Hart, ‘Legal Responsibility and Excuses’ in Punishment and Responsibility: Essays in the Philosophy of Law (1968); A Farnsworth, Alleviating Mistakes (2004); E McKendrick, ‘Total Failure of Consideration and Counterrestitution: Two Issues or One?’ in P Birks (ed), Laundering and Tracing (1995); J Raz, The Morality of Freedom (1986); J Feinberg, Harm to Self (1986); K Barker, ‘After Change of Position: Good Faith Exchange in the Modern Law of Restitution’ in P Birks (ed), Laundering and Tracing (1995); D Nolan, ‘Change of Position’ in P Birks (ed), Laundering and Tracing (1995); P Birks, ‘The Necessity of a Unitary Law of Tracing’ in R Cranston (ed), Making Commercial Law: Essays in Honour of Roy Goode (1997); C Mitchell, The Law of Subrogation (1994); A Burrows, The Law of Restitution (3rd ed, 2011); D Klimchuk, ‘The Normative Foundations of Unjust Enrichment’ in R Chambers, C Mitchell and J Penner (eds), The Philosophical Foundations of Unjust Enrichment (2009). Restitution Law Review: M McInnes, ‘Restitution, Unjust Enrichment and the Perfect Quadration Thesis’ [1999] RLR 118; J Palmer, ‘Chasing a Will-O’-the-Wisp? Making Sense of Bad Faith and Wrongdoers in Change of Position’ [2005] RLR 53; A Tettenborn, ‘Subsisting Contracts and Failure of Consideration: A Little Scepticism’ [2002] RLR 1.

Singapore Journal of Legal Studies: R Grantham, ‘Restitutionary Recovery Ex Aequo at Bono’ (2002) Singapore JLS 388. St Martins Press: R Nozick, ‘Coercion’ in S Morgenbesser, P Suppes and M White (eds), Philosophy, Science and Method: Essays in Honour of Ernest Nagel (1969). Supreme Court of New South Wales: NSWSC, NSWCA. Supreme Court of Queensland: QCA. Supreme Court of Victoria: VSC, VSCA. Supreme Court of Western Australia: WASC. Sweet & Maxwell (Thomson): R Bigwood, ‘Economic Duress by (Threatened) Breach of Contract’ (2001) 117 LQR 76; R Goff and G Jones, The Law of Restitution (1st ed, 1966); R Grantham and C Rickett, ‘On the Subsidiarity of Unjust Enrichment’ (2001) 117 LQR 273; E MacDonald, ‘Duress by Threatened Breach of Contract’ [1989] JBL 460. Texas Law Review: H Dagan, ‘Mistakes’ (2001) 79 Texas LR 1795; L Smith, ‘Restitution: The Heart of Corrective Justice’ (2001) 79 Texas L Rev 2115. The Federation Press: I Jackman, The Varieties of Restitution (2nd ed, 2017). United Kingdom Government Licensing Framework (public sector information licensed under the Open Government Licence v3.0): UKHL, EWCA, EWHC, UKPC. University of Toronto Law Journal: E Weinrib, ‘Corrective Justice in a Nutshell’ (2002) 52 Univ Toronto LJ 349.

University of Western Australia Law Review: P Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 Univ WA L Rev 1; N Nahan, ‘Rescission: A Case for Rejecting the Classical Model?’ (1997) 27 Univ WA L Rev 66. Web Journal of Current Legal Issues: S Hedley, ‘Ten Questions for “Unjust Enrichment” Theorists’ (1997) 3 Web JCLI.

Table of Cases References are to paragraph numbers

A A & M Green Investments Pty Ltd v Progressive Pod Properties Pty Ltd [2011] NSWSC 502 … 3.34C, 3.38C, 8.59C AB Corporation v CD Company (The ‘Sine Nomine’) [2002] 1 Lloyd’s Rep 805 … 10.37C ABB Power Generation v Chapple (2001) 25 WAR 158; [2001] WASC 412 … 3.19C, 3.34C Abbot, Re [1900] 2 Ch 326 … 7.5E Abou-Rahmah v Abacha [2006] EWCA Civ 1492 … 12.38C Abram Steamship Co Ltd v Westville Shipping Co Ltd [1923] AC 773 … 13.33C, 15.52E ACN 005 057 349 Pty Ltd v Commissioner of State Revenue [2015] VSCA 332 … 11.8C Adam v Newbigging (1888) 13 App Cas 308 … 13.33C Adras Ltd v Harlow and Jones Gmbh [1995] RLR 235 … 10.30 Advance Business Finance Pty Ltd v Zip Zap Pty Ltd [2014] FCCA 483 … 12.26C Aerolineas Argentinas v Federal Airports Corporation (1995) 63 FCR 100 … 8.20C, 11.5, 11.7C Aged Care Services Pty Ltd v Kanning Services Pty Ltd [2013] NSWCA 393 … 15.58C Agip (Africa) Ltd v Jackson [1990] Ch 265 … 6.14C, 13.34, 13.39, 13.41C, 14.6

— v — [1991] Ch 547 … 13.34, 13.39, 13.41C, 14.6, 14.11, 14.13 Agricultural Credit Corpn of Saskatchewan v Pettyjohn (1991) 79 DLR (4th) 22 … 14.26C Aiken v Short (1856) 1 H & N 210 … 5.12C, 5.13C, 5.21C, 5.26C, 5.30C Air Canada and Pacific Western Airlines Ltd v Her Majesty the Queen in Right of the Province of British Columbia and the Attorney General of British Columbia (1989) 59 DLR (4th) 161; [1989] 1 SCR 1161 … 5.19, 5.21C, 5.25C, 13.42, 13.45C Alati v Kruger (1924) 34 CLR 160 … 15.52E — v — (1955) 94 CLR 216 … 13.33C, 15.52E Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 … 8.56, 8.60C Alesco Corporation Limited v Te Maari [2015] NSWSC 469 … 15.3 Allcard v Skinner (1887) 36 Ch D 145 … 8.44C, 9.9C, 9.11, 9.15C, 9.17C, 9.23C, 9.35, 9.38, 15.4 Allianz Australia Insurance Ltd v Rose Marie Lo-Giudice [2012] NSWSC 145 … 15.3, 15.37C, 15.62C Alma Hill Constructions Pty Ltd v Onal [2007] VSC 86 … 3.35 Alpha Wealth Financial Services and Leasing Pty Ltd v Frankland Olive Co Ltd [2008] WASCA 119 … 5.27C, 12.10, 12.16C, 13.15 Amadio Pty Ltd v Henderson (1998) 81 FCR 149 … 13.63C Amax Potash Ltd v Government of Saskatchewan [1977] 2 SCR 576 … 13.45C Ames’ Settlement, In Re [1946] Ch 217 … 7.1, 7.5E Anderson v Anderson [2013] QSC 8 … 9.10C

— v Bowles (1951) 84 CLR 310; [1951] HCA 61 … 10.20C — v McPherson (No 2) [2012] WASC 19 … 7.6C, 9.6, 15.44, 15.45C Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd (2002) 5 VR 577; [2002] VSC 248 … 3.19C, 3.35, 3.39 Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30 … 10.28 Angelopoulos v Sabatino (1995) 65 SASR 1 … 3.35, 3.38C, 7.38C Angove’s Pty Ltd v Bailey [2016] UKSC 47 … 15.39C Anns v Merton London Borough Council [1978] AC 728 … 1.39C Aquilina Holdings Pty Ltd v Lynndell Pty Ltd [2008] QSC 57 … 15.58C Archer v Cutler [1980] 1 NZLR 386 … 9.33C Artcraft Pty Ltd v Dickson [2014] SASC 108 … 6.14C Ashhurst v Mason (1875) LR 20 Eq 225 … 8.58C Associated Alloys Pty Ltd v ACN 001452106 Pty Ltd (2000) 202 CLR 588 … 14.2 Associated Japanese Bank (International) Ltd v Credit du Nord SA [1989] 1 WLR 255 … 5.24C, 5.35 Astley v Reynolds (1731) 2 Str 915 … 8.11, 8.19C Astor’s ST, Re [1952] Ch 534 … 7.5E Atco Controls Pty Ltd (In Liq) v Stewart (2013) 31 ACLC ¶13-065 … 15.62C — v Stewart (in his capacity as liquidator of Newtronics Pty Ltd) [2013] VSCA 132 … 3.39 Atco Controls Pty Ltd v Stewart [2013] VSCA 132 … 3.39 Atlas Express v Kafco Ltd [1989] QB 833 … 8.25C Attorney-General v Blake [1998] Ch 439 … 10.36C, 10.40C — v — [2001] 1 AC 268 … 3.18E, 10.9, 10.12, 10.13E, 10.14E,

10.17, 10.22C, 10.25C, 10.26, 10.28, 10.29, 10.33, 10.35C, 10.36C, 10.37C — v Gray [1977 ] 1 NSWLR 406 … 4.28C — v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 … 10.12, 10.26, 10.40C Attorney-General for Ceylon v Silva [1953] AC 461 … 4.28C Attorney-General for Hong Kong v Reid [1994] 1 AC 324; [1994] 1 NZLR 1 … 10.27, 15.40C, 15.41C, 15.42C Attorney-General (Hong Kong) v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114 … 13.10C Auckland Harbour Board v R [1924] AC 318 … 4.27C, 4.28C, 11.6C Australia and New Zealand Banking Group Ltd v Karam [2005] NSWCA 344 … 8.16C, 8.33C — v Paciocco [2015] FCAFC 50 … 13.57E — v Westpac Banking Corporation (1988) 164 CLR 662; [1988] HCA 17 … 1.25C, 1.31C, 5.21C, 5.30C, 12.1, 12.26C, 13.35, 13.37E, 13.39, 13.40C Australia Estates P/L v Cairns City Council [2005] QCA 328 … 5.37C Australia Guarantee Corporation Ltd v Ross [1983] 2 VR 319 … 7.10C Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488 … 13.63C Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] 214 CLR 51 … 1.33E Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd [2011] NSWSC 267 … 1.18 — v — (2014) 253 CLR 560; [2014] HCA 14 … 1.18, 1.25C, 1.26C, 1.27C, 1.30C, 1.31C, 1.33E, 5.30C, 6.16C, 12.1, 12.2, 12.6, 12.10, 12.14, 12.16C, 12.17C, 12.20C, 12.22C, 12.23,

12.24, 12.25, 12.28C, 12.33C, 13.2, 13.6, 13.15, 13.16C Avon County Council v Howlett [1983] 1 WLR 605 … 12.32C, 12.33C, 13.10C, 13.13C, 13.14C

B B & S Contracts v Victor Green Publications Ltd [1984] ICR 419 … 8.10E, 8.23C B Liggett (Liverpool) Ltd v Barclays Bank Ltd [1928] 1 KB 48 … 8.53C, 15.55E Baden v Société Générale pour Favoriser le Developpement du Commerce et de l’Industrie en France [1983] BCLC 325 … 6.14C, 6.15C Badman v Drake [2008] NSWSC 1366 … 9.2 Bainbrigge v Browne (1881) 18 Ch D 188 … 8.44C, 9.15C, 9.22C, 13.23E Baker Ltd v Medway Building and Supplies Ltd [1958] 2 All ER 532; [1958] 3 All ER 540 … 6.13C Baltic Shipping Co v Dillon (The Mikhail Lermontov) (1993) 176 CLR 344; 111 ALR 289 … 1.25C, 1.30C, 7.2, 7.6C, 7.12C, 7.16, 7.20E, 7.21, 7.25C, 7.26C, 7.27C Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437; [2000] 4 All ER 221 … 6.14C, 10.26, 12.37C Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923 … 8.43C, 9.10C, 9.15C, 9.17C Bank of Cyprus UK Ltd v Menelaou [2015] UKSC 66 … 3.57, 3.61C, 3.62C, 15.9, 15.54, 15.55E, 15.57C Bank of Montreal v Stuart [1911] AC 120 … 9.17C Bank of New South Wales v Murphett [1983] 1 VR 489 … 5.21C Bank of Victoria Ltd v Mueller [1925] VLR 642 … 9.21C,

9.29C Bank Tejarat v Hong Kong and Shanghai Banking Corp (CI) Ltd [1995] 1 Lloyd’s Rep 239 … 14.6 Bankers Trust Co v Shapira [1980] 1 WLR 1274 … 15.38C Banque Belge pour l’Etranger v Hambrouck [1921] 1 KB 321 … 6.10C, 6.16C, 14.6, 14.9E, 14.17C, 14.19C Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 … 1.16, 2.28E, 3.61C, 3.62C, 15.54, 15.56C, 15.57C, 15.58C Barber v Brown (1856) 1 CB (NS) 120; 140 ER 50 … 10.21C Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 … 7.5E — v Simms [1980] QB 677 … 13.23E — v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677 … 5.13C, 5.14, 5.21C, 5.24C, 5.26C, 5.28C, 5.29C, 5.30C Barclays Bank Ltd v WJ Simms, Son & Cooke (Southern) Ltd [1980] QB 677 … 8.53C, 12.1, 12.16C Barclays Bank plc v Boulter [1999] 1 WLR 1919 … 9.20C — v Coleman [2001] QB 20 … 9.17C — v Estates & Commercial Ltd [1977] 1 WLR 415 … 15.57C — v O’Brien [1994] 1 AC 180 … 9.15C, 9.17C, 9.20C, 9.21C, 9.22C, 13.23E Barlow Clowes International Ltd (in liq) v Vaughan [1992] 4 All ER 22 … 14.25C Barnes v Addy (1874) LR 9 Ch App 244 … 6.11C, 6.14C, 6.15C, 6.16C, 6.17C, 13.27C, 15.38C Barrett & Sinclair v McCormack [1999] VUCA 11 … 15.38C Barros Mattos Jnr v MacDaniels Ltd [2004] 3 All ER 299 … 6.16C Barrows v Isaacs and Son [1891] 1 QB 417; [2005] 1 WLR 247 … 5.11C, 12.25, 12.39C

Bartels v Behm (1990) 19 NSWLR 257 … 8.56 Barton v Armstrong [1976] AC 104 … 8.3, 8.11, 8.13C, 8.14C, 8.16C, 8.18, 8.32C, 8.35C, 8.36C, 8.42C Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 … 15.9, 15.38C, 15.41C Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 … 12.10, 12.27C, 12.32C, 15.52E Baumgartner v Baumgartner (1987) 164 CLR 137 … 15.36C, 15.38C Baxter v Obacelo Pty Ltd [2001] 205 CLR 635 … 1.33E Baylis v Bishop of London [1913] 1 Ch 127 … 6.13C, 12.32C, 13.39 BBB Constructions v Aldi Foods [2010] NSWSC 1352 … 7.37C, 7.39C Beagle v Australian Capital Territory and Southern New South Wales Rugby Union Ltd [2016] ACTSC 271 … 7.37C Beavan v M’Donnell (1854) 9 Exch 309 … 9.33C Beerens v Bluescope Distributions Pty Ltd [2012] VSCA 209 … 8.33C, 8.46 Behrend v Produce Brokers Ltd [1920] 3 KB 530 … 7.44E Bell v Lever Bros Ltd [1932] AC 161 … 5.35, 5.37C Bell Bros Pty Ltd v Shire of Serpentine-Jarrahdale (1969) 121 CLR 137 … 8.20C, 11.1, 11.7C Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1; [2008] WASC 239 … 13.57E Belmont Finance Corporation Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 … 6.14C, 12.37C Belshaw v Bush (1851) 11 CB 191 … 8.53C Benedetti v Sawiris [2013] UKSC 50; [2014] AC 938 … 1.18,

2.9C, 3.28, 3.29E, 3.46C, 7.1, 7.34, 7.40C, 10.11E, 15.57C Bernstone v Almack-Kelly [2014] VSC 358 … 12.16C Beverley’s case (1603) 4 Rep 123 … 9.4C Bhullar v Bhullar [2003] 2 BCLC 241 … 15.42C Biggs v Hoddinott [1898] 2 Ch 307 … 9.25 Bilbie v Lumley (1802) 2 East 469 … 5.19, 5.20C, 5.22C, 5.27C, 6.13C Birch v Blagrave (1755) 1 Amb 264 … 15.45C Birmingham v Renfrew (1937) 57 CLR 666 … 15.41C Bishopsgate Investment Management Ltd (in liq) v Homan [1995] Ch 211 … 14.5C, 14.26C Bize v Dickason (1786) 1 Term Rep 285 … 5.20C, 6.13C Black v S Freedman & Co (1910) 12 CLR 105 … 6.11C, 6.16C, 14.9E, 14.11, 15.37C, 15.38C, 15.45C Blackburn v Smith (1848) 2 Ex 783 … 13.33C Blomley v Ryan (1956) 99 CLR 362 … 9.3, 9.4C, 9.28C, 9.29C, 9.30, 9.31C, 9.37 BMP Global Distribution Inc v Bank of Nova Scotia [2009] SCC 15 … 1.39C Boardman v Phipps [1967] 2 AC 46 … 10.26, 10.40C Bofinger v Kingsway Group Ltd [2009] HCA 44 … 1.23C, 1.33E, 15.58C Boissevain v Weil [1950] AC 327 … 13.63C Bond Worth, Re [1980] 1 Ch 228 … 15.60E Bonner v Tottenham & Edmonton Permanent Investment Building Society [1899] 1 QB 161 … 8.58C Boomer v Muir 24 P 2d 570 (1933) … 7.46C Boscawen v Bajwa [1996] 1 WLR 328 … 12.22C, 12.31E, 14.11, 15.56C, 15.57C, 15.58C Boulter v Peplow (1850) 9 CB 493 … 8.56 Bowes v City of Toronto (1858) 11 Moo PC 463 … 15.42C

Box v Barclays Bank plc [1998] Lloyds Rep Bank 185 … 6.10C BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783 … 3.18E, 3.19C, 3.39, 3.43C, 7.20E, 7.22C BP Petroleum Development Ltd v Esso Petroleum Ltd [1987] SLT 345 … 8.59C Bracewell v Appleby [1975] Ch 408 … 10.36C Bracken Partners Ltd v Gutteridge [2003] EWHC 1064 … 14.11 Brady v Stapleton (1952) 88 CLR 322 … 14.7C Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 … 10.28 Break Fast Investments Pty Ltd v Giannopoulos (No 5) [2011] NSWSC 1508 … 6.14C Brennan v Bolt Burdon [2005] QB 303; [2004] EWCA Civ 1017 … 5.24C, 5.27C, 5.35 Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221 … 3.11C, 3.18E, 3.19C, 3.34C, 3.36E, 3.37C, 7.38C Brent v Slegg Construction Materials Ltd [2007] BCSC 661 … 1.39C Brewer Street Investments Ltd v Barclays Woollen Co Ltd [1954] 1 QB 428 … 7.36E, 7.37C, 7.41E Bridgemen v Green (1757) Wilm 58 … 9.19 Bridgewater v Griffiths [2000] 1 WLR 524 … 3.35 Brisbane v Dacres (1813) 5 Taunt 143 … 5.19, 5.22C, 6.13C Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 … 13.50C British American Continental Bank v British Bank for Foreign Trade [1926] 1 KB 328 … 13.39 British American Tobacco Australia Ltd v Western Australia (2003) 217 CLR 30 … 8.20C, 11.5

British Columbia v Canadian Forest Products Ltd [2004] 2 SCR 74 … 3.62C British Motor Trade Association v Gilbert [1951] 2 All ER 641 … 10.36C British Transport Commission v Gourley [1956] AC 185 … 10.15C Brocklehurst (Deceased), Re [1978] 1 All ER 767 … 9.23C Brook’s Wharf and Bull Wharf Ltd v Goodman Brothers [1937] 1 KB 534 … 3.9C, 8.52C, 8.53C Brown v Smith (1924) 34 CLR 160 … 13.33C Browning v War Office [1963] 1 QB 750 … 10.15C Bruce v Warwick (1815) 6 Taunt 118 … 4.16C Brusewitz v Brown [1923] NZLR 1106 … 4.8C, 9.11, 9.13, 9.18C Bryan v Maloney (1995) 182 CLR 609 … 1.23C, 15.58C Bugatti GmbH v Shine Forever Men Pty Ltd (No 2) [2014] FCA 171 … 10.18, 10.40C Buhr v Barclays Bank plc [2001] EWCA Civ 1223; [2002] BPIR 25 … 15.57C Buller v Harrison (1777) 2 Cowp 565 … 13.34, 13.39, 13.40C Bulman & Dickson v Fenwick & Co [1894] 1 QB 179 … 8.23C Bunnings Group Ltd v CHEP Australia Ltd [2011] NSWCA 342 … 10.2, 10.22C Burgess v Rawnsley [1975] Ch 429 … 7.5E Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 … 8.58C, 8.60C Burkinshaw v Nicholls (1878) 3 App Cas 1004 … 13.10C Burland v Earle [1902] AC 83 … 15.41C Burn v Miller (1813) 4 Taunt 745 … 7.27C Burston Finance Ltd v Speirway Ltd [1974] 1 WLR 1648 … 3.62C, 15.56C, 15.57C

Butler v Rice [1910] 2 Ch 277 … 15.56C

C Caledonia North Sea Ltd v London Bridge Engineering Ltd 2000 SLT 1123 … 8.59C Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95 … 13.32 — v Hooper (1855) 3 Sm & G 153 … 9.33C — v Kitchen & Sons Ltd and Brisbane Soap Co Ltd (1910) 12 CLR 515 … 1.31C, 12.1 Canon Australian Pty Ltd v Patton [2007] NSWCA 246 … 8.33C Cantiare San Rocco SA v Clyde Shipbuilding and Engineering Co Ltd [1924] AC 226 … 7.6C Cape Breton Co, Re (1885) 29 Ch D 795 … 15.41C Carillion Construction Ltd v Felix (UK) Ltd [2001] BLR 1 … 8.26C, 8.37 Carl-Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276 … 6.14C Carr v Gilsenen [1946] St R Qd 44 … 8.23C, 8.60C Carr-Saunders v Dick McNeill Associates Ltd [1986] 1 WLR 922 … 10.18 Carson v Wood (1994) 34 NSWLR 9 … 10.28 Carter; Sumitomo Bank Ltd v Kartika Ratna Thahir [1993] 1 SLR 735 … 15.41C Cartier v Carlisle (1862) 31 Beav 292 … 10.40C Cashflow Finance Pty Ltd (in liq) v Westpac Banking Corporation [1999] NSWSC 671 … 15.38C Cassell & Co Ltd v Broome [1972] AC 1027 … 10.15C, 10.18 Cave v Cave (1880) 15 Ch D 639 … 14.15C Cavenagh Investment Pte Ltd v Kaushik Rajiv [2013] SGHC

45 … 12.23 Caves Beachside Cuisine Pty Ltd v Boydah Pty Ltd [2015] NSWSC 1273 … 3.38C, 7.37C, 10.26, 10.39 Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 12 BPR 22,257; [2003] NSWSC 1072 … 15.58C Chan v Zacharia (1984) 154 CLR 178 … 10.40C, 15.41C, 15.42C Chandler v Webster [1904] 1 KB 493 … 7.6C, 7.21, 7.22C Chaplin v Hicks [1911] 2 KB 786 … 3.24 Chapman, Re (1884) 13 QBD 747 … 12.26C Charles v Jones (1887) 35 Ch D 544 … 15.58C Charles Uren v First National Home Finance Limited [2005] EWHC 2529 … 1.27C Charter plc v City Index Ltd [2008] Ch 313 … 6.14C Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105 … 12.31E, 15.18, 15.38C, 15.45C Chatfield v Paxton … 5.20C Cheese v Thomas [1994] 1 WLR 129 … 12.3, 12.16C, 12.31E, 12.40C, 15.53C Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291; [2004] 13 EG 127 … 15.56C, 15.57C Chesworth v Farrar [1967] 1 QB 407 … 10.18 Chetwynd v Allen [1899] 1 Ch 353 … 15.56C Childers v Childers (1857) 1 De G & J 482 … 15.45C Chillingworth v Chambers [1896] 1 Ch 685 … 8.56 — v Esche [1924] 1 Ch 97 … 7.5E, 7.14C, 7.26C, 7.31C, 7.33 Chimaera Capital Markets Pte Ltd v Kangaroo Resources Ltd [2014] VSC 419 … 12.17C CIBC Mortgages Plc v Pitt [1994] 1 AC 200 … 8.43C, 9.15C, 9.17C, 9.22C

Citadel General Assurance Co v Lloyds Bank Canada [1997] 3 SCR 80 … 6.14C Citadel Insurance Co v Lloyds Bank Canada [1997] 3 SCR 805 … 3.23E Citigroup Pty Ltd v National Australia Bank Ltd [2012] NSWCA 381 … 12.20C, 12.21C, 13.35 Clarke v Dickson (1858) EB & E 148 … 13.33C, 15.47, 15.48, 15.51E Clarke v Shee and Johnson (1774) 1 Cowp 197; Lofft 756 … 1.31C, 6.10C, 14.10C Classic International Pty Ltd v Lagos (2002) 60 NSWLR 241 … 5.37C Clifton v Coffey (1924) 34 CLR 434 … 7.42 Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55 … 3.19C, 3.46C, 7.1, 7.34, 7.40C Cobbett v Brock (1855) 20 Beav 524 … 9.22C Cochrane v Cochrane (1985) 3 NSWLR 403 … 15.58C Cocks v Masterman (1829) 9 B & C 902 … 5.26C Collins v Blantern (1767) 2 Wils KB 341 … 13.63C Colonial Bank v Exchange Bank of Yarmouth, Nova Scotia (1886) 11 App Cas 84 … 13.40C Colt v Woolaston (1723) 2 P P Wms 154 … 1.13 Comgroup Supplies Pty Ltd v Products For Industry Pty Ltd [2016] QCA 88 … 12.16C Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; 46 ALR 402 … 1.33E, 8.16C, 8.33C, 9.24, 9.29C, 9.30, 9.32C, 9.33C, 9.37, 9.39E, 15.36C — v Younis [1979] 1 NSWLR 444 … 5.13C, 5.21C, 12.1 Commercial Banking Co of Sydney Ltd v Mann [1961] AC 1 … 6.10C, 14.10C Commerzbank AG v Price-Jones [2003] EWCA

Civ 1663 … 12.8, 12.16C, 12.22C, 12.33C, 12.35C, 12.36C Commerzbank Akiengesellschaft v IMB Morgan plc [2004] EWHC 2771 … 14.25C Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 … 5.17 Commissioner of State Revenue v ACN 005 057 349 Pty Ltd [2017] HCA 6 … 5.25C, 5.32, 11.4, 11.5, 11.8C Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51 … 1.27C, 1.35, 5.22C, 5.25C, 5.31, 5.32, 11.7C, 13.43, 13.45C Commissioner of Taxation v Macquarie Health Corporation Ltd (1998) 88 FCR 451 … 15.41C Commissioners for her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq) [2017] UKSC 29 … 1.17, 1.18, 1.20E, 1.27C, 2.9C, 2.35E, 3.1, 3.62C, 10.7, 10.11E Commissioners of Customs and Excise v Barclays Bank plc [2006] UKHL 28; [2006] 3 WLR 1 … 1.39C Commonwealth v Burns [1971] VR 825 … 4.28C — v Colonial Ammunition Co Ltd (1924) 34 CLR 198 … 4.28C — v Davis Samuel Pty Ltd (No 7) (2013) 95 ACSR 258; [2013] ACTSC 146 … 5.8C, 6.3, 15.37C — v Verwayen (1990) 170 CLR 394; 95 ALR 321; [1990] HCA 39 … 8.16, 12.16C, 13.8, 13.9, 13.10C, 13.14C, 13.16C Commonwealth of Australia v Davis Samuel Pty Ltd (No 7) [2013] NSWSC 1332 … 6.5E Comptroller-General of Customs and Anor v Kawasaki Motors Pty Ltd (No 2) (1991) 32 FCR 243 … 11.7C Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 … 6.14C, 10.40C

Continental C & G Rubber Company Pty Ltd, In re (1919) 27 CLR 194 … 7.11C, 7.21 Continental Caoutchouc & Gutta Percha Co v Kleinwort, Sons & Co (1904) 9 Com Cas 240 … 13.40C — v — (1904) 20 TLR 403 … 13.39 Coogee Esplanade Surf Motel Pty Ltd v The Commonwealth (Court of Appeal, 16 March 1976, unreported) … 4.28C Cooper v Phibbs (1867) LR 2 HL 149 … 15.62C Coras v Webb [1942] St R Qd 73 … 4.6 Corporate Management Services (Australia) Pty Ltd v AbiArraj [2000] NSWSC 361 … 12.17C, 12.18 Cory Bros & Co Ltd v Turkish Steamship Mecca (owners), The Mecca [1897] AC 286 … 14.25C Cowern v Nield [1912] 2 KB 419 … 13.29C Cox v Prentice (1815) 3 M & S 344 … 13.34, 13.39, 13.40C Crabb v Arun District Council [1976] Ch 179 … 12.16C, 13.14C Craven-Ellis v Canons Ltd [1936] 2 KB 403 … 3.40, 5.39C, 6.6E, 7.37C Craythorne v Swinburne (1807) 14 Ves Jun 160 … 8.60C Creak v James Moore & Sons (1912) 15 CLR 426 … 6.9C Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 … 8.11, 8.15C, 8.16C, 8.17, 8.22C, 8.23C, 8.26C, 8.31C, 8.33C, 8.36C Cressman v Coys of Kensington (Sales) Ltd [2004] EWCA Civ 47 … 12.26C Criterion Properties plc v Stratford UK Properties plc [2004] UKHL 28; [2004] 1 WLR 1846 … 6.14C, 6.17C Criterion Theatres Ltd v Melbourne Board of Works [1945] VLR 267 … 8.20C, 11.1 Crown Prosecution Service v Eastenders Group [2014] UKSC

26 … 1.18 CSR Ltd v Amaca Pty Ltd (under NSW administered winding up) [2016] VSCA 320 … 8.61E CTN Cash & Carry Ltd v Gallagher Ltd [1994] 4 All ER 714 … 8.7, 8.30C, 8.31C Cummings v Rundle (1993) 41 FCR 559 … 8.58C Customs and Excise Comrs v Barclays Bank plc [2006] 3 WLR 1 … 5.24C Cutter v Powell (1795) 6 TR 320 … 7.27C

D Dalma No 1 Pty Ltd (in liq), Re [2013] NSWSC 1335 … 15.5C, 15.58C Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 … 15.52E Damberg v Damberg (2001) 52 NSWLR 492 … 3.35 Dane v Viscountess Kirkwall (1838) 8 C & P 679 … 9.4C Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119 … 15.42C Dart Industries Inc v Décor Corporation Pty Ltd (1993) 179 CLR 101 … 10.40C Daunt v Daunt [2015] VSCA 58 … 9.23C David v Frowd (1833) 1 My & K 200 … 6.13C David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 23 FCR 1 … 11.7C — v — (1992) 175 CLR 353; [1992] HCA 48 … 1.2, 1.22C, 1.23C, 1.24C, 1.25C, 1.27C, 1.31C, 5.6C, 5.7C, 5.13C, 5.19, 5.21C, 5.24C, 5.27C, 5.30C, 6.14C, 7.2, 7.6C, 7.12C, 7.20E, 11.7C, 12.1, 12.13, 12.14, 12.16C, 12.17C, 12.21C, 12.27C, 13.16C, 15.58C Davies v Littlejohn (1923) 34 CLR 174 … 15.61C

Dawson v Linton (1822) 5 B & Ald 521 … 8.52C DBDC Spadina Ltd v Walton [2014] ONSC 4644; 121 OR (3d) 449 … 15.35E Dean v MacDowell (1878) 8 Ch D 345 … 15.41C Deemcope Pty Ltd v Cantown Pty Ltd [1995] 2 VR 44 … 8.29C Deering v Earl of Winchelsea (1787) 2 Bos & P 270 … 8.56, 8.57C Deglman v Guaranty Trust Co of Canada [1954] 3 DLR 785 … 5.4E, 7.29C Delaforce v Simpson-Cook (2010) 78 NSWLR 483 … 12.16C Delgman v Guaranty Trust Co of Canada [1954] SCR 725 … 1.2, 1.27C Denley’s Trust Deed, Re [1969] 1 Ch 373 … 7.5E Deutsche Bank v Beriro (1895) 1 Com Cas 255 … 13.11C Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2003] 4 All ER 645 … 5.24C — v — [2006] 2 WLR 103 … 5.24C Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2006] UKHL 49; [2007] 1 AC 558 … 1.39C, 5.8C, 5.17, 5.24C, 5.29C, 7.31C, 11.3 Devaynes v Noble (Clayton’s case) (1816) 1 Mer 572; [1814– 23] All ER Rep 1 … 14.24C, 14.25C Devenish Nutrition Ltd v Sanofi-Aventis SA (France) [2009] Ch 390; [2008] EWCA Civ 1086 … 10.18, 10.35C, 10.36C Dexter Motors Ltd v Mitcalfe [1938] NZLR 804 …. 14.17C Dextra Bank & Trust Co Ltd v Bank of Jamaica [2002] 1 All ER (Comm) 193; [2001] UKPC 50 … 5.4E, 5.14, 12.12, 12.16C, 12.22C, 12.23, 12.24, 12.26C, 12.33C, 12.35C, 12.36C, 12.37C, 12.43C Di Rico v Cominos [2015] NSWCATCD 75 … 3.38C

Diao v Cohen [2016] NSWSC 96 … 12.26C, 12.28C Dies v British and International Mining and Finance Corporation Ltd [1939] 1 KB 724 … 7.26C Dimskal Shipping Co SA v International Transport Workers Federation (The Evia Luck) (No 2) [1992] 2 AC 152 … 8.11, 8.14C, 8.15C, 8.19C, 8.22C, 8.25C, 8.31C, 8.33C, 8.36C Diplock’s Estate, Re, Diplock v Wintle [1948] 2 All ER 318; [1948] Ch 465 … 1.33E, 6.13C, 12.1, 12.3, 12.31E, 12.40C, 13.54E, 13.57E, 14.6, 14.11, 14.12, 14.19C Diprose v Louth (No 1) (1990) 54 SASR 438 … 9.31C Direct Birmingham & Brighton Railway Co, Re; Spottiswoode’s Case (1855) 6 De GM & G 345; 43 ER 1267 … 8.58C Director of Public Prosecutions for Northern Ireland v Lynch [1975] AC 653 … 8.15C Directors, etc, of the Ashbury Railway Carriage and Iron Co v Riche (1875) LR 7 HL 653 … 4.25C Dive v Maningham (1550) 1 Pl Com 60 … 8.20C Dixon v Monkland Canal Co (1831) 5 W & S 445 … 5.19 Doe v Hare (1833) 2 Cr & M 145 … 10.21C Doneley v Doneley [1998] 1 Qd R 602 … 13.27C Doulton Potteries Ltd v Bronette (1971) 1 NSWLR 591 … 15.3 DPC Estates Pty Ltd v Grey and Consul Development Pty Ltd [1974] 1 NSWLR 443 … 6.14C Drew v Lockett … 15.58C DSND Subsea Ltd v Petroleum Geo-Services ASA [2000] BLR 530 … 8.23C, 8.25C, 8.26C, 8.37 Dubai Aluminium Co Ltd v Salaam [2003] 1 All ER 97 … 8.61E Duke of Norfolk v Worthy (1808) 1 Camp 337 … 13.34 Dunbar Bank plc v Nadeem [1998] 3 All ER 876 … 13.31

E E A Negri Pty Ltd v Technip Oceania Pty Ltd [2010] VSCA 44 … 6.10C Eagle Star Insurance Co Ltd v Provincial Insurance plc [1994] 1 AC 130 … 8.53C EagleBurgmann Australia Pty Ltd v Ross Grant Leadbeater [2012] NSWSC 573 … 10.40C Earl of Aylesford v Morris (1873) LR 8 Ch App 484 … 9.25, 9.28C Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125 … 9.5, 9.25, 9.28C East Cork Foods Ltd v O’Dwyer Steel Co [1978] IR 103 … 1.2 Eastenders Cash & Carry Plc & Others v Crown Prosecution Service [2014] UKSC 26 … 1.27C Eastenders Cash & Carry plc v Crown Prosecution Service [2014] UKSC 26 … 7.1, 7.16, 7.34 Edelsten v Edelsten (1863) 1 De GJ & S 185 … 10.40C Eden v Ridsdales Railway Lamp & Lightning Company (1889) 23 QBD 368 … 15.42C Edinburgh and District Tramways Co Ltd v Courtenay 1909 SC 99 … 3.62C Edmunds v Wallingford (1885) 14 QBD 811 … 8.49 Edwards v Lee’s Administrators 96 SW 3d 1028 (Ky, 1936) … 10.25C El Ajou v Dollar Land Holdings Ltd [1993] 3 All ER 717 … 14.5C, 15.52E — v — [2001] Ch 437 … 12.37C Elders Pastoral Ltd v Bank of New Zealand [1989] 2 NZLR 180 … 14.11 Electricity Generation Corporation v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corp

[2014] HCA 7 … 8.10E, 8.25C Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2013] WASCA 36 … 8.10E, 8.14C, 8.23C, 8.25C, 8.33C, 15.48 Ellis v Hamlen (1810) 3 Taunt 52 … 7.27C Empson v Bathurst (1619) Hutt 52 … 8.20C England v Marsden (1866) LR 1 CP 529 … 8.55C Equitcorp Industries Group Ltd (In Statutory Management) v The Crown (No 47) [1998] 2 NZLR 481 … 1.27C Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 … 8.16C, 8.33C Equity Trustees Executors & Agency Co Ltd v New Zealand Loan & Mercantile Agency Co Ltd [1940] VLR 201 … 15.58C Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 … 1.18, 1.24C, 1.25C, 1.31C, 3.62C, 7.1, 7.2, 7.6C, 7.16, 7.20E, 7.32C, 12.16C, 13.62, 13.63C Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 … 12.40C, 13.33C, 13.48, 15.48, 15.52E Esperance Cattle Company Pty Ltd v Granite Hill Pty Ltd [2014] WASC 279 … 10.25C Essery v Cowlard (1884) 26 Ch D 191 … 7.5E Esso Petroleum Co Ltd v Niad Ltd [2001] All ER (D) 324 … 10.37C Evans v LLwellyn (1787) 2 Bro CC 150; 1 Cox CC 333 … 1.13 Eves v Eves (1975) 1 WLR 1338 … 15.36C Exall v Partridge (1799) 8 Term Rep 308; 101 ER 1405 … 3.20, 8.53C, 8.55C Experience Hendrix LLC v PPX Enterprises Inc [2003] 1 All ER (Comm) 830; [2003] EWCA Civ 323 … 10.22C, 10.37C

F Fairbanks v Snow (1887) 13 NE 596 … 8.35C Falcke v Imperial Insurance Co (1886) 34 Ch D 234 … 3.27 — v Scottish Imperial Insurance Co (1886) 34 Ch D 234 … 15.62C Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 … 1.23C, 1.25C, 1.27C, 1.31C, 2.33, 6.3, 6.8, 6.10C, 6.11C, 6.14C, 6.15C, 6.16C, 6.17C, 10.11E, 10.26, 13.26, 13.27C, 15.9, 15.38C, 15.58C Farmer v Arundel (1772) 2 W Bl 824 … 6.13C Farnham v Atkins [(1670) 1 Sid 446 … 4.17C Farnsworth v Garrard (1807) 1 Camp 38 … 7.27C Farquharson Bros & Co v King & Co [1902] AC 325 … 13.17 Fawcett 1 Russ & M 132 … 15.42C Federal Republic of Brazil v Durant International Corporation (Jersey) [2015] UKPC 35 … 14.26C Federal Sugar Refining Co v United States Sugar Equalisation Board 268 F 575 (1920) … 10.18 Ffrench’s Estate, Re (1887) 21 LR (Ir) 283 … 14.16E FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45; [2015] AC 250 … 15.39C, 15.40C, 15.42C Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 … 1.25C, 1.31C, 7.6C, 7.20E, 7.22C, 7.31C, 7.37C, 7.47C Filby v Mortgage Express (No 2) Ltd [2004] EWCA Civ 759 … 3.61C First Investments Ltd (in liq), Re (1999) 8 NZCLC 261 … 14.5C Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81 … 6.10C, 6.11C, 6.14C, 6.17C Focus Metals Pty Ltd v Babicci [2014] VSC 380 … 1.18, 12.18

Footwear Design v Marketing (Aust) Pty Ltd v Jas Forwarding (Aust) Pty Ltd (1988) 7 SR (WA) 160 … 8.23C Forbes v Jackson (1882) 19 Ch D 615 … 15.55E Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186 … 4.24E, 6.16C Ford (by his tutor Watkinson) v Perpetual Trustees Victoria Ltd [2009] NSWCA 186 … 3.21C, 12.16C Forestview v Perpetual Trustees WA Ltd [1998] HCA 15 … 6.11C Forsyth-Grant v Allen [2008] EWCA Civ 505 … 10.18 Foskett v McKeown [1998] Ch 265 … 14.26C Foskett v McKeown [2000] 1 AC 102; [2000] 2 WLR 1299 … 2.47C, 2.48E, 3.23E, 12.31E, 14.5C, 14.8C, 14.10C, 14.17C, 14.23C, 14.26C, 14.28, 14.29C, 14.30E, 15.35C, 15.40C, 15.57C, 15.62C Fostif Pty Ltd v Campbells Cash and Carry Pty Ltd [2005] NSWCA 83 … 7.6C Framson v Delamere (1595) Cro Eliz 458 … 5.20C French Marine v Compagnie Napolitaine d’Eclairage et de Chauffage par le Gax [1921] 2 AC 494 … 2.41C Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21 … 1.31C, 8.48, 8.56, 8.58C, 8.59C, 8.60C, 15.58C Frith v Cartland (1865) 2 H & M 417 … 14.7C, 14.23C Fry v Lane (1888) 40 Ch D 312 … 9.35, 9.36

G Gaba Formwork Contractors Pty Ltd v Turner Corp Ltd (1991) 32 NSWLR 175 … 10.18, 10.22C Gafford v Graham (1999) 77 P & CR 73 … 10.35C Garcia v National Australia Bank Ltd (1998) 194 CLR 395 … 9.20C, 9.21C, 9.32C

Garland v Consumers’ Gas Co [2004] SCC 25; [2004] 1 SCR 629 … 1.27C, 1.39C Gasbourne Pty Ltd, Re [1984] VR 801 … 8.53C GasTOPS Ltd v Forsyth [2012] ONCA 134 … 10.26 Gebhart v Saunders [1892] 2 QB 452 … 8.53C Gertsch v Atsas [1999] NSWSC 898 … 12.17C, 12.22C Ghana Commercial Bank v Chandiram [1960] AC 732 … 15.56C Gibbon v Mitchell [1990] 1 WLR 1304 … 5.17, 5.18C Giedo Van der Garde BV v Force India Formula One Team Ltd [2010] EWHC 2373 … 7.16 Giles v Edwards (1797) 7 Term Rep 181 … 7.17C Gill v Darbar [2002] BCSC 969 … 9.40E Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 … 12.16C, 13.10C, 15.9, 15.41C, 15.58C Global Finance Group Pty Ltd, Re [2002] WASC 63 … 6.10C Gold v Rosenberg [1997] 3 SCR 767 … 3.23E Goldcorp Exchange Ltd, Re [1995] 1 AC 74; [1994] 3 NZLR 385 … 14.5C, 14.26C, 15.38C, 15.45C Golec v Scott [1995] 38 NSWLR 168 … 3.24 Golightly v Reynolds (1772) Lofft 88 … 6.10C Gondall v Dillon Newspapers Ltd [2001] RLR 221 … 10.20C Gore v Gibson (1845) 13 M & W 623 … 9.4C Goss v Chilcott [1996] AC 788; [1996] 3 NZLR 385 … 7.18C, 12.28C, 12.35C, 12.43C Governor and Company of the Bank of Scotland v Bennett (1999) 7 P & CR 447 … 8.43C Gowers v Lloyds and National Provincial Foreign Bank Ltd [1938] 1 All ER 766 … 13.34, 13.39, 13.40C Grand Lodge, AOUW of Minnesota v Towne (1917) 161 NW 403 … 12.21C

Great Eastern Railway Co v Turner (1872) 8 Ch App 149 … 4.12C Great Investments Ltd v Warner [2016] FCAFC 85 … 4.12C, 6.10C, 6.17C, 15.37C Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679; [2002] EWCA Civ 1407 … 5.35, 5.37C Great Western Railway Company v Sutton (1869) LR 4 HL 226 … 8.20C — v — (1871) 7 Ch App 104 … 11.1 Greenwood v Bennett [1973] 1 QB 195 … 3.29E, 3.39 Griffiths, Re [2009] Ch 162; [2008] EWHC 118 … 5.4E, 5.14, 5.17 Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22; [2012] FCAFC 6 … 6.11C, 6.14C, 6.17C, 10.26, 10.40C, 15.22, 15.31E, 15.40C, 15.41C, 15.42C Grist v Bailey [1967] Ch 532 … 15.53C Gronow v Gronow (1979) 144 CLR 513 … 9.21C Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641; [1937] HCA 58 … 12.16C, 13.10C, 13.14C Guardian Ocean Cargoes Ltd v Banco Do Brasil SA (The Golden Med) [No 3] [1992] 2 Ll Rep 193 … 7.15C Guinness Mahon & Co Ltd v Kensington and Chelsea Royal London Borough Council [1999] QB 215 … 7.31C Guinness plc v Saunders [1990] 2 AC 663 … 1.5 Gutnick v Indian Farmers Fertiliser Cooperative Ltd [2016] VSCA 5 … 15.52E

H Ha v New South Wales (1997) 189 CLR 465 … 7.6C Haines v Carter [2001] 2 NZLR 167 … 8.15C Halifax Building Society v Thomas [1995] 4 All ER (Eng CA)

673 … 10.18 Hall v Myrick (1957) 2 QB 455 … 3.24 — v Wells [1962] Tas SR 122 … 4.11C Hallett’s Estate, Re; Knatchbull v Hallett (1879) 13 Ch D 696; [1874–80] All ER Rep 793 … 5.22C, 14.7C, 14.17C, 14.21, 14.23C, 14.25C, 15.62C Hammond v Osborne [2002] EWCA Civ 885 … 9.36 Hamond v Hicks (1686) 1 Vern 432 … 1.13 Hampton v BHP Billiton (No 2) [2012] WASC 285 … 3.46C, 10.20C, 10.21C Hanover Shoe Inc v United Shoe Machinery Corpn (1968) 392 US 481 … 3.62C Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 … 15.41C — v Watson (1791) Peake 102 … 8.24C Harrison v Kirk [1904] AC 17 … 6.13C Hart v Burbridge [2013] EWHC 1628 … 9.6, 9.33C Hatch v Hatch (1804) 9 Ves 292 … 9.11 Haugesund Kommune v Depfa ACS Bank [2010] EWCA Civ 579 … 12.32C Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 … 8.7, 8.19C Hayward v Giordani [1983] NZLR 140 … 15.36C Hazell v Hammersmith & Fulham London Borough Council [1992] 2 AC 1 … 5.22C, 5.24C, 5.33E Head v Tattersall (1871) LR 7 Exch 7 … 13.33C Heckenberg v Delaforce [2000] NSWCA 137 … 7.6C, 7.16 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 … 1.39C Heid v Reliance Finance Corp Pty Ltd (1983) 49 ALR 229 … 15.60E

Hemming (t/as Simply Pleasure Ltd) v The Lord Mayor and Citizens of Westminster [2013] EWCA Civ 591 … 8.20C Henderson v Merrett Syndicates Ltd [1994] 3 WLR 761 … 7.20E Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252 … 6.10C, 6.16C, 12.21C, 14.4C, 15.37C Heward v Eli Lilly & Co (2007) CanLII 265 … 10.18 Hewer v Bartholomew (1598) Cr Eliz 885 … 5.20C Hewett v Court (1983) 149 CLR 639 … 15.60E, 15.61C, 15.62C — v First Plus Financial Group plc [2010] EWCA Civ 312 … 9.10C Hickey & Co Ltd v Roches Stores (Dublin) Ltd (1993) RLR 196 … 10.33 Hicks v Hicks (1802) 3 East 16 … 7.20E Highland v Exception Holdings Pty Ltd (In liq) (2006) 60 ACSR 223 … 15.58C Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295 … 1.27C HIH Claims Support Ltd v Insurance Australia Ltd [2011] HCA 31 … 8.56, 8.59C Hill v Perrott (1810) 3 Taunt 274 … 10.18 — v van Erp (1997) 188 CLR 159 … 3.64E Hills Industries Ltd v Australian Financial Services and Leasing Pty Ltd [2012] NSWCA 380 … 5.30C, 13.35 Hobbs v Marlowe [1978] AC 16 … 15.56C Hoenig v Isaacs [1952] 2 All ER 176 … 7.25C Hogg v Kirby (1803) 8 Ves 215 … 10.18 Hoghton v Hoghton (1852) 15 Beav 278 … 9.20C Holiday v Sigil (1826) 2 C&P 176 … 6.9C Holland v Russell (1861) 1 B & S 424 … 13.34

Hollins v Fowler (1872) LR 7; QB 616 … 13.17 Holman v Johnson (1775) 1 Cowp 341; 98 ER 1120 … 12.39C, 13.60, 13.63C — v Lyones (1854) 4 De GM & G 270 … 9.11 Holmes v Jones (1907) 4 CLR 1692 … 13.33C Holt v Markham [1923] 1 KB 504 … 1. 9E, 1.27C, 13.11C, 13.13C, 13.14C Hookway v Racing Victoria Ltd (2005) 13 VR 444; [2005] VSCA 310 … 5.4E, 5.8C, 5.27C Hooper v Exeter Corporation (1887) 56 LJQB 457 … 11.7C — v Mayarand Corporation of Exeter (1887) 56 LJQB 457 … 11.7C Hooper and Grass’ Contract, Re [1949] VLR 269 … 8.23C, 8.25C Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 … 10.40C, 15.41C Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 110 FCR 157; [2001] FCA 1040 … 10.4, 10.19, 10.24C, 10.25C, 10.28 Houghton v Fayers and Day [2000] 1 BCLC 511 … 6.14C Howe v Smith (1884) 27 Ch D 89 … 7.44E Howell v Falmouth Boat Construction Co Ltd [ [1951] AC 837 … 4.28C Hua Rong Finance Ltd v Mega Capital Enterprises Ltd [2000] HKCFI 1310 … 12.22C Hughes v Molloy [2005] VSC 240 … 3.39 Hughes and Vale Pty Ltd v The State of New South Wales (No 1) (1954) 93 CLR 1 … 11.7C Huguenin v Baseley (1807) 14 Ves 273 … 8.44C, 9.9C, 9.11, 9.15C, 9.19 Hunt v Silk (1804) 5 East 449 … 7.9C, 7.17C

Huntley Management Ltd v Australian Olives Ltd [2010] FCAFC 98 … 3.65C Hurst v Vestcorp Ltd (1988) 12 NSWLR 394 … 13.63C Hussey v Palmer (1972) 1 WLR 1286 … 15.36C Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd’s Rep 620 … 8.25C, 8.27E, 8.31C, 8.36C, 8.38C Hydro Electric Commission of Nepean v Ontario Hydro (1982) 132 DLR (3d) 193; [1982] 1 SCR 347 … 5.21C, 13.45C Hyundai Shipbuilding & Heavy Industries Co ltd v Papadopoulos [1980] 1 WLR 1129 … 7.25C

I Ideas Plus Investments Ltd v NAB Ltd [2006] WASCA 215 … 1.18 Ierino v Gutta [2012] WASCA 222 … 6.11C Iezzie Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350 … 3.35, 7.47C Ilich v R (1987) 162 CLR 110 … 3.23E, 6.6E Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920 … 6.14C, 6.15C Imperial Loan Co Ltd v Stone [1892] 1 QB 599 … 4.24E, 9.33C Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 … 9.15C, 9.23C Insurance Corporation of British Columbia v Lo (2006) 278 DLR (4th) 148 … 15.41C International Sales & Agencies Ltd v Marcus [1982] 3 All ER 551 … 6.14C Inverugie Investments Ltd v Hackett [1995] 1 WLR 713 … 10.18, 10.20C, 10.22C

Investment Trust Companies v Revenue and Customs Commissioners [2012] EWCH 458; [2012] STC 1150 … 1.17, 3.61C, 15.57C — v — [2015] EWCA Civ 82 … 3.16C Irving v Wilson (1791) 4 TR 485 … 8.20C Island Records, Ex parte [1978] Ch 122 … 2.26E

J J Gasden Pty Ltd v Strider (1990) 20 NSWLR 57 … 8.53C J Leslie (Engineers) Ltd, Re [1976] 1 WLR 292 … 14.16E Jackson v Dickinson [1903] 1 Ch 947 … 8.58C Jacob v Allen (1703) 1 Salk 27; 91 ER 26 … 3.64E Jaggard v Sawyer [1995] 1 WLR 269 … 10.35C, 10.36C, 10.37C James v Thomas H Kent & Co Ltd [1951] 1 KB 551 … 1.12C, 7.29C James Hardie & Co Pty Ltd v Wyong Shire Council (2000) 48 NSWLR 679 … 8.56 James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62 … 14.19C, 14.23C, 14.26C Jamshed Khodaram Irani v Burjorji Dhunjibhai (1915) LR 43 Ind App 26 … 15.61C Jarvis (decd), Re [1958] 1 WLR 815 … 10.40C Jegon v Vivian (1871) LR 6 Ch App 742 … 10.12, 10.36C Jennings & Chapman Ltd v Woodman, Matthews & Co [1952] 2 TLR 409 … 7.37C, 7.41E Jenyns v Public Curator (Qld) (1953) 90 CLR 113 … 8.60C John v MGN Ltd [1997] QB 586 … 10.24C John Alexander’s Clubs [2010] HCA 19 … 15.9, 15.41C John Nelson Developments Pty Ltd v Focus National Developments Pty Ltd [2010] NSWSC 150 … 2.48E, 7.6C,

7.43C Johnson, Re (1880) 15 Ch D 548 … 15.55E Johnson v Agnew [1980] AC 367 … 7.46C, 10.36C — v Buttress (1936) 56 CLR 113 … 9.9C, 9.11, 9.13, 9.16C Jon Beauforte (London) Ltd, Re [1953] Ch 131 … 13.30C Jones v De Marchant (1916) 28 DLR 561 … 14.23C — v Southall & Bourke Pty Ltd (2004) 2 ABC (NS) 1 … 15.58C

K Kakavas v Crown Melbourne Limited [2013] HCA 25 … 9.32C, 9.33C Kalls Enterprise Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557 … 6.14C, 6.15C Karasiewicz v Eagle Star Insurance Co Ltd [2002] EWCA Civ 940 … 15.57C Keech v Sandford (1726) Sel Cas t King 61; 25 ER 223 … 10.40C Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd … 15.41C Kelly v Solari (1841) 9 M & W 54 … 5.11C, 5.13C, 5.21C, 5.22C, 5.26C, 12.35C, 13.13C Kerr v Baranow [2011] 1 SCR 269 … 3.28, 3.29E, 3.46C — v Western Australian Trustee Executor and Agency Co Ltd (1937) 39 WALR 34 … 9.11 Kerr (a Bankrupt), Re [1927] NZLR 177 … 14.17C Kerrison v Glyn, Mills, Currie & Co (1911) 81 LJKB 465 … 5.13C, 5.26C, 5.30C, 12.37C Keys v Harwood (1846) 2 CB 905 … 7.44E Kingstreet Investments Ltd v New Brunswick [2007] SCC 1 … 11.2

— v New Brunswick (Department of Finance) [2007] 1 SCR 3 … 2.9C Kitchen v Royal Air Forces Association [1958] 2 All ER 241 (Eng CA) … 3.24 Kiwi Packaging Ltd v Isaac (1997) 8 NZCLC 261 … 10.18 Kleinwort Benson Ltd v Birmingham City Council [1997] QB 380; [1996] 4 All ER 733 … 3.61C, 3.65C, 13.43 — v Lincoln City Council [1999] 2 AC 349; [1998] 3 WLR 1095 … 5.4E, 5.7C, 5.8C, 5.14, 5.19, 5.22C, 5.24C, 5.28C, 5.33E, 7.31C, 12.16C, 12.34C, 12.37C —v South Tyneside Metropolitan BC [1994] 4 All ER 972 … 12.33C Kleinwort Sons & Co v Dunlop Rubber Co (1907) 97 LT 263 … 5.13C, 5.26C, 13.34, 13.39 Kolmar Group AG v Traxpo Enterprises PVT Ltd [2010] EWHC 113 … 8.37 Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 … 6.14C, 13.26, 13.27C Krelinger v New Patagonian Meat Co [1914] AC 28 … 9.25 Kuwait Airways Corp v Iraqi Airways Co (Nos 4 & 5) [2002] UKHL 19; [2002] 2 AC 883 … 10.37C, 12.23, 12.29E

L Labelmakers Group Pty Ltd v LL Force Pty Ltd (No 3) [2013] FCA 1059 … 10.26 Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574 … 10.27 Lactos Fresh Pty Ltd v Finishing Services Pty Ltd (No 2) [2006] FCA 748 … 8.25C Lady Hood of Avalon v MacKinnon [1909] 1 Ch 476 …

5.11C, 5.17 Lake v Bayliss [1974] 1 WLR 1073 … 10.36C Lamine v Dorrell (1701) 2 Ld Raymond 1216; 92 ER 303 … 10.18, 10.19, 10.40C Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3) [2014] WASC 162 … 3.38C, 7.40C Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432 … 10.18, 10.20C, 10.21C Lancashire Loans Ltd v Black [1934] 1 KB 380 … 9.16C Laskar v Laskar [2008] 1 WLR 2695 … 9.2 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 … 9.24 Lavin v Toppi [2015] HCA 4 … 8.48, 8.56, 8.60C Lawes v Purser (1856) 6 E & B 930 … 7.9C Ledir Enterprises Pty Ltd, Re [2013] NSWSC 1332 … 6.5E, 6.10C Leeds Industrial Co-operative Society Ltd v Slack [1924] AC 851 … 10.35C Legione v Hateley (1983) 152 CLR 406; [1983] HCA 11 … 12.16C, 13.7, 15.36 Lever v Goodwin (1887) 36 Ch D 1 … 10.18, 10.40C LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 … 13.27C Liberty Mutual Insurance Co (UK) Ltd v HSBC Bank Plc [2001] Lloyd’s Rep Bank 224 … 15.58C — v — [2002] EWCA Civ 691 … 15.58C Liggett v Kensington [1993] 1 NZLR 257 … 14.11 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548; [1991] 3 WLR 10 … 2.25E, 3.13C, 5.22C, 5.28C, 6.10C, 6.11C, 6.13C, 6.14C, 6.16C, 6.17C, 7.20E, 12.1, 12.16C, 12.17C, 12.21C, 12.22C, 12.23, 12.25, 12.26C, 12.29E,

12.31E, 12.32C, 12.33C, 12.34C, 12.35C, 12.36C, 12.37C, 12.39C, 12.43C, 13.14C, 13.16C, 13.21E, 13.37E, 14.4C, 14.10C, 14.16E, 14.17C Lister & Co v Stubbs (1890) 45 Ch D 1 … 15.41C, 15.42C Littlewoods Ltd v Commissioners for Her Majesty’s Revenue and Customs [2015] EWCA Civ 515 … 3.46C, 11.3 Littlewoods Retail Ltd v HM Revenue & Customs [2010] EWHC 2771 … 11.3 Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 … 10.24C LJP Investments Pty Ltd v Howards Chia Investments Pty Ltd (1990) 24 NSWLR 499 … 10.18 Lloyds Bank Ltd v Brooks (1950) 6 Legal Decisions Affecting Bankers 161 … 13.13C — v Bundy [1975] QB 326 … 9.10C — v Independent Insurance Co Ltd [1999] 2 WLR 986 … 5.28C Load v Green (1846) 15 M &W 216; 153 ER 828 … 15.48 Lodder v Slowey [1904] AC 442 … 7.25C, 7.46C, 7.47C Lollis v Loulatzis [2007] VSC 547, 10.21C London and River Plate Bank Ltd. v. Bank of Liverpool [1896] 1 QB 7 … 12.32C Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 … 15.52E Lord Napier and Ettrick v Hunter [1993] AC 713 … 15.56C, 15.60E Louth v Diprose (1992) 175 CLR 621 … 8.16C, 9.9C, 9.11, 9.29C, 9.31C, 9.32C, 9.38 Lowick Rose LLP (in liq) v Swynson Ltd [2017] UKSC 32 … 2.9C, 2.35E, 10.11E, 15.54 Lukey v Corporate Investment Australia Funds

Management Pty Ltd [2005] FCA 298 … 8.56 Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635; [2008] HCA 27 … 2.43C, 2.48E, 3.31, 3.35, 3.38C, 3.60E, 7.38C, 7.47C, 8.58C, 15.58C, 15.62C Luo v Zhai [2015] FCA 350 … 7.25C Lupker v Shine Lawyers Pty Ltd [2015] QSC 278 … 7.37C Lupton v White (1808) 15 Ves 442 … 14.23C Lutterel v Lord Waltham 1 Ves Jun 638 … 9.19 Lyon v Home (1868) Law Rep 6 Eq 655 … 9.9C

M McCarey v Associated Newspapers Ltd (No 2) [1965] 2 QB 86 … 10.15C McClintock v The Commonwealth (1947) 75 CLR 1 … 8.20C MacDonald Dickens & Macklin (a firm) v Costello [2011] EWCA Civ 930 … 3.60E McDonald v Coys of Kensington [2004] EWCA Civ 47 … 3.28, 3.35, 3.41, 3.43C, 3.46C — v Dennys Laschelles Ltd (1933) 48 CLR 457 … 7.26C, 7.46C McKenzie v McDonald [1927] VLR 134 … 15.53C McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 … 6.11C, 6.17C, 15.3 McLean v Discount & Finance Ltd (1939) 64 CLR 312 … 8.60C McMillan v Singh (1984) 17 HLR 120 … 10.24C Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 … 13.26, 13.27C Macquarie International Health Clinic Pty Ltd v Sydney Local Health District [2016] NSDWSC 1587 … 10.20C McRae v Commonwealth Disposals Commission (1950) 84

CLR 377 … 5.35 Maddingley Brown Coal v Environment Protection Authority (No 2) [2013] VSC 687 … 8.20C Magarey Farlam Lawyers Trust Accounts (No 3), Re [2007] SASC 9 … 5.26C, 5.29C Magripilis v Baird [1924] QSR 303 … 7.37C Maguire v Makaronis (1998) 188 CLR 449 … 13.33C, 15.53C Mahoney v McManus (1981) 180 CLR 370 … 8.56, 8.58C, 8.59C, 8.60C Manchester Trust v Furness [1895] 2 QB 539 … 9.32C Marc Rich & Co v Portman [1996] 1 Lloyd’s Rep 430 … 8.36C Marks and Spencer plc v Customs and Excise Commissioners [2005] UKHL 53 … 13.43 Marsh v Shire of Serpentine-Jarrahdale (1966) 120 CLR 572 … 11.7C Marston Construction Co Ltd v Kigass Ltd (1989) 46 BLR 109 … 3.43C Martin v Pont [1993] 3 NZLR 25 … 12.16C, 12.22C, 12.43C — v Porter (1839) 5 M & W 351 … 10.36C — v Sitwell (1691) Holt 25 … 7.3 Maskell v Horner [1915] 3 KB 106 … 8.11, 8.13C Mason v New South Wales (1959) 102 CLR 108 … 8.20C, 8.39C, 11.1, 11.7C Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428; [1958] HCA 55 … 13.63C Mayne v Public Trustee (1945) 70 CLR 395 … 6.14C Mayson v Clouet [1924] AC 980 … 7.44E Medforth v Blake [2000] Ch 86 … 12.37C Mediana, Owners of the Steamship v Owners, Master & Crew of the Lightship Comet (‘The Mediana’) [1900] AC 113 … 10.21C, 10.22C, 10.36C

Meinhard v Salmon (1928) 164 NE 545 … 10.40C Menelaou v Bank of Cyprus plc [2014] 1 WLR 854 … 3.62C — v Bank of Cyprus UK Ltd [2015] UKSC 66 … 5.14 Menzies v Perkins [2001] NSWSC 40 … 14.11 Mercedes-Benz (NSW) Pty Ltd v ANZ and National Mutual Royal Savings Bank (SC(NSW), Palmer J, 5 May 1992, unreported) … 12.26C, 12.27C, 12.32C — v National Mutual Royal Savings Bank Ltd (unreported, NSWCA, Priestley, Clarke and Sheller JJA, 1 April 1996 … 12.26C Meriton Apartments Pty Ltd v Council of the City of Sydney (No 3) [2011] NSWLEC 65 … 11.5 Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 … 15.45C Metallgesellschaft Ltd v Inland Revenue Commissioners [2001] Ch 620 … 5.24C Miles v Wakefield [1987] AC 539 … 7.44E Miller v Miller (2011) 242 CLR 446; [2011] HCA 9 … 13.63C — v Race (1758) 1 Burr 452 … 6.10C, 13.21E Ministry of Defence v Ashman [1993] 2 EGLR 102; (1993) 25 HLR 513; 66 P&CR 195 … 3.9C, 3.28, 3.30, 3.45C, 3.46C, 10.18, 10.20C, 10.22C, 10.25C, 10.36C Ministry of Health v Simpson [1951] AC 251 … 3.64E, 6.5E, 6.13C, 6.14C, 12.32C Mitchell v Pacific Dawn Pty Ltd [2006] QSC 198 … 8.16C — v Pacific Dawn Pty Ltd [2011] QCA 98 … 8.16C, 8.23C, 8.25C, 8.26C Moffat v Kazana [1969] 2 QB 152; [1968] 3 All ER 271 … 6.5E, 6.9C Molestina v Ponton [2002] 1 Lloyd’s Rep 271 … 15.53C Molton v Camroux (1848) 2 Ex 487 … 9.3, 9.4C, 9.33C

Monks v Poynice Pty Ltd (1987) NSWLR 662 … 3.39, 3.40 Montagu’s Settlement Trusts, Re; Duke of Manchester v National Westminster Bank Ltd [1987] Ch 264 … 6.14C, 15.38C Montana v Crow Tribe of lndians 523 US 696 (1998) … 3.64E Montgomery’s Estate, Re 6 NE (2d) 40 (1936) … 7.46C Moore v National Mutual Life Association of Australasia Ltd [2011] NSWSC 416 … 12.17C — v Vestry of Fulham [1895] 1 QB 399 … 5.27C Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225 … 13.10C Morgan v Ashcroft [1938] 1 KB 49 … 5.13C, 5.26C Morgan Guaranty Trust Co of New York v Lothian Regional Council [1995] SC 151; [1995] SLT 299 … 5.19, 5.22C Moritz v Horsman (1943) 9 NW 2d 868 … 12.21C Morris v Ford Motor Co [1973] QB 792 … 15.55E Morrison v Coast Finance Ltd [(1965) 55 DLR (2d) 710 … 9.29C Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676 … 2.25E, 3.50C, 5.29C, 7.3, 8.20C, 8.29C, 12.1, 12.16C, 12.32C, 15.36C Moule v Garrett (1872) LR 7 Exch 101 … 8.51C, 8.52C, 8.53C Moulton v Roberts [1977] Qd R 135 … 8.58C Moyes and Groves Ltd v Radiation New Zealand [1982] 1 NZLR 368 … 8.15C Muller, Re; Cassin v Mutual Cash Order Co Ltd [1953] NZLR 879 … 15.45C Munro v Butt (1858) 8 El & Bl 738; 120 ER 275; [1858] EngR 216 … 7.27C Murad v Al Saraj [2004] EWHC 1235 … 10.18 — v — [2005] EWCA Civ 959 … 10.18

Muschinski v Dodds (1985) 160 CLR 583 … 7.6C, 15.31E, 15.36C, 15.38C, 15.41C Mutual Finance Ltd v John Wetton & Sons Ltd [1937] 2 All ER 657; [1937] 2 KB 389 … 8.17, 8.30C My Kinda Town Ltd v Soll and Grunts Investments [1982] FSR 147 … 10.18, 10.19, 10.40C

N Nash v Inman [1908] 2 KB 1 … 4.17C Nash Brothers Builders Pty Ltd v Riverina Water County Council (No 2) [2015] NSWLEC 156 … 8.20C, 13.46C National Australia Bank Ltd v Rusu [2001] NSWSC 32 … 6.14C — v Satchithanantham [2009] NSWSC 21 … 8.43C National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1999] 2 NZLR 211 … 3.23E, 12.24, 12.25, 12.26C, 12.35C, 12.37C, 12.43C National Motor Mail-Coach Co Ltd, In Re, Clinton’s Claim [1908] 2 Ch 515 … 8.53C National Westminster Bank plc v Morgan [1985] AC 686 … 9.10C, 9.11, 9.12, 9.15C, 9.17C, 9.19, 9.38, 12.40C Neate v Harding (1851) 6 Exch 349 … 6.5E Negri Pty Ltd v Technip Pty Ltd [2010] VSCA 44 … 3.60E Nelson v Nelson (1995) 184 CLR 538; [1995] HCA 25 … 6.17C, 13.61, 13.63C Nelson Guarantee Corporation v Farrell [1955] NZLR 405 … 4.11C Neste Oy v Lloyds Bank plc [1983] 2 Lloyd’s Rep 658 … 15.38C, 15.39C New South Wales v Bardolph (1934) 52 CLR 455 … 4.28C New Zealand Jockeys’ Association v Young [1922] NZLR

1011 … 13.29C Newbigging v Adam (1886) 34 Ch D 582 … 13.33C Newborn v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 … 13.9 Nikolic v Oladaily Pty Ltd [2007] NSWCA 252 … 2.43C NIML Ltd v MAN Financial Australia Ltd [2004] VSC 449 … 6.11C, 6.14C Ninety Five Pty Ltd (in liq) v Banque Nationale De Paris [1988] WAR 133 … 6.14C Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985; [2003] EWCA Civ 1446 … 12.23, 12.32C, 12.37C, 12.38C Niru Battery Manufacturing Co v Milestone Trading Ltd (No 2) [2004] EWCA Civ 487 … 8.48 Nixon v Furphy (1925) 25 SR (NSW) 151 … 8.21, 8.23C Nocton v Lord Ashburton [1914] AC 932 … 15.53C Noel v Robinson 1 Vern 90 … 6.13C North Central Wagon Finance Co Ltd v Brailsford [1962] 1 WLR 1288 … 7.30C North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd (The Atlantic Baron) [1979] QB 705 … 8.16C, 8.21, 8.23C, 8.27E Norton v Relly 2 Eden 286 … 9.9C Norwich Union Fire Insurance Society Ltd v Wm H Price Ltd [1934] AC 455 … 5.26C, 5.33 Nottidge v Prince (1860) 2 Giff 246 … 9.9C Nottingham Permanent Benefit Building Society v Thurston [1903] AC 6 … 15.60E Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 526 … 10.26 Nu Line Construction Group Pty Ltd v Fowler (2012) 16 BPR

31; [2012] NSWSC 587 … 13.57E — v — [2014] NSWCA 51 … 7.15C Nurdin & Peacock plc v DB Ramsden & Co Ltd [1999] 1 WLR 1249 … 5.4E, 5.14

O Oatway, Re [1803] 2 Ch 356 … 14.23C O’Brien v Melbank Corporation Ltd (1991) 7 ACSR 19 … 13.63C O’Brien Homes Ltd v Lane [2004] EWHC 303 … 10.35C Obvious Deadline Pty Ltd v Clancy; Clancy v Obvious Deadline Pty Ltd [2016] NSWSC 1837 … 8.56 Occidental Worldwide Investment Corporation v Skibs A/S Avanti (The Siboen and the Sibotre) [1976] 1 Lloyd’s Rep 293 … 8.13C, 8.19C, 8.21, 8.31C Ocean Star Resort v David Holkyoon Kwon [2012] NSWSC 318 … 7.43C O’Connor v Hart [1985] 1 NZLR 159 … 4.24E, 9.33C Official Custodian for Charities v Mackey (No 2) [1985] 1 WLR 130 … 3.64E Ogilvie v Allen (1899) 15 TLR 294 … 5.17 — v Littleboy (1897) 13 TLR 399 … 5.17, 5.18C Oliver v Lakeside Property Trust Pty Ltd [2005] NSWSC 1040 … 3.37C Optus Productions Pty Ltd v Popwing Pty Ltd (SC(NSW), Santow J, 9 December 1985, unreported) … 14.11 Orakpo v Manson Investments Ltd [1977 1 WLR 347 … 15.58C — v — [1978] AC 95 … 15.56C, 15.57C, 15.58C Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 … 15.38C

Ormes v Beadel (1860) 2 GF & J 333 … 8.42C — v — (1860) 2 Giff 166 … 8.42C O’Rorke v Bolingbroke (1877) 2 App Cas 814 … 9.29C Orr v Kaines Ves Sen 194 … 6.13C O’Sullivan v Management Agency and Music Ltd [1985] QB 428 … 12.40C Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2004] VSC 400 … 13.15 Owen and Co v Cronk (1894) 1 QB 265 … 12.26C Owen and Gutch v Homan [(1853) 4 HLC 997 … 9.32C Owen v Tate [1976] QB 402 … 8.53C, 8.55C Oxley v James (1938) 38 SR (NSW) 362 … 9.32C

P Palinkas v Palinkas [2009] NSWSC 92 … 7.6C Palmer v Blue Circle Southern Cement (1999) 48 NSWLR 318; [1999] NSWSC 697 … 12.16C, 12.17C Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1994] 2 Lloyd’s Rep 427 … 8.36C Pan Ocean Shipping Ltd v Creditcorp Ltd [1994] 1 WLR 161 … 2.41C, 2.43C, 2.48E Pao On v Lau Yiu Long [1980] AC 614 … 8.13C, 8.14C, 8.16C, 8.21, 8.23C, 8.24C, 8.36C, 8.37, 8.38C, 8.40E Parker v R (1997) 186 CLR 494 … 14.6 Patel v Mizra [2016] UKSC 42 … 13.60 Paul v Speirway Ltd [1976] Ch 220 … 15.55E, 15.56C — v Speirway Ltd (in liq) [1976] 1 WLR 220 … 15.56C Pavey and Matthews Ltd v Paul (1987) 162 CLR 221 … 3.32, 3.33, 3.35, 3.38C, 5.21C, 7.29C, 7.38C, 7.39C, 7.42, 7.43C, 7.47C, 13.63C, 15.58C Payne v Rowe (2012) 16 BPR 30,869; [2012] NSWSC 685 …

13.57E Peanut Marketing Board v Cuda (1984) 79 FLR 368 … 8.29C Peel (Regional Municipality) v Canada [1992] 3 SCR 762 … 2.9C, 3.9C, 3.40, 3.42C Pell-Frischmann Ltd v Bow Valley Ltd [2009] UKPC 45 … 10.35C Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyd’s Rep 359 … 10.18, 10.20C, 10.35C, 10.36C Pentridge Village Pty Ltd v Potenza Pty Ltd [2014] VSCA 50 … 5.14 Perpetual Trustee Co Ltd v El-Bayeh [2010] NSWSC 1487 … 3.12C Perpetual Trustees Australia Ltd v Heperu Pty Ltd (2009) 76 NSWLR 195; [2009] NSWCA 84 … 12.8, 12.20C, 12.23, 12.32C, 14.4C Perpetual Trustees Victoria Ltd v Ford [2008] NSWSC 29 … 13.15 Peter Pan Manufacturing Corp v Corsets Silhouette Ltd [1963] 3 All ER 402; [1964] 1 WLR 96 … 10.26, 10.40C Pettkus v Becker (1980) 117 DLR (3d) 257; [1980] 2 SCR 834 … 3.4, 15.36C Philip Collins Ltd v Davis [2000] 3 All ER 808 … 12.16C, 12.33C, 12.34C, 13.14C Phillips v Homfray (1871) 6 Ch App 770 … 10.20C, 10.25C — v — (1883) 24 Ch D 439 … 3.7E, 3.9C — v Phillips (1852) 4 DF & J 208 … 14.15C Phipps v Boardman [1967] 2 AC 46 … 10.40C, 15.42C Phoenix Life Assurance Co, Re (1862) 2 J & H 441 … 13.30C Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 … 7.20E, 10.36C Pilcher v Rawlins (1872) 7 Ch App 259 … 13.21E

Pitt v Combes (1835) 2 Ad & El 459 … 8.11 — v Holt [2013] UKSC 26; [2013] 2 AC 108 … 5.4E, 5.8C, 5.11C, 5.18, 6.17C, 15.48 — v —; Futter v Futter[2011] EWCA Civ 197 … 5.4E Planché v Colburn (1831) 8 Bing 14; 131 ER 305 … 3.19C, 3.29E, 3.34C, 7.47C Polly Peck International plc (in administration) (No 2), Re; Marangos Hotel Co Ltd v Stone [1998] 3 All ER 812 … 15.29, 15.33E, 15.38C Port of Brisbane Corporation v ANZ Securities Ltd [2001] QSC 466 … 3.13C — v ANZ Securities Ltd (No 2) [2002] QCA 158; [2003] 2 Qd R 661 … 3.13C, 6.16C, 12.20C Porter v Latec Finance (Qld) Pty Ltd [(1964) 111 CLR 177 … 5.21C Portman Building Society v Hamlyn Taylor Neck (a firm) [1998] 4 All ER 202 … 3.12C, 13.34, 13.37E Potton Ltd v Yorkclose Ltd (1989) 17 FSR 11 … 10.18, 10.40C Powell v Powell [1900] 1 Ch 243 … 9.12 — v Rees (1837) 2 Taunt 274; 128 ER 109 … 10.18, 10.19 — v Thompson [1991] 1 NZLR 597 … 6.14C Pownal v Ferrand (1827) 6 B & C 439 … 8.52C, 8.53C Pratt v Barker (1855) 4 E & B 760 … 9.11 Price v Neale (1762) 3 Burr 1355 … 12.32C Priestley v Priestley [2016] NSWSC 1096 … 5.4E, 5.14, 5.39C Primeau v Granfield (1911) 184 F 480 … 14.21, 14.23C, 15.41C Pritchard v Hitchcock (1843) 6 Man & G 151 … 5.12C Procter & Gamble Philippine Manufacturing Corpn v Peter Cremer GmbH & Co (The Manila) [1988] 3 All ER 843 … 3.39, 3.43C

Products Ltd v US Surgical Corp (1984) 156 CLR 41 … 10.28 Prudential Assurance Co Ltd v Revenue and Customs Commissioners [2013] EWHC 3249 … 11.3 Puma Australia Pty Ltd v Sportman’s Australia Ltd (No 2) [1894] 2 Qd R 159 … 14.6

Q Queensland Alumina Ltd v Alinta DQP Pty Ltd [2006] QSC 391 … 5.8C — v — [2007] QCA 387 … 5.27C Quek v Beggs (1990) BPR 11 … 9.18C Quince v Varga [2008] QCA 376 … 15.62C Quistclose Investments Ltd v Rolls Razor Ltd (In Liquidation) [1970] AC 567 … 15.45C, 15.57C

R R v Attorney-General for England and Wales [2003] UKPC 22 … 8.14C, 8.17, 8.32C — v Burdett (1696) 1 Lord Raym 149 … 8.20C — v Clerk of the Peace of Cumberland (1706) 1 Mod 81 … 8.20C — v Eyres (1666) 1 Sid 307 … 8.20C — v Lawrence [1982] AC 510 … 13.50C — v Roberts (1692) Carth 96 … 8.20C R Leslie Ltd v Sheill [1914] 3 KB 607 … 13.29C R Stringer & Co Ltd v Berrett [1921] GLR 240 … 13.39 Ramskill v Edwards (1885) 31 Ch D 100 … 8.56 Ramzan v Brookwide Ltd [2011] EWCA Civ 985 … 10.20C Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135 … 7.6C, 15.45C RBC Dominion Securities v Dawson (1994) 111 DLR (4th)

230 … 12.6, 12.18, 12.34C, 13.14C RE Jones Ltd v Waring and Gillow Ltd [1926] AC 670 … 5.13C, 12.32C, 13.13C Reading v Attorney General [1951] AC 507 … 10.36C Reese River Silver Mining Co v Smith (1869) LR 4 HL 64 … 13.33C, 15.51E Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 … 10.26, 10.40C, 15.42C Regalian Properties Ltd v London Docklands Development Corporation [1995] 1 WLR 212 … 7.37C, 7.39C, 7.41E Reid-Newfoundland Co v Anglo-American Telegraph Co Ltd [1912] AC 555 … 10.36C Relfo Ltd v Varsani (No 2) [2014] EWCA Civ 360; [2015] 1 BCLC 14 … 3.61C, 3.62C Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 … 7.25C, 7.46C, 7.47C Reynell v Sprye (1852) 1 De GM & G 660 … 8.35C Rhone v Stephens [1994] 2 AC 310 … 6.11C Rice v Rice (1853) 2 Drew 73 … 14.15C Riches v Hogben [1985] 2 Qd R 292 … 12.16C Riverwood Legion & Community Club Ltd v Repaja & Co Pty Ltd [2015] NSWSC 383 … 6.14C, 6.16C, 12.18, 14.9E Robb Evans of Robb Evans & Associates v The European Bank Ltd (2004) 61 NSWLR 75; [2004] NSWCA 82 … 6.14C, 15.37C, 15.38C Roberts v Roberts [1957 ] Tas SR 84 … 4.11C Robertson v Minister of Pensions [ [1949] 1 KB 227 … 4.28C Robinson v Harman (1848) 1 Exch 850 … 10.36C Rookes v Barnard [1964] AC 1129 … 10.15C Rose, Re [1952] Ch 499 … 3.64E Rover International Ltd v Cannon Film Ltd (No 3) [1989] 3

All ER 423; [1989] 1 WLR 912 … 7.12C, 7.18C, 7.20E, 7.26C, 7.30C, 7.47C Rowe v Vale of White Horse District Council [2003] 1 Lloyd’s Rep 418 … 3.35 Rowland v Divall [1923] 2 KB 500 … 7.9C, 7.10C, 7.12C, 7.20E, 7.30C, 7.31C Roxborough v Rothmans of Pall Mall Australia Ltd (1999) 95 FCR 185 … 7.43C — v — (2001) 208 CLR 516; [2001] HCA 68 … 2.42C, 2.43C, 2.48E, 3.65C, 6.10C, 6.14C, 6.17C, 7.2, 7.6C, 7.12C, 7.16, 7.19C, 7.20E, 7.32C, 7.39C, 7.42, 7.43C, 12.16C, 13.43, 13.46C, 14.2, 15.36C Roy v Lagona [2010] VSC 250 … 3.35 Royal Bank of Scotland Plc v Etridge (No 2) [1998] 4 All ER 705 … 9.15C, 9.19 — v — (No 2) [2002] 2 AC 773 … 8.41, 8.43C, 8.44C, 9.7, 9.15C, 9.17C, 9.22C, 9.34 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 … 6.14C Rural Municipality of Storthoaks v Mobil Oil Canada Ltd (1955) 25 DLR (3d) 1 … 12.21C, 13.45C Russell Gould Pty Ltd v Ramangkura [2014] NSWCA 310 … 14.9E Russell-Cooke Trust Co v Prentis [2002] EWHC 2227 … 14.25C Russet Pty Ltd (in liq) v Bach (unreported, Supreme Court of NSW, Equity Division, 23 June 1988) … 15.58C Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 … 10.36C

S

Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880 … 7.37C, 7.39C, 7.41E Sadler v Evans (1766) 4 Burr 1984; 98 ER 34 … 12.16C Salib v Gakas [2010] NSWSC 505 … 5.8C Sandeman & Sons v Tyzack and Branfoot Steamship Co Ltd [1913] AC 680 … 14.23C Sargood Bros v Commonwealth (1910) 11 CLR 258 … 11.1, 11.7C Satchithanantham v National Australia Bank Ltd [2009] NSWCA 268 … 8.43C Savery v King (1856) HLC 627 … 9.11 Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309 … 6.14C, 6.15C Scott v Davis (2000) 204 CLR 333 … 14.2 — v Scott (1963) 109 CLR 649 … 6.16C, 14.23C — v Surman (1743) Willes 400 … 14.19C Scottish Equitable plc v Derby [2000] 3 All ER 793 … 13.14C — v — [2001] 3 All ER 818 … 12.8, 12.10, 12.16C, 12.18, 12.22C, 12.34C, 12.36C, 13.8, 13.14C Sellars v Adelaide Petroleum NL … 12.16C Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Commissioners [2007] UKHL 34 … 2.33, 3.9C, 3.25C, 3.28, 3.45C, 3.46C, 10.11E Sexton v Kessler (1912) 225 US 90 … 15.61C Sharland v Mildon (1846) 15 LJ Ch 434 … 12.26C Shaw, Re [1957] 1 WLR 729 … 7.5E Shaw Building Group Pty Ltd v Narayan (No 2) [2015] FCA 585 … 6.10C Shivas v Bank of New Zealand [1990] 2 NZLR 327 … 8.15C Sidell v Vickers (1892) 9 RPC 152 … 10.40C Sinclair v Brougham [1914] AC 398; [1914–15] All ER Rep

622 … 8.29C, 13.30C, 14.11, 14.17C, 14.25C, 15.3, 15.42C, 15.45C — v Rankin (No 2) [1908] WAR 126 … 7.37C Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2012] Ch 453; [2011] 4 All ER 335; [2011] EWCA Civ 347 … 15.40C, 15.41C, 15.42C Singtel Optus Pty Ltd v Almad Pty Ltd [2013] NSWSC 1427 … 10.26 Sino Iron Pty Ltd v Worldwide Wagering Pty Ltd [2017] VSC 101 … 12.26C Skeate v Beale (1841) 11 Ad & E 983 … 8.19C Skilled Group Ltd v CSR Viridian Pty Ltd [2012] VSC 290 … 2.43C Skyring v Greenwood (1825) 4 B & C 281 … 13.7, 13.11C, 13.12C, 13.13C, 13.14C Slater v Burnley Corp (1888) 59 LT 636 … 11.1 Slowey v Lodder (1901) 20 NZLR 321 … 7.46C, 7.47C Smith v Clay (1767) 3 Bro CC 639n … 13.48 — v Cunningham [(1915) 34 NZLR 385 … 14.17C — v Governor and Company of the Bank of Scotland 1997 SC 111 … 9.21C — v William Charlick Ltd (1924) 34 CLR 38 … 8.16C, 8.29C Snowden v Davis (1808) 1 Taunt 359 … 12.26C, 13.39 Soar v Ashwell [1893] 2 QB 390 … 6.14C Solicitor, Re a [1952] Ch 328 … 15.57C Solle v Butcher [1950] 1 KB 671 … 5.35, 5.37C, 15.53C Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141 … 7.25C, 7.44E, 7.47C South Tyneside Metropolitan Borough Council v Svenska International Plc [1995] 1 All ER 545 … 12.22C, 12.33C, 12.35C

Southage Pty Ltd v Vescovi [2014] VSC 141 … 14.3, 14.4C, 14.5C — v — [2015] VSCA 117 … 12.8, 12.22C Southage Pty Ltd v Vescovi [2015] VSCA 117 … 14.4C Southern Pacific Co v Jensen (1917) 244 US 205 … 5.22C Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072 … 14.5C Sadler v Evans (1766) 4 Burr 1984 … 13.34 Spangaro v Corporate Investment Australia Funds Management Ltd [2003] FCA 1025 … 6.15C, 6.16C, 7.43C Spectrum Plus Ltd, Re [2005] UKHL 41; [2005] 2 AC 680 … 5.24C Spence v Crawford [1939] 3 All ER 271 … 12.40C, 13.32, 13.33C Speno Rail Maintenance Australia Pty Ltd v Metals and Minerals Insurance Pte Ltd [2009] WASCA 31 … 15.58C Spring v Guardian Assurance [1995] 2 AC 296 … 2.26E State Bank of New South Wales v Swiss Bank Corporation (1995) 39 NSWLR 350 … 12.20C, 12.21C State ex rel Steger v Garber 1979 WL 207282 (Ohio Ct App 1979) … 12.12 Steele v Tardiani (1946) 72 CLR 386 … 2.43C, 3.35, 7.27C — v Williams (1853) 8 Ex 625 … 8.20C Steinberg v Scala (Leeds) Ltd [1923] 2 Ch 452 … 4.19C Stephenson Nominees Pty Ltd v Official Receiver (1987) 16 FCR 536 … 15.62C Stewart v Atco Controls Pty Ltd (in liq) [2014] HCA 15 … 3.38C, 3.39, 15.62C Stilk v Myrick (1809) 2 Camp 317 … 8.24C Stimpson v Smith [1999] Ch 340 … 8.58C

Stocks v Wilson [1913] 2 KB 235 … 4.11C, 15.38C Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574 … 2.48E, 7.11C, 7.16 Stoke-on-Trent City Council v W and J Wass Ltd [1988] 1 WLR 1406 … 10.18 Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246 … 10.12, 10.18, 10.22C, 10.35C, 10.36C Stray v Russell (1859) 1 E & E 888 … 7.26C Street v Retravision (NSW) Pty Ltd (1995) 56 FCR 588 … 8.58C Streeter v Western Areas Exploration Pty Ltd [2011] WASCA 17 … 13.32 Sumpter v Hedges (1898) 1 QB 673 … 7.27C Super 1000 Pty Ltd v Pacific General Securities Ltd [2008] NSWSC 1222 … 6.14C Surrey County Council v Bredero Homes Ltd [1993] 1 WLR 1361 … 10.24C, 10.35C, 10.36C, 10.37C Sutton v Sutton [1984] Ch 184 … 12.36C Swordheath Properties Limited v Tabet … 10.20C

T TA Sundell & Sons Pty Ltd v Emm Yannoulatos (Overseas) Pty Ltd (1955) 56 SR (NSW) 323 … 8.23C, 8.25C Tamares (Vincent Square) Ltd v Fairpoint [2007] EWHC 212 … 10.20C Tara Shire Council v Garner [2003] 1 Qd R 556 … 6.14C, 13.26, 13.27C Taylor v Caldwell (1863) 3 B & S 826 … 7.22C — v Hare (1805) 1 Bos & PNR 260 … 7.9C — v Johnson (1983) 151 CLR 422 … 5.35, 5.37C

— v Johnston (1882) 19 Ch D 603 … 9.11 — v Laird (1856) 25 LJ Ex 329 … 3.37C, 3.46C — v Motability Finance Ltd [2004] EWHC 2619 … 7.47C — v Plumer (1815) 3 M & S 562; 105 ER 721 … 14.7C, 14.17C, 14.19C Test Claimants in the FII Group Litigation v HM Revenue and Customs Commissioners [2008] EWHC 2893 … 11.3, 12.23, 12.32C — v — [2010] EWCA Civ 103 … 11.3 — v — [2012] UKSC 19 … 11.3 — v — [2014] EWHC 4302 … 11.3, 12.10, 12.34C, 12.39C Testel Australia Pty Ltd v KRG Electrics Pty Ltd [2013] SASC 91 … 10.28 TFL Management Services v Lloyd’s TSB Bank plc [2014] 1 WLR 2006 … 3.61C The Leasing Centre (Aust) Pty Ltd v Rollpress Proplate Group Pty Ltd [2010] NSWSC 282 … 7.12C Thiess v Collector of Customs (2014) 250 CLR 664; [2014] HCA 12 … 11.4, 13.57E Thomas v Brown (1876) 1 QBD 714 … 7.14C — v Houston Corbett & Co [1969] NZLR 151 … 5.26C, 12.22C, 12.35C, 12.43C Thompson v Palmer (1933) 49 CLR 507 … 13.10C Thorne v Motor Trade Association [1937] AC 797; [1937] 3 All ER 157 … 8.28, 8.30C, 8.31C, 8.32C Tilley’s Will Trusts, In re [1967] Ch 1179 … 14.23C Tinsley v Milligan [1994] 1 AC 340 … 12.39C, 13.60, 13.63C Tito v Waddell (No 2) [1977] Ch 106 … 10.35C TRA Global Pty Ltd v Kebakoska [2011] VSC 480 … 12.17C, 13.14C, 13.15 Transvaal and Delagoa Bay Investment Co v Atkinson [1944]

1 All ER 579 … 13.39 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 … 10.28 Truck Equipment Service Co v Fruehauf Corp 536 F 2d (1976) 1210 … 10.40C Trustees of the Property of FC Jones & Sons v Jones [1997] Ch 159 … 14.5C Turner v Bladin (1951) 82 CLR 463 … 7.29C Turner to Black v S Freedman & Co (1910) 12 CLR 105 … 4.12C Twinsectra Ltd v Yardley [2002] 2 AC 164 … 12.37C, 15.57C Twyford v Manchester Corp [1946] Ch 236 … 11.1

U Union Bank of Australia Ltd v McClintock [1922] 1 AC 240 … 6.10C, 14.10C — v Whitelaw (1906) VLR 711 … 9.29C Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573 … 9.9C United Australia Ltd v Barclays Bank Ltd [1941] AC 1 … 7.37C, 10.18, 10.19 United Overseas Bank v Jiwani [1976] 1 WLR 964 … 13.7 United States v Zara Contracting Co 146 F 2d 606 (1944) … 7.46C Universal Distributing Company Ltd (in liq), Re (1933) 48 CLR 171; [1933] HCA 2 … 15.62C Universe Tankships Inc of Monrovia v International Transport Workers Federation (The Universe Sentinel) [1983] 1 AC 366; [1982] 2 All ER 67; [1982] ICR 262; [1982] 1 Lloyd’s Rep 537 … 8.11, 8.14C, 8.15C, 8.16C, 8.17, 8.22C,

8.23C, 8.25C, 8.27E, 8.28, 8.30C, 8.31C, 8.32C, 8.33C University of Wollongong v Metwally (1984) 158 CLR 447 … 5.22C Unwin v Leaper (1840) 1 Man & G 747 … 8.17 Upton-on-Severn Rural District Council v Powell [1942] 1 All ER 220 … 7.37C Uren v First National Home Finance Ltd [2005] EWHC 2529 … 3.60E Urusoglu v MSU Management Pty Ltd [2011] NSWSC 54 … 3.38C, 5.4E

V Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 … 13.33C, 15.53C Valentini v Canali (1889) 24 QBD 166 … 4.18C Van den Berg v Giles [1979] 2 NZLR 111 … 3.35, 7.38C Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 … 15.45C Vandervell’s Trusts, Re (No 2) [1974] Ch 269 … 15.45C Vasco Investment Managers Ltd v Morgan Stanley Australia Ltd [2014] VSC 455 … 3.19C, 3.38C, 7.37C V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd [2013] FCAFC 16 … 10.40C Victoria v The Commonwealth [(1975) 50 ALJR 157 … 4.28C Vinogradoff, Re; Allen v Jackson [1935] WN 68 … 15.45C

W Waikato Regional Airport Ltd v Attorney-General (New Zealand) [2004] 2 NZLR 1 … 8.20C Walstab v Spottiswoode (1846) 15 M&W 501 … 7.25C Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

… 13.10C, 13.14C Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589 … 15.38C, 15.39C, 15.45C Ward v Byham [1956] 1 WLR 496 … 8.24C Ward & Co v Wallis [1900] 1 QB 675 … 5.26C, 5.30C Watkin v Coombs (1922) 30 CLR 180 … 9.11, 9.29C Watson v Watson [1953] NZLR 266 … 7.37C, 7.38C Welby v Drake (1825) 1 C&P 557 … 8.53C Weld-Blundell v Synott [1940] 2 KB 107 … 5.13C West v Public Trustee (1942) SASR 109 … 9.18C West Sussex Constabulary’s Fund, Re [1971] Ch 1 … 7.5E Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1994] 4 All ER 890; [1994] 1 WLR 938 … 5.22C, 7.30C, 7.31C — v — [1996] AC 669 … 7.6C, 7.31C, 15.22, 15.38C, 15.39C, 15.44, 15.45C Western Australian Insurance Co Ltd v Dayton (1924) 35 CLR 355 … 13.7, 13.10C Westpac Banking Corporation v Cockerill (1998) 152 ALR 267 … 8.16C, 8.17 — v Rae [1992] 1 NZLR 338 … 8.53C — v Savin [1985] 2 NZLR 41 … 6.14C — v The Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157 … 6.14C, 13.57E — v Toksoz [2010] NSWSC 1509 … 15.37C Whaley Bridge Calico Printing Co v Green (1879) 5 QBD 109 … 15.42C Whitbread & Co Ltd v Watt [1902] 1 Ch 835 … 15.61C Whitecomb v Jacob Salk 160 … 14.19C Whitham v Bullock [1939] 2 KB 81 … 8.58 Whyte v Meade (1840) 2 Ir Eq Rep 420 … 9.9C

Wickham Developments v Parker [1995] QCA 281 … 15.52E Wilkinson v Lloyd (1845) 7 QB 27 … 7.45 William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932 … 5.4E, 7.35C, 7.36E, 7.37C William Whiteley Ltd v R (1909) 101 LT 741 … 11.1, 11.7C Williams v Bank of Nigeria [2014] UKSC 10 … 13.57E — v Bayley (1866) LR 1 HL 200 … 8.17, 8.42C, 8.46 — v Frayne (1937) 58 CLR 710 … 13.7 — v Johnson [1937] 4 All ER 34 … 9.11 — v Roffey Brothers & Nicholls (Contractors) Ltd [1991] 1 QB 1 … 8.8E, 8.10E, 8.24C — v Williams [1957] 1 WLR 148 … 8.24C Wilson v The King [1938] 3 DLR 433 … 9.33C Wolmerhausen v Gullick [1893] 2 Ch 514 … 8.56 Wood v Downes (1813) 18 Ves 120 … 9.11 — v Rowcliffe (1847) 2 Ph 3; 45 ER 990 … 15.3 Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 97,590 … 9.24 — v — (1996) 7 BPR 14,686 … 14.11 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 … 15.58C Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70 … 5.22C, 5.24C, 7.30C, 7.31C, 11.2, 11.3, 11.4, 11.5, 11.6C, 11.7C, 11.8C, 13.45C — v — (No 2) [1989] 1 WLR 137 … 11.6C Wright v Carter (1903) 1 Ch 27 … 9.18C — v Kelly (1884) 5 NSWLR 297 … 8.21, 8.23C — v Vanderplank (1856) 8 De GM & G 133 … 9.11 Wylie v Carlyon [1922] 1 Ch 51 … 15.55E

X

X v X (Y and Z intervening) [2002] 1 FLR 508 … 12.36C

Y Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410; [1978] HCA 42 … 13.63C Yardley v Arnold (1842) C&M 434; 174 ER 577 … 3.64E Yeoman Credit Ltd v Apps [1962] 2 QB 508 … 7.10C Yerkey v Jones (1939) 63 CLR 649 … 9.20C, 9.21C Yonge v Reynell (1852) 9 Hare 809 … 15.58C Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330 … 15.55E Young v Lalic [2006] NSWSC 18 … 15.38C

Z Zamet v Hyman [1961] 3 All ER 933; [1961] 1 WLR 1442 … 9.10C, 9.11, 9.15C

Table of Statutes References are to paragraph numbers Commonwealth Australian Consumer Law s 20 … 9.27 s 21(2) … 8.33C Commonwealth of Australia Constitution Act s 90 … 7.6C Companies Code … 13.63C Pt IV Div 6 … 13.63C s 170 … 1.24C, 13.63C s 170(1) … 13.63C s 174(1) … 13.63C s 174(2) … 13.63C Competition and Consumer Act 2010 Sch 2 … 9.27 Copyright Act 1968 s 115 … 10.18 Corporations Act 2001 s 124 … 4.26E s 125 … 4.26E Customs Act 1901 … 13.57E s 167 … 11.4, 11.7C Designs Act 2003 s 75 … 10.18 Federal Airports Corporations Act 1986 … 11.7C Income Tax Assessment Act 1936

s 261 … 5.21C Judiciary Act 1903 s 40 … 11.70C Life Insurance Act 1995 s 199(1) … 4.14 Patents Act 1990 s 122(1) … 10.18 s 123 … 10.18 Sales Tax Assessment Act 1992 … 13.46C s 51 … 11.4 Trade Marks Act 1995 s 126 … 10.18 s 127 … 10.18 Trade Practices Act 1974 … 8.33C Pt VI … 15.58C s 51AA … 1.33E, 8.33C, 9.27 s 51AB … 8.33C s 51AC … 8.33C s 52 … 8.58C Australian Capital Territory Age of Majority Act 1974 … 4.13 Law Reform (Miscellaneous Provisions) Act 1955 s 11 … 8.56 Limitation Act 1985 s 6 … 13.48 s 11 … 13.51 Partnership Act 1963 s 13 … 8.56 Sale of Goods Act 1954 s 7 … 4.14 Taxation Administration Act 1999

s 23 … 5.23E New South Wales Builders Licensing Act 1971 … 7.29C s 45 … 7.29C, 13.63C Business Franchise Licences (Tobacco) Act 1987 … 7.6C Companies Act 1961 s 83 … 13.63C s 86 … 13.63C Confiscation of Proceeds of Crime Act 1989 … 10.36C Conveyancing Act 1919 s 37C … 9.25 Guardianship Act 1987 s 3 … 4.23E s 16 … 4.23E s 21 … 4.23E s 21C … 4.23E Law Reform (Miscellaneous Provisions) Act 1946 s 5 … 8.56 Limitation Act 1969 … 7.15C s 9 … 13.48 s 14 … 13.52E s 14(1)(a) … 13.51 s 48 … 13.56 Local Government Act 1993 s 625 … 12.27C Minors (Property and Contracts) Act 1970 … 4.12C, 4.13, 4.14 s 20 … 4.11C Partnership Act 1892 s 9 … 8.56

Public Service Act 1902 s 14(1) … 4.28C Recovery of Imposts Act 1963 s 2 … 11.4 s 3 … 5.23E s 4(2) … 13.46C State Transport (Co-ordination) Act 1931 … 11.7C Northern Territory Age of Majority Act 1981 … 4.13 Law Reform (Miscellaneous Provisions) Act 1956 s 12 … 8.56 Limitation Act 1981 s 7 … 13.48 s 12(1)(a) … 13.51 s 35D … 5.24C s 43 … 5.24C Partnership Act 1997 s 13 … 8.56 Sale of Goods Act 1972 s 7 … 4.14 Queensland Age of Majority Act 1974 … 4.13 Criminal Proceeds Confiscation Act 2002 … 10.36C Law Reform Act 1995 s 6 … 8.56 s 17 … 4.13 Limitation of Actions Act 1974 s 10(1)(a) … 13.51 s 10A … 11.4

s 43 … 13.48 Partnership Act 1891 s 12 … 8.56 Sale of Goods Act 1896 s 5 … 4.14 South Australia Age of Majority (Reduction) Act 1970 … 4.13 Limitation of Actions Act 1936 s 26 … 13.48 s 38 … 13.54E s 38(1) … 13.51 Minors Contracts (Miscellaneous Provisions) Act 1979 … 4.14 s 4 … 4.20E s 6 … 4.20E s 7 … 4.11C, 4.20E Partnership Act 1891 s 9 … 8.56 Sale of Goods Act 1895 s 2 … 4.14 Wrongs Act 1936 s 25 … 8.56 Tasmania Age of Majority Act 1973 … 4.13 Hire Purchase Act 1943 s 28 … 4.11C Limitations Act 1974 s 4(1)(a) … 13.51 s 25C … 13.46C

s 36 … 13.48 Partnership Act 1891 s 14 … 8.56 Sale of Goods Act 1896 s 7 … 4.14 Wrongs Act 1954 s 4(1) … 8.56 Victoria Age of Majority Act 1977 … 4.13 Australian Consumer Law and Fair Trading Act 2012 Pt 3.2 … 7.22C Goods Act 1958 s 7 … 4.14 Guardianship and Administration Act 1986 s 3 … 4.24E s 24 … 4.24E Land Tax Act 1958 … 11.5, 11.8C Pt III … 11.8C Pt VI … 11.8C s 19 … 11.8C s 90AA … 11.8C Limitation of Actions Act 1958 s 5(1) … 13.53E s 5(1)(a) … 13.51 s 20A … 11.4 s 20B … 13.46C s 27(c) … 13.57E s 31 … 13.48 Partnership Act 1958 s 13 … 8.56

Property Law Act 1958 s 175 … 9.25 Stamps Act 1958 s 111 … 11.7C Taxation Acts Amendment Act 1987 … 5.25C s 2(4) … 5.25C Transfer of Land Act 1958 … 13.27C s 42 … 13.27C s 42(1) … 13.27C Wrongs Act 1958 … 8.61E s 23A … 8.61E s 23B … 8.56, 8.61E s 24 … 8.61E Western Australia Age of Majority Act 1972 … 4.13 Limitation Act 1935 ss 21(1)(a)–47 … 13.57E s 38 … 13.51 Limitation Act 2005 s 13 … 13.51 s 80 … 13.48 Partnership Act 1895 s 16 … 8.56 Property Law Act 1969 s 124(2) … 5.23E s 125 … 12.41 s 125(1) … 12.3, 12.8 Sale of Goods Act 1895 s 2 … 4.14

Imperial Limitation Act 1623 … 13.50C Canada Juvenile Delinquents Act 1970 … 3.42C New Zealand Judicature Act 1908 s 94A … 5.19, 5.23E s 94A(2) … 5.23E s 94B … 12.8, 12.16C, 12.35C, 12.41, 12.42E, 12.43C Judicature Amendment Act 1958 s 2 … 5.19 Marine Insurance Act 1908 s 79 … 15.55E Minors’ Contracts Act 1969 s 5 … 4.21E s 6 … 4.21E s 7 … 4.21E New Zealand Frustrated Contracts Act 1944 … 7.22C Protection of Personal and Property Rights Act 1988 s 53 … 4.24E United Kingdom Chancery Amendment Act 1858 (Lord Cairns’s Act ) … 10.36C, 10.37C s 2 … 10.36C Civil Liability (Contribution) Act 1978 … 8.56, 8.61E Commonwealth of Australia Constitution Act 1900 s 92 … 11.7C Finance Act 2004

s 320 … 5.24C Income and Corporation Taxes Act 1988 s 14(1) … 5.24C, 5.29C s 247 … 5.24C s 247(1) … 5.24C Infants’ Relief Act 1874 … 4.17C, 4.19C, 15.60E s 1 … 4.18C, 4.19C, 15.60E Law Reform (Frustrated Contracts) Act 1943 … 2.41C, 3.43C, 7.22C Limitation Act 1980 … 5.23E s 5 … 13.54E s 32 … 5.22C, 5.24C s 32(1) … 1.36C, 5.24C s 32(1)(c) … 5.24C Lottery Act 1772 … 6.10C Matrimonial Causes Act 1973 s 1(2)(d) … 12.36C Mercantile Law Amendment Act 1856 s 5 … 8.53C, 15.55E Official Secrets Act 1989 s 1(1) … 10.36C Proceeds of Crime Act 2002 … 10.36C Revenue Act 1869 … 11.7C Sale of Goods Act 1979 s 53 … 7.9C Sales of Reversions Act 1867 … 9.25 Statute of Frauds 1677 … 9.4C s 4 … 3.38C Taxes Management Act 1973 s 33 … 5.24C Trade Union and Labour Relations Act 1974 … 8.22C

s 13 … 8.14C, 8.22C s 14 … 8.22C s 29 … 8.22C s 29(1) … 8.22C Welfare Reform and Pensions Act 1999 … 12.34C

Contents Preface Acknowledgements Table of Cases Table of Statutes

1

Unjust enrichment: history, concepts and alternative liability models Introduction History The common law forms of action The implied contract fallacy Equity’s historical contribution The concept of unjust enrichment Elements of an unjust enrichment claim The role(s) of the unjust enrichment concept Alternative models of restitutionary liability Unconscionability (unconscionable retention of benefit) Unjustified enrichment and ‘absence of basis’

2

Locating unjust enrichment in private law Introduction Foundational aims Corrective justice Distributive justice

Summary and reflections Taxonomy — mapping private law Approaches to taxonomy The scope of unjust enrichment law as a category — the broad view Criticisms of the broad view — the challenge of diversity Unjust enrichment law as a category — modern views Unjust enrichment as a ‘Subsidiary’ Doctrine Unjust enrichment and contract Unjust enrichment and property Subsidiarity arguments

3

The elements of an unjust enrichment claim Introduction Benefit A broad conception Positive and negative Legal and factual Examples of types of benefit Objectivity, subjectivity and freedom of choice Legal ‘tests’ of benefit Valuing the benefit Unjust A recognised reason for restitution Defendant has no right to the benefit At the plaintiff’s expense The minimum requirement: causation and the

‘but for’ test Recovery from indirect recipients: ‘leap frogging’ Claims in respect of assets never owned: interceptive subtraction

4

Defects in legal capacity Introduction The effect of incapacity on the passing of title The incapacity of minors Minors’ contracts at common law Recovery at common law of benefits conferred by a minor Statutory rights of restitution The mentally disordered Ultra vires transactions Private bodies Public bodies

5

Mistake Introduction The meaning of mistake The reason(s) for recovery Mistakes of fact The requirement of causative mistake What test of causation? Mistaken gifts Mistakes of law Abolition of the mistake of law ‘bar’ Difficult issues: uncertain law, invalid law and

changes in the law Limitations on recovery ‘Voluntary submission to an honest claim’ ‘Good consideration’ — payments to meet a valid obligation Contradiction of statutory regime Mistakes and contract Non-Monetary benefits

6

Ignorance’ or ‘Absence of Consent’ Introduction The Argument from Mistake Rival property analyses The Common Law Position The Position in Equity The ‘rule in Re Diplock’ Personal liability for knowing receipt Personal liability for benefits knowingly ‘retained’ Liability in equity for the receipt of company assets without authority

7

Failure of Basis Introduction The concept of a ‘Basis’ (‘Consideration’) Proving ‘Failure’ of the Basis Identifying the basis of a benefit’s provision Proving that the basis has failed The requirement of ‘Total’ Failure

Example 1 — Contracts Discharged by Frustration Example 2 — Contracts Terminated for Breach Claims by the innocent party Claims by the party in breach Example 3 — Unenforceable and Void Contracts Example 4 — Incomplete or Anticipated Contracts Example 5 — Performances under Valid Contracts Escaping Bad Bargains

8

Coercion Introduction The Concept of Coercion A preliminary definition Coercion distinguished from compulsion Threats distinguished from warnings Duress at Common Law The rationale of recovery The first requirement: ‘illegitimate’ threat The second requirement: causation A possible third requirement: absence of reasonable alternatives Equitable Duress (Actual Undue Influence) Legal Coercion and Compulsion Reimbursement Contribution

9

Defects in personal capacity Introduction Constraints on relief

Undue Influence Classes of undue influence Actual (relational) undue influence Presumed undue influence Relationships proven to be of influence A transaction requiring explanation Undue influence and third parties Rebutting the presumption Unconscionable Bargains A Special Disadvantage Knowledge of the special disadvantage The Basis of Equitable Intervention: Impaired Judgmental Capacity or Wrongdoing?

10 Wrongdoing Introduction Terminology and Taxonomy Foundational aims Corrective justice? The protection of important social institutions? Deterrence and punishment? The Current Pattern of Recovery Torts and intellectual property infringements Equitable wrongs Breach of contract Quantification

11 Restitution from public authorities Introduction

The Woolwich Principle

12 The change of position defence Introduction Different Models for the Defence Model 1 — An enrichment-related defence Model 2 — A detriment-related defence Model 3 — A hardship-related defence Elements of the Australian Defence The basic model iterated Detriment Causation (‘on the faith of the receipt’) Good faith, fault and wrongdoing Proprietary claims England and Wales New Zealand The statutory defence The defence at common law

13 Other defences Introduction Estoppel The basis of estoppel The elements of estoppel The extent of the defence Estoppel and change of postion Bona fide purchase Land registration as a defence to restitutionary claims

The Defence of Incapacity Counter-restitution Ministerial Receipt The doctrinal basis of ministerial receipt Making out the defence of ministerial receipt The defence of Passing On Delay and limitation The limitation statutes Delay in equity — laches, acquiescence and delay Illegality

14 The nature and basis of tracing Introduction The Nature of Tracing Common Law and Equitable Tracing A unitary law of tracing? The Reasons for Tracing The Prerequisites for Tracing The Effect of Tracing The Rules of Tracing Tracing at common law Tracing in equity Tracing into discharged debts Tracing and Unjust Enrichment

15 Proprietary restitution Introduction Types of proprietary remedy

Operational differences Advantages and motivations Proprietary remedies and insolvency law Rival Models of Proprietary Relief Model 1 — No proprietary remedies Model 2 — ‘Proprietary base’ Model 3 — ‘Initial’ injustice Model 4 — ‘Plaintiff does not take the risk of the defendant’s insolvency’ Model 5 — Remedial flexibility and discretion Discretionary Remedialism Proprietary remedies Constructive trusts and ‘proportionate share’ remedies Resulting trusts Rescission Subrogation Equitable liens Index

[page 1]

1

Unjust enrichment: history, concepts and alternative liability models CHAPTER SUMMARY

Introduction History The common law forms of action R Goff and G Jones, The Law of Restitution J Baker, ‘The History of Quasi-Contract in English Law’ Moses v Macferlan

The implied contract fallacy Pavey & Matthews v Paul

Equity’s historical contribution The Concept of Unjust Enrichment Elements of an unjust enrichment claim The role(s) of the unjust enrichment concept K Barker, ‘Understanding the Unjust Enrichment Principle in Private Law: A Study of the Concept and its Reasons’ Pavey & Matthews Pty Ltd v Paul

1.1 1.4 1.6 1.8E 1.9E 1.10C 1.11 1.12C 1.13 1.15 1.15 1.19

1.20E 1.21C

David Securities Pty Ltd v Commonwealth Bank of Australia

1.22C [page 2]

Bofinger v Kingsway Group Ltd Equuscorp Pty Ltd v Haxton Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3) Eastenders Cash & Carry Plc & Others v Crown Prosecution Service

Alternative Models of Restitutionary Liability Unconscionability (unconscionable retention of benefit) Roxborough v Rothmans of Pall Mall Australia Ltd Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd R Grantham, ‘Restitutionary Recovery Ex Aequo et Bono’ P Birks, Unjust Enrichment

Unjustified enrichment and ‘absence of basis’ Kleinwort Benson Ltd v Lincoln City Council P Birks, Unjust Enrichment Deutsche Morgan Grenfell Group Plc v Inland Revenue Commissioners

1.23C 1.24C 1.25C 1.26C 1.27C 1.28 1.29 1.30C 1.31C 1.32E 1.33E 1.34 1.36C 1.37E 1.39C

INTRODUCTION 1.1 The advent of a law of unjust enrichment is a relatively recent and, in some jurisdictions, remains a controversial event. While the law has in fact, from early Roman times, always provided remedies that focus on the restitution of a defendant’s gains, as opposed to the compensation of a plaintiff’s losses, it is only in the twentieth and twenty-first centuries that common law systems have begun to draw together and rationalise the various instances in which this occurs. The process was formally initiated in the United States in 1937 through the recognition of a ‘law of restitution’ in the first Restatement of Restitution.1 Today, the field is more often referred to as the law of ‘unjust enrichment’ and that name now appears in the title of the most recent, Third Restatement of the law,2 as well on the front pages of many leading academic works in the Commonwealth.3 The change in nomenclature from ‘restitution’ to ‘unjust enrichment’ reflects the significant shift in intellectual thinking that has occurred, since the abolition of the ancient forms of action, away from describing private law in terms of particular procedures for obtaining remedies (writs), and towards the description and analysis of the rights and causes of action upon which remedies are based. Unjust enrichment law names and describes a series of events that give rise to gainbased remedies (‘restitution’4) [page 3]

in private law, subjecting all such claims to the discipline of a common analytical framework. The subject draws its moral strength from the ancient principle that one person should not enrich himself unjustly at the expense of another: Iure naturae aequum est neminem cum alterius detrimento et iniuria fieri locupletiorem.5 1.2 The discrete place of unjust enrichment law within private law was recognised in Canada in 19546 and in the United Kingdom in 1991 in the landmark case of Lipkin Gorman (a firm) v Karpnale Ltd.7 The High Court of Australia recognised the principle against unjust enrichment several years prior to Lipkin Gorman in Pavey & Matthews Pty Ltd v Paul,8 but its endorsement of the idea has been more cautious in recent years. The Court has tended to favour a different taxonomic framework according to which restitutionary remedies are understood as being based upon traditional equitable doctrines and principles, in particular the principle of ‘unconscionability’. This preference for the language of ‘equity’ over that of ‘unjust enrichment’ reflects, we suggest, the very late fusion of law and equity in New South Wales9 and the hold that historical jurisdictional forms continue to exercise over the legal imagination in some parts of Australia. Despite this uncertainty, recent changes in the composition of the High Court10 are likely to result in greater acceptance of the subject in future years. There are also clear signs of unjust enrichment reasoning in lower courts. The second edition of this book therefore enters the stage at a critical phase of the law’s development. Even if the High Court is persuaded, in line with other common law jurisdictions, to accept the taxonomy of unjust enrichment, there is no guarantee that the law will develop in exactly the

same way in Australia as it has elsewhere. A number of important choices remain to be made concerning the scope, structure and content of unjust enrichment claims and defences. We address these throughout the course of this book. 1.3 This chapter provides an introduction to the concept of unjust enrichment. The first section provides a brief history. The second section examines the role that the concept plays in the modern law. The final section examines two rival models of restitutionary liability that potentially compete with the unjust enrichment model, including the High Court’s recent thesis that restitutionary rules are based on notions of equity, good conscience and the prescription of unconscionable conduct. [page 4]

HISTORY 1.4 The law of restitution is at once both very old and very new.11 On the one hand, its origins lie in writ actions, such as debt, account, money had and received, and quantum meruit, which were well known as early as the sixteenth century. On the other hand, however, these actions were not regarded as representing a coherent body of law. They were seen either as a miscellany or as an obscure subdivision of the law of contract that came to be known as ‘quasi-contract’. The emergence of a law of unjust enrichment as a coherent body of law is a development of the last 30 to 40 years.

1.5 Despite having been freed from the shackles of the old forms of action for over 150 years, their legacy continues to influence the shape of the modern law. This legacy consists of the arcane and confusing language of money had and received and quantum meruit and, more importantly, in the close association which ‘quasi-contract’ suggested with the law of contract proper. The fallacy that restitutionary obligations are founded upon genuine implied promises to pay for benefits received has now been resoundingly rejected.12

The common law forms of action 1.6 Actions for restitution were historically brought at common law via a variety of different forms of action, including the old ‘praecipe’ writs of debt and account and then (later — from about 1657 onwards) via actions on the case, in particular the form of action known as ‘assumpsit’. One form of assumpsit action — the action in ‘indebitatus assumpsit’ — came to be of particular importance for procedural and evidential reasons that need not concern us today. It had a number of different sub-forms that were in practice used to seek restitution in different circumstances — the action for money had and received, the action for money paid, quantum meruit and quantum valebat actions. Collectively, these actions came to be known as the law of ‘quasi-contract’. In each case, the plaintiff based his or her claim on a fictional promise by the defendant to pay for the benefit he or she had received. The following are abbreviated examples of the forms of words used in each case to assert the relevant restitutionary claim, each containing reference to

a promise made by the defendant to pay that did not in fact need to exist for the claim to succeed:13 Action for money had and received. This form of action was used where P sought to recover money received by D. ‘Whereas the defendant was indebted to the plaintiff in the sum of [£x] for so much money by the defendant had and received to and for the use of the plaintiff and being so indebted he, the defendant, in consideration thereof afterward and faithfully promised [assumpsit] the plaintiff to pay the said sum, yet the defendant hath not paid the said sum, but hath wholly refused and still refuses, to the plaintiff’s damage’.

[page 5]

Action for money paid: This form of action was used where P paid money to a third party, but D benefited by this exercise — as, for example, where P paid off one of D’s debts, or where P paid a plumber to repair D’s burst water pipe. ‘Whereas the defendant was indebted to the plaintiff in the sum of [£x] for so much money by the plaintiff paid, laid out and expended to and for the use of the defendant at the defendant’s special instance and request, he the defendant, in consideration thereof

afterwards promised to pay.’

Quantum Meruit and Quantum Valebat: The claim for a quantum meruit (meaning ‘as much as was merited’) was

used to recover reasonable remuneration for services rendered. Quantum valebat (meaning ‘as much it was worth’) was used to recover a reasonable price for chattels supplied to D. The following is an example of the form of words used in a quantum valebat claim: ‘Whereas P afterwards at the special instance and request of D had sold and delivered to D other wines, the said D in consideration thereof afterwards assumed upon himself and faithfully promised that he the said D so much money as he the said P for the wine last mentioned should reasonably deserve would well and faithfully pay: nevertheless the said D has not paid.’ 1.7 Nowadays, the forms of action are redundant, but their language obstinately persists. The term ‘quasi-contract’ is also unhelpful, precisely because the vast majority of restitutionary claims are not based on the defendant’s promise to pay for his or her gain. Etymologically, the Latin prefix ‘quasi’ in the term ‘quasi-contract’ means ‘as if’ — stressing a distinction from contract, not a similarity to it. The most important of the old forms of action — the action for money had and received — is considered by Lord Mansfield in Moses v Macferlan (1.10C).

1.8E R Goff and G Jones, The Law of Restitution 1st ed, Sweet & Maxwell, London, 1966, pp 3–5 (some references omitted) Restitution includes quasi-contract … We understand quasicontract to be that part of restitution which stems from the common indebitatus counts for money had and received and for money paid, and from quantum meruit and quantum valebat claims. The action for money had and received lay to recover money which the plaintiff had paid to the defendant, on the ground that it had been paid under a mistake or compulsion, or for a consideration which had wholly failed. By this action the plaintiff could also recover money which the defendant had received from a third party, as when he was accountable or had attorned to the plaintiff in respect of the money, or the money formed part of the fruits of an office of the plaintiff which the defendant had usurped. The action also lay to recover money which the defendant had acquired from the plaintiff by a tortious act; and, in the very rare cases where the defendant had received money which the plaintiff could still identify as his own and was not a bona fide purchaser for value, the plaintiff could assert his ownership in the money by means of the action. The action for money paid was the appropriate action when the plaintiff’s claim was in respect of money paid, not to the defendant but to a third party, from which the defendant had derived a benefit. Historically, the plaintiff had to show that the payment was made at the defendant’s request; but we shall see that the law was prepared to ‘imply’ such a request on certain occasions, in particular where the payment was made under compulsion of law, or in limited circumstances, in the course of intervention in an emergency on the defendant’s behalf, which in this book we shall call necessitous intervention. Quantum meruit and quantum valebat claims lay respectively to recover reasonable remuneration for services and a reasonable price for goods supplied by the plaintiff. Since, like a payment to a third party, services can be rendered and goods supplied without the co-operation of the defendant, something

more than the mere supply of the services or goods must be shown to make the defendant liable to pay for them. So here, too, the plaintiff had to prove, and indeed must still plead, a request by the defendant. But again the notion of request has been extended. As we shall see, it is now enough that the defendant has freely accepted the services or goods, having had an opportunity to reject them and having accepted them with actual or presumed knowledge that they were paid for; and, on those rare occasions when the plaintiff can rely on his necessitous intervention in the defendant’s interest, no request at all need be proved. To draw the boundaries of quasi-contract, it is necessary to refer to the limits of these old forms of action. But these limits, though relevant, are not definitive. Not every right enforced by these remedies (continued)

[page 6] can be classified as quasi-contractual. Each one of the remedies might be used to enforce purely contractual claims. Thus the action for money had and received was used to compel a contracting party, such as an agent, to account; and the action for money paid lay to enforce the contractual right of indemnity, for example, by a surety against his principal debtor. Quantum meruit and quantum valebat claims were employed to recover reasonable remuneration for services or a reasonable price for goods which had been rendered or supplied under a contract in which the remuneration or price had not been agreed. Moreover, as we have seen, the action for money had and received also lay in respect of money as property; and the action could be used to recover miscellanea such as statutory penalties and judgment debts, these claims being part of the inheritance which indebitatus assumpsit received from debt in the seventeenth century. Historical accident is an unsatisfactory basis

for classification and, to arrive at a satisfactory description of quasi-contract, jurists have been forced to search for a predominant principle which will enable them to reject a minority and unify the majority of the claims enforced by these forms of action. This principle is widely accepted to be Unjust Enrichment. Quasi-contractual claims are, therefore, those which fall within the scope of the actions for money had and received or for money paid, or of quantum meruit or quantum valebat claims, and which are founded upon the principle of unjust enrichment. There are, however, other claims of different origin which are also founded on that principle. So, for example, there are claims in equity analogous to quasi-contractual claims to recover money paid under a mistake; and equitable relief from undue influence is a rational extension of the limited relief which the common law provides in cases of duress. Some restitutionary claims outside the scope of quasicontract were known to both law and equity; these include two of the most important topics in restitution, namely, contribution and subrogation. Other restitutionary claims, notably generally average and salvage, were developed by the Court of Admiralty. But the substantive link between these and quasi-contractual claims was hidden by the artificial barriers erected by the forms of action. It is now almost a century since the forms of action were abolished [S.3 of the Common Law Procedure Act, 1852, provided that it should no longer be necessary to mention any form or cause of action in the writ. … The final demise of the forms of action was effected by the Judicature Acts, 1873–1875 …], and there is no reason why they should be allowed any longer to obstruct a unified treatment of all claims founded on the principle of unjust enrichment. The law of restitution is the law relating to all claims, quasi-contractual or otherwise, which are founded upon that principle.

1.9E J Baker, ‘The History of Quasi-Contract in English Law’ in W Cornish, R Nolan, J O’Sullivan and G Virgo (eds),

Restitution, Past, Present and Future, Hart, Oxford, 1998, Ch 3,

pp 39, 41–2, 53–5 (some references omitted) The main reason why our earlier common lawyers did not, either in the context of debt or account, develop a coherent theory of money claims is that it would have seemed a work of supererogation. They did not need one. The formulary system required that a plaintiff find an original writ with wording to suit his facts rather than a conceptual pigeon-hole in which to put them. And the original writs, even if they reflected the elementary concepts of the time in which they were first devised, had developed piecemeal without much recourse to abstract theorising. In any case, it was not the older forms of action, encumbered as they were by archaic procedures, which in the end provided the vehicle for the nascent law of restitution. In the sixteenth century they gave way to actions of trespass on the case, which were more flexible in scope and wording and proved useful in framing restitutionary money claims. There was no action on the case for restitution as such, and the only possible judgment in an action on the case was for unliquidated damages as assessed by the jury. Nor was there an action on the case for the enforcement of a trust as such, … The practical way to achieve restitutionary remedies was therefore not by inventing a new form of action but by fictional extensions of the action on the case upon assumpsit, which in form was an action for damages for breach of an undertaking. … The three principal forms of assumpsit which lent themselves to development through fiction were quantum meruit (or more strictly quantum mereret), quantum valebant and indebitatus assumpsit. The first two were used where services were performed, or goods sold, and no certain remuneration or price was agreed upon at the time. The plaintiff alleged a promise to pay what he deserved for the services, or what the goods were worth and added an averment as to what the appropriate sum was. There is no reason why a person should not make an explicit promise in these terms, but the formula obviously lent itself to fiction, or at least implication, where no

promise had been made at all. Indebitatus assumpsit, on the other hand, was used as an alternative to the writ of debt, and rested on the assertion that the defendant,

[page 7] being indebted to the plaintiff in a certain sum, and in consideration of that indebtedness, promised to make payment. In this form of assumpsit, the promise to pay was no doubt almost always fictitious, for it was generally accepted that this was essentially a claim in debt forced into the assumpsit formula by the addition of an imaginary promise. However, it was necessary for the plaintiff to indicate in his count, in general terms, why the defendant was indebted to him: for instance, for ‘goods sold’, for ‘work done’, for ‘money laid out’, or for ‘money had and received’ to his use. These subsidiary formulae were known as the common money-counts. The count for money had and received proved to be the most expansive for restitutionary purposes, since it represented on its face a claim by a beneficiary to enforce a trust of money. It would be extended to cover various cases where money was not expressly or ostensibly received to the plaintiff’s use, but a use was implied by law from the circumstances. The other three counts all required a prior request by the defendant: for example, he could not be charged for services performed unless he had requested them. The need for this request formally hindered restitutionary claims; but the request, though always alleged, could itself become fictitious, and then the claim might take on a very different character. … By the time of Lord Mansfield, then, the common law provided restitutionary remedies in a number of situations, but still had no coherent theory to explain them. … [J]udges referred occasionally to ‘quasi- contract’. The term was convenient to denote the use of a contractual form of action in circumstances where there was no

contract, whether or not the object was restitution. But the use of Roman terminology did not import the borrowing of civilian doctrine, and it is clear that the thinking of the continental civilians was not current among the common lawyers. Another mode of expression — if not of explanation — was that of the implied contract, or implied promise. … In Moses v. Macferlan (1760), [2 Burr 1005 …] Lord Mansfield brought together the notion of quasi-contract and the restitutionary uses of indebitatus assumpsit in a famous synthesis: ‘If the defendant be under an obligation, from the ties of natural justice, to refund, the law implies a debt, and gives this action [assumpsit for money had and received], founded in the equity of the plaintiff’s case, as it were upon a contract (quasi ex contractu, as the Roman law expresses it)’. Even here the language of quasi-contract or implied contract has no theoretical substance: it is a means of formal classification, not of juristic explanation. The nearest we come to explanation is in the talk of natural justice, or equity: ‘In one word’, said Lord Mansfield, ‘the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money’. [… at p 1012] … Natural justice, human nature, and equity, are elegant eighteenth-century ways of expressing what Lord Justice Scrutton would ungenerously condemn as ‘well meaning sloppiness of thought’, [Holt v Markham [1913] 1 KB 504, at 513 …] or perhaps what our ruder age would term the ‘gut-reaction’. The need for a remedy is apparent to the decent observer without the need to find a specific rule which preordains it. Moreover, the reaction of the laymen on the jury counted as much in such cases as the views of the judge. In this context, as in many others, the law evolved from the attitudes of people facing the facts of particular cases. It was, after all, the twelve good men and true rather than the twelve judges who had the last word on whether or not a fiction would take effect, and in what circumstances. Judges may have helped them with guidance; but their directions have only intermittently survived. Counsel may have encouraged them to extend a formula which did not quite fit,

in order to achieve justice; but juries themselves gave no reasons. Special verdicts could raise such questions formally; but they were uncommon. As a result, legal principle followed rather than preceded the development of remedies.

1.10C Moses v Macferlan (1760) 2 Burr 1005 at 1012 (KB) (references omitted) Moses endorsed four promissory notes to the defendant. The defendant signed an agreement to the effect that Moses would not be prejudiced by making the endorsements, but subsequently sued him on the notes anyway. The defendant obtained judgment from the Court of Conscience, which refused to accept the ‘no prejudice’ agreement by way of defence. Moses paid the sums found to be due pursuant to the judgment, but then sought to recover them from the defendant in an action for money had and received. Lord Mansfield allowed the claim on the basis that the defendant could not in good conscience retain the money. Lord Mansfield: If the defendant be under an obligation, from the ties of natural justice, to refund; the law implies a debt, and gives this action, founded in the equity of the plaintiff’s cases, as it were upon a contract (‘quasi ex contractu,’ as the Roman law expresses it). (continued)

[page 8] This species of assumpsit, (‘for money had and received to the plaintiff’s use,’) lies in numberless instances, for money the

defendant has received from a third person; which he claims title to, in opposition to the plaintiff’s right; and which he had, by law, authority to receive from such third person. … This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged. It lies only for money which, ex æquo bono, the defendant ought to refund. It lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition, (express, or implied;) or extortion; or oppression; or an undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.

Notes and questions 1. Moses is seminal to the modern law of unjust enrichment on account of what Lord Mansfield had to say about the basis of the action in money had and received. The actual decision, however, has been questioned on the basis that, judgment already having been given in the defendant’s favour, the principle of res judicata should have precluded the claim (see, for example, G Fridman, Restitution (2nd ed, Carswell, Toronto, 1992), pp 449–50; P Jaffey, The Nature and Scope of Restitution (Hart, Oxford, 2000), p 183; cf contra Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68 at [80] (Gummow J). Alternatively, it might be argued that the question of the defendant’s entitlement to the money paid by Moses was fixed by the contractual terms of the endorsement and that restitution

of the money paid would therefore have unacceptably contradicted these terms. This issue, which can be described as one of the ‘subsidiarity’ of restitution to any valid contractual risk allocation, is discussed further at 2.38 et post. 2. The action for money had and received is a creation of the common law courts. What, therefore did Lord Mansfield mean when he described the action as ‘equitable’ in nature? Does the language of equity assist in understanding the basis of the claim? See further 1.29. 3. The Court of Conscience was a court of first instance established in 1517 in London to hear matters of debts between citizens and freemen of the city. It was abolished in 1847.

The implied contract fallacy 1.11 For many years, the idea persisted that rights to restitution were based on implied promises by the defendant to pay for the benefit that he or she had received, not on unjust enrichment. It was for this reason that much of the law of restitution came to be housed at the back of textbooks and treatises on the law of contract under the mysterious heading of ‘quasi-contract’. The fallacy, which is dispelled in Pavey (1.12C), seems to be attributable to a number of historical factors. The first is the use of the ‘assumpsit’ form of action to enforce restitutionary debts. This process started in the period following Slade’s Case14 (1602) and was adverted to above. It resulted in one and the same writ action being used to bring both genuine contractual claims, and restitutionary ones. It was then easy for the two to become

confused. A second factor was the unfortunate use of the phrase ‘quasi-contract’ to refer collectively to the common law forms of action giving rise to restitution. The term is one that was borrowed by English lawyers (first by Lord Mansfield in Moses (1.10C)) from Roman law (Justinian). [page 9] When Justinian originally used the term,15 he was simply referring to a category of claims that was neither obviously tortious, nor contractual.16 Ironically, however, the language of quasi-contract appears to have resulted in text writers conceptualising restitutionary claims as analogous to contract, not distinct from it. A third factor lies in the great influence that William Blackstone’s work had on judges’ understanding and development of the common law in the eighteenth and nineteenth centuries. Like many writers of his time, Blackstone took social contract theory to be the normative foundation of all forms of legal obligation and it seems possible that this in turn led him, in his lectures and Commentaries on the Laws of England,17 to rationalise restitutionary claims under an ‘implied contract’ rubric.18 Professor Ibbetson has described this as a ‘disastrous false step’.19 It engendered a critical misunderstanding of the law among subsequent generations of lawyers relying upon his work. 1.12C Pavey & Matthews v Paul (1987) 162 CLR 221 at 227–8 (HCA) (some references omitted)

The plaintiff was a builder who had carried out building work under an oral contract with the defendant. The contract was unenforceable because it was oral and statute required it to be made in writing. Instead of suing on the contract, the plaintiff sought to claim a restitutionary quantum meruit for the reasonable value of the work done. The principal question was whether allowing the claim would, in effect, be equivalent to allowing an action upon the unenforceable contract. The High Court held that it would not, because the claim was one based on unjust enrichment of the defendant. It allowed the claim. Mason and Wilson JJ: Deane J, whose reasons for judgment we have had the advantage of reading, has concluded that an action on a quantum meruit, such as that brought by the appellant, rests, not on implied contract, but on a claim to restitution or one based on unjust enrichment, arising from the respondent’s acceptance of the benefits accruing to the respondent from the appellant’s performance of the unenforceable oral contract. This conclusion does not accord with the acceptance by Williams, Fullagar and Kitto JJ in Turner v Bladin of the views expressed by Lord Denning in his articles in the Law Quarterly Review, vol 41 (1925), p 79, and vol 55 (1939), p 54, basing such a claim in implied contract. These views were a natural reflection of prevailing legal thinking as it had developed to that time. The members of this Court were then unaware that his Lordship had, in his judgment in James v Thomas H Kent & Co Ltd, as reported in the authorized reports, discarded his earlier views in favour of the restitution or unjust enrichment theory. Since then the shortcomings of the implied contract theory have been rigorously exposed [see Goff and Jones, The Law of Restitution, 2nd ed. (1978), pp 5-11] and the virtues of an approach based on restitution and unjust enrichment, initially advocated by Lord Mansfield and later by Fuller and Perdue [see ‘The Reliance Interest in Contract Damages’, Yale Law Journal, vol 46 (1936–37), pp 352, 373, esp at p. 387], widely appreciated … . We are therefore now

justified in recognizing, as Deane J has done, that the true foundation of the right to recover on a quantum meruit does not depend on the existence of an implied contract. Once the true basis of the action on a quantum meruit is established, namely execution of work for which the unenforceable contract provided, and its acceptance by the defendant, it is difficult to regard the action as one by which the plaintiff seeks to enforce the oral contract … The purpose of proving the contract is not to enforce it but to make out another cause of action having a different foundation in law.

Notes and questions 1. The fact that a restitutionary quantum meruit can be made out without proving and enforcing a contractual promise (as in the instant case) does not necessarily mean that all [page 10] quantum meruit actions are restitutionary. The same form of action has sometimes been used to enforce genuine implied promises by a defendant to pay a reasonable remuneration for work done. In the modern era, we would therefore do well to abandon the language of the old forms of action entirely, to enable us to discriminate clearly between claims based on genuine agreement and those based on unjust enrichment. 2. Does the fact that the claim in this case was restitutionary, not contractual, fully explain why it was allowed? Did awarding restitution not conflict with the purpose of the statutory provision making oral building contracts

unenforceable? See further D Ibbetson, ‘Implied Contracts and Restitution: History in the High Court of Australia’ (1988) 8 OJLS 312.

Equity’s historical contribution 1.13 It is not just the common law that has historically effected restitution.20 Examples of equity’s contribution include the remedies of account of profits, equitable rescission, the constructive (and possibly the resulting) trust, the technique of subrogation, orders for the re-conveyance of property,21 and the equitable lien. Its role in the development of proprietary restitutionary remedies has been especially important and is examined in detail in Chapter 15. Equity has also contributed a number of valuable substantive doctrines that provide independent grounds for restitution going beyond those recognised at common law, such as the doctrine of undue influence (9.5) and unconscionable bargain (9.24). 1.14 The process of integrating restitutionary doctrines and remedies of equitable origin with those of the common law is far from complete, or without controversy. While some equitable doctrines and remedies are undoubtedly concerned to reverse or prevent the defendant’s unjust enrichment, they can still, and perhaps more often do, serve other ends. The constructive trust provides a clear example. As well as responding to unjust enrichment, such trusts can also give effect to a promise the defendant has made, or protect a plaintiff’s equitable property rights.22 Any attempt to fuse equitable and common law principles to produce a coherent body of unjust enrichment law must bear this in

mind and distinguish clearly between those cases in which equity is doing restitution and those in which it is not. The idea of fusion is still strongly opposed in some quarters.23 At the root of the idea is the desire to ensure that like cases are treated alike and that the law is organised in a rational, analytical manner that does not depend on the random fortuities of historical accident, or make outcomes depend on jurisdictional divisions between Courts of Equity and Law that no longer exist in the modern day.

THE CONCEPT OF UNJUST ENRICHMENT Elements of an unjust enrichment claim 1.15 In the United Kingdom and most other common law jurisdictions in which the law of unjust enrichment is now firmly recognised, courts have come to analyse claims falling within the subject’s rubric through the deployment of the analytical framework set out in Figure 1.1. [page 11]

Figure 1.1: The analytical frasmework of unjust enrichment.

This framework breaks unjust enrichment claims down into a series of logical questions. These are, firstly, was the defendant enriched? Secondly, was that enrichment at the expense of the plaintiff? Thirdly, was the enrichment unjust (in the sense that it violated a recognised legal or equitable rule)? Fourthly, does the defendant have any defence to the claim? Fifthly and finally, what type of remedy should be granted (personal, or proprietary) and in what measure (quantum)? 1.16 The first four stages of this framework were recognised by Lord Steyn in Banque Financiére de la Cité v Parc (Battersea) Ltd,24 where his Lordship said: Four questions arise. (1) Has [the defendant] … benefited or been enriched? (2) Was the enrichment at the expense of [the plaintiff]? (3) Was the enrichment unjust? (4) Are there any defences? 1.17 The fifth analytical question (remedies) is sometimes framed instead in terms of what ‘type of right’ a successful plaintiff is entitled to,25 or by asking what ‘type of restitution order’ the court can make.26 The principles underlying these choices are perhaps the least well understood.27 The onus is on the plaintiff to make out the first three elements and once this has been done, he or she has a prima facie claim to restitution. The onus then shifts to the defendant to make out a defence at the fourth stage. Collectively, these ‘elements’ provide a conceptual framework for the analysis of a variety of different unjust enrichment claims, or, as Lord Clarke has put it, ‘broad headings’ which assist in the ‘exposition’ of such claims.28 It is important to stress that it is not enough simply to plead the first three elements of the framework in

the abstract in order to make out a restitutionary claim. The elements are ‘not themselves legal tests, but are signposts towards areas of inquiry’ designed to structure a court’s approach to liability and to increase certainty and predictability.29 A plaintiff must always refer in detail to existing rules of law that prove the injustice of the defendant’s enrichment by reference to a specific and legally recognised reason (‘unjust factor’). 1.18 The above framework has recently been re-iterated several times by the United Kingdom Supreme Court.30 The High Court of Australia is yet to adopt it explicitly, but there [page 12] is recognition in the joint judgment of French CJ, Crennan and Kiefel JJ in Equuscorp Pty Ltd v Haxton31 (extracted at 1.24C) of some of its key elements. The full, five-stage analysis has been strongly advocated by Keith Mason, writing extra-judicially,32 and significant parts of it (the first three, or four, stages) have been deployed in the reasoning of a good number of lower Australian courts.33 In the High Court, in Roxborough v Rothmans of Pall Mall Australia Ltd,34 Justice Kirby went so far as to describe the analysis as ‘generally accepted’, which was probably to overstate the High Court’s own views at the time, but this description now reflects the vast majority of modern English authority and an increasing proportion of Australian judicial opinion. Remaining reservations about the adoption of the unjust enrichment principle appear to be related to confusion

regarding the way it should be used. A key concern that resonates through the extracts from the High Court in the following section is that unjust enrichment might be understood not as an analytical framework or legal principle for rationalising restitutionary claims that is grounded in the existing law, but as a ‘top-down theory’,35 or a ‘definitive’ legal rule.

The role(s) of the unjust enrichment concept 1.19 Some of the recent Australian resistance to the unjust enrichment principle probably stems from unarticulated disagreements about the role that such a principle might occupy within the law. The following extract identifies four possible roles that the concept might play — as an organisational category (area of the law); a moral principle that merely informs the law from the outside; a legal principle that rationalises and guides the development of existing legal rules; or a cause of action. Consider which role or roles is (are) endorsed in the following judgments. Consider also which role is the most appropriate. 1.20E K Barker, ‘Understanding the Unjust Enrichment Principle in Private Law: A Study of the Concept and its Reasons’ in J Neyers, M McInnes, S Pitel (eds), Understanding Unjust Enrichment, Oxford, Hart, 2004, pp 84–90 [A] common debate has emerged about the nature of unjust enrichment as an idea. Different jurists have understood it in very different ways. It has thus variously been described as an extrinsic moral standard incapable of concrete application, an ‘aspiration

and a standard for judgment,’ an ‘idea’ underlying a variety of different parts of the law but with no claim to its own taxonomic territory, an ‘organisational tool’ or ‘classificatory label’ for existing legal decisions, a ‘principle of justice,’ a ‘generalized articulation

[page 13] of the common sense and policy considerations’ lying behind sets of legal rules, a ‘unifying principle’, a ‘legal concept’ with both empirical content and predictive power, a legal ‘doctrine’, a ‘cause of action’ and a ‘basis of liability’. From this descriptive soup, four possible roles for the concept can be strained. … John McCamus [J McCamus, ‘Unjust Enrichment: Its Role and Limits’ in Waters (ed), Equity, Fiduciaries and Trusts (Toronto, Carswell, 1993) p 129] identified some of these for us in 1993 and they coincide with the intuitions expressed by Joseph Raz [J Raz, ‘Legal Principles and the Limits of Law’ (1972) 81 Yale LJ 823, especially 839–42] about the way in which principles can more generally be used in law. Firstly, the concept might operate as a classificatory [taxonomic, organisational] unit, like contract or tort. In this role, it has no normative force, any more than a generic label such as ‘cats’ or ‘dogs’ does. It simply groups cases which are perceived by their observer to have more or less homogeneous characteristics. It is then an instrument of observation, organisation and understanding, but lacks any form of prescriptive power. In Raz’s terms, it is a way of interpreting legal rules in order to accord them coherence. … A second view is that the principle expresses an extrinsic norm: one who is unjustly enriched at the expense of another ought … for reasons either moral or other [eg reasons of policy], to yield up his enrichment in such a way as to make good the injustice. The normative aspect of the principle in this role means that it can act as a legislative or judicial reason for changing existing legal rules, or

making new ones.

But its extrinsic [extra-legal] nature denudes it of legal force. It is a principle, but not a principle of law. … The third role identified for unjust enrichment is as a legal principle. In this guise, the concept has both normative force and (vitally) legal status: it states that one must not in law unjustly enrich oneself at the expense of another. The normative aspect means, again, that it can operate as a reason for changing existing legal rules – it makes the principle dynamic. Its legal status affords it greater weight and legitimacy in judicial argument than if it simply embodied extrinsic values … Nonetheless, the concept has only limited, dispositive power. It does not itself dispose of particular cases, but mediates a set of lower-level concepts and rules. What is meant by ‘injustice’ for example, depends upon the category of case concerned and it is only by looking to the relevant category that the required elements of liability may be precisely determined. … The idea that the principle is a higher-level mediator of lower-level ideas means that it looks ‘downward toward the cases,’ not upward, to a starry firmament of subjective, moral considerations. … The final role for the concept is as a legal cause of action. By this, I think it is generally meant that the concept can of itself be legally dispositive. Its direct application generates liability, without further reference to lower-level concepts. In this guise, it looks more like what Dworkin might refer to as a rule, because of its high degree of prescriptive force. The occurrence of a particular ‘event’ (unjust enrichment) describes the set of conditions (the ‘protasis’ of the rule) under which the relevant consequence (the ‘apodosis’) automatically applies. … The debate about the nature of the unjust enrichment principle can … be crudely summarised in terms of the above, four, functional options. … It is not easily settled because the question of role is culturally contingent and perceptions of [unjust enrichment’s] function are also affected by perceptions of [its] scope. In Canada, there is evidence of it having been used in the first, third and fourth roles. In England, where it is younger,

attitudes more cautious and the civilian influence less apparent, the evidence is that it is settling into the first and third roles: as a principle around which the interpretation of legal material takes place [a legal category] and as a normative legal proposition which is used as a basis for changing existing, lower-level rules, or creating new ones across a broad variety of cases.

Notes and questions 1. What practical difference does it make whether unjust enrichment is considered to be a category of law, a purely moral principle, a legal principle, or a cause of action? What, indeed, is meant by the idea that unjust enrichment is a cause of action? On this question, see S Harris, ‘What is a Cause of Action’ (1928) 16 California Law Rev 459; C Clark, ‘The Cause of Action’ (1934) 82 University of Pennsylvania Law Review 354; and L Smith, ‘Defences and the Disunity of Unjust Enrichment’ in A Dyson, J Goudkamp and F Wilmot-Smith (eds), Defences in Unjust Enrichment (Oxford, Hart Publishing, 2016), Ch 10, pp 29– 39. [page 14] 2. If one takes the view that unjust enrichment claims have the various ‘elements’ described at 1.15, which view is one taking — that the unjust enrichment is a category of law and interpretive tool, that it is a normative legal principle, or that it is a cause of action? In Commissioners for her Majesty’s Revenue and Customs v The Investment

Trust Companies (in liq) [2017] UKSC 29, the United Kingdom Supreme Court suggested at [41] that the elements are not themselves ‘legal tests’ but ‘signposts towards areas of inquiry involving a number of distinct, legal requirements’. What does this tell one about the function which the Supreme Court thinks is served by the overarching principle of unjust enrichment? 1.21C Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256 (HCA) For the facts, see 1.12C. Deane J: [Unjust enrichment is] a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case (see Muschinski v Dodds (1985) 60 ALJR 52, at p 67; 62 ALR 429, at p 455; Goff & Jones, op cit, at pp 11ff).

1.22C

David Securities Pty Ltd v Commonwealth Bank of

Australia

(1992) 175 CLR 353 at 406 (HCA) Dawson J: Whilst unjust enrichment does not of itself constitute a cause of action, it provides a ‘unifying legal concept.’

1.23C Bofinger v Kingsway Group Ltd [2009] HCA 44 at [86]–[89] For the facts, see 15.58C.

Gummow, Hayne, Heydon, Kiefel and Bell JJ: [86] In a passage in their reasons in David Securities Pty Ltd v Commonwealth Bank of Australia, ((1992) 175 CLR 353 at 378–379) Mason CJ, Deane, Toohey, Gaudron and McHugh JJ rejected the submissions that in Australian law unjust enrichment was more than ‘just a concept’ and that it was ‘a definitive legal principle according to its own terms’. The use of the phrase ‘unifying legal concept’ earlier in the joint reasons must be understood with what was said in that later passage. In the years which have followed the Court has reaffirmed this position (Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 156 [151] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ; Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 664–665 [83]–[85] per Gummow, Hayne, Crennan and Kiefel JJ) and all other Australian courts are bound accordingly. [87] A not dissimilar fate met the attempt to adopt ‘proximity’ as the ‘unifying theme’ of the categories of case recognising a duty to take reasonable care to avoid a reasonably foreseeable risk of injury to another (See Bryan v Maloney (1995) 182 CLR 609 at 619, and the later decisions collected in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 528–529 [18]). [88] The concept of unjust enrichment may provide a means for comparing and contrasting various categories of liability. … [89] The concept of unjust enrichment also may assist in the determination by the ordinary processes of legal reasoning of the recognition of obligations in a new or developing category of case (Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 257; Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 665 [85]). An example is the conclusion reached in David Securities itself, that the vitiating factors which enliven the action for money had and received include mistakes of fact or law ….

[page 15]

1.24C Equuscorp Pty Ltd v Haxton [2012] HCA 7 at [29]–[30] Equuscorp was the assignee of rights to a number of loans made to investors in a group of companies involved in running a blueberry farming investment scheme. The assignment was taken from one of the companies in the group, Rural Group Finance (Rural), which had been set up specifically to finance investments in the scheme but which was wound up in March 1996. Under the scheme itself, investors obtained tax benefits while personally having to advance little capital of their own and having their borrowings paid off by the profits of the scheme over a 5-year period, as well as being entitled to share in future profits. The scheme failed. Equuscorp sought to recover outstanding principal and interest owing under the loan agreements from investors, but these claims were rejected in the lower courts on the basis that the investment schemes were illegal because they violated s 170 of the Companies Code (no proper prospectus had been provided to investors) and the loan contracts were themselves also tainted by that illegality (because they operated to support the investment scheme) and were therefore unenforceable. Equuscorp attempted an alternative claim for restitution of the sums loaned in an action for money had and received, on the basis that the consideration for the loans had totally failed. This claim was also ultimately rejected by the High Court, which found that to grant restitution would be inconsistent with the policy underlying the Companies Code (namely, to protect investors). It also held that the claim would fail in any event because there had never been a valid assignment

to it of the original lenders’ restitutionary rights. The following extract focuses on the High Court’s understanding of the basis of restitutionary claims and the idea of unjust enrichment. French CJ, Crennan and Kiefel JJ: [29] The claim for money had and received was an offshoot of the old form of action of indebitatus assumpsit which, by the 17th century, had superseded the action of debt. The requirement of a promise to fit the claim within the old writs led to the creation of what Lord Atkin described as ‘fantastic resemblances of contracts … in order to meet requirements of the law as to forms of action’. So the action came to be thought of as resting upon an implied contract. The implied contract theory was rejected in Australia by this court in Pavey & Matthews Pty Ltd v Paul as ‘but a reflection of the influence of discarded fictions …. It came to be displaced by the concept of unjust enrichment. Unjust enrichment was described by Deane J in Pavey & Matthews as: … a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case. It is not a ‘definitive legal principle according to its own terms.’ Nor was it such when first propounded in legal scholarship. It was: … an ex post facto explanation of decisions that had already been reached, an organisational category separate from contract. The substance of the law still had to be found in its concrete emanations. [30] In

David,

this court explained the part played by unjust

enrichment in a claim for money had and received (in that case for recovery of a payment made under mistake of law). That explanation may be expressed, at a fairly high level of abstraction, as an approach to determining such claims. In summary: •

•

• •

recovery depends upon enrichment of the defendant by reason of one or more recognised classes of ‘qualifying or vitiating’ factors; the category of case must involve a qualifying or vitiating factor such as mistake, duress, illegality or failure of consideration, by reason of which the enrichment of the defendant is treated by the law as unjust; unjust enrichment so identified gives rise to a prima facie obligation to make restitution; the prima facie liability can be displaced by circumstances which the law recognises would make an order for restitution unjust. (continued)

[page 16] Unjust enrichment therefore has a taxonomical function referring to categories of case in which the law allows recovery by one person of a benefit retained by another. In that aspect, it does not found or reflect any ‘all-embracing theory of restitutionary rights and remedies’. It does not, however, exclude the emergence of novel occasions of unjust enrichment supporting claims for restitutionary relief. It has been said of Lord Mansfield’s judgment in Moses v Macferlan that it was his view that ‘the grounds for obtaining relief in money had and received were not to be considered static and the remedy could be made available in any case in which money had been paid in circumstances where it was unjust for the defendant to retain it’. Nor is the emergence of general principle precluded when ‘derived from judicial decisions upon particular

instances’.

Question The above extract describes unjust enrichment as ‘an approach to determining … claims’ and as having a ‘taxonomic function’, but not as an ‘all embracing theory of [restitutionary] rights and remedies’. What do you think is meant by an ‘all embracing theory’ and what do you think the objections are to one? Is the objection to such a theory consistent with the court’s readiness to accept the ‘emergence of a general principle … derived from judicial decisions’? 1.25C

Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd

[2014] HCA 14 at [16], [20], [78], [105], [138]–[141] (some references omitted) The full facts are summarised at 12.16C. A finance company, Australian Financial Services & Leasing (AFSL), sought restitution of payments it had mistakenly paid to Hills Industries (Hills), as a result of which Hills innocently discharged third party debts. The main issue before the High Court was whether or not Hills was entitled to claim a defence of change of position on the basis that it had, in reliance on the receipts, given up opportunities to take legal proceedings to recover the monies owed from the debtors, or continued to trade with the debtors. The High Court allowed the defence. Here, we are interested in the way in which the court conceptualised the basis of the restitutionary claim and its understanding of the concept

of unjust enrichment. Further extracts from the case, which should be read alongside these, appear at 1.31C. French CJ: [16] While legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience, the action for money had and received was described in the ANZ Case [Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662] as ‘a common law action for recovery of the value of the unjust enrichment’. … The change of position defence was recognised in that case in the context of recovery of money paid under a mistake of fact. The law imposed a prima facie liability on the recipient of a mistaken payment to make restitution and: [b]efore that prima facie liability will be displaced, there must be circumstances (eg, that the payment was made for good consideration such as the discharge of an existing debt or, arguably, that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust. So a concept of injustice, redolent of Lord Mansfield’s equity, informed the right of recovery and, at the same time, qualified and limited it. That normative concept resembled what Professor Stone called a ‘legal standard’ in a ‘category of indeterminate reference’, albeit a standard informing guiding criteria for particular classes of case … . [20] In discussing so-called ‘unjust enrichment theory’ in Roxborough, in the context of claims for money had and received, Gummow J referred to Lord Mansfield’s observation that: General rules are … varied by change of circumstances. Cases arise within the letter, yet not within the reason, of the rule; and exceptions are introduced, which, grafted upon the rule, form a system of law.

Unjust enrichment came to be seen not as a principle of ‘direct application in a particular case’ but rather as a taxonomical concept. It was not at large. As this Court said in Farah Constructions Pty Ltd v Say-Dee Pty Ltd, it was not to be determined:

[page 17] by reference to a subjective evaluation of what is unfair or unconscionable: recovery rather depends on the existence of a qualifying or vitiating factor falling into some particular category. That being said, the equitable norm underlying the concept of unjust enrichment is to be found in Moses v Macferlan. Neither that case nor subsequent authority precluded the emergence of ‘novel occasions of unjust enrichment supporting claims for restitutionary relief.’

Hayne, Crennan, Kiefel, Bell, Keane JJ: [78] The approach argued by AFSL does not involve an enquiry as to whether it would be inequitable to require the recipient to repay. Instead, AFSL’s approach [to the defence of change of position] focuses upon the extent to which Hills … have been ‘disenriched’ subsequent to the receipt. This approach seeks to give effect to an understanding of unjust enrichment as a principle of direct application, which operates by measuring the extent of enrichment or, where a defence of change of position is invoked, the extent of disenrichment subsequent to that receipt. Such a ‘principle’ does not govern the resolution of this case because the concept of unjust enrichment is not the basis of restitutionary relief in Australian law. The principle of disenrichment, like that of unjust enrichment, is inconsistent with the law of restitution as it has developed in Australia.

Gageler J:

[105] The nature of the action for restitution of money paid under a mistake was explained in David Securities Pty Ltd v Commonwealth Bank of Australia. The David Securities explanation was recently summarised in Equuscorp Pty Ltd v Haxton. Within that explanation, ‘unjust enrichment’ is rejected as ‘a definitive legal principle’ but is embraced as a ‘unifying legal concept’. … [His Honour then reviewed a number of decisions. He discussed Lord’s Wright’s statement in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 (HL) that ‘any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit’, noting that Lord Wright was influenced by the jurisprudence of the United States in the first Restatement of Restitution. He then noted the way in which Lord Wright’s statements were subsequently influential in a number of Australian cases, culminating in Pavey & Matthew v Paul (1987) 162 CLR 221 (HCA); Australia and New Zealand Banking Group Ltd v Westpac [1988] HCA 17; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; and Baltic Shipping Co v Dillon (1993) 176 CLR 344 (HCA). He continued:] [138] … The coherent principle which had by then come to exist in the common law of restitution in Australia, following removal in Pavey and Westpac of the constraint imposed by the form of action for money had and received, lay in the two-stage analysis formulated in Westpac and confirmed in David Securities. Consistently with underlying notions of good conscience or equity tracing to Lord Mansfield, but updated to adopt modern terminology, that overall analysis was explained (as distinct from defined) by reference to the juristic concept of unjust enrichment. Equuscorp confirms the continuing utility of the two-stage David Securities analysis, and of the ‘taxonomical function’ which unjust enrichment performs within that analysis. [139] Coherent legal principle should never be elevated to allembracing legal theory. As Gummow J emphasised in Roxborough v Rothmans of Pall Mall Australia Ltd, the concept of unjust enrichment would lose its utility were it to be pressed so far as to conceal ‘why the

law would want to attribute a responsibility to one party to provide satisfaction to the other’. The force of that observation has been reinforced by subsequent reiteration of points made in David Securities itself: that the concept of unjust enrichment provides a link between what might otherwise appear to be distinct categories of liability; that it can assist, by the ordinary processes of legal reasoning, in the development of legal principle; and that it is not a sufficient premise for direct application in a particular case. [140] No less than its traditional synonyms, ‘unconscionable’ and ‘unconscientious’, ‘unjust’ has the potential to ‘mask rather than illuminate the underlying principles at stake’. Having noted that ‘[t]he notion of unconscionability is better described than defined’, Deane J pointed out in a related context that a question whether conduct is or is not unconscionable in the circumstances of a particular case ‘involves a ‘real process of consideration and judgment’ in which the ordinary processes of legal reasoning by induction and deduction from settled rules and decided cases are applicable but are likely to be inadequate to exclude an element of value judgment in a borderline case’. The question is not to be resolved ‘by reference to some preconceived formula framed to serve as a universal yardstick’. (continued)

[page 18] [141] Appearing at each stage of the David Securities analysis, the notion of injustice conveyed by the word ‘unjust’ is to be understood in that same sense: as descriptive, accumulative and incremental. That was the sense in which the notion was explained (as distinct from defined) by Campbell J in Wasada Pty Ltd v State Rail Authority of New South Wales (No 2): ‘Unjust’ is the ‘generalisation of all the factors which the law recognises as calling for restitution’. Because we need to

search for recognised factors, examination of which involves an analysis of case law, the reference to ‘injustice’ as an element of unjust enrichment, is not a reference to judicial discretion. Normal judicial processes are involved and it is only in cases where there is no recognised basis for saying that injustice has arisen that problems can arise.

Notes and questions 1. The assertion in the joint judgment of Hayne, Crennan, Kiefel, Bell, Keane JJ at [78] that ‘the concept of unjust enrichment is not the basis of restitutionary relief in Australian law’ has caused some consternation. Is it consistent with French CJ’s assertion that the idea is a ‘legal standard’ and a ‘taxonomic concept’, or indeed with the assertion of two of the same judges in Equuscorp at [30] that unjust enrichment provides an ‘approach to determining claims’? 2. One possible explanation for the statement is that it was made in the very particular context of a discussion of the change of position defence — in particular, in the context of the Court rejecting a model of that defence that depended on proof that a defendant has been ‘disenriched’. In emphasising that a defendant need not prove that he or she has lost an enrichment to make out the defence (but rather must prove innocent detrimental reliance on a receipt), the Court suggested that the basis of restitutionary liability is not unjust enrichment. This statement was not necessary for the Court’s conclusion regarding the defence’s detailed rules of operation and is therefore to be regarded as obiter dicta. See further on the defence of change of position at 12.13.

1.26C

Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3)

[2014] WASC 162 at [50]–[51] Edelman J: [50] The concept of unjust enrichment is, in Australia, limited to … [a] taxonomic function. It has been emphasised on numerous occasions that unjust enrichment is not a ‘definitive legal principle’, and does not supply ‘a sufficient premise for direct application in a particular case’. In this sense, unjust enrichment is not the direct basis of restitutionary relief in Australian law. A comparison might be drawn with the category of torts. A plaintiff cannot plead that a defendant is liable for having committed a ‘tort’. ‘Torts’ describes the category not the action (which might be assault, battery, conversion etc). At an even higher level of theory, the ultimate basis of restitutionary liability was expressed by the joint judgment in Australian Financial Services as depending upon whether retention is against ‘conscience’. Their Honours explained that ‘conscience’ does not invite subjective evaluation. Instead, it is ‘a construct of values and standards against which the conduct of ‘suitors’ – not only defendants – is to be judged’. [51] Provided that unjust enrichment is not applied as a direct source of liability, in Australia the taxonomic category of unjust enrichment has served a useful function and might continue to do so. Like the category of ‘torts’ the category of unjust enrichment assists in understanding even though it is not a direct source of liability. The category directs attention to a common legal foundation shared by a number of instances of liability formerly concealed within the forms of action or within bills in equity.

1.27C

Eastenders Cash & Carry Plc & Others v Crown Prosecution Service

[2014] UKSC 26 at [102]

Lord Toulson SJC (Baroness Hale, Lord Kerr, Lord Wilson and Lord Hughes JJSC agreeing): [102] As to the ‘unjust’ element in an unjust enrichment claim, I agree with the following overview in the current edition of Goff & Jones at para 1-08:

[page 19] the ‘unjust’ element in ‘unjust enrichment’ is simply a ‘generalisation of all the factors which the law recognises as calling for restitution’ [a citation from the judgment of Campbell J in Wasada Pty Ltd v State Rail Authority of New South Wales (No 2) [2003] NSWSC 987, para 16, quoting Mason & Carter, Restitution Law in Australia (1995), paras 59—60]. In other words, unjust enrichment is not an abstract moral principle to which the courts must refer when deciding cases; it is an organising concept that groups decided authorities on the basis that they share a set of common features, namely that in all of them the defendant has been enriched by the receipt of a benefit that is gained at the claimant’s expense in circumstances that the law deems to be unjust. The reasons why the courts have held a defendant’s enrichment to be unjust vary from one set of cases to another, and in this respect the law of unjust enrichment more closely resembles the law of torts (recognising a variety of reasons why a defendant must compensate a claimant for harm) than it does the law of contract (embodying the single principle that expectations engendered by binding promises must be fulfilled).

Notes and questions 1. What role or roles do the above extracts suggest that

members of the High Court of Australia and the United Kingdom Supreme Court assign to the concept of unjust enrichment? Is there a clear view? 2. The use of unjust enrichment as a moral principle external to the law (that is, role 2 explained by Barker (1.20E) attracts little support. It would be overly vague and could open the door to unfettered judicial discretion and ‘wellmeaning sloppiness of thought’ (Holt v Markham [1923] 1 KB 504 at 513–14 (Scrutton LJ). Very few authors or judges therefore understand unjust enrichment in this way. Almost all reject the notion that ‘unjust’ means ‘morally unfair’. Rather, they take the view that the meaning of ‘unjust’ is derived from the decided cases. See, for example, Deane J in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256–7; Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 at [150]. 3. Why do you think Dawson J in David Securities (1.22C) rejects the idea that unjust enrichment is a cause of action? Is this what Edelman J means in Lampson when he says that unjust enrichment is ‘not applied as a direct source of liability’? The idea that unjust enrichment is not a cause of action is supported by numerous recent assertions by Australian courts that it is not good enough for plaintiffs to plead ‘unjust enrichment’ without further specification of the precise factor or factors which make a defendant’s enrichment ‘unjust’. See, for example, Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295 (Edelman J). 4. Courts in New Zealand and England also reject the idea that unjust enrichment is a cause of action as such: Equitcorp Industries Group Ltd (In Statutory Management) v

The Crown (No 47) [1998] 2 NZLR 481 at 709–10 (NZHC) (Smellie J); Charles Uren v First National Home Finance Limited [2005] EWHC 2529 (English High Court); Commissioners for her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq) [2017] UKSC 29 at [41]. Contrast the position in Canada (Deglman v Guaranty Trust of Canada [1954] SCR 725; Garland v Consumers’ Gas Distributors Inc [2004] 1 SCR 629). The influence of civilian thinking in Canada (emanating from the province of Quebec) probably explains this difference: civilian legal systems have tended to define causes of action at higher levels of abstraction than common law ones, which prefer to proceed by identifying reasons for restitution at a level closer to the ground in particular, distinct categories of case. See further G Klippert, ‘The Juridical Nature of Unjust Enrichment’ (1980) 30 Univ Toronto LJ 356. 5. The extract from Deane J in Pavey is consistent with unjust enrichment’s role as a legal principle which can help decide new cases and there is no doubt that the idea has on occasion been used by courts in this way: Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51 (HCA); Kleinwort Benson Ltd v Lincoln County Council [1999] 2 AC 349 (HL). See also the suggestions in the preceding extracts that the idea of unjust enrichment can assist in the development of liability in new categories of case. [page 20] For this to be the case, the idea must clearly have some

normative weight as a reasoning guide. There is nonetheless a puzzle. How can the idea assist in the determination of new cases, if it simply looks downward to existing ones? One suggestion is that the higher-level principle is capable of expressing something about the reasons for the rules underlying existing cases, such that those reasons can then be extended to new circumstances falling outside the ambit of existing rules: K Barker, ‘Theorising Unjust Enrichment: Being Realist(ic)’ (2006) 26 OJLS 609, pp 615–16. Contrast E Sherwin, ‘Restitution and Equity: An Analysis of the Principle of Unjust Enrichment’ (2001) 79 Texas L Rev 2083, p 2110; H Dagan, The Law and Ethics of Restitution (CUP, Cambridge, 2004), pp 12, 25–36. 6. In Southage Pty Ltd (ACN 050 240 965) v Vescovi [2015] VSCA 117 at [45], Warren CJ, Santamaria JA and Ginnane AJA said (obiter) that the High Court of Australia: … has rejected the idea that unjust enrichment is the overarching legal genus of which, for example, payment under a mistake or failure of consideration or duress or undue influence or demands made without authority are merely species. On the same basis, the court concluded that it was not permissible for courts to approach the question of restitutionary liability, as the trial judge had done, by applying the five- stage framework set out at 1.15, indicating at [49] that ‘authority binding on this Court is against liability to restitution being established … by answering the five questions identified by the judge’. Is

either of these conclusions correct? In particular, does para [78] in Hills (1.25C) preclude courts making reference to the analytical framework of unjust enrichment?

ALTERNATIVE MODELS OF RESTITUTIONARY LIABILITY 1.28 While unjust enrichment is now regarded as the dominant explanatory principle underpinning restitutionary claims, there are currently at least two alternative models of liability. The following sections consider these alternatives and canvas arguments about their advantages and disadvantages.

Unconscionability (unconscionable retention of benefit) 1.29 A potentially competing explanation for restitutionary remedies which has found favour with some members of the High Court of Australia in recent years (Gummow J in particular) is the concept of ‘unconscionability’. This explanation appears to be tied to the idea, stemming from Lord Mansfield in Moses (1.10C) that restitutionary remedies are ‘equitable’ in nature and equity works ‘on the conscience’. It appears also to be connected to a view (which is not accepted in the United Kingdom or the United States) that restitutionary liability does not flow from a defendant’s unjust receipt of an enrichment, but from his or her refusal to return it (unjust or

unconscionable retention of the benefit). The following extracts variously represent and challenge the view that restitution is better understood as being based on an equitable principle of ‘unconscionable retention’, not ‘unjust enrichment’. 1.30C Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68 at [70]–[72], [75]–[76], [83]–[84], [100] (some references omitted) The full facts are summarised at 7.6C. Roxborough, tobacco retailers, sought restitution from a wholesaler, Rothmans, of a portion of the price paid for cigarettes which related to a tax on the sale that was subsequently found to be unconstitutional. The action took the form of an ‘action for money had and received’. The High Court allowed the claim. The following extract [page 21] from the judgment of Gummow J considers the foundational basis of the restitutionary ‘action for money had and received’. Gummow J: [70] Writing extrajudicially, Justice Paul Finn has said of the concept of ‘unjust enrichment’ that ‘[a]t a quite visceral level it provides an important catalyst to further legal inquiry’, particularly as ‘a unifying legal concept’ which ‘explains why the law recognises an obligation to make restitution in particular contexts’. The conventional view is that it is the unjust enrichment which gives rise to the obligations of restitution. However, Justice Finn

expresses concern that the concept of unjust enrichment may ‘contrive legal analysis’ and continues (in a passage I would adopt): [T]o the extent that it directs attention to outcomes and to the character to be attributed to them, it is capable of concealing rather than revealing why the law would want to attribute a responsibility to one party to provide satisfaction to the other. This is particularly so where, as is so often the case, it is conduct in a relationship or dealing — an expectation created and relied upon; a mistake not corrected; etc — which provides the focus of legal attention and which generates the issue of legal policy for which resolution is required. This, I suspect, provides the reason why unconscionable conduct and not unjust enrichment (a possible effect of that conduct) has achieved the currency it has in Australian law. [71] … [I]n Baltic Shipping, Mason CJ said that, in cases of money had and received, the retention of the money in question: ‘is regarded, in the language of Lord Mansfield, as against conscience or, in the modern terminology, as an unjust enrichment of the defendant because the condition upon which it was paid, namely, performance by the defendant may not have occurred’. Nevertheless, reflection will demonstrate that the notion of unjust enrichment cannot be accepted as a modern synonym for a refusal ‘against conscience’ to pay the money in question. This is because, as Rothmans emphasised in its submissions, the action for money had and received lies against defendants who fail to account but who, on any sensible understanding of the term, have not been enriched. A recent example is the decision of the New Zealand Court of Appeal in Martin v Pont. A principal who entrusted money to an agent for the purpose of investing it with a nominated finance company was entitled to recover from the agent when, by reason of a defalcation by an employee of the agent which did not benefit the agent, the purpose was not carried out. [72] Considerations such as these, together with practical

experience, suggest caution in judicial acceptance of any allembracing 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 … . [75] On the other hand, the action to recover the moneys sought by the appellants after the failure of the purpose of funding Rothmans to renew its licence may be illustrative of the gap-filling and auxiliary role of restitutionary remedies. These remedies do not let matters lie where they would fall if the carriage of risk between the parties were left entirely within the limits of their contract. Hence there is some force in the statement by Laycock: The rules of restitution developed much like the rules of equity. Restitution arose to avoid unjust results in specific cases — as a series of innovations to fill gaps in the rest of the law. The Decision in Moses v Macferlan

[76] That returns one to a consideration of the decision in Macferlan itself. What was decided in Moses v Macferlan? …

Moses v

[83] Lord Mansfield spoke of the action for money had and received as one which ‘lies in numberless instances’, as ‘founded in the equity of the plaintiff’s case’, and as a ‘kind of equitable action, to recover back money, which ought not in justice to be kept’, the question being whether ‘the defendant may retain it with a safe conscience’ [Moses v Macferlan (1760) 2 Burr 1005 at 1008–1012 [97 ER 676 at 678–681]]. [84] It has been suggested that the use by Lord Mansfield in his judgment of the phrase ‘ex aequo et bono’ and his references to the ties of natural justice and equity bespeak the reception of Roman

law. However, it must be remembered that Lord Mansfield borrowed ideas from various sources. An example, recently considered by the House of Lords in Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [[2001] 2 WLR 170 at 184–186], is the concept of good faith in relation to insurance law. (continued)

[page 22] Sir Anthony Mason has observed that Lord Mansfield’s approach to good faith and to restitution reflects ‘the spirit of equity rather than what its admirers refer to as the genius of the common law’. With varying degrees of success, Lord Mansfield sought to translate equitable principles, doctrines, and procedures into the trial of actions at law; this reflected his appreciation of equitable doctrine for its flexibility and adaptability to modern needs, particularly in commercial law. Then, as today, ‘equity is the spur to new thought and further remedy, and … provides a means of introducing new policies’… . [100] In all of these areas, as in Moses v Macferlan, notions derived from equity have been worked into and in that sense have become part of the fabric of the common law. Hence the statement in Baltic Shipping by Deane and Dawson JJ where, after indicating that the indebitatus count for money had and received was framed in the traditional language of trust or use, their Honours continued [(1993) 176 CLR 344 at 376; cf Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256–257]: [I]n a modern context where common law and equity are fused with equity prevailing, the artificial constraints imposed by the old forms of action can, unless they reflect coherent principle, be disregarded where they impede the principled enunciation and development of the law. In particular, the notions of good conscience, which both the

common law and equity recognised as the underlying rationale of the law of unjust enrichment, now dictate that, in applying the relevant doctrines of law and equity, regard be had to matters of substance rather than technical form. Earlier, in Muschinski v Dodds [(1985) 160 CLR 583 at 619–620], Deane J, after referring to Moses v Macferlan, and to ‘the general equitable notions which find expression in the common law count for money had and received’, identified the operation of most of the traditional doctrines of equity as operating upon ‘legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct’. One such instance then identified by his Honour [(1985) 160 CLR 583 at 620] concerned the removal of the substratum of a joint relationship or endeavour ‘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’. Those observations are applicable to the class of case where, in Lord Mansfield’s words, money has been paid ‘upon a consideration which happens to fail’ [Moses v Macferlan (1760) 2 Burr 1005 at 1012 [97 ER 676 at 681]]. This is such a case.

Notes and questions 1. The ‘action for money had and received’ is a form of action developed at common law. What does Gummow J, therefore, mean when he says that it reflects the ‘spirit of equity’ and fills ‘gaps’ in the law? See further R Grantham, ‘The Equitable Basis of the Law of Restitution’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Law Book Company, Sydney, 2005), p 349. 2. What was supposedly ‘unconscionable’ about Rothmans’

‘conduct’? 3. Is the idea that the defendant is liable to make restitution of money because his or her ‘conscience’ is affected in substance any different to the idea that the defendant is liable because his or her receipt of the money is unjust? Are Gummow J’s statements reconcilable with the view of French CJ in Hills (1.25C) at [16] that ‘principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience’? 1.31C

Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd

[2014] HCA 14 at [65], [68]–[76] The facts are summarised briefly at 1.25C and more extensively at 12.16C. Here, we are interested in the court’s apparent preference for a model of restitutionary liability based on unconscionable retention of benefit. Hayne, Crennan, Kiefel, Bell, Keane JJ: [65] The relevant enquiry: whether retention of monies unconscionable … [68] There can be no denying the equitable roots of the principle by which a claim for restitution of money had and received to the use of the payer is to be determined. In Dale v Sollet, Lord Mansfield said of

[page 23] the action: ‘This is an action for money had and received to the plaintiff’s use. The plaintiff can recover no more than he is in conscience and equity entitled to’. In Clarke v Shee, his Lordship

referred to the action as ‘a liberal action in the nature of a bill in equity; and if, under the circumstances of the case, it appears that the defendant cannot in conscience retain what is the subjectmatter of it, the plaintiff may well support this action.’ [69] In Roxborough v Rothmans of Pall Mall Australia Ltd, Gummow J explained that the ‘equitable notions’ of which Lord Mansfield wrote have been absorbed into the ‘fabric of the common law’ right of action for money had and received. In this regard, it is to be noted that any reference to equitable notions does not invite a balancing of competing equities as between the parties, based on considerations such as fault. The question here is whether it would be inequitable in all the circumstances to require Hills and Bosch to make restitution. The answer to that question is not at large, but neither is it simply a measure of the monetary extent to which the recipient remains enriched by the receipt at the time of demand for repayment. [70] In the United States, in Cardozo J said:

Atlantic Coast Line Railroad Co v Florida,

The claimant to prevail must show that the money was received in such circumstances that the possessor will give offense to equity and good conscience if permitted to retain it. [71] The continuing influence of Lord Mansfield’s view that the cause of action for money had and received depends on legal rules framed by reference to considerations of good conscience is also apparent in the judgment of Lord Wright in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd and in the decision of the Supreme Court of the United States in Great-West Life & Annuity Insurance Co v Knudson. [72] In Lipkin Gorman (a firm) v Karpnale Ltd, Lord Goff of Chieveley stated that a defendant may rely upon a defence of change of position whenever ‘it would be inequitable in all the circumstances to require him to make restitution’. Lord Templeman referred, with

evident approval, to the observations of Lord Wright in Fibrosa in a way which suggests that Lord Templeman identified an unjust enrichment as a benefit that it would be against ‘conscience’ to retain. [73] Lipkin Gorman also proceeded upon the basis that English law had accepted unjust enrichment as a legal principle to be applied as a ground for liability. By reference to what was said by Lord Goff in that case respecting the defence of change of position, it would appear that the principle of unjust enrichment may have been intended to operate more widely than the action for money had and received, which requires the presence of vitiating factors such as mistake. In David Securities, the submission that unjust enrichment was a definitive legal principle was rejected. That position has since been maintained consistently by this Court. In Friend v Brooker, it was said that the concept of unjust enrichment was not a principle supplying a sufficient premise for direct application in a particular case. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd, it was commented that there was potential for unjust enrichment as a principle to distort equitable doctrine and to generate new fictions. In Roxborough, Gummow J pointed out that: [S]ubstance and dynamism may be restricted by dogma. In turn, the dogma will tend to generate new fictions in order to retain support for its thesis. It also may distort well settled principles in other fields, including those respecting equitable doctrines and remedies, so that they answer the newly mandated order of things. Then various theories will compete, each to deny the others. [74] More recently, Equuscorp Pty Ltd v Haxton confirmed that unjust enrichment does not found or reflect any ‘all-embracing theory of restitutionary rights and remedies’. That case identified unconscionability as relevant and as derived from general equitable notions which find expression in the action for money had and received. As this Court acknowledged in Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation, ‘contemporary legal principles of

restitution or unjust enrichment can be equated with seminal equitable notions of good conscience’. [75] In Australia, the equitable roots of the action for money had and received were early recognised in Campbell v Kitchen & Sons Ltd and Brisbane Soap Co Ltd. There, Barton J observed that recovery ‘depends largely on the question whether it is equitable for the plaintiff to demand or for the defendant to retain the money.’ In National Commercial Banking Corporation of Australia Ltd v Batty, Gibbs CJ said: Whether the action is based on an implied promise to pay, or on a principle designed to prevent unjust enrichment, the emphasis on justice and equity in both old and modern authority on this subject supports the view that the action will not lie unless the defendant in justice and equity ought to pay the money to the plaintiff. (continued)

[page 24] [76] This is not to suggest that a subjective evaluation of the justice of the case is either necessary or appropriate. The issues of conscience which fall to be resolved assume a conscience ‘properly formed and instructed’ by established equitable principles and doctrines. As was said in Kakavas v Crown Melbourne Ltd, ‘[t]he conscience spoken of here is a construct of values and standards against which the conduct of ‘suitors’ — not only defendants — is to be judged.’

1.32E

E R Grantham, ‘Restitutionary Recovery Ex Aequo et

Bono’

(2002) Sing J Legal Stud 388, pp 395–402 (references omitted)

Perhaps as a consequence of the characterisation of restitutionary claims as equitable, the majority [in Roxborough] … rejected the notion that the principle underlying restitutionary recovery was that of unjust enrichment. … Rather, the majority identified the basis of recovery as the defendant’s unconscientious retention of the money and refusal to account to the plaintiff. Thus, unlike the orthodox account of restitutionary liability based on the principle of unjust enrichment, which focuses on the quality of the plaintiff’s consent to the transfer, the majority focused on the position of the defendant, in particular whether the defendant had a legitimate right to retain the enrichment. This conception of restitutionary liability has a number of important doctrinal and theoretical implications. First, the characterisation of the right to restitution as arising from the defendant’s unconscionable retention of or refusal to account for the enrichment suggests that liability is not strict, but rather is dependant [sic] upon the quality of the defendant’s conduct or response to the plaintiff’s claim. Indeed, implicit in the very idea of ‘unconscientiousness’ is the requirement that the defendant’s conscience be bound. This in turn suggests that liability does not arise at the moment of receipt, but only at some later point. Logically, one can be said to have retained an enrichment only after the moment of receipt, while a refusal to account for the enrichment implies at the very least being aware of the plaintiff’s claim. … Secondly and more fundamentally, the emphasis placed by the majority, and by Gummow J in particular, on the defendant’s retention of, or refusal to account for, the enrichment suggests that restitutionary liability is a species of wrongdoing. This is implicit not only in the very notion of ‘unconscientious’, but also in the analytical structure of unconscientious retention. As articulated in the judgments, the unconscientiousness lies in the defendant’s retention or refusal to account for the enrichment in circumstances

where the defendant had ‘no title’ or right to retain it. The defendant’s lack of title to retain the enrichment is a consequence of the vitiation of the transfer by factors such as mistake or failure of consideration. However, the restitutionary liability imposed on the defendant is not directly a response to the defective transfer, but rather to the defendant’s failure to make restoration of the enrichment to the plaintiff at the moment of receipt. … … if the majority in Roxborough do regard restitutionary liability as a species of wrongdoing, their view is problematic in two important aspects. The first concerns the appropriate remedy for the defendant’s unconscientious retention. The majority regarded the liability imposed as being restitutionary. As Gummow J noted, restitution differs from compensation in that the focus is the defendant’s gain not the plaintiff’s loss. However, if the cause of action is properly regarded as one focused on the defendant’s wrongdoing, the presumptive and appropriate remedy would seem to be compensation for the loss caused by the wrong. … The second is that it is far from clear how the wrong of unconscientious retention of the enrichment relates to or is justified by the primary right/duty that arises from a vitiation of the transfer of wealth by factors such as a failure of consideration or a mistake. The existence of a wrong is logically dependent upon the existence of a prior right/duty: one cannot infringe a right that has yet to come into existence. Moreover, the content of the wrong is dependent upon and justified by the nature of the prior right: the wrong consists of the breach of the primary duty. Despite recent academic attempts at expansion, the range of circumstances giving rise to restitutionary liability have not changed greatly from the list proposed by Lord Mansfield in Moses v Macferlan: ‘… money paid by mistake (express or implied); or extortion, or oppression, or where undue advantage is taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances.’ What each of these factors articulates is a

reason why the plaintiff should not be held

[page 25] to the diminution of his or her wealth effected by the transfer. The concern is thus with the quality of the plaintiff’s consent to the transfer and whether the plaintiff’s wealth position should be restored to the status quo ante. The emphasis in the majority judgments in Roxborough, especially that of Gummow J, however, is on the refusal or failure of the defendant to make restoration. The concern is thus with the quality of the defendant’s conduct, not the plaintiff’s wealth position. … The concern must be, therefore, that, as formulated by Gummow J in particular, the wrongdoing is both unrelated to and cannot be justified by the primary right. If, therefore, the duty not to unconscientiously retain the enrichment is to be doctrinally coherent, a different primary right must be articulated. Conceptualising exactly what this right might be is, however, extraordinarily difficult.

1.33E P Birks, Unjust Enrichment 2nd ed, Clarendon, Oxford, 2005, pp 5–6, 275–6 (references omitted) This shows the danger of using the word ‘unconscientious’ in this context. It and other adjectives in the same family easily suggest bad behaviour at the time of receipt. That is misleading, for there is nothing resembling a requirement of fault on the part of the defendant … The only unconscientiousness in play is unconscientiousness ex post, which is no more than a reflection of the prior determination that other facts require restitution to be made. It is the obligation to make restitution which renders retention unconscientious. … It is unconscientious to retain what you ought to repay. Unconscientiousness ex post has no explanatory

weight. … If Dr Kremer is to be believed, the High Court of Australia nevertheless not only prefers the language of conscience but, in addition, has decided to take a long step beyond the unsafe preference for a stronger adjective. It has decided not to base its approach on unjust enrichment at all. The intention must therefore be to submerge unjust enrichment in the law of equitable compensation for unconscionable behaviour, which itself would have to be located in the law of wrongs. … In order to empty unjust enrichment into this Chancery extension of the law of wrongs, Lord Mansfield’s echo of the Roman ‘aequitas’ in Moses v Macferlan is being made to suggest that either he was referring to equity in the sense of Chancery law or, if he was not, that his aequitas was and is one and the same as Chancery’s equity. This is a distortion of history and a denial of the Roman substructure of Lord Mansfield’s contribution in this field. Much more importantly, it seeks to ignore or override the raison d’etre of the law of unjust enrichment as a distinct category, which is that, subject to the defence of disenrichment, an irresistible claim to restitution of enrichment can be made out on very weak facts, not connoting fault and incapable of engendering any right to recover for consequential loss … Enrichment is the key to this unique liability. If it is true that the present High Court of Australia intends to deny that truth, the experience of every other jurisdiction suggests that it will later have to change its mind. The price of extending the law of wrongs instead of recognizing a law of unjust enrichment will be that in some cases claimants will obtain compensation when they should not, and in others they will be denied restitution when it should have been granted.

Notes and questions

What do Birks and Grantham mean when they indicate 1. that unconscionability has ‘no explanatory weight’ (Birks) or that it assumes the infringement of an unexplained prior right (Grantham)? For the defence of unconscionability that is criticised above by Birks, see B Kremer, ‘Restitution and Unconscientiousness: Another View’ (2003) 119 LQR 188 and ‘The Action for Money Had and Received’ (2001) 17 JCL 93. 2. Does unconscionability necessarily undermine the normal assumption in unjust enrichment law that liability is strict? See In Re Diplock [1948] Ch 465 at 488. 3. For the origins of unconscionability as a basal principle in Australian law, see Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. The idea as it has developed is wider than even the broadest conception of unjust enrichment. It has thus been used as a basis for undoing contracts, refusing to allow parties to exercise their legal rights or remedies, [page 26] enforcing informal promises and compensating reliance losses. For considered criticism of the concept, see J Getzler, ‘Unconscionable Conduct and Unjust Enrichment as Grounds for Judicial Intervention’ (1990) 16 Monash U L Rev 283; P Finn, ‘Unconscionable Conduct’ (1994) 8 JCL 37; J Beatson and G Virgo, ‘Contract, Unjust Enrichment and Unconscionability’ (2002) 118 LQR 352; M Bryan, ‘Unjust Enrichment and Unconscionability in Australia: A False Dichotomy?’ in Neyers, McInnes and

Pitel (eds), Understanding Unjust Enrichment, p 79; R Havelock, ‘Conscience and Unconscionability in Modern Equity’ (2015) 9 Journal of Equity 1. At its highest level of abstraction, the idea of unconscionability as a metaprinciple is subject to exactly the same sorts of criticism that have been levelled at the concept of unjust enrichment. Does it have any other advantages? 4. Apart from the Roxborough and Hills cases, the High Court has mentioned unconscionability alongside, or in preference to, unjust enrichment on several occasions. In Baxter v Obacelo Pty Ltd [2001] 205 CLR 635, it refused to express any preference between the two doctrines. In Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] 214 CLR 51 (an action under s 51AA of the Trade Practices Act 1974 (Cth)), it expressed agreement with the view that a broad doctrine of unconscionability might ‘mask rather than illuminate the underlying principles at stake.’ In Bofinger v Kingsway Group Ltd [2009] HCA 44 (1.23C), it expressly took the view at [88]–[98] that it is the concept of unconscionability and not unjust enrichment that underpins the doctrine of subrogation in Australian law. In Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6 (a case of mistaken payment), the Court of Appeal of Victoria concluded that a restitutionary claim should fail because it was not ‘unjust or unconscionable’ (at [21]) (our emphasis) for the defendant to retain money mistakenly paid. In W Cook Builders Pty Ltd (in liq) v Lumbers [2007] SASC 20, the Supreme Court of Southern Australia regarded the concept of unconscionability (at [63]) as an alternative

way of expressing the requirement that an enrichment be proven to be unjust — a view that appears to be consistent with the opinion of French CJ in the Hills case above, that ‘legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience’ (at [16]) (our emphasis). If unconscionable enrichment and unjust enrichment can be equated in the way that French CJ suggests, what does the equitable language of conscience really add? 5. Ignoring for the moment the linguistic distinction between ‘unjust’ and ‘unconscionable’ enrichment (which may perhaps be regarded as more apparent than real) a more significant distinction appears to be that, whereas the ‘unjust enrichment’ approach tends to focus on the question whether a defendant has unjustly received a benefit, the ‘unconscionability’ approach focuses on the question whether it would be inequitable for the defendant to retain it. This approach is exhibited in the recent case of Perpetual Trustees Australia Ltd Heperu Pty Ltd [2009] NSWCA 84 (12.20C), where Allsop P said (at [128]) that ‘it is the inequitable retention of money or benefit which lies at the root of … the injustice of the enrichment’ in unjust enrichment cases. More recently, however, in Southage Pty Ltd (ACN 050 240 965) v Vescovi [2015] VSCA 117 (12.22C) (at [50]), the Court of Appeal of Victoria considered that whether or not it is unconscionable for a defendant to retain a benefit is relevant only to the question whether he or she can make out a defence to the claim, not a prima facie cause of action. Note that both the Hills and Perpetual Trustees cases were cases involving the defence of change of position, which

seems to add weight to this point of view. Prior to Hills, the High Court had not officially recognised the change of position defence, so that the only way in which a court wanting to protect an innocent volunteer recipient of money who had spent it against an unfair liability was by focusing on what that party retained (nothing retained = no liability). Is the Southage view — that the question whether it is unjust for the defendant to retain the benefit is relevant to defences, not the restitutionary cause of action — preferable? What practical consequences might [page 27] flow from a model of liability in which the defendant is only prima facie liable where he or she has ‘unconscionably retained’ a benefit? Would the defendant be liable for interest on the sum received prior to the point in time when retention became unconscionable? How often would it be necessary for a defendant who has innocently spent the money received to rely on a defence of change of position? Indeed, would the defence of change of position be needed at all, when none of the money is retained? See S Kiefel, ‘Lessons from a “Conversation” about Restitution’ (2014) 88 ALJ 176, esp. pp 177–8 (suggesting that this way of thinking could limit the need for a change of position defence in Australia).

Unjustified enrichment and ‘absence of basis’ 1.34

Most civilian and mixed jurisdictions recognise a

principle against unjust enrichment, but they structure it in a very different way. Whereas the common law in the United Kingdom and the United States requires a plaintiff to prove a specific and legally recognised reason why the defendant’s enrichment is unjust (an ‘unjust factor’, as it is sometimes known, such as a mistake), civilian systems tend to ask whether the enrichment is justified, or has a valid explanatory basis (causa or ‘cause’). This appears to reflect a different philosophical starting point — the point of view that enrichments require explanation or justification, as opposed to the view that there must be shown to be something wrong with them for a defendant to be obliged to give them up.36 Sometimes, this involves a shift in the onus of proof. But even in those jurisdictions, such as Germany, where the onus of proof technically remains on the plaintiff, he or she must still prove that the defendant has no ‘valid basis’ for his or her enrichment, rather than proving a positive reason why it is unjust. In this sense, the plaintiff must establish a ‘negative’ by showing that there is no good, legally recognised (‘juristic’) reason for the defendant to have the enrichment, such as a valid contract, a debt or a gift. 1.35 This different way of thinking has found its way into Canadian law and was mentioned obiter by Mason CJ in Commissioner of State Revenue v Royal Insurance Australia Ltd.37 Some English judges have also toyed with it in the context of a difficult set of cases (the ‘swaps cases’) involving money received under void contracts. It was these cases which Professor Birks believed compelled a radically-revised approach to unjust enrichment law, structured along civilian lines. We start this section with one such case. We then consider the revised model of unjust enrichment which

Professor Birks suggested for English law, which he viewed as a viable compromise between the civilian and the common law approach. Neither English nor Australian courts have, as yet, chosen to adopt it. Here, we consider whether or not it might be a useful approach for Australian law to take. 1.36C Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 408–9 (HL) Kleinwort Benson paid money to Lincoln City Council under an ‘interest rate swap’ contract which was generally thought to be valid at the time it was made, and which was fully performed by both parties. Some years after the payments had been made, the contract was declared void, on the basis that it was beyond the Council’s powers. Kleinwort sought to recover its money, less the money it had in turn received under the contract from Lincoln. Lincoln claimed that the claim was time-barred in respect of any money it had received more than 6 years before the issue of the writ. A key question was whether Kleinwort had originally paid under a mistake as to the law, because extended time periods apply in such a case under s 32(1) of the Limitation (continued)

[page 28] Act 1980 (UK). The House of Lords held by a 3:2 majority that it had paid under a mistake of law, so that it was

entitled to claim the benefit of the extended limitation period. Lord Hope: In my opinion the proper starting point for an examination of this issue is the principle on which the claim for restitution of these payments is founded, which is that of unjust enrichment. The essence of this principle is that it is unjust for a person to retain a benefit which he has received at the expense of another, without any legal ground to justify its retention, which that other person did not intend him to receive. This has been the basis for the law of unjust enrichment as it has developed both in the civilian systems and in Scotland, which has a mixed system — partly civilian and partly common law. On the whole, now that the common law systems see their law of restitution as being based upon this principle, one would expect them to apply it, broadly speaking, in the same way and to reach results which, broadly speaking, were similar: Zweigert and Kötz, An Introduction to Comparative Law, 2nd ed (1987), vol II, pp 262–263, 267. What, then, is the function of mistake in the field of restitution on the ground of unjust enrichment? The answer, one may say, is that its function is to show that the benefit which has been received was an unintended benefit. A declaration of intention to confer the benefit, even if unenforceable, will be enough to justify the retention of the enrichment. A mistake, on the other hand, will be enough to justify the restitutionary remedy, on the ground that a benefit which cannot be legally justified should not be retained where it was a mistaken and thus unintended benefit. It may be helpful to mention the material we were given to illustrate its function in the civilian systems. The details vary as between the major civil codes. But in simple terms, the law looks for the absence of a legal justification for the enrichment: Zweigert and Kötz, p 232. If the payer paid in the mistaken belief that he was under a duty to pay, it is prima facie unjust that the payee should be allowed to retain what he received. But the burden of proving that the payer knew that there was no duty, and was not mistaken, is on

the recipient: Englard, International Encyclopedia of Comparative Law (1991), vol X, pp 8–9, para 5–13. Mistake in this context means lack of knowledge, and it makes no difference whether this is of fact or of law: Englard, p 18, para 5–30. As for the concept of enrichment, a person is enriched when he receives a payment which the payer was not bound by any obligation to make to him. The payee is entitled to retain the payment if it was made to him voluntarily, as in the case of a gift. The enrichment is unjust if the person who made the payment did not do so voluntarily and there was no obligation to confer the benefit: Zweigert and Kotz, p 261. The approach of the common law is to look for an unjust factor, something which makes it unjust to allow the payee to retain the benefit: Birks, An Introduction to the Law of Restitution, 2nd ed (1989), pp 140 et seq. It is the mistake by the payer which, as in the case of failure of consideration and compulsion, renders the enrichment of the payee unjust. The common law accepts that the payee is enriched where the sum was not due to be paid to him, but it requires the payer to show that this was unjust. Whereas in civilian systems proof of knowledge that there was no legal obligation to pay is a defence which may be invoked by the payee, under the common law it is for the payer to show that he paid under a mistake. My impression is that the common law tends to place more emphasis on the need for proof of a mistake. But the underlying principle in both systems is that of unjust enrichment. The purpose of the principle is to provide a remedy for recovery of the enrichment where no legal ground exists to justify its retention.

Notes and questions 1. Like the rest of the majority, Lord Hope took the view that Kleinwort had been mistaken in paying. Technically, this is consistent with the traditional ‘unjust factors’ approach. What, therefore, do we make of his proposition that the essence of unjust enrichment is the retention of a

benefit received at the expense of another, without any legal ground to justify its retention, which that other did not intend him to receive? Is unjust enrichment based on the ‘absence of legal ground’ for the enrichment, on proof of vitiated intention, or on both? 2. The extract indicates that the ‘unjust factor’ of mistake has a function even under the civilian analysis. What, then, is the difference in approach? Is there one? 3. P pays money to D. Should the onus be on P to prove that a mistake was made, or on D to prove that there was none? [page 29] 4. For the view that there was no mistake in the instant case, so that the true explanation for recovery must be ‘absence of legal ground’ see S Meier and R Zimmermann, ‘Judicial Development of the Law, Error Iuris and the Law of Unjustified Enrichment: A View from Germany’ (1999) 115 LQR 556. The question whether Kleinwort did make any mistake is considered further at 5.22C. 1.37E P Birks, Unjust Enrichment 2nd ed, Clarendon, Oxford, 2005, pp 102–3, 114–17 The Civilian Approach: No Explanatory Basis

It is not right to think of all civilian jurisdictions as homogenous … It is nevertheless true that all civilian jurisdictions share a particular angle of approach to ‘unjust’ which is ultimately derived from the Roman action of debt. They begin from the proposition that every enrichment at

another’s expense either has an explanation known to the law or has not. Enrichments are received with the purpose of discharging an obligation or, if without obligation, to achieve some other objective as for instance the making of a gift, the satisfaction of a condition, or the coming into being of a new contract. These outcomes succeeding, the enrichment is sufficiently explained. An enrichment which turns out to have no such explanation is inexplicable and cannot be retained. The recipient is not entitled to it. The shorthand for this, in Latin, is ‘sine causa’. In English, that reduces to ‘no basis’. Enrichment sine causa is enrichment with no explanatory basis. 1. Absence of Basis is not another Unjust Factor

The list of unjust factors was already miscellaneous. In principle it could admit another reason for restitution. But absence of basis is not a deficiency of consent; nor is it a policy dictating that the enrichment should be reversed; it is also not a reason for restitution independent of the other members of the list. This means that it cannot join either of the two groups of unjust factors, and it cannot make a third group of its own. One could not smuggle ‘vertebrates’ into a list of mammals. In the same way absence of basis cuts across the list of unjust factors. … Absence of basis is now the only unjust factor in English law. This makes for lawyer’s law. No passenger on the Clapham Omnibus ever demanded restitution for want of legally sufficient basis. But the change of course is not a disaster. The civilian method at which our courts have arrived, although it too leaves room for many arguments in difficult cases, is efficient, tried and tested. … 3. The Pyramid: A Limited Reconciliation

The pevious pages show that a limited reconciliation between the two approaches lies in making the intent-based unjust factors subservient to absence of basis, which itself then becomes an intermediate generalisation between the unjust factors and unjust. A pyramid can be constructed in which, at the base, the particular

factors such as mistake, pressure and undue influence become reasons why, higher up, there is no basis for the defendant’s acquisition, which is then the master reason why, higher up still, the enrichment is unjust and must be surrendered … The base of the pyramid thus consists of all the categories of deficient intent (no intent, impaired intent, and qualified intent) together with all other causes of invalidity. All these work through ‘absence of basis’. A single proposition covers every case: an enrichment at the expense of another is unjust where it is received without explanatory basis.

1.38 Birks’s proposed revised model of unjust enrichment law is not an exact replica of any existing civilian or common law system. It results in the recognition of only one reason for restitution, which the plaintiff must prove, namely the absence of any explanatory basis for the defendant’s enrichment. Demonstrating the absence of any such basis can be effected in one of three ways: by demonstrating that any obligation pursuant to which the benefit was transferred, or the transfer itself, was invalid; or by showing that the transfer of the plaintiff’s value came about as a result of some ‘taking’ by the defendant. A consequence of this model is that none of the traditional ‘unjust factors’ such as mistakes, have any formal part to play in the law of unjust enrichment itself — they operate in other fields of the law, such as the law of [page 30]

Figure 1.2: The revised Birksian model of unjust enrichment. contract or trusts, simply to establish the invalidity of any contract or disposition between the parties. In this way, the law of unjust enrichment shrinks in size, becoming parasitic on rules set elsewhere in the law of contract, property and trust regarding transactional validity. As one author has put it, unjust enrichment becomes ‘a tail to be wagged by the dog of the rest of the law.’38 A representation of the resulting model appears in Figure 1.2. 1.39C

Deutsche Morgan Grenfell Group Plc v Inland Revenue Commissioners

[2006] UKHL 49 at [154]–[158] For the facts, see 5.24C. Lord Walker: [154] … The choice as to the way forward which restitution scholars identify is between continuing to view unjust enrichment

as depending on the presence of one or more of a variety of ‘unjust factors’ and adopting the single test of ‘absence of basis’. [155] My Lords, the House is being invited (much more pressingly, it must be said, by scholars than by counsel for the parties) to make a choice at a very high level of abstraction. Most scholars would take the view (though Professor Birks himself would not, I suspect, have agreed, since he regarded taxonomy as very important) that the choice is one which will rarely make much if any practical difference to the outcome of any particular case before the court. For several reasons I doubt whether this is the right time for your Lordships to decide whether to rebase the whole law of unjust enrichment on a highly abstract principle which (although familiar to civilians and to Scottish lawyers, and discussed in the speech of my noble and learned friend Lord Hope of Craighead in Kleinwort Benson [1999] 2 AC 349, pp 408–409 would represent a distinct departure from established doctrine. [156] It is of the nature of the common law to develop slowly, and attempts at dramatic simplification may turn out to have been premature and indeed mistaken. As Lord Rodger of Earlsferry put it in Commissioners of Customs and Excise v Barclays Bank plc [2006] UKHL 28; [2006] 3 WLR 1, 19, para 51: Part of the function of appeal courts is to try to assist judges and practitioners by boiling down a mass of case law and distilling some shorter statement of the applicable law. The temptation to try to identify some compact

[page 31] underlying rule which can then be applied to solve all future cases is obvious. [Counsel for the appellants] submitted that in this area the House had identified such a rule in the need to find that the defendant had voluntarily assumed

responsibility. But the unhappy experience with the rule so elegantly formulated by Lord Wilberforce in Anns v Merton London Borough Council [1978] AC 728, 751–752, suggests that appellate judges should follow the philosopher’s advice to ‘Seek simplicity, and distrust it.’ Other members of the House showed a similar disinclination to wide generalisation: see Lord Bingham of Cornhill at para 8, Lord Hoffmann at para 36 and Lord Mance at para 83. Commissioners of Customs & Excise v Barclays Bank plc shows that more than forty years on from Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, the true foundations of the law of tortious liability for negligent misstatement are still open to debate. [157] By contrast the English law of unjust enrichment has in the space of a decade seen four very important developments, all informed by the learning of Lord Goff: Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 in 1991, Woolwich [1993] AC 70 in 1992, Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 in 1996, and Kleinwort Benson [1999] 2AC 349 in 1998. The change in the views of Professor Birks is a recent development (which sadly he could not pursue further) and it has not yet been fully considered by other legal scholars. There is, it seems to me, much to be said for a period of reappraisal. [158] Nevertheless I would add that my tentative inclination is to welcome any tendency of the English law of unjust enrichment to align itself more closely with Scottish law, and so to civilian roots. I see attractions in the suggestion made by Professor Birks in Unjust Enrichment (2nd edition, p 116, under the heading ‘The Pyramid: a Limited Reconciliation’): A pyramid can be constructed in which, at the base, the particular unjust factors such as mistake, pressure and undue influence become reasons why, higher up, there is no basis for the defendant’s acquisition, which is then the master reason why, higher up still, the enrichment is unjust and must be surrendered.

I would be glad to see the law developing on those lines. The recognition of ‘no basis’ as a single unifying principle would preserve what Lord Hope refers to as the purity of the principle on which unjust enrichment is founded, without in any way removing (as this case illustrates) the need for careful analysis of the content of particular ‘unjust factors’ such as mistake.

Notes and questions 1. Lord Hoffmann considered that it was unnecessary to make any decision on the fundamental shape of unjust enrichment doctrine, but considered that the conclusion that there had been a mistake on the facts was not necessarily inconsistent with the scheme proposed by Professor Birks. In the more recent case of Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34, Lord Walker made no further allusion to absence of basis. Lord Hope (at [23]) appears to have preferred the traditional ‘unjust factors’ approach. 2. From the moral or economic point of view, should the gains that someone makes from another have to be explained, or should it be assumed that they are legitimate until a good reason (‘unjust factor’) is shown why they are not? See further K Barker, ‘Responsibility for Gain: Unjust Factors or Absence of Basis? Starting Points in Unjust Enrichment Law’ in R Grantham and C Rickett (eds), Structure and Justification in Private Law: Essays for Peter Birks (Hart, Oxford, 2007), Ch 4. 3. Does it make any practical difference to the outcome of a case whether one takes the ‘unjust’ or ‘unjustified’ enrichment approach? See further, M Chen-Wishart, ‘Unjust Factors and the Restitutionary Response’ (2000)

20 OJLS 557; S Meier, ‘Unjust Factors and Legal Grounds’ and T Krebs, ‘In Defence of Unjust Factors’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment (CUP, Cambridge, 2002), Chs 2, 3; A Burrows, ‘Absence of Basis: The New Birksian Scheme’ in A Burrows and A Rodger (eds), Mapping the Law (OUP, Oxford, 2006), p 33; G Virgo, ‘Demolishing the Pyramid — The Presence of RiskTaking in the Law of Unjust Enrichment’ in D Nolan and A Robertson (eds), Rights and Private Law (Hart, Oxford, 2012), p 477. [page 32] 4. If ‘absence of cause’ were the only cause of action in unjust enrichment, how would one plead it? 5. Which is the more abstract approach — ‘unjust’ or ‘unjustified’ enrichment? 6. What practical adjustments would one have to make to Australian law to import the civilian approach? Would it be worth the effort? See G Dannemann, ‘Unjust Enrichment as Absence of Basis: Can English Law Cope?’ in Burrows and Rodger (eds), Mapping the Law, Ch 19. 7. In Canada, a mixed jurisdiction, courts have ultimately endorsed the civilian approach: see Garland v Consumers’ Gas Co [2004] SCC 25; Pacific National Investments v Victoria (City) [2004] SCC 75; Brent v Slegg Construction Materials Ltd [2007] BCSC 661; BMP Global Distribution Inc v Bank of Nova Scotia [2009] SCC 15. There has been much academic criticism. An initial negative reaction appears to have been followed by the more recent view that,

although the new system is formally very different and has difficulties of its own, in practice it yields the same results in most instances. See generally R Grantham, ‘Absence of Juristic Reason in the Supreme Court of Canada’ (2005) 13 RLR 102; M McInnes, ‘Making Sense of Juristic Reasons: Unjust Enrichment after Garland v Consumers’ Gas’ (2004) 42 Alberta L Rev 399; L Smith, ‘Demystifying Juristic Reasons’ (2007) Can Bus LJ 281; M McInnes, ‘The Reason to Reverse: Unjust Factors and Juristic Reasons’ (2012) Boston U Law Rev 1049; ‘Revising the Reason for Restitution: Garland Ten Years After’ (2015) 57 Can Bus LJ 1; C Hunt and L Hamill, ‘Building the Pyramid: Unjust Factors and Juristic Reasons 10 Years After Garland v Consumers’ Gas Co’ (2015) 57 Can Bus LJ 58; L Smith, ‘The State of the Law of Unjust Enrichment in Common Law Canada’ (2015) 57 Can Bus LJ 39. 8. In Unjust Enrichment (2nd ed), Ch 6, pp 118, 130–8 (and see also Ch 7), James Edelman and Elise Bant suggest that for a plaintiff to succeed in an unjust enrichment claim, he or she must both (i) prove an unjust factor; and (ii) ‘negate’ any juristic reason that the defendant asserts for retaining the enrichment. The second of these stages must be executed along with the first before any defences to a claim are considered: Apart from the existence of an unjust factor, the law of restitution also requires that there be no juristic reason entitling the defendant to retain the enrichment. … The requirement that an enrichment be ‘unjust’ therefore requires (i) an unjust factor that causes the enrichment, and (ii) that the defendant has no juristic reason entitling

her to retain the enrichment.’ (p 130) Is this approach helpful? How does it differ from Birks’s approach? Can it more easily be adopted into a common law system? There is certainly evidence in the existing law that if a plaintiff wishes to claim restitution of benefits transferred under a contract, the onus is upon the plaintiff first to show a reason why the contract should be set aside (thereby removing the defendant’s contractual right to the benefits), before being entitled to restitution. This supports their view. An alternative way in which a common law system law might potentially accommodate the same point and avoid restitution of benefits to which defendants have existing legal rights would be to allow the defendant to plead the existence of that right by way of defence to any restitutionary claim a plaintiff is able to make out, or to regard the existence of the defendant’s legal right to a benefit as a ‘qualification’ upon a plaintiff’s right to restitution: see A Burrows, The Law of Restitution (3rd ed, OUP, Oxford, 2011), p 89. Upon whom should the onus on such questions lie? See further 3.51–3.53.

1.

Restatement of the Law, Restitution (American Law Institute, St

Paul, Minnesota, 1937). The origins in the United States reach further back to the work of J B Ames, ‘The History of Assumpsit: Implied Assumpsit’ (1888) 2 Harvard L Rev 53; A Kull, ‘James Barr Ames and the Early Modern History of Unjust Enrichment’ (2005) 25 OJLS 297. 2.

Restatement of the Law Third, Restitution and Unjust Enrichment

3.

4.

5.

6. 7.

8.

(American Law Institute, St Paul, Minnesota, 2011). See, for example, G Klippert, Unjust Enrichment (Butterworths, Toronto, 1983); P Birks, Unjust Enrichment (2nd ed, Clarendon, Oxford, 2005); A Burrows, A Restatement of the English Law of Unjust Enrichment (OUP, Oxford, 2012); C Mitchell, P Mitchell and S Watterson, Goff and Jones: The Law of Unjust Enrichment (9th ed, Sweet & Maxwell, London, 2016); J Edelman and E Bant, Unjust Enrichment (2nd ed, Hart, Oxford, 2016). The term ‘restitution’ is used in this book to refer to all gain-based remedies in private law. Note, however, that where defendants are forced to ‘give up’ rather than ‘give back’ their gain to a plaintiff, the term ‘disgorgement’ is sometimes preferred. This occurs most frequently in cases in which the defendant has gained without obtaining any asset that previously belonged to the plaintiff, or by causing the plaintiff any corresponding loss. On this distinction, see further Chapter 10. Pomponius, De Regulis Iuris, D 50, 17, 206. More literally: ‘It is by nature fair that no-one should gain at the cost of harm and injury to another.’ See, similarly, D 12, 6, 14: ‘nem hoc natura aequum est, neminem cum alterius detrimento fieri locupletiorem’. Delgman v Guaranty Trust Co of Canada [1954] SCR 725 (SCC). [1991] 2 AC 548 (HL). The principle is also recognized in New Zealand (National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1999] 2 NZLR 211 (CA), Ireland (East Cork Foods Ltd v O’Dwyer Steel Co [1978] IR 103) and Scotland (Shilliday v Smith 1998 SC 725). (1987) 162 CLR 221 (HCA). See also David Securities Pty Ltd

v Commonwealth Bank of Australia (1992) 175 CLR 353 (HCA).

9.

10.

11.

12.

Procedural fusion was completed only in 1972. On the fascinating history, see K Mason, ‘Fusion: Fallacy, Future or Finished?’ in S Degeling and J Edelman (eds), Equity in Commercial Law (Lawbook Co, Sydney, 2005), Ch 3. Three retirements are of particular significance — Justices Gummow, Hayne and Heydon, two of whom are one-time or existing authors of the leading Australian work on equitable doctrine: J Heydon, M Leeming and P Turner, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, LexisNexis Butterworths, Sydney, 2015). The fourth edition of this work overtly cast unjust enrichment scholars in the mould of ‘empire builders’: see R Meagher, D Heydon and M Lemming, Meagher, Gummow & Lehane’s Equity Doctrine and Remedies (4th ed, LexisNexis Butterworths, Sydney, 2002), p xi. A significant recent appointment, with a very different viewpoint, is Justice Edelman. See generally J Baker, ‘The History of Quasi-Contract in English Law’ in W Cornish, R Nolan, J O’Sullivan and G Virgo (eds), Restitution, Past Present & Future (Hart, Oxford, 1998), Ch 3; D Ibbetson, A Historical Introduction to the Law of Obligations (OUP, Oxford, 1999), Ch 14; P Birks, ‘English and Roman Learning in Moses v MacFerlan’ (1984) 37 CLP 1; W Seavy and A Scott, ‘Restitution’ (1938) 54 LQR 29, pp 32–5; W Swain, ‘Unjust Enrichment and the Role of Legal History in England and Australia’ (2013) 36 UNSWLJ 1030. It still re-emerges occasionally: see, for example, Guinness plc v Saunders [1990] 2 AC 663 at 689. There may also, of

13. 14.

15. 16. 17. 18. 19. 20.

21.

course, be cases where a genuine promise to pay for benefits received can legitimately be implied from a course of dealings between the parties. For the full form of words, see Stephen on Pleading (2nd ed, London, 1827), p 312. (1604) 4 Coke 92. The case allowed assumpsit for the first time to be sued to enforce genuine, promissory debts, rather than confining plaintiffs to the old debt action. Progressively, assumpsit then came to be used for the enforcement of non-promissory restitutionary debts as from around 1657. The transition was fully complete by the time of Moses. Inst. 3.13.2. P Birks and G McLeod, ‘The Implied Contract Theory of Quasi-Contract’ (1986) 6 OJLS 46, p 54. W Blackstone, Commentaries on the Laws of England, 1765– 1769, Books 1–4. Birks and McLeod, (1986) 6 OJLS 46, pp 50–51. Ibbetson, A Historical Introduction to the Law of Obligations, p 273. Ibbetson, A Historical Introduction to the Law of Obligations, pp 273–6; M Bryan, ‘Equity and Restitution’ in P Parkinson (ed), The Principles of Equity (Lawbook Co, Sydney, 2003), Ch 4, esp. pp 111–23; J Edelman, ‘Unjust Enrichment and the Law of Trusts’ (2011) 35 Aust Bar Rev 219. These were available historically where the property was conveyed by mistake (Pusey v Desbhouverie (1734) 3 P Wms 216; Evans v LLwellyn (1787) 2 Bro CC 150; 1 Cox CC 333), fraud (Colt v Woolaston (1723) 2 P P Wms 154), or where the purpose of the conveyance failed: Hamond v Hicks (1686) 1 Vern 432.

22. 23.

24. 25.

26. 27.

28.

See C Rickett, ‘The Classification of Trusts’ (1999) 18 NZULR 305. For a sample of the debate, see A Mason, ‘The Place of Equity and Equitable Remedies in the Contemporary Common Law World’ (1994) 110 LQR 238; A Burrows, ‘We Do this at Common Law, But that in Equity’ (2002) 22 OJLS 1. [1999] 1 AC 221 (HL) 227. See, for example, Birks, Unjust Enrichment (2nd ed), p 39; A Lodder, Enrichment in the Law of Restitution (Hart, Oxford, 2012), p 2 (rights to value and rights to ‘specific restitution’). Edelman and Bant, Unjust Enrichment (2nd ed), pp 35–46. K Barker, ‘Riddles, Remedies and Restitution: Quantifying Gain in Unjust Enrichment Law’ [2001] 54 CLP 255. Menelaou v Bank of Cyprus plc [2015] UKSC 66 at [19]; Investment Trust Companies v Revenue and Customs Commrs [2012] STC 1150 at [38] per Henderson J; Commissioners for her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq) [2017] UKSC 29 at [41] per Lord Reed (Lords

Neuberger, Mance, Carnwath and Hodge agreeing). 29.

30.

Commissioners for her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq) [2017] UKSC 29 at [41] per

Lord Reed (Lords Neuberger, Mance, Carnwath and Hodge agreeing). Benedetti v Sawiris [2013] UKSC 50 at [10] per Lord Clarke (Lords Kerr and Wilson agreeing); Crown Prosecution Service v Eastenders Group [2014] UKSC 26 at [102] per Lord Toulson, Lady Hale and Lord Kerr (Lords Wilson and Hughes agreeing); Menelaou v Bank of Cyprus [2015] UKSC 66 at [18] per Lord Clarke, at [61] per Lord Neuberger;

Commissioners for her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq) [2017] UKSC 29 at [24] per

31.

32.

33.

34. 35. 36.

Lord Reed (Lords Neuberger, Mance, Carnwath and Hodge agreeing). [2012] HCA 7 at [30]. See also Gageler J in Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 at [138]. K Mason, ‘What has Equity to do with Restitution? Does it Matter?’, Chancery Bar Association, Inner Temple, London, 27 November 2006; ‘Where has Australian Restitution Law Got to and Where is it Going?’ (2003) 77 ALJ 358. See, for example, Koorootang Nominees Pty Ltd v Australian & New Zealand Banking Group Ltd [1998] 3 VR 16 at 102 (Hansen J) (stages 1–3); Spangaro v Corporate Investment Australia Funds Management Ltd [2003] FCA 1025 at [48] (Finkelstein J) (stages 1–4); Ideas Plus Investments Ltd v NAB Ltd [2006] WASCA 215 at [96] (McLure JA) (stages 1–4); Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309 at [222] (Tobias J) (stages 1–3); W Cook Builders Pty Ltd (in liq) v Lumbers [2007] SASC 20 at [63] (Sulan and Layton JJ) (stages 1–4); Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2011] NSWSC 267 at [21]–[23] (Einstein J) (stages 1–4); Focus Metals Pty Ltd v Babicci [2014] VSC 380 at [120] (Sloss J) (endorsing Einstein J in Hills, ibid); Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3) [2014] WASC 162 at [51]–[55] (Edelman J) (stages 1–4). [2001] HCA 68 at [139] fn 229. Ibid at [72]–[73] (Gummow J). K Barker, ‘Responsibility for Gain: Unjust Factors or Absence of Basis? Starting Points in Unjust Enrichment

37. 38.

Law’ in R Grantham and C Rickett (eds), Structure and Justification in Private Law: Essays for Peter Birks (Hart, Oxford, 2007), Ch 4. (1994) 182 CLR 51 at 67. L Smith, ‘Demystifying Juristic Reasons’ (2007) 45 Can Bus LJ 281, p 301.

[page 33]

2

Locating unjust enrichment in private law CHAPTER SUMMARY

Introduction Foundational Aims Corrective justice Peel (Regional Municipality) v Canada

E Weinrib, ‘Corrective Justice in a Nutshell’ E Weinrib, The Idea of Private Law K Barker, ‘Unjust Enrichment: Containing the Beast’ L Smith, ‘Restitution: The Heart of Corrective Justice’ Distributive justice D Klimchuk, ‘Unjust Enrichment and Corrective Justice’ H Dagan, The Law and Ethics of Restitution E Sherwin, ‘Rule-Oriented Realism: The Law and Ethics of Restitution’ D Klimchuk, ‘The Normative Foundations of Unjust Enrichment’ Summary and reflections

2.1 2.3 2.9C 2.9C 2.10E 2.11E 2.12E 2.13E 2.14 2.15E 2.16E 2.17E 2.18E 2.19

Taxonomy – Mapping Private Law 2.22 Approaches to taxonomy 2.24E P Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ 2.24E P Birks, ‘Definition and Division: A Meditation on Institutes 3.13’ 2.25E G Samuel, ‘Can Gaius Really be Compared to Darwin? 2.26E S Hedley, ‘Rival Taxonomies Within Obligations: Is there a Problem?’ 2.27E The Scope of unjust enrichment law as a category - the broad view 2.28E P Birks, An Introduction to the Law of Restitution 2.28E [page 34] Criticisms of the broad view –the challenge of diversity 2.29 S Hedley, ‘Ten Questions for “Unjust Enrichment” Theorists’ 2.30E K Barker, ‘Understanding the Unjust Enrichment Principle in Private Law’: A Study of the Concept and its Reasons 2.31E Unjust enrichment law as a category – modern views 2.32 S Hedley, ‘Unjust Enrichment: A Middle Course?’ 2.34E P Birks, Unjust Enrichment 2.35E M McInnes, ‘Restitution, Unjust Enrichment and the Perfect Quadration Thesis’ 2.37E

Unjust Enrichment as a ‘Subsidiary’ Doctrine Unjust enrichment and contract Pan Ocean Shipping Ltd v Creditcorp Ltd Roxborough v Rothmans of Pall Mall Australia Ltd Lumbers v W Cook Builders Pty Ltd (in liq)

Unjust enrichment and property Foskett v McKeown

2.38 2.40 2.41C 2.42C 2.43C 2.44 2.47C 2.48E

Subsidiarity arguments R Grantham and C Rickett, ‘On the Subsidiarity of Unjust Enrichment’ 2.48E

INTRODUCTION 2.1 The first chapter of this book detailed the historical emergence of the law of unjust enrichment, the meaning and role of the idea in modern judicial reasoning and two competing models of restitutionary liability — ‘unconscionable retention’ of a benefit; and civilian, or mixed, models of ‘unjustified enrichment’. This chapter considers the way in which the subject fits within the private law as a whole. 2.2 was and has,

For much of the last century, the domain of private law conceived of largely in terms of property law, contract torts. The emergence of the law of unjust enrichment however, shown this division to be inadequate. Private

law rights can no longer be said to flow simply from ownership, consent or wrongdoing. At the same time, the recognition of rights based on unjust enrichment raises difficult issues as to how the subject now fits within the private law as a whole. Three questions in particular need to be answered. First, what are the underlying aims of unjust enrichment law and how do they compare to those of other areas of private law? Secondly, where does the subject fit within the law’s organisational scheme or ‘map’ and what is its scope? In this book, we take the view that the subject includes both cases of ‘unjust enrichment by subtraction’ from a plaintiff (where the defendant’s gain has been obtained ‘from’ the plaintiff, for example, where the plaintiff has mistakenly paid money to the defendant) and cases of unjust enrichment by ‘wrongdoing’ (where the defendant’s gain is made by infringing one of the defendant’s primary rights, for example, by breaching his or her confidence, or copyright). This view is not shared by all judges and commentators. Thirdly, what is the nature of the relationship between unjust enrichment and its neighbouring subjects? Do they enjoy equal status, or is there something akin to a hierarchy between them, based on the relative importance of their underlying aims? Is unjust enrichment a ‘subsidiary’ doctrine which must yield where other legal principles logically apply to a particular set of facts? None of these questions is easy; indeed, most are still hotly contested. They are also closely interrelated. Our understanding of the law’s foundational aims clearly has the potential to affect the way in which we organise it (our taxonomy). The way in which we organise private law then, in turn, affects the relationship between its composite parts and the extent to which conflicts

and questions of priority arise between them. [page 35]

FOUNDATIONAL AIMS 2.3 Theories about the aims of unjust enrichment law can be divided crudely into two groups. Those in the first group conceive of it as a way of achieving justice between the parties. ‘Corrective justice’ theorists, for example, argue that restitutionary rules set out to rectify (correct) an imbalance in the parties’ positions brought about by an injustice which has occurred between them. Restitution restores the parties’ prior ‘equality’ by forcing the one who has gained from the injustice to make good the position of the party who has suffered it. This process of restoration is moral, looks backward to past events, protects individual rights and makes people accountable for the wrongs they do. The idea is derived from Aristotle1 but has been put into prominent recent use by a number of private law theorists,2 most notably Professor Ernest Weinrib. In The Idea of Private Law,3 Weinrib claimed (and he maintains in more recent publications) that corrective justice underpins the whole of private law, including the law of contract, torts and unjust enrichment. 2.4 The second group of theories, by contrast, sees unjust enrichment law as a mechanism for achieving goals extending beyond the immediate parties to a given dispute. A number of texts thus include cases in which restitution is

claimed to have an underlying ‘policy’ basis, such as encouraging one person to help another, or ensuring respect for constitutional or private legality; and courts sometimes refer to restitutionary rules as having a ‘deterrent’ function, particularly in cases where one party has profited by abusing a relationship of confidence or trust. Such theories conceive of the purpose (not just the effect) of unjust enrichment rules as being to achieve a particular social end or ends, rather than as simply resolving past disputes and restoring the parties to their prior positions. Such rules are purposive, look forward to the future effects of legal rules and see private law as an instrument of social or economic policy. One theory of this type considered below is Dagan’s (2.16E–2.18E), according to which restitutionary rules are (and/or should be) constructed in such a way as to promote particular liberal public values, such as personal autonomy. Another (consideration of which we postpone to Chapter 10) is Jackman’s theory of restitution for wrongs, according to which the primary purpose of restitutionary rules is to protect our key social institutions of property, contract and trust. 2.5 As you read the following extracts, bear in mind two further points of distinction between the various theories. First, while some may purport to explain the law from the inside (to provide an account of judges’ reasons in deciding cases), others are more overtly normative — that is, they may claim only that legal rules ought to follow their reasoning, not that they necessarily ever did or currently do. Such theories are valuable in the sense that they supply us with an important point of view from which to critically appraise the law and (where appropriate) suggest reforms, but they may

be less helpful when it comes to predicting the outcome of cases because they are further removed from the law’s (judges’) actual internal motivations. They are theories about the law, not necessarily theories of the law. Dagan’s theory lies somewhere between these two types. He describes it as ‘interpretive’. Interpretive theories do not claim to give us a literal account of the law’s history as such. Nor do they purport to tell us simply what the law should be. Rather, they profess to provide the ‘best explanation’ for the law’s existing rules — the one that discloses in the law an intelligible order. Sceptics [page 36] say that the process of ‘interpreting’ the law is really no different to re-modelling it in the way one thinks fit, but interpretive theories nonetheless make a different type of claim to ‘bare’ normative theories and form part of a respectable critical tradition.4 Interpretive theorising is also closest to the type of approach that judges tend to take in developing the law, given the limitations on their constitutional role. 2.6 A second point of differentiation is that, whereas some theories (most notably Weinrib’s) are ‘monistic’ in the sense that they claim only one aim for restitutionary rules, others (‘pluralistic’ theories) maintain that these rules pursue a variety of distinct aims, which on some facts pull in the same direction, but which on other facts compete with one another and have to be weighed and balanced when it comes to settling any final legal rule. Dagan falls into the latter camp.

Unsurprisingly perhaps, monistic theories claim to be more coherent, but it is highly questionable whether any single idea can explain every rule of unjust enrichment law. Pluralistic theories either admit openly that the law is not coherent (this being one of their principal claims); or they say that it is coherent in pockets (that is, some bits do one discrete thing and other bits do another); or they say that there are ways of dealing with competing priorities in a coherent way (for example, by having a ranking of the various aims, or a formula for weighing and balancing them). All law is a balance between different value considerations and we simply have to do the best that we can to be consistent in the balances that we set. 2.7 We take the view that restitutionary rules are to be understood as resting on plural aims. The best strategy for understanding is, therefore, to identify the underlying aim (or aims) of the law in each particular category of unjust enrichment case, acknowledging that some aims may be common to all categories, and some discrete to particular instances. Like all families, restitutionary rules share some things and differ on others. 2.8 Because the material is complex, the theoretical extracts below have been selected to address the question of foundational aim(s) in two main types of case, which are commonly regarded as paradigmatic. The first is the case of ‘unjust enrichment by subtraction’, typified in particular by (but by no means confined to) the case of the mistaken payment. Liability in such instances tends to be strict. The second is that of enrichment by wrongdoing, where one party profits not by receiving property or other value from

the plaintiff, but by infringing his or her rights, such as the right to confidence or fiduciary loyalty. An increasing number of authors consider cases of enrichment by wrongdoing to belong outside the category of ‘unjust enrichment law’ altogether, although this is not a universal view. For present purposes, we keep an open mind on this question. For current purposes, we simply observe that cases of unjust enrichment by ‘subtraction’ and restitution for wrongdoing probably share certain, common aims. The following sections may assist in testing this hypothesis. Further insight into this question can be gleaned from Chapter 10.

Corrective justice 2.9C Peel (Regional Municipality) v Canada [1992] 3 SCR 762 at 804 (SCCan) McLachlin J: The concept of ‘injustice’ in the context of the law of restitution harkens back to the Aristotelian notion of correcting a balance or equilibrium that had been disrupted. The restitutive form of justice is distinct from the analysis particular to tort and contract law, in the sense that questions of duty, standards, and culpability are not a central focus in restitution. Speaking in highly general terms, D Stevens suggests that contract and tort claims deal with punitive or distributive measures, whereas restitution claims deal with a ‘non-consensual receipt and a retention of value’ (‘Restitution, Property, and the Cause of Action in Unjust Enrichment: Getting By With Fewer Things (Part I)’ (1989) 39 UTLJ 258,

[page 37]

at p 271; see also DR Wingfield, ‘The Prevention of Unjust Enrichment: Or How Shylock Gets His Comeuppance’ (1988) 13 Queen’s LJ 126, at p 134). Thus, restitution, more narrowly than tort or contract, focuses on re-establishing equality as between two parties, as a response to a disruption of equilibrium through a subtraction or taking. This observation has dual ramifications for the concept of ‘injustice’ in the context of restitution. First, the injustice lies in one person’s retaining something which he or she ought not to retain, requiring that the scales be righted. Second, the required injustice must take into account not only what is fair to the plaintiff; it must also consider what is fair to the defendant. It is not enough that the plaintiff has made a payment or rendered services which it was not obliged to make or render; it must also be shown that the defendant as a consequence is in possession of a benefit, and it is fair and just for the defendant to disgorge that benefit.

Notes and questions 1. McLachlin J here is here talking only about restitution in cases of ‘subtraction’ or ‘taking’, as where a plaintiff mistakenly pays money to another. How do you think she would explain the purpose of restitution in cases involving wrongs, as where a fiduciary profits by taking a wrongful bribe? 2. McLachlin’s J’s analysis of cases of unjust enrichment by subtraction was approved by the Supreme Court of Canada in Kingstreet Investments v New Brunswick (Department of Finance) [2007] 1 SCR 3 at [32], where the Court added: ‘Restitution is a tool of corrective justice. When a transfer of value between two parties is normatively defective, restitution functions to correct that transfer by restoring parties to their pre-transfer

positions.’ The same view has recently been iterated by the United Kingdom Supreme Court, which also expressly refers to Aristotle: Benedetti v Sawiris [2013] UKSC 50 at [97] per Lord Reed (3.46C); Commissioners for her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq) [2017] UKSC 29 at [42]–[43] per Lord Reed (Lords Neuberger, Mance, Carnwath and Hodge agreeing); Lowick Rose LLP (in liq) v Swynson [2017] UKSC 32 at [22] per Lord Sumption (Lords Neuberger, Clarke and Hodge agreeing). 2.10E E Weinrib, ‘Corrective Justice in a Nutshell’ (2002) 52 UTLJ 349, pp 349–50 (references omitted) Corrective justice is the idea that liability rectifies the injustice inflicted by one person on another. … Corrective justice … features the maintenance and restoration of the notional equality with which the parties enter the transaction. This equality consists in persons having what lawfully belongs to them. Injustice occurs when, relative to this baseline, one party realizes a gain and the other a corresponding loss. The law corrects this injustice when it reestablishes the initial equality by depriving one party of the gain and restoring it to the other party. …

Notes and questions 1. Weinrib here summarises his understanding of the idea of corrective justice. Note that when he refers to one party ‘realizing’ a gain and the other a corresponding loss, he is referring simply to a change in their respective ‘normative’ positions. The ideas of gaining and losing are just the metaphorical equivalents of doing and suffering the injustice respectively. The injustice is then rectified by

the party responsible for it transferring to the other so much of his or her factual gain as is needed to restore the latter’s rights. See further E Weinrib,‘The Gains and Losses of Corrective Justice’ (1994) 44 Duke LJ 277. This ‘normative’ understanding of gain and loss is true to Aristotle. 2. In Weinrib’s view, private law remedies, including restitutionary ones, are a continuation of a plaintiff’s primary rights, not a replacement for them. They are therefore unaffected by aims other than corrective justice, such as economic efficiency or social policy. They simply give effect to the right. This makes the law coherent. For a full explanation of the [page 38] idea of ‘continuation’ between right and remedy, see E Weinrib, Corrective Justice (OUP, Oxford, 2013), Ch 3, ‘Remedies’. 3. In what sense is the equality to which parties are restored by corrective justice ‘notional’? 2.11E E Weinrib, The Idea of Private Law Harvard University Press, Cambridge, Mass, 1995, pp 140–2 (references omitted) The Restitution of Gains

Restitution is the law’s response to one person’s unjust enrichment at the expense of another. The requirement that the enrichment be ‘at the expense of’ the plaintiff reflects the bipolarity of corrective justice by encapsulating the plaintiff’s entitlement to what the

defendant must disgorge. Because the defendant’s enrichment was at the plaintiff’s expense, the plaintiff can be said to be suffering a deprivation through the defendant’s enrichment. Restitution rectifies this deprivation by forcing the defendant to surrender the enrichment (or its value) to the plaintiff. One can broadly classify the situations that give rise to a restitutionary response according to the absence or presence of a wrongful act by the defendant. Exemplifying the first situation are benefits conferred through mistake, where the defendant has to disgorge despite having been innocently passive in the receipt of a benefit from the plaintiff. Exemplifying the second situation are gains realised through breaches of fiduciary duty or through the wrongful appropriation and subsequent sale of someone else’s property. Each of these situations features the correlativity of right and duty, though they construe the right and duty differently. In the first situation, the plaintiff recovers the gain even in the absence of wrongdoing by the defendant. The ultimate basis of recovery is that corrective justice, being in Aristotle’s words ‘towards another,’ assumes the mutual externality of the parties and the consequent separateness of their interests. The conferral of the benefit is literally within the free gift of the donor as a self-determining agent. Consequently, only if the donor acts in execution of a donative intent is the transfer of the benefit an expression of right. Unilateral transfers, such as mistaken payments, that are not the product of donative intent are juridically ineffective, regardless of the absence of wrongdoing by the donee. Their restitution can therefore be demanded as a matter of corrective justice. … In such circumstances, the enrichment itself represents something that is rightfully the plaintiff’s. Because its retention by the defendant is an infringement of the plaintiff’s right, the defendant has a duty to restore it to the plaintiff. Liability is the juridical confirmation that, by holding on to the factual gain, the defendant breaches a duty that is correlative to the plaintiff’s right.

In the second situation, where the enrichment is the consequence of a wrongful act, the right and duty that define the wrongfulness are the basis of the plaintiff’s claim to the defendant’s enrichment. For instance, where a tortfeasor appropriates and sells the property of another, the plaintiff’s entitlement to the tortfeasor’s gain reflects the plaintiff’s right in the appropriated property and the defendant’s breach of the corresponding duty to abstain from that property. The money produced by the sale is the factual gain that embodies the plaintiff’s right to the object; indeed, that money can be thought of ‘as a replacement or substitute for the property.’ Similarly, the disgorging of profits by a fiduciary responds to the breach of the duty of unqualified loyalty owed to the principal. Existence of the fiduciary obligation means that the loyalty demanded by that obligation is included within the plaintiff’s possessions. Because the fiduciary has wrongly replaced duty with interest, the resulting profits can be thought of as the factual embodiment of the plaintiff’s right to the fiduciary’s loyalty. Restitution in the aftermath of wrongdoing amply illustrates the point that the correlativity of gain and loss is normative, not merely factual. The plaintiff is entitled to recover the gain even without having suffered a corresponding factual loss. For example, if the defendant commercially exploits a cave that opens only onto his property but runs beneath his neighbour’s as well, the neighbour can recover a proportion of the profits. In such a case, the neighbour suffers no factual loss, since he has no way of using a cave to which he had no access. Nonetheless, by exploiting the plaintiff’s part of the cave, the defendant infringes the plaintiff’s right, and the plaintiff has a claim to profits attributable to that wrong. Similarly, the fiduciary can be required to surrender unauthorized profits even if those profits could not practically or legally be acquired by the principal.

[page 39]

Notes and questions 1. What is the ‘injustice’ which Weinrib says is corrected by restitution in the mistake case? Is it a wrong on the part of the recipient in retaining the money, or simply the fact that the recipient received it when he or she was not intended to have it? If it is the ‘wrong’ of ‘retention,’ why is retention a wrong? See further the criticisms of the ‘unconscionable retention’ model of unjust enrichment law at 1.29–1.33E. 2. Most recently, Weinrib has proffered a fuller explanation of the injustice in the mistake case, arguing that it lies in the defendant’s voluntary ‘participation’ in the unintended transfer of value. The defendant ‘participates’ (implicates his or her own will in the transfer) by ‘accepting’ the benefit as non-gratuitously (‘nondonatively’) given. The combination at one and the same time of the plaintiff’s lack of will in making the transfer of value and the implication of the defendant’s own will in retaining it gives rise to an obligation on the part of the defendant to restore the value to the plaintiff: E Weinrib, ‘The Normative Structure of Unjust Enrichment’ in R Grantham and C Rickett (eds), Structure and Justification in Private Law: Essays for Peter Birks (Hart, Oxford, 2007), Ch 3, esp. pp 37–9; ‘Correctively Unjust Enrichment’ in R Chambers, C Mitchell and J Penner (eds), The Philosophical Foundations of Unjust Enrichment (OUP, Oxford, 2009), Ch 2, esp. p 45; ‘The Structure of Unjustness’ (2012) Boston University Law Review 1067, esp. p 1072; and, most recently, Corrective Justice, pp 203–17. It is evident that the idea that the defendant has ‘participated’ in the plaintiff’s mistaken payment in this account carries an extended

meaning. ‘Acceptance’ of a non-gratuitous transfer thus need have nothing to do with the defendant’s actual state of mind, but can be objectively ‘imputed’ to the defendant where he or she (i) requests the transfer; (ii) knows about (but fails to prevent) it; (iii) subsequently fails to reverse it where this can easily be done; or (iv) where what has been transferred ‘forwards’ his or her ‘purposes’ (as money allegedly always does). Do these forms of ‘imputed’ acceptance of the benefit really implicate the defendant in the transfer in such a way that his or her will can be said to be truly involved in it? Do they adequately explain restitution from a defendant who was ‘innocently passive in the receipt of a benefit’? Is the idea that the justification for restitution lies in part in a defendant’s ‘will’ in accepting a non-donative benefit any different from the traditional (and widely discredited) idea that restitution is based on an implied promise by the defendant to repay? There also appears to be a problem with Weinrib’s thesis in so far as it cannot explain why a defendant becomes liable for receiving an enrichment (and liable to pay interest) as from the date the enrichment is received, not at the later point in time when his or her will is implicated in it through ‘acceptance’. For further criticisms of Weinrib’s explanation of the mistake case based upon these and other points, see M McInnes, ‘Unjust Enrichment: A Reply to Professor Weinrib’ (2001) RLR 29, pp 37–43; K Barker, ‘The Nature of Responsibility for Gain’ in Chambers, Mitchell and Penner (eds), The Philosophical Foundations of Unjust Enrichment, Ch 6, pp 163–4; D Klimchuk, ‘The Normative Foundations of Unjust Enrichment’ in Chambers, Mitchell and Penner

(ibid), pp 88–93; and M Doyle, ‘Corrective Justice and Unjust Enrichment’ (2012) 62 UTLJ 229. For Weinrib’s response to these criticisms, see Weinrib, (2012) Boston University Law Review 1067, pp 1076–9. 3. Does it make sense to think of restitution as doing corrective justice where a defendant has not done any wrong? For the view that it can, see McLachlin J above (2.9C) and Barker and Smith below (2.12E and 2.13E). 4. If I wrongly trespass on your property, or breach a fiduciary duty by making profit which you would in fact never have made yourself, how does forcing me to give you that profit restore you to your previous position? Are you not actually better off than you were before? How is that result consistent with the restorative aims of corrective justice? [page 40] 5. Weinrib does not go so far as to claim that all cases of restitution for wrongs are explicable by corrective justice. He confines the claim in the main to cases which involve wrongful infringements of property rights or ‘propertylike’ rights, such as rights to fiduciary loyalty or bodily integrity. Why do you think this is? For demarcation and further explanation of these limits, see E Weinrib, ‘Restitutionary Damages as Corrective Justice’ (2000) 1 Theoretical Inquiries in Law 1; ‘Punishment and Disgorgement as Contract Remedies’ (2003) 78 Chicago Kent Law Review 55; and Corrective Justice, Ch 4.

2.12E K Barker, ‘Unjust Enrichment: Containing the Beast’ (1995) 15 OJLS 457, pp 468–70 How can we maintain … that the receipt of a mistaken payment constitutes a ‘wrongful’ gain calling for reversal under corrective justice, when the defendant breached no civil law duty by receiving, and was entirely innocent of the mistake? At first sight, this obstacle looks a little daunting, since Aristotle himself appears to have contemplated a corrective justice duty of rectification only where the defendant was guilty of a deliberate wrong.5 In fact, however, it is not as problematic as it seems. As Posner has observed in a different context, corrective justice in its Aristotelian conception is a form of justice which does not necessarily entail any particular substantive content. The crucial idea is that wrongful transactions should be rectified without regard to the respective needs or merits of the individual parties, not that wrongfulness be defined in any particular way. … The point, then, is that the concept of ‘wrongful’ gain in [Aristotle’s] corrective justice theory is a flexible and open-textured one. On the view endorsed here, it can include gains which are ‘unjust’ in the sense that there is an individualistic reason why they should not have been made (for example, because there was a volitional defect in their transfer) even if these gains have not been attained via the breach of any primary legal duty. Following this premise to its logical conclusion, corrective justice embraces the broad objective of rectifying individual injustices, not simply the (narrower) concern to rectify wrongdoing. It is in this way that it can accommodate a restitutionary response in the mistake case posited above: where a party — even a party who is entirely innocent of any breach of legal duty — obtains title to property without the full and informed consent of the original owner, she has an individual duty in justice to return it. The duty is unique to her, flows from the transaction which has occurred between them, and

endorses a corrective or restorative aim.

Notes and questions 1. Is Barker’s understanding of corrective justice different to Weinrib’s? Is Barker’s view true to Aristotle? On the latter issue, see further the contrasting views of Smith (2.13E) (maintaining that it is) and Klimchuk (2.15E and note 6 thereto) (arguing that it is not, but suggesting that it may be consistent with other conceptions of corrective justice). 2. Barker has since expanded his explanation of the basis of recovery in cases like the mistaken payment. In ‘The Nature of Responsibility for Gain’ in Chambers, Mitchell and Penner (eds), The Philosophical Foundations of Unjust Enrichment, pp 169–70, he says: [T]he defendant’s obligation to pay in these cases resides in a prior, correlative right of the plaintiff, such as a property right, which those coming into possession or ownership of the resource are obliged to respect. Although one’s title in mistakenly paid money almost always passes to a defendant, a credible view is that this happens primarily for instrumentalist reasons (to promote the certainty and speed of commerce) and that restitution operates precisely to recognise and reverse the moral problems which this necessary instrumentalism creates. Taking this view, one might … argue that the right to restitution from the mistaken payer is still morally premised at its root on the plaintiff’s prior entitlement to his resources, which

[page 41] must be recognised by the law even though the entitlement has technically been lost, because this loss was sustained in circumstances in which the plaintiff was not morally responsible for it. [One can then regard] cases of this type as ones in which the plaintiff is not morally (albeit that he is for instrumentalist reasons) to be regarded as having lost the entitlement [to his money] at all. … According to this … understanding … the plaintiff’s lack of responsibility for his loss of entitlement is taken as a reason to deem his loss of right (or, more accurately, aspects of the right) never to have happened. … Though it is not perfect and wears on its face the scar of an apparently ugly contradiction, this technique for understanding the origins of legal responsibility for the receipt of a mistaken payment accommodates and recognises openly some of the inevitable tensions between the respective moral and instrumental concerns which arise when property interests or other resources are transferred under circumstances of reduced autonomy. In Reason and Restitution (OUP, Oxford, 2016), esp. pp 56–66, 73–7, 82–3, Charlie Webb builds on this type of argument in a slightly different way. Restitution of the mistaken payment, he argues, does corrective justice and is justified by the fact that the plaintiff’s original

property right includes the right to choose how it is transferred or used. Restitution therefore protects the plaintiff’s original property rights, even though the plaintiff actually lost title to his or her property when the transfer was made. Do you find these explanations convincing? Can either account explain cases of restitution for services mistakenly rendered, as opposed to money mistakenly paid? See further A Botterell, ‘Property, Corrective Justice and the Nature of the Cause of Action in Unjust Enrichment’ (2007) 20 Can JL & Jurisprudence 275. 3. Although Barker regards the mistake case as based on corrective justice, his understanding of unjust enrichment law as a whole is pluralistic. Corrective justice explains much, but not all, of the law and some cases are only explicable by deterrent aims: K Barker, ‘Understanding the Unjust Enrichment Principle in Private Law: A Study of the Concept and its Reasons’ in J Neyers, M McInnes and S Pitel (eds), Understanding Unjust Enrichment (Hart, Oxford, 2004), p 79 at pp 101–6; ‘Theorising Unjust Enrichment: Being Realist(ic)?’ (2006) 26 OJLS 609. 2.13E L Smith, ‘Restitution: The Heart of Corrective Justice’ (2001) 79 Texas Law Review 2115, pp 2121, 2141, 2144–5 (some references omitted) The simplest case of unjust enrichment liability is the mistaken payment. The plaintiff, thinking she owes the defendant $100, pays that amount, but in fact she does not owe anything. But the transfer takes effect as such, so that the defendant becomes the owner of the money. There is an enrichment of the defendant, a

corresponding deprivation of the plaintiff, and a reason for restitution in the plaintiff’s mistake. The material gains and losses are clear. The plaintiff has also suffered a normative loss because she did not fully assent to the transfer of wealth; the transfer was made on the basis of bad information. It was not an expression of self-determining agency. The question is how we can say that the defendant achieved a normative gain without doing anything wrong. As we should expect, the answer appears to lie in the constituent elements of unjust enrichment liability, which differentiate it from civil wrongs. Unjust enrichment includes both a material gain to the defendant and a material loss by the plaintiff. Moreover, the loss and the gain do not come together by random chance. They are two sides of the same coin — that coin being a transfer of wealth from plaintiff to defendant. There is a nexus of exchange between the parties. This nexus gives an ‘articulated unity’ to their bilateral relationship in a transaction which is paradigmatically within Aristotle’s conception of corrective justice. The transactional unity is far tighter than in a case of carelessness causing loss or profitable wrongful conduct. The single transfer of wealth, lost by the plaintiff and gained by the defendant, functions normatively just as the owned thing in the case of the vindicatio. Before the transfer, the wealth is an external projection of the plaintiff’s agency. If the transfer is normatively flawed from the plaintiff’s end, then the plaintiff suffers a normative loss. Because the defendant’s enrichment is nothing other than (continued)

[page 42] the plaintiff’s normative deprivation, the defendant’s material gain is also a normative gain. Hence, corrective justice is violated, and a duty to make restitution arises without the need to find any breach of duty on the part of the defendant.

… Some reasons for restitution turn on neither a shortcoming in the plaintiff’s consent to the transfer, nor on any shabby conduct by the defendant. Birks calls these ‘policy-based restitution’ [Birks, An Introduction to the law of Restitution (rvsd edn, 1989) at 294]. Even these claims seem to be explicable under corrective justice. The crucial difference is that the flaw in the transaction, which makes the material gain and loss into a normative gain and loss, is not a violation of Kantian right. Rather, it is a violation of some other norm. Often it is a norm of public law. For example, the law of England and Wales is that a payment of tax under ultra vires legislation is recoverable, even if the plaintiff made no mistake and was under no compulsion, and the defendant did nothing wrong. This liability supports the constitutional principle that there should be no taxation without legislative authority. The public-law nature of this liability is made clear by the opposite rule which has been suggested for Canada, that to protect the public purse from ‘fiscal chaos,’ there should be a bar to recovery of any taxes paid pursuant to ultra vires legislation. Similarly, claims might be allowed to encourage people to withdraw from illegal transactions. … in all of these cases of policy-based unjust enrichment, we seem to have a relationship which fits Aristotle’s formal structure, but the normative input that identifies the transfer as violative of corrective justice is non-Kantian.

Notes and questions 1. Like Barker, Lionel Smith here argues that receiving title to a mistaken payment triggers a duty in corrective justice to return it to the payor without the need to prove wrongdoing on the part of the recipient. He bases his argument on an analogy with cases in which the defendant receives property which is still in a plaintiff’s ownership. There, he points out, the receiver of the property is under a strict duty to make restitution of it, if

the plaintiff asserts his or her right to it (via an action known as the vindicatio). The liability is strict and not based on any breach of duty by the defendant. Is this a helpful analogy? 2. A criticism levelled at both Smith and Barker’s corrective justice explanations is that the mere fact that the plaintiff made a mistake when paying fails to explain why the defendant recipient (as opposed to anyone else) has an obligation to correct his or her position. It is only if the defendant owed (and breached) a personal duty to the plaintiff not to receive the money in the first place that this would make sense, and yet such a duty cannot sensibly exist, because it would be unduly onerous: S Smith, ‘Justifying the Law of Unjust Enrichment’ (2001) 79 Texas Law Review 2177; P Saprai, ‘Restitution without Corrective Justice’ (2006) 14 RLR 41, pp 46–50. Is it possible to answer this point? Do you agree with Saprai and Stephen Smith that the factual receipt of money paid by mistake discloses no particular moral reason for its recipient to give it back and that there would only be such a reason if he or she were guilty of ‘wronging’ the plaintiff? 3. Are cases of ‘policy-based’ restitution explicable by corrective justice, as Lionel Smith suggests? Consider the cases in Chapter 11 and see further R Posner, ‘The Concept of Corrective Justice in Recent Theories of Tort Law’ (1981) 10 J Legal St 187.

Distributive justice 2.14 Aristotle drew a fundamental distinction between distributive and corrective justice.6 In corrective justice, the

law’s concern is to restore the parties to an injustice to their former positions, without regard either to the social implications, or the relative merits or needs of the parties. So if A mistakenly pays $50 to B, B must repay the $50, even if A is rich (and does not need the money) and B is poor (and in desperate straits). The same is true even if A is a [page 43] bad person and B a good one. By contrast, distributive justice theories tend to decide how to allocate resources between A and B either (i) by reference to the beneficial social effects this may have (such theories are described by Klimchuk in the following extract as ‘instrumental’ distributive justice theories); or (ii) by looking at criteria such as A’s and B’s relative need, fault, or capacity vis-à-vis one another. Klimchuk calls the latter approach ‘localised’ distributive justice, because it makes decisions about how to allocate the $50 between A and B depend only on the relative merits, needs and circumstances of And B themselves, not on broader social questions. 2.15E D Klimchuk, ‘Unjust Enrichment and Corrective Justice’ in Neyers, McInnes and Pitel (eds), Understanding Unjust Enrichment, pp 111, 112, 118–21, 132–4 A number of legal theorists have recently argued that the law of unjust enrichment expresses, or exhibits the structure of corrective justice. I will challenge this view and explore an alternative, according to which the structure of the action in unjust enrichment

is distributive, in a particular way. … I contend that the plaintiff’s claim that the defendant was unjustly enriched at her expense is not a claim in corrective justice. I aim to defend this by arguing that restitution of money received by mistaken payment is not a matter of corrective justice, as Aristotle understood it. … I am focussing on mistaken payment because it is, on all accounts the paradigmatic case of unjust enrichment. … [Unjust enrichment] was not Aristotle’s paradigm. His examples are what we would now categorise as cases of breach of contract and of intentional torts. The case he discusses in detail is a tort, a battery … [I]n the case … in which one has received and the other has inflicted a wound, or one has slain and the other has been slain, the suffering and the action have been unequally distributed; but the judge tries to equalize things by means of the penalty, taking away from the gain of the assailant. For the term ‘gain’ is applied generally to such cases, even if it be not a term appropriate to certain cases, eg to the person who inflicts a wound and ‘loss’ to the sufferer; at all events when the suffering has been estimated, the one is called loss and the other gain. [Aristotle, Nichomachean Ethics 5.5, 1132a-14] … Aristotle says that in a case in which ‘one has received and the other has inflicted a wound the suffering and the action have been unequally distributed.’ Now, I am not sure just what, exactly, Aristotle thinks has been unequally distributed. But I think that nonetheless we can see the answer to the puzzle here. Immediately after this passage Aristotle describes the wounder’s conduct as the realisation of a gain. So the gain corresponds to the wounding and the loss to the suffering … The defendant and plaintiff are, respectively, the doer and sufferer of the same wrong. [Weinrib, ‘The Gains and Losses of Corrective Justice’ (1994) 44 Duke LJ 277;

M Stone, ‘The Significance of Doing and Suffering’ in G Postema (ed), Philosophy and the Law of Torts (Cambridge University Press, Cambridge, 2001) pp 131–82)] So tort law can … be reckoned as an expression of corrective justice. But the law of unjust enrichment cannot be … There are two significant ways … in which the mistaken transfer of money is unlike, say, a battery. … The first problem is that, in the case of a mistaken payment, the defendant is not only faultless; … she need not have done anything. That is, in the case of mistaken payment, the doer and the sufferer are the same person. This matters because … it is the fact that the same event can be described as suffering on the plaintiff’s part and as a doing on the defendant’s part that explains why the remedy … takes the form of a transfer for money from the defendant to the plaintiff. But restitution for mistaken payment cannot be anchored in that way. The second problem is, in effect, another side of the first. It is that we cannot describe anything the payee does or refrains from doing in such a way as to identify that feature which, from the payer’s perspective, impugns the transaction. That latter feature, it is often said, is that insofar as she was labouring under a mistake, the plaintiff’s autonomy was compromised in a way in which the law ought, for that reason, to take an interest. [Jaffey, The Nature and Scope of Restitution (Oxford, Hart, 2000) 159; H Dagan, ‘Mistakes’ (2001) 79 Texas Law Review 1795] The problem is that nothing that the defendant (continued)

[page 44] does counts as an interference with the plaintiff’s autonomy. It does not follow from the fact that, but for the plaintiff’s autonomy

having been compromised, she would not have conferred a benefit on the defendant, that the defendant in any sense brought about her receipt of that benefit. So, again, the defendant is not implicated in the plaintiff’s loss in the way that corrective justice requires. …

IX The Internal Distributive Account In comment (c) to § 1 of the first Restatement of Restitution — which sets out its core principle, ‘a person who has been unjustly enriched at the expense of another is required to make restitution to the other’ — the reporters tell us that an enrichment is unjust only if ‘as between the two persons, it is unjust for the defendant to retain it.’ … Let us call this the Restatement measure. It may seem to be a tautology, but it is not. There are two substantive claims in it. The first is that the focus of the unjust enrichment inquiry is the post-transactional state of affairs, that is, the state in which the defendant rather than the plaintiff has the disputed thing of value. We can, on this point, contrast unjust enrichment with tort. In tort it is the event which gives rise to the cause of action that the award of damages seeks to set right. … More controversial is the second claim. It is implicit in the use of the locution ‘as between the two persons.’ As Stephen Perry argues, the invocation of this phrase ordinarily signals that the question of liability at issue is understood to be a matter of what he calls ‘localized distributive justice.’ An argument of this sort is based on a claim of distributive justice because it focuses initially on the loss, which is regarded as a burden to be distributed among a specified group of persons. It is an argument of localized distributive justice because the group is limited to the victim and her injurer (or injurers) [S Perry ‘The Moral Foundations of Tort Law’ (1992) 77 Iowa Law Review 449, 461]. It is important to see in just what way the structure of the action of unjust enrichment is distributive on this view. In private law theory, distributive justice explanations are typically instrumental.

One might, for example, defend tort on the grounds of its capacity to efficiently allocate accident costs across the relevant group (or conversely, urge its abolition on the grounds that some other legal instrument would better realise this goal). But on the view under consideration, the plaintiff’s claim in unjust enrichment does not await vindication by proof that the liability rule had positive consequences for some relevant broader group. Nor — it must be emphasised — is the plaintiff’s claim that, in light of her and the defendant’s extra-transactional holdings, distributive justice is best served by the disputed enrichment being returned to her. In other words, the distributive claim is localised in two senses. First, it is limited to the parties to the transaction. Second, it rests on a norm whose scope is limited to the parties to the structure of the disputed transfer — in the case under discussion something like ‘as between the mistaken payer and the payee, the former has the superior claim to the thing transferred.’ To emphasise this second point, I will refer to this account as the internal (rather than the ‘localised’) distributive justice account.

Notes and questions 1. Klimchuk’s objection to understanding restitution for mistake in terms of Aristotelian corrective justice is not that corrective justice requires fault or even wrongdoing (a breach of duty) on the part of the defendant, but that it requires him or her at the very least to have done something to bring about a change in the other party’s position. Do you agree? 2. If restitution is about doing internal distributive justice between the parties, how does one work out what constitutes a fair distribution of the gain? Is the fairest distribution not simply the one that existed before the transaction?

How is doing ‘internal’ distributive justice in a mistake 3. case different from the idea of doing ‘corrective’ justice between the parties? What practical difference does it make, if any, which explanation is correct? 4. It does not follow from Klimchuk’s conclusion that restitution for mistake is not motivated by Aristotelian corrective justice that other cases of unjust enrichment are not. This is because in many instances in which D is enriched at P’s expense, D will actually have done something to bring the enrichment about, for example, by making a misrepresentation, applying duress, or engaging in wrongdoing. He has also since conceded that there might [page 45] be other (non-Aristotelian) conceptions of corrective justice that can explain the case: D Klimchuk, ‘The Normative Foundations of Unjust Enrichment’ in Chambers, Mitchell and Penner (eds), The Philosophical Foundations of Unjust Enrichment , Ch 4, pp 87–8. 5. For another account suggesting that some restitutionary rules are based on the idea of doing localised distributive justice between the parties, see Jaffey, The Nature and Scope of Restitution (Hart, Oxford, 2000), Chs 3, 4. 2.16E H Dagan, The Law and Ethics of Restitution Cambridge University Press, Cambridge, 2004, p 329 In these pages I have tried to vindicate the theoretical potential of the law of restitution, showing that a normative inquiry into its

various paradigms can bring clarity and coherence to the doctrines and help direct their future development. The three common normative themes that run through this book — autonomy, utility and community — are core commitments of any liberal legal system, and it is therefore not surprising that they inform the American law of restitution. But as (realist) lawyers, we are never content with such broad generalization. Rather, our attention is always focussed on more subtle nuances: the contextual balancing between these reasons for restitution and their translation into specific legal rules.

2.17E E Sherwin, ‘Rule-Oriented Realism: The Law and Ethics of Restitution’ (2005) 103 Michigan L Rev 1578, p 1579 (references omitted) … Dagan analyses the law of restitution in terms of three values that are prevalent in liberal societies: autonomy, utility and community. Autonomy, for Dagan, means the power of selfdetermination (not to be confused with negative liberty, which is only an instrument of autonomy). Utility means human welfare, typically elaborated through the proxy of economic analysis. The value of community is somewhat more mysterious, although it plays an undeniable part in modern ethics. At times Dagan uses the term community to capture the ideals of co-operation, mutual support, and a limited form of altruism that accords value to the interests of others but does not require individuals to suppress all interests of their own. At other times, he uses the term to denote voluntary associations that contribute to the identity and welfare of individuals that can be facilitated by appropriate use of restitution. Dagan applies these values ‘contextually,’ that is, within the different classes of human situations in which restitution claims arise. He does not, however, recommend that judges simply balance the implications of autonomy, utility and community in particular cases that come before them. Rather, he proposes that

the rules of restitution should respond to the interplay of these three values in certain classes of cases.

2.18E D Klimchuk, ‘The Normative Foundations of Unjust Enrichment’ in R Chambers, C Mitchell and J Penner (eds), The Philosophical Foundations of Unjust Enrichment, Oxford University Press, Oxford, 2009, Ch 4, pp 94, 95–6 (some references omitted) Restitution in cases of a mistaken transfer, Dagan argues, protects claimants’ autonomy in three ways. First, it respects the maxim that ‘the exercise of (subjective) free will should be the prerequisite to any legitimate transfer of, or interference with, resources’ [Dagan, The Law and Ethics of Restitution (Cambridge: Cambridge University Press, 2004, p 43]. Second, it expands would-be plaintiffs’ freedom of action, by ‘softening the possible tangible losses of mistakes’. In this way, the right to restitution ‘can give people breathing space for spontaneity and ease that are important aspects of freedom and individuality’. Finally, it promotes the integrity of the claimant’s self ‘by preserving the record of [her] mistake while nullifying the unintended consequences of her action.’ Collectively these considerations underwrite what Dagan calls the ‘liberal’ presumption of restitution — liberal owing to the protection restitution is shown to give to the core liberal value of individual autonomy. … Mistaken transfers implicate recipients’ autonomy as well, because autonomy involves (continued)

[page 46] not only freedom but also security. The recipient’s interest in

security of receipt is an autonomy interest because our capacity to be self-governing is dependent upon our ability to plan, itself contingent on the stability of our resources. … The solution is to protect the recipient’s autonomy interests by protecting her against any unrecoverable costs of detrimental reliance. … ‘Mistaken payments in this view prompt restitution because, and to the extent that, the retention of the wealth of the recipient would undermine the claimant’s autonomy and restitution would not unduly infringe on the autonomy of the recipient’ [ibid, at 40] … [A] … second concern cannot … be … easily answered. It is that the autonomy analysis cannot adequately explain why the defendant is liable to the plaintiff. That is because, especially in the sort of case on which I am focusing, the defendant is not in any way implicated in the compromise of the plaintiff’s autonomy. The mistaken payer, again, is the agent of her own misfortune. It is certainly true that in the full picture, on Dagan’s account, the defendant’s autonomy interests are protected. What is not clear, however, is why the protection of the plaintiff’s autonomy is the defendant’s responsibility. Put another way, what is not clear is how this account explains or explains away the unilaterality of the right to restitution.

Notes and questions 1. According to Dagan, the promotion of individual autonomy is not the only aim that underpins restitutionary rules in general (and the mistake case in particular). Utility (which frequently means economic efficiency) comes in a close second. The idea of community is thought to have more limited implications, but nonetheless to be important. For example, it underpins Dagan’s argument that a more generous approach should be taken in giving restitution to good

2.

3.

4.

5.

Samaritans who act to protect the life, health or property of others. For a detailed explanation of Dagan’s views as to the way in which the values of autonomy and utility affect the construction of legal rules in the mistake case, see H Dagan, ‘Just and Unjust Enrichments’ in A Robertson and T Wu (eds), The Goals of Private Law (Hart, Oxford, 2009), p 423 at pp 436–8. Unlike Klimchuk’s ‘internal’ distributive justice scheme, Dagan’s is an ‘instrumentalist’ theory in the sense that it suggests that restitutionary rules should balance social aims and enhance social values which extend beyond the immediate interests of the parties to the dispute. But how is this possible, in the context of private litigation involving only two parties? See further E Weinrib, ‘Restoring Restitution’ (2005) 91 Valparaiso Law Review 861. Klimchuk’s objection to Dagan’s account in the final paragraph of 2.18E is the same as his objection to Barker and Smith, above; namely, that it cannot explain why it is the defendant that must make good the plaintiff’s mistake by paying restitution, as opposed to anyone else. Do you agree? Klimchuk goes on in the above extract (at pp 96–7) to query whether or not Dagan’s approach (which he calls a ‘value instrumentalist’ approach) ends up treating the defendant as a mere means to an end. This is on the basis that making the defendant liable for the mistaken payment when she has done nothing to obtain it is using her as a mechanism for enhancing the plaintiff’s autonomy by protecting the plaintiff against the

consequences of her unintended actions. Klimchuk does not reach a final conclusion on this question, recognising that it could be argued that the end ultimately being pursued by Dagan’s restitutionary regime is the protection of the collective autonomy of both the plaintiff and the defendant, not just that of the plaintiff. What is your own view? Do you think it is right to suggest that by making the defendant return the mistaken payment, the law is forcing her to promote the payer’s welfare? 6. Is it up to judges to formulate private law rules in such a way as to enhance ‘community’ or ‘general welfare,’ or is this something that should be left to a democratically elected parliament? [page 47] 7. For critical reviews of Dagan’s theory, see A Tettenborn, ‘The Law and Ethics of Restitution’ (2005) 13 RLR 245; M Gergen, ‘A Thoroughly Modern Theory of Restitution’ (2005) 84 Texas Law Review 173; Sherwin, (2005) 103 Michigan Law Review 1578; Weinrib, (2005) 91 Valparaiso Law Review 861. For a critical comparison of the theories of Weinrib and Dagan, see K Barker, ‘Theorising Unjust Enrichment Law: Being Realist(ic)’ (2006) 26 OJLS 609. For Dagan’s response to critics and fuller explanation of his realist approach, see H Dagan, ‘Restitution’s Realism’ in Chambers, Mitchell and Penner, Philosophical Foundations of Unjust Enrichment, Ch 2.

Summary and reflections 2.19 The undoubted strength of corrective justice as an explanation of restitutionary rules is that it fits the two-party structure of those rules very well. If the aim is to correct injustices between the parties and restore the status quo ante, it makes sense that restitution litigation involves only those two parties and that the defendant (and no-one else) is forced to pay his or her gains to the plaintiff (and no-one else), rather than the gains being confiscated by the State. Nonetheless, there are at least two important challenges for corrective justice theory. First, how does it explain cases, like the mistake case, in which the defendant has ‘done’ nothing ‘wrong’ to bring about his own enrichment? Is there an ‘injustice’ (as opposed to just an accident) in such instances to ‘correct’? Secondly, how does it explain cases in which a defendant is made to pay over his gain when the plaintiff has not suffered any actual loss? Corrective justice theorists, as we have seen, have a variety of different answers to these questions and you may think some are more convincing than others. 2.20 As regards the first problem, some writers maintain that the mistake case does involve the doing of a subtle wrong, such as ‘retaining’,7 ‘knowingly retaining’8 or ‘accepting’9 the money. But is this convincing? How is it consistent with the fact that liability in mistake cases currently arises (and the obligation to pay interest starts to accrue) as soon as the money is received, not when the defendant subsequently comes to know about the mistake? And if there is a ‘wrong’, why does this ‘wrong’ not give rise to an action for compensatory damages, as torts do? Other

writers (Barker, Smith and Webb) take a different tack. They concede openly that the defendant does no ‘wrong’ in the mistake example, but advocate models of corrective justice which are nonetheless broad enough to fit the case. But are these models of corrective justice attractive? Are they true to Aristotle? Does it matter? Klimchuk’s criticisms of these models are powerful, because even if one ignores the fact that there is no wrongdoing in the mistake case, it does seem to be the plaintiff, and not the defendant, who is responsible for having brought about the defendant’s enrichment. Justifying the defendant’s liability in such instances on corrective justice grounds seems to require a different understanding of corrective justice to Aristotle’s — one that is more akin, it has been suggested, to that of Thomas Aquinas.10 At the same time, however, even if we accept Klimchuk’s criticisms, they are not as fatal to the corrective justice analysis as he implies. Certainly, his conclusion that none of the law of unjust enrichment can be understood as doing Aristotelian corrective justice simply because one ‘paradigm’ case (the case of the un-induced mistaken payment) cannot be, seems to be going too far. Even on the Aristotelian view of corrective justice, many cases of restitution could surely fit. This is because in a good number of cases, the defendant in a restitution case has indeed played an active role in bringing about his own enrichment at the [page 48] plaintiff’s

expense,

for

example,

by

making

a

misrepresentation, exerting undue influence over the plaintiff, or committing an independent wrong, such as a tort or breach of fiduciary duty. 2.21 Corrective justice theorists offer us answers to the second kind of problem too. Weinrib’s idea that corrective justice is about restoring the positions the parties were entitled to be in prior to a transaction (as opposed to the position they occupied in fact) may be able to deal with some otherwise tricky cases in which defendants are forced to give up their profits to a plaintiff who has actually suffered no factual loss. But there are limits to the cases this argument can explain and it is likely that in some cases at least, broader instrumentalist ideas have featured in courts’ reasoning. Cases in which fiduciaries are subjected to proprietary restitutionary liabilities in respect of bribes they have taken appear to provide one such difficult example.11 Even if restitution ‘corrects’ the infringements of rights, it may well be that restitutionary rights and remedies are sometimes formulated by judges in a way which takes some account of their likely social effects. This point has been forcefully made by Professor Cane in criticising Weinrib’s corrective justice approach to tort law.12 Dagan’s position endorses something of an extreme version of this point of view, in so far as he argues that the promotion of social values like autonomy, welfare and community are the primary underlying aims of restitutionary rules, but there might be less extreme positions. One possibility, which pays greater attention to the caution which judges normally demonstrate when called upon to engage questions of social policy, is that policy considerations act as constraints on individual rights in some cases, even if they do not in general constitute their primary

raison d’être.13 Or it may be that policy is indeed sometimes the primary aim, but only in exceptional categories of case such as those mentioned by Professor Lionel Smith. Either way, a very convincing case has to be made for any theory which claims that the ethical foundations of unjust enrichment law lie in any single idea. This ethical diversity does not necessarily mean that unjust enrichment rules cannot legitimately be regarded as a ‘family’, because all families have their differences as well as their similarities.14 It does mean, however, that particularly close attention has to be given to the purposes underpinning particular rules in particular kinds of case and that we do not rush to blunt, universalising assumptions about the aim of restitutionary rules. To this extent, whether or not one agrees with Dagan’s particular conclusions about the particular aims of restitutionary rules, there is much wisdom in his observation that no single value or end underpins them. The life of the law is not that simple. Questions 1. Does it really matter what the underlying theory of restitution is? Why? 2. Is unjust enrichment law justified by one aim, or more than one? 3. Are the aims of restitution similar to those of compensation in the law of tort and contract? 4. Is the idea that the law does corrective justice incompatible with the idea that sometimes restitutionary rules are affected by ‘policy’ concerns? What is the role of ‘policy’ in unjust enrichment law?

[page 49]

TAXONOMY — MAPPING PRIVATE LAW 2.22 In comparison with the civil law, the study of the structure or taxonomy of private law has been somewhat neglected. Taxonomy is nonetheless important and has practical consequences. It offers a map or organisational structure that not only reflects but also influences and determines the content of legal rules. Placing a case within the ‘territory’ of contract, tort, property or unjust enrichment may affect the type of liability rule (and the standard of liability) that is applied, as well as the remedies and defences that are available to a plaintiff. At its most basic level, the desire to ‘map’ the law is grounded in the rational desire to understand legal rules and to ensure that like cases are treated alike (equality). Professor McKendrick suggests six reasons why it might be important:15 (i) to ensure that like cases are treated alike (equality); (ii) to expose anomalies and inconsistencies in the law (the detection of error); (iii) to keep the law on the right track (guidance); (iv) to make the law more accessible (clarity); (v) to facilitate intellectual economy (the avoidance of needless duplication); and (vi) because it promotes ‘elegance’ in the law (what we might call ‘aesthetic attractiveness’). 2.23 Accepting that taxonomy is important does not tell one what taxonomy to adopt. In theory, one could divide up private law in any number of different ways. The following extracts consider the value of taxonomy in private law generally; the best way of constructing legal categories; and

the place of unjust enrichment law within the map of the modern private law as a whole.

Approaches to taxonomy 2.24E P Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 UWALR 1, pp 3–4 Taxonomy is a classification. In relation to any particular science, taxonomy is the branch of that science which deals with the accurate classification of the subject-matter of that science. It is not too much to say that taxonomy is that foundation of most of the science which late 20th century homo sapiens takes for granted. Had he been averse to taxonomy or a bad taxonomist, Darwin would have observed but would not have understood. Taxonomy changes nothing, but it promotes understanding. Without it there is only a chaos of unsorted information, what Thomas Wood, writing on the condition of English law in 1722, called ‘a heap of good learning.’ [T Wood, An Institute of the Laws of England (London, 1722) Preface …] The realists and post-realists have done a good job of debunking legal science. In the United States where Jerome Frank and his intellectual successors did their most serious damage, it has never recovered and now lets in floods of law and economics in the hope of filling the broken vessel. However, if we were to adapt Chesterton’s famous dictum upon the Christian way of life, [G K Chesterton ‘The Unfinished Temple’ in What’s Wrong With the World (London: Cassell, 1912) 5] we might say that a rational science of the law has not been tried and found wanting but has merely been found difficult and left untried. A sound taxonomy, together with a keen sense of importance, constant suspicion of its possible inaccuracy and vigorous debate on its improvement, is an essential precondition of rationality. All these are wanting in common law systems. Until that is put right, the realists and fundamentalists of

the school of critical legal studies will continue to play from a winning hand.

2.25E P Birks, ‘Definition and Division: A Meditation on Institutes 3.13’ in P Birks (ed), The Classification of Obligations, Clarendon, Oxford, 1997, pp 17–20 (continued)

[page 50] The Fourfold Classification

An obligation, viewed from the Roman perspective which was described above, is a kind of right, a right in personam. It is possible to make immediate sub-divisions of such rights according to their content or, which is not unrelated, their purpose. For example, you can distinguish between the right to a fixed thing (the cow, Buttercup), a fixed quantity (ten bushels of wheat), a fixed sum of money (£1,000), an unliquidated sum of money (the amount of my loss), a service (a report to be written) and so on. Or, switching to purposes, you can distinguish between a right designed to perfect an expectation, to obtain compensation of loss, to insist on restitution of gains, to obtain a sum which will punish, and so on. We will return briefly to such subdivisions below under the heading of response-dominated classifications. It is enough to say here that whether or not you go in for subdivisions of that kind you will in the end have to come to causative events. That is to say, no right can be understood without understanding the events which bring it into being. ‘You owe me five farthings!’ The immediate response is, ‘Why?’, meaning ‘Because of what facts?’ This is the very heart of the law of obligations. Upon what facts do obligations arise? Or, synonymously, what are their causative events? Contract, Wrongs & Various Other Events

… In his Institutes Gaius tried a simple division into two: every obligation arises from a contract or from a wrong. But he found almost at once that that would not work. The past had handed down obligations which manifestly arose from events which were neither contracts nor wrongs. The recipient of a mistaken payment was obliged to give it back. [Gaius, Inst 3.89-91] Such a payment was a causative event within the compartment formed by the Roman action of debt. Hidden away in that package it was quite happy in the company of manifestly contractual causes of the same response, such as loan and formal promise. But, unlike them, in a classification by causative events, it and others of the same kind clearly could not fit within contract or wrongs. In another book Gaius settled for a residual miscellany: every obligation arises from a contract, a wrong or some other kind of event. [Digest 44.7.1 pr (Gaius, Res Cottidianae)] … Contract, Wrongs, Unjust Enrichment and other Events

It may be that the credit for carving out of that residual miscellany the further nominate category of unjust enrichment at the expense of another belongs to Grotius in the early seventeenth century. The importance of the principle against unjust enrichment was recognised in the Roman texts. But the Roman jurists never succeeded in identifying the generic conception of unjust enrichment as a distinct causative event capable of aligning, in the classification of obligations, with contract and wrongs. Whether or not Grotius’s contribution was decisive, the jurists of modern civilian systems agree that the quasi categories are unhelpful and that the best course is to accept an incomplete resolution of the Gaian miscellany. On this basis the classification of obligations by reference to the events from which they arise runs like this: every obligation arises from a contract, from a wrong, from an unjust enrichment, or from some other kind of event. In effect, unjust enrichment is thus taken out of the miscellany, but the much reduced miscellany then remains miscellaneous and indeed of uncertain size. Examples can be given such as salvage, judgments,

taxable events, and becoming a parent, but it would require very remarkable learning to compile an exhaustive list. The civilian figure of negotiorum gestio (management for another or, more literally, management of affairs), to which the common law is supposedly hostile, belongs in the miscellaneous fourth category. Thanks in large measure to one great book, English law has now reached a point at which it accepts that version of the fourfold classification by causative event. Goff and Jones has seen off the fiction of implied contract and has brought the recognition that English law does have a law of restitution based on unjust enrichment. There will be no turning back from the advance decisively made in Lipkin Gorman v Karpnale Ltd, [[1991] 2 AC 548] … not even if, as with its precursor Moses v Macferlan, [(1760) 2 Burr 1005] the actual decision comes into question. Lipkin Gorman unequivocally marks ‘the long overdue recognition of the independent existence of the subject at the highest level.’ [W J Swadling (1992) All ER Review, 255] One step still has to be taken. The name has to be changed. We have to stop calling the law of unjust enrichment the law of restitution.

Notes and questions 1. Birks’s taxonomy divides the law up by reference to four different categories of ‘event,’ rejecting what he calls ‘response-based’ classifications. What is the difference between an [page 51] ‘event’ and a ‘response’? Do these concepts correspond to ‘cause of action’ and ‘remedy’? What is wrong with categorising the law by reference to its responses, rather

than its causes of action? 2. Birks regards property rights as a type of response, not event. That is, property rights result from other events, rather than in themselves giving rise to rights. Is this view correct, or can property itself be a causative event, giving rise to other legal responses? See further R Grantham and C Rickett, ‘Property Rights as a Legally Significant Event’ [2003] CLJ 717; and 2.44. 3. How does ‘equity’ fit into this taxonomy, or does it not? Is equity a category of law? See further P Birks, ‘Equity in the Common Law: An Exercise in Taxonomy’ (1996) 26 UWALR 1, pp 66–7 and contrast the extract from Hedley at 2.27E. Is the view that ‘equity’ is a ‘category’ responsible for the view that restitution responds to ‘equity,’ not ‘unjust enrichment’ (1.29)? 4. Some writers have criticised Birks’s classification system (among others) on the basis that it is unsupported by historical evidence: see, for example, S Waddams, Dimensions of Private Law: Categories and Concepts in AngloAmerican Legal Reasoning (CUP, Cambridge, 2003). But the categorisation of law is not necessarily simply a matter of historical fact (presenting what judges actually said in their judgments); it may be a matter of presenting the best (contemporary) interpretation of the legal material. For a vigorous defence of the type of interpretive mapping exercise in which Birks engaged, see A Beever and C Rickett, ‘Interpretive Legal Theory and the Academic Lawyer’ (2005) 68 MLR 320. 2.26E G Samuel, ‘Can Gaius Really be Compared to Darwin?’

(2000) 49 ICLQ 297, pp 313, 315, 319 (some references omitted) IV. Taxonomy in Law and Science When one turns to the common law, the absence of an internal legislative structure is not without its advantages. … New interests can emerge from facts and can be reacted to by an institutional structure of remedies which is not constrained by a rigid formal hierarchy imposed by the legislator … . There is, however, a price to be paid for this flexibility. According to Professor Birks ‘the modern law of tort is still a tangle of criss-crossing categories’ where negligence ‘is a category based on a degree of fault’ and defamation ‘is a category based on an interest infringed, and is interference with contractual relations, or interference with chattels’; as for conspiracy, this ‘is a category based upon the description of an act’. Professor Birks illustrates this apparent disorder by reference to the case of Spring v Guardian Assurance. [[1995] 2 AC 296] In this case the House of Lords held than an employer was liable for economic loss in the tort of negligence to an exemployee about whom they had written a carelessly inaccurate reference. The problem with this case, according to Birks, is that two legal categories intersect. Defamation, which is an infringement of the reputation interest, intersects with negligence, which is a wrong based on a species of fault. This leads to a situation where a careless invasion of the reputation interest could give rise to two wrongs, namely defamation and negligence, when a rational system ought to see only one wrong. [Birks, ‘Equity in the Modern Law: An Exercise in Taxonomy’ (1996) 26 Univ WA L Rev 1, pp 5–6] In order to give intellectual support for claimed rationality, Birks draws an analogy with the zoological sciences: My canary is yellow and eats seeds. If all birds are seedeaters, yellow, or others, my canary counts twice. Are there two birds or one? If there come to be two birds, the doublevision is due to the bent classification. There is only one bird. [ibid, p 6]

Just as there is only one bird, so the ‘law cannot tolerate, or should not be able to tolerate, torts named so as to intersect’. Professor Birks goes on to consolidate this canary analogy by making the point that there is no branch of human knowledge which can manage without taxonomy. Whales must not be confused with fish, just as the gender of seahorses must not be confused with mammals. Indeed Darwin, according to Birks, would have despaired at the muddled taxonomy of English law. The point that he wishes to make with this reference to Darwin is spelt out in a later essay: (continued)

[page 52] To say that every obligation arises from contract, wrong, restitution, or some other event is much like saying that animals are mammals, reptiles, birds, yellow, or of some other kind. The classification is bent. At yellow it turns a corner. [Birks, ‘Definition and Division: A Meditation in Institutes 3.13’ in Birks (ed), The Classification of Obligations, p 21] However there is a problem with making an analogy between legal classification and taxonomy in the natural sciences. With a subject like zoology, classification relates to specifically identifiable objects which can be said to exist independently of the science. No doubt one has moved on from the older view in the natural sciences of a sharp distinction between the science and the object of science; but whales and fish, in the language of Gaius, are res corporales. They can be seen and touched. The objects of the empirical sciences, while being abstractions in terms of the scientific scheme itself, never actually lose their link with the senses and this link goes far in regulating the rigour of the science itself. Law as a ‘science’ is different. It is the discourse of law that, to a large extent, creates its own objects such as ‘persona’, ‘res’,

‘contract’, ‘tort’, ‘defamation’, ‘interest’, ‘fault’, ‘damage’ and so on. Legal science, as Villa has observed, is characterised by ‘atypical objects’ which escape the observability criteria established for all empirical phenomena and thus the objects of legal science cannot be seen without the aid of concepts and theoretical categories.16 These concepts and theoretical categories are of course part and parcel of the science of law itself and the objects of science thus merge with the science. Law is the object of its own science. The result is that the taxonomy scheme in law is subject to much less rigour emanating from the object of the science; the science can simply construct or deconstruct its own objects to achieve a desired solution. … Now, when Birks adds ‘yellow’ to the zoological scheme, what he is doing is to leave the science of zoology and insert into the system an element that does not belong to the science. Yellow does not relate in any way to the scientific system that contains the categories of mammals and reptiles. He is thus right to say that such taxonomy is ‘bent’. But where he encounters difficulties is in drawing an analogy with legal categories such as ‘contract’, ‘wrong’ and ‘restitution’ since these categories are not subject to the same empirical control as the categories used in zoology. Of course one might argue that the object of legal science is the facts of cases. Thus ‘damage’ can be related to a broken arm and ‘interest’ can be related to some lost profit. Equally ‘defamation’ can be seen as a scientific rationalisation of words and reputation. However the science and object of science dichotomy undermines this kind of rationalisation in two major ways. First, if legal science is the discourse that rationalises ‘fact’, then what of the discourse that rationalises ‘rights’ and ‘duties’? If the law of tort, contract and property is the science itself, this same science cannot of itself distinguish between the categories it uses. One has need of a meta-science to distinguish contract from tort, real rights from personal rights, property from obligations, public law from private law and so on. This adds a new level of confusion when it comes to the avoidance of intersection of categories since the meta-science

can always be used as a means of avoiding the lower level science … However it is with regard to such objects and their categorisation that one comes up against the second major difficulty caused by law in effect being the object of its own science. The abstract scheme not only has the capacity to categorise objects that seemingly exist in social reality but also the ability to alter both the concept and category within the abstract scheme and the nature of these empirical objects themselves. If the jurist chooses to postulate the existence of a new conceptual object such as some new ‘interest’ then this cannot be logically refuted provided it does not radically undermine the internal coherence of law. If it chooses to invest a live musical performance with the character of ‘property’ then this can be criticised but not logically refuted. [Ex parte Island Records [1978] Ch 122] Equally if the law chooses not to categorise some asset as ‘property’ then this cannot be attacked on the ground of an absence of scientific logic. … Can, therefore, one really compare Gaius to Darwin? There are, as we have seen, dangers in doing this. The fundamental danger is to fail to appreciate that taxonomy is about the construction of systems and systems have their own function. Gaius may have believed that he was trying to ‘map’, in a descriptive way, social reality. Just as Darwin could be said to have been trying to ‘map’ the natural world of plants and animals. Yet the functions of the two systems are different. Gaius’ system was going well beyond mere description; he was producing a map that was capable of creating its own reference points. That is to say, he was mapping things that had no actual ‘existence’ in society.

[page 53]

Notes and questions 1. Samuel makes the point that legal categories or ‘maps’ cannot be tested empirically for their truth against external facts, as they can in the physical sciences. This is because the material that they organise (legal rules) has no ‘real’ existence outside the science of law itself. This in turn means that there can be more than one way of classifying private law. If this is so, what makes one legal map ‘truer’ (better) than any other? What are the features of a ‘good’ taxonomy of the private law? Does the Birksian scheme pass the test? 2. In later work, Samuel suggests that Birks’s reliance on the ancient Gaian/civilian scheme of private law is backward-looking. He also questions the ‘rigidity’ of Birks’s rights-based taxonomy, which he claims is untested for its merits against others: G Samuel, ‘English Private Law: Old and New Thinking in the Taxonomy Debate’ (2004) 24 OJLS 335. Samuel’s own taxonomy rejects traditional divisions between public/private law and property/obligation, distinguishing first and foremost between constitutional, patrimonial (economic) and social law. This scheme, he says, is more rooted in facts, because it distinguishes between the different dimensions of a person’s social existence (political, economic and social). Presumably, contract and restitution would fit under ‘patrimonial law’ in this scheme. Tort law is harder to locate. 3. What does Samuel’s organisational scheme illustrate about his own priorities when it comes to ‘classifying’? How do they differ from those of Birks?

2.27E S Hedley, ‘Rival Taxonomies Within Obligations: Is There a Problem?’ in S Degeling and J Edelman (eds), Equity in Commercial Law, Lawbook Co, Sydney, 2005, Ch 4, pp 78, 84–8 (some references omitted) The Taxonomical Attack on Equity

It has been said that private law must be divided into a law of property and a law of obligations, and that the law of obligations in its turn must be divided into liabilities arising from four categories of causative events — consent, wrongs, unjust enrichment, and other events. Why does this have anything to do with equity? Equity has coexisted in the past with any number of other notions, and so it is not at first sight, at all obvious what the problem is. But those promoting this taxonomy say that it is an all-or-nothing deal. If it is used to classify legal obligations, then those who do so may not use any other classifying concepts — they cannot talk about whether the liabilities are legal or equitable, or indeed put them into any sort of conceptual boxes that are not allowed for by the taxonomy. … Choose, they say: either use the taxonomy, or embrace chaos — there is no third possibility. And the notion of ‘equity’ is only open to those who have chosen chaos. … Whether We Can Have More than one Taxonomy

Most of the trouble here is caused by an assumption that there can only be one taxonomy — that somehow rational legal argument is impossible unless everyone agrees on the same scheme for liabilities. If that’s really so, of course, then very few legal arguments are rational, and we are in a very deep hole indeed. This argument has always struck me as a wild exaggeration. Of course, lawyers need to agree on some things if legal argument is not to be completely chaotic. By and large we do, and while obviously the disagreements are fun and make a lot of noise, they

are the exception. Even seemingly fundamental disagreements about how to structure the law can only happen because we already fundamentally agree on what sort of things the law contains, we are just not sure what pattern to put them in. A certain amount of pluralism is a healthy sign in any institution; it is far from clear that the imposition of a greater degree of order is useful. What is the argument against this? Why is the imposition of a single taxonomy supposed to be a good idea? For Birks, it was all obvious. For him it was axiomatic that common law systems were inherently disordered and irrational — this was so obvious to him that he never thought it necessary to document it or argue for it. For him, it was enough just to state that anyone who relied on considerations (continued)

[page 54] of conscience must be ‘unprincipled,’ or that when he looked at equity he felt like he was looking at a woolly mammoth in a museum. He left the justification of these rather bizarre propositions to his followers. Some such have felt under rather more of an obligation to justify themselves, and I’ll look at them briefly. First, Burrows has been saying that those who do not accept the preferred taxonomy are guilty of a fundamental legal error. They are not treating like cases alike, but are drawing irrational distinctions between equity cases and legal cases. If equity cases really are different, he says, then those differences must be stated in terms compatible with the taxonomy; if the differences are not real, then we shouldn’t perpetuate history by pretending that there is a difference. [A Burrows, ‘We Do This at Common Law But That in Equity’ (2002) OJLS 1] This seems to me to misunderstand what

equity is all about. Equity is there to correct the common law, to do justice where the common law does not. If the common law says two cases are identical, then it may be equity’s job to step in and say that they are different, for some reason deriving from conscience or whatever. And of course its language and concepts jar with those of the common law — that is the whole point. If equity’s interventions seem to lack a single theme, that may be because the common law’s errors lack a single theme — there are lots of things wrong with it, perhaps not all related to one another. Surely we can accept that some bits of the law are fine and others need equitable modification; surely that is not ‘incoherence’. And if it is hard to understand the pattern of equitable modification from a common law perspective, that may simply mean that the common law perspective is wrong. … no doubt there are some areas of equity that can usefully be integrated with common law. But the big question is whether the common law has outgrown the need for equitable intervention completely. Has the common law become so perfect that it never needs to be corrected; or, perhaps is equity’s method of intervention so flawed somehow that it can’t do the job any more? Someone who claims that should indeed be arguing for the abolition of equity as a category. But Burrows doesn’t claim that. On the contrary, he thinks that many equitable interventions are still useful and indeed vital, and he’s made that absolutely plain! That being so, it seems to me that he should be supporting equity, not giving encouragement to those who would abolish it. He concedes the need for special equitable intervention sometimes; he just objects to some particular examples of it. Well, no-one said that equity was perfect; and the case for equity does not have to pretend that everything done in its name has always been good. Burrows should be saying, it seems to me, that equity should be made better than it is, not that it should be swept away. The other recent writer to justify the need for a taxonomy is Professor McKendrick — he wasn’t writing specifically about equity, but rather about the need for a unified taxonomy.

McKendrick argues for the taxonomy on six grounds: that like cases should be treated alike; that otherwise, anomalies and inconsistencies in the law will remain unexposed; that taxonomy keeps the law ‘on the right track’; that it makes the law more accessible; that it is more ‘economic’, presumably in the sense of intellectual economy rather than financial economy; and that it promotes legal elegance [E McKendrick, ‘Taxonomy: Does It Matter?’ in D Johnston and R Zimmerman (eds), Unjustified Enrichment: Key Issues in Comparative Perspective, at pp 627, 632–8]. Summarising this, I suppose there are really two main claims, one empirical and one ideological. The empirical is that a precise and detailed taxonomy makes the law easier to apply, more userfriendly if you like. The ideological claim is that a law which is more satisfying to a logician should be more satisfying to everyone else — that logical clarity is good in itself. The empirical claim — that applying a uniform taxonomy would make it easier for people to understand that law — is very interesting if true. Anything that makes law easier to understand should be welcomed. But empirical claims need empirical validation. It is far from obvious that greater logic in the law saves anyone any time or resources. A logically precise scheme is not always an easy one to apply. The most pure logical disciplines — such as philosophy and mathematics — certainly do not have the reputation of being the easiest. Is there any evidence that legal research is a more speedy or fair process in nations with more logical legal systems? Is it easier or cheaper to resolve law cases in continental Europe — which by and large accepts the taxonomy — than it is in common law countries? Are users of legal services any better served there than here? I know of no evidence to that effect, and the pro-taxonomists don’t seem to be on the verge of producing any.

[page 55]

As to the ideological claim, that a more logical and structured legal system is a better one in itself, I need only refer you to the pride and joy of the taxonomical school, namely the theory of unjust enrichment. This has been in a constant state of flux throughout the whole of its life. Bold theoretical claims are made, and praised by all as fundamental contributions to the area. Then their author withdraws them, and we argue for years about whether he was right to do so, and whether the new theory he’s put in its place is any better. Meanwhile, different theorists go off in different directions, and consensus becomes unattainable … if someone is now claiming that this has all made the law simpler or easy to apply then they should not be surprised if general hilarity ensues. One thing is clear about unjust enrichment law: it is not easy to apply or understand. So if the argument for the taxonomy is supposed to be that it makes things simpler, then I think it refutes itself. My difficulty in this regard has always been the high level of exaggeration in the pro-taxonomy argument. Common law legal systems are not in chaos, in any practical sense, and claiming that they are serves no purpose. There is no obvious difficulty in finding out the law, so long as you have enough time, brain-power and upto-date law books — and if the process is any better or easier in civil law countries, this has not come to the attention of comparative lawyers. All we have is the same false claim from the pro-taxonomists, repeating like a broken record: that anyone who doesn’t adopt their way of thinking is irrational. Such a claim requires a weighty justification if it is to be taken seriously; so far we have received none at all. Conclusion

To conclude, therefore, no good case has been made for sweeping away the distinction between law and equity. Those who say that it is irrational have themselves shown no great regard for rationality in their argument. Those who say that it is a merely historical distinction have equally relied on history for their argument. And those who say that maintaining the distinction unnecessarily complicates the law have probably done more than

anyone else in introducing unnecessary complications in recent years. There is no demonstrated need for a rigid taxonomical scheme; indeed, a healthy pluralism arguably demands the coexistence of many and conflicting taxonomical concepts. It is said that, if we look to the long term, equity is a dying tradition. Perhaps. But in the long term we are all dead: equity is indeed dying, and so is the common law which it both supports and corrects. But for as long as there is a common law there will be a need of doctrines to correct and fine-tune its application; and it seems to me that the equity tradition is still a valuable part of that, despite the taxonomical impurities it has. Long live the incoherent common law, and incoherent equity to correct it as necessary.

Notes and questions 1. Is Hedley arguing for the preservation of equity as a distinct legal category, or simply for the preservation of a way of dealing with the inadequacy of legal rules? Is there merit in either of these ideas? For a similar view of equity as a system for flexibly adjusting rules, not a jurisdictional classification of those rules, see H Smith, ‘Fusing the Equitable Function in Private Law’ in K Barker, K Fairweather and R Grantham, Private Law in the 21st Century (Hart, Oxford, 2017), Ch 9. This was Aristotle’s conception of equity too. How is one to preserve the law’s flexibility without it? 2. Do you agree with Hedley’s view that a variety of different ways of classifying the same legal material is a healthy thing? Would judges agree? 3. Hedley rejects the proposition that there is any inherent (ideological) or consequential practical virtue in the law being logical. He says there is no evidence for this. Do

you agree? 4. In Australia, there is a strong ‘preservationist’ tradition with regard to equity as a distinct body of law, stemming at least in part from the very late ‘fusion’ of law and equity in New South Wales. Note the impact of this on the High Court’s conceptual approach to unjust enrichment law at 1.29–1.31C. [page 56]

The scope of unjust enrichment law as a category — the broad view 2.28E P Birks, An Introduction to the Law of Restitution Clarendon, Oxford, 1985 (rev 1989), pp 16–17, 22–3, 25 (references omitted) We have been focusing on one specific example of an event which triggers restitution: receipt of a mistaken payment. The generic conception of all such events is ‘unjust enrichment at the expense of another’ … In the next few pages it will be necessary to refer rather frequently to this phrase ‘generic conception’. It only refers to the words which manage to capture at a high level of generality the common quality of a number of apparently different events. It is when a list of events turns out to fit one such description that it is perceived as more than a random miscellany. Its members become species of a genus … . [T]he generic conception of all the events which give rise to restitution — payments by mistake, under compulsion, on bases which fail, benefits freely accepted, obligatory expenditure compulsorily anticipated, and so on (for

again the list is incomplete) — is unjust enrichment at the plaintiff’s expense: unjust enrichment, for short.

Notes and questions 1. Birks’s early definition of unjust enrichment law was broad, encompassing all events giving rise to restitution (gain-based remedies). He subdivided the category internally to distinguish between cases, like the mistake case, in which unjust enrichments are ‘subtracted’ from a plaintiff (‘autonomous’ unjust enrichment) and those in which they have been obtained by the defendant committing a ‘wrong’ against the plaintiff, such as a tort or breach of fiduciary duty. Although the latter are not referred to in the above passage, they fell within his overall, generic conception. 2. Birks subsequently abandoned his broad view and others have followed suit (see 2.32–2.35E). It nonetheless retains some support. For example, it is endorsed in the most recent Restatement of the law in the United States (Restatement of the Law Third Restitution and Unjust Enrichment (American Law Institute, Minnesota, 2011) §1 and comment (a)) and in German law (para 812(1) of the BGB). For academic supporters of the broad view, see A Kull, ‘Rationalising Restitution’ (1995) 83 California Law Review 1191; Barker, (2006) 26 OJLS 609; T Krebs, ‘The Fallacy of Restitution for Wrongs’ in A Burrows and A Rodger (eds), Mapping the Law (OUP, Oxford, 2006), Ch 20. For judicial support, see Lord Steyn in Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 (HL) at 227.

Criticisms of the broad view — the challenge of diversity 2.29 A common criticism of the broad category of unjust enrichment was that the material it encompassed (all events giving rise to restitution) was too contextually diverse to make the category coherent. The following extracts make, and then consider the validity of, this objection. 2.30E S Hedley, ‘Ten Questions for “Unjust Enrichment” Theorists’ [1997] 3 Web Journal of Current Legal Issues (references omitted) The subject-matter of restitution is very diverse. There is little factually in common between marine salvage, undue influence, and over-payment of taxes. The question is, therefore, what links these diverse issues together. The ‘miscellany’ conception of restitution gives the answer that nothing does. The boundaries of restitution are set by history and by convenience. In asking how the ‘unjust enrichment’ school would answer, we immediately see how their subject differs from many others: its coherence, if such it is, derives from theory only. It is the last subject without a social context. This is not, in itself, an argument against the ‘unjust enrichment’ school, but it points a sharp finger at where its justification must be found, if it exists at all — it places an awful weight on the theory of the subject.

[page 57]

2.31E

K Barker, ‘Understanding the Unjust

Enrichment Principle in Private Law: A Study of the Concept and its Reasons’ in J Neyers, M McInnes and S Pitel (eds), Understanding Unjust Enrichment (Hart, Oxford, 2004), pp 92–5 (references omitted) Accepting that the material which the unjust enrichment principle spans is diverse, how can it be regarded as sufficiently homogenous to constitute a category? The answer is that the various rules which the principle mediates all address the same question about the actionability of gains in private law. Moreover, they bear to one another a series of important normative resemblances. They are related via their reasons. … Wittgenstein … posited a powerful … thesis; that one attributes a common name to things, not because they share a single essence, but because they bear ‘family resemblances.’ The point is made in a much celebrated passage in the Philosophical Investigations, where he discusses what is meant by a game. This bears citation in full. Consider for example the proceedings that we call ‘games.’ I mean board-games, card-games, ball-games, Olympic games, and so on. What is common to them all? — Don’t say: ‘There must be something in common, or they would not be called ‘games’ — but look and see whether there is anything common to them all. For if you look at them you will not see something that is common to all, but similarities, relationships, and a whole series of them at that … Look for example at board-games, with their multifarious relationships. Now pass to card-games; here you find many correspondences with the first group, but many common features drop out, and others appear. When we pass next to ball-games, much that is common is retained, but much is lost. Are they all ‘amusing’? Compare chess with noughts and crosses. Or is there always winning and losing, or competition between players? Think of patience. In ball

games there is winning and losing; but when a child throws his ball at the wall and catches it again, this feature has disappeared. Look at the parts played by skill and luck; and at the difference between skill in chess and skill in tennis. … And we can go through the many, many other groups of games in the same way; can see how similarities crop up and disappear. And the result of this examination is: we see a complicated network of similarities overlapping and criss- crossing: sometimes overall similarities, sometimes similarities of detail. I can think of no better expression to characterise these similarities than ‘family resemblances’; for the various resemblances between members of a family: build, colour of eyes, gait, temperament, etc. etc. overlap and criss-cross in the same way. And I shall say ‘games’ form a family. The lesson we can usefully draw from this, I think, is that cases can rationally be grouped under the same name despite the fact that, individually, they display all sorts of differences. Applying that intuition in the current context, we may meaningfully refer to a category of private law based on unjust gain, even though it prescribes a broad spectrum of different types of behaviour ranging from misrepresentation and undue influence on the one hand, to the infringement of intellectual property rights and breaches of fiduciary duty, on the other. Unjust enrichment law, like tort law, is a mixed bag without being an incoherent bag. Moreover, whilst the rules which it contains indeed display all sorts of important differences, these should not be allowed to obscure the set of similarities which they collectively share.

Notes and questions 1. Does Barker’s defence of Birks’s original broad conception of unjust enrichment meet Hedley’s criticism

that the only thing that binds together cases of restitution is a ‘theory’? 2. There is no reason in logic or practice why unjust enrichment cannot encompass a diverse range of legal material. The law of torts provides an example, grouping a wide variety of causes of action such as negligence, nuisance and breach of statutory duty. But do the various rules which give rise to gain-based awards have enough in common to make grouping them together a sensible or helpful exercise? Do they constitute a ‘family’ with ‘resemblances’, or are there simply too many differences between them to justify putting them all under the same roof? If there are similarities, what are they? Do they consist in something other than the mere fact that the focus of the action is the defendant’s gain? 3. Can a category be ‘mixed’ without being ‘incoherent’? Is the law of torts incoherent as a category? [page 58] 4. If unjust enrichment law includes cases in which people gain by committing a wrong, such as cases of profiting through a breach of fiduciary duty, does this produce an overlap with existing categories of law? Is this a problem?

Unjust enrichment law as a category — modern views 2.32 Theorists have responded to the contextual diversity of restitutionary rules in three different ways. Some have

from the outset regarded it as fatal to any category of unjust enrichment law.17 Others (like Barker (2.31E)) accept and accommodate the diversity, maintaining that unjust enrichment is a broad, but nonetheless logically robust category of law encompassing a variety of different causes of action. A third group has struck a middle path, arguing that unjust enrichment encompasses some, but not all, restitutionary rules. These writers advocate a smaller category of unjust enrichment law, which excludes cases in which defendants gain by wrongdoing. This vision suggests that restitution is ‘multi-causal’ — a remedial response not only to unjust enrichment, but also to other legal events, such as wrongs, property rights and even consent. 2.33 Australian courts clearly accept unjust enrichment in a ‘taxonomic’ role (see 1.24C–1.26C), but it is unclear as yet whether they conclusively favour the broad or the narrow view of the subject’s scope. In practice, they are more concerned with the law’s dispositive rules than with this taxonomic issue. Citing a recent article by James Edelman,18 the High Court has nonetheless suggested that gain-based liabilities for the wrong of breach of fiduciary duty may be ‘foreign to unjust enrichment notions because the unjust factors [in unjust enrichment law] are commonly concerned with vitiation or qualification of the intention of a claimant.’19 This suggests a preference for the narrow view, but whether it goes so far as to state a definitive position is unclear and can perhaps be doubted. 2.34E S Hedley, ‘Unjust Enrichment: A Middle Course?’ (2002) 2 Oxford U Comparative L Journal, pp 181–2, 187–8,

190–6 A. THE DIFFERENT VIEWS: BROAD, NARROW AND SCEPTICAL The outer extremes of the debate are relatively easy to identify. At one, there are those for whom ‘unjust enrichment’ and ‘restitution’ are merely different sides of the same coin. Restitution is the remedy for unjust enrichment, and neither is ever encountered without the other. They dovetail (or ‘quadrate’) perfectly. This view has a vocal, if currently diminishing, following. The view at the other extreme is that the theory of unjust enrichment explains nothing, justifies nothing, clarifies nothing. Actions in restitution are to be explained on a quite different basis. This view is coming more into fashion, though the unity its followers show in attacking ‘unjust enrichment’ will perhaps falter as they discuss what is to replace it. What of those — the majority, no doubt — between the extremes? … … I suggest that it is no longer adequate to divide the various writings into two opposing camps — those who believe in ‘unjust enrichment’ and those who do not. It is more realistic to talk of three camps. At one extreme, there is the broad view of unjust enrichment. In this view, the law recognizes a principle

[page 59] against unjust enrichment, which explains a significant number of cases. This includes examples of both direct restitution — where the claimant seeks restitution for benefits which the claimant directly conferred on the defendant — but also indirect restitution, where the defendant benefited at the claimant’s expense in some other sense. At the other extreme is the sceptical view — that ‘unjust enrichment’ explains little or nothing. Other, more satisfactory explanations must be sought for restitutionary liabilities. Between these two, however, I suggest that we find what might be termed

the narrow view of the subject: that unjust enrichment adequately explains cases of direct restitution, but has no adequate explanation for the indirect cases. In this view, the justification of these indirect cases must be sought elsewhere. … I … suggest that the narrow view is now a recognizable and popular middle ground, which is de facto the basis from which most of the text writers proceed … C. THE NARROW VIEW The narrow view can be seen from two angles, reflecting the two views with which it is contrasted. Like the broad view, it accepts that direct restitution flows from unjust enrichment. So (for example) personal claims for mistake, for duress or undue influence, or for necessity, are to be explained as examples of unjust enrichment. Those who adopt the narrow view also adhere, for now at least, to most of the apparatus of the developed theory of unjust enrichment, including the carefully-crafted definition of ‘enrichment’. However, while accepting all of this, they also accept the validity of the sceptical criticisms of indirect enrichment. So, for them, unjust enrichment cannot explain restitution for wrongs, or proprietary restitution. The principle of unjust enrichment is considered a valuable part of the law, but much of the use that has been made of it is thought to be overblown. The narrow view encompasses many viewpoints, united merely by the assertion that ‘unjust enrichment’ has a significant analytical role, coupled with a denial that ‘unjust enrichment’ should include cases of indirect enrichment. This view still leaves plenty of room for debate. Some would cut the narrow view to the bone, allowing the law of contract to reclaim much territory over which unjust enrichment was to hold sway. Others would extend it considerably, arguing that cases of payment of another’s debt ‘only look like indirect enrichment’ but in fact involve a ‘direct transfer of wealth’. Yet the extent of the territory claimed for the principle has, oddly, not been the focus of the arguments in which the area is embroiled. …

E. CONCLUSION It is clear that the discussion is far from over. It appears that the broad viewpoint has now largely exhausted its intellectual resources; it can save itself now only by branching out in new, and hitherto unexplored, directions. The narrow and the sceptical viewpoints have yet to find their feet properly; it remains to be seen, when they have done so, which issues will then occupy them. The matter will not, I suggest, be resolved by case law. As Lord Millett has pointed out extra-judicially, judges are for the most part ‘profoundly uninterested’ in issues of classification, and seem likely to remain so. The only thing plain beyond all doubt is that the productive, if occasionally somewhat bad-tempered, dialogue will continue for a while.

2.35E P Birks, Unjust Enrichment 2nd ed, Clarendon, Oxford, 2005, pp 1, 16–17 The law of unjust enrichment is the law of all events materially identical to the mistaken payment of a non-existent debt. … Analysis of the receipt of a mistaken payment of a non-existent debt reveals a causative event of a third kind. It is not a manifestation of consent such as a contract and it is not a wrong … . The generic conception of that causative event is unjust enrichment at the expense of another. … The study of the core case … gives no indication whether … the category that forms around it will be a loose confederacy, like the law of tort, or a close knit family, like the law of contract. The law of tort, in the common law, is of the former kind, a long list of particular wrongs which are difficult to integrate with one another. … Until a decade ago, one could predict that in the common law the mature law of unjust enrichment would look more like the law of tort — a list of unjust enrichments. Massive litigation concerning value passing under void contracts has meanwhile forced a change in direction. Unjust enrichment now begins to look more like the

law of contract in that it has acquired a tighter unity.

[page 60] Notes and questions 1. How is this view of unjust enrichment different from Birks’s previous view (2.28E)? 2. Birks’s decision to narrow the scope of unjust enrichment law is a consequence of his retracting his view that unjust enrichment and restitution ‘quadrate’ perfectly (that is, that restitution only responds to unjust enrichment and unjust enrichment only gives rise to restitution). It is designed both to avoid a taxonomic overlap between unjust enrichment law and the law of wrongs and to make it smaller and more coherent. On the process and reasons for his conversion, see P Birks, ‘Misnomer’ in W Cornish, R Nolan, J O’Sullivan and G Virgo, Restitution Past, Present and Future (Hart, Oxford, 1998), Ch 1; ‘The Law of Unjust Enrichment: A Millennial Resolution’ [1999] Singapore JLS 318, pp 319–20; ‘A Letter to America: The New Restatement of Restitution (2003) 3 Global Jurist Frontiers, Article 2. The narrow view has gained significant academic support: L Smith, ‘The Province of the Law of Restitution’ (1992) Canadian Bar Review 671; R Grantham and C Rickett, Enrichment and Restitution in New Zealand (Hart, Oxford, 2000), pp 18–20; J Edelman, Gain-Based Damages (Hart, Oxford, 2002); A Burrows, A Restatement of the English Law of Unjust Enrichment (OUP, Oxford, 2012) (retracting his former position in A

Burrows, ‘Quadrating Restitution and Unjust Enrichment: A Matter of Principle’ [2000] RLR 257); C Mitchell, P Mitchell and S Watterson, Goff and Jones: The Law of Unjust Enrichment (9th ed, Sweet & Maxwell, London, 2016); J Edelman and E Bant, Unjust Enrichment (2nd ed, Hart, Oxford, 2016). The United Kingdom Supreme Court appears, in recent times, also to have adopted the narrow view, identifying unjust enrichment law with cases involving ‘normatively defective transfers of value’: Commissioners for Her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq) [2017] UKSC 29 at [42] per Lord Reed (Lords Neuberger, Mance, Carnwath and Hodge agreeing); Lowick Rose LLP (in liq) v Swynson [2017] UKSC 32 at [22] per Lord Sumption (Lords Neuberger, Clarke and Hodge agreeing). See further note 5 to 10.11E. 3. If unjust enrichment law is defined as those events that are ‘materially identical’ to cases of mistaken payment, how does one determine ‘material identity’? What is the key criterion that creates the narrow category? 4. Not all those that take a ‘narrow’ view of unjust enrichment exclude from its ambit cases of ‘proprietary’ restitution, as Hedley suggests. See Chapter 15. 5. Hedley is himself a self-confessed ‘sceptic’, viewing restitutionary rules as simply a miscellany of principles based on extensions of contract, wrongdoing, property and payment of debt. See further S Hedley, ‘Unjust Enrichment’ [1995] CLJ 578; Restitution: Its Division and Ordering (Sweet and Maxwell, London, 2001), Ch 9. For others taking this view, see fn 17. If, however, restitutionary rules are not based on any common

principle(s), is there any point in grouping them together? What is the justification for ‘sceptics’ writing books on ‘restitution’ at all? 6. What practical difference does it make, if any, whether one adopts a ‘narrow’, ‘wide’ or ‘sceptical’ view of unjust enrichment law? 2.36 Birks’s modern view of the overall shape of private law and the legal responses to which the various categories within it can potentially give rise is illustrated in Figure 2.1. The events in respect of which restitution is available are highlighted in the first column.

Figure 2.1: Private Law Events and Responses [page 61]

2.37E M McInnes, ‘Restitution, Unjust Enrichment and the Perfect Quadration Thesis’ [1999] RLR 118, pp 119–20, 122–3 (references omitted) … Birks insisted for many years that the causative event of unjust enrichment perfectly quadrates with the response of restitution: unjust enrichment logically supports only restitution and restitution logically follows only from unjust enrichment. Recently, however, Birks has recanted the perfect quadration thesis. While continuing to maintain the first part of that theory, he now holds that restitution may be triggered not only by unjust

enrichment but by the other three categories of causative events as well. This paper critically examines that proposition and argues that Birks’ revised thesis is problematic for two reasons. First, it occasionally relies upon definitions of ‘restitution’ and ‘unjust enrichment’ that are, respectively, artificially expansive and artificially constrained. Secondly, it occasionally entails the characterisation of responses not only on the basis of the purposes that they serve, but also on the basis of the effects that they achieve. The first criticism is relatively less worrisome; practical considerations may indeed exceptionally justify terminological inaccuracies. The second criticism is far more significant; if accepted, Birks’ views almost surely will lead to error. … [C]ourts will be misled by the application of the term ‘restitution’ to rights that, while coincidentally restitutionary in effect, serve nonrestitutionary purposes. The likely result will be a mis-alignment of causative events and responses. II. UNJUST ENRICHMENT AND RESTITUTION It is best to address the least controversial matter first. Defined by reference to the autonomous action in unjust enrichment, the causative event of unjust enrichment consists of three elements: (i) an enrichment to the defendant, (ii) gained at the plaintiff’s expense, (iii) as a result of an unjust factor. A concurrence of those elements points to the response of restitution. On the strength of the unjust factor, the law imposes upon the defendant a primary obligation to give back to the plaintiff (the value of) the benefit that had been subtracted from her. Indeed, the only apparent reason for conducting a judicial inquiry into the defendant’s enrichment and the plaintiff’s expense is to determine whether or not such an order should be granted. The natural inference drawn from the fact that the defendant received an unjust enrichment is that he ought to give up his gain; the natural inference drawn from the fact that the plaintiff suffered an expense that resulted in an unjust enrichment is that she ought to have that enrichment returned to her. And because the enrichment and the expense are causally interdependent, the plaintiff is identified to be the appropriate

recipient of the defendant’s divestment and the defendant is identified to be the appropriate source of the plaintiff’s restoration. Accordingly, at the risk of belabouring the obvious, it can be said that the response that attends upon the causative event of unjust enrichment is restitutionary in both effect and purpose. As to the former, it is factually true that the obligation in question requires the defendant to return to the plaintiff (the value of) something that he had acquired from her. More significantly, however, the very aim of that obligation is to respond to the causative event of unjust enrichment by reversing an intolerable transfer of value … . IV. CONSENT AND RESTITUTION It is at this point that Birks’ revised thesis becomes very difficult to accept. While technically it may be inaccurate to refer to gainbased rights arising from wrongs as being ‘restitutionary’ [McInnes says that gain-based awards for wrongs are better described as ‘disgorgement’ to refer to such awards], such terminology nevertheless may be defended in that context on the practical ground of settled usage. In contrast, there are few arguments for, and many arguments against, using ‘restitution’ to describe the response generated by the causative event of consent. Consider a situation in which Pamela expects to receive a job promotion during the week. Wishing to celebrate in advance by sharing her good fortune with a friend, she gives £500 to David on Monday. Under seal, however, he agrees to repay that sum to her on Friday if she does not in fact get promoted. Friday arrives and Pamela, having been disappointed by her employer, receives £500 from David. According to Birks, David’s performance of his primary obligation under the contract properly can be characterised as being restitutionary in both effect and purpose. That seems incorrect. David’s act undoubtedly was restitutionary in effect; it saw him give back to Pamela £500. However, the purpose of David’s act was not to achieve restitution per se, but rather to honour his promise and thereby to fulfil Pamela’s expectation. Only

that characterisation of the response

[page 62] accurately reflects the underlying causative event. The origin of David’s obligation simply was the making of an enforceable promise; he gave something to Pamela because he had agreed to do so. It is only by coincidence that he paid over the same amount of money that he previously had received from her. Just as the terms of the contract could have called for his payment on Saturday instead of Friday, so too it could have called for payment of something more or less than £500. And, just as there is no analytical advantage in labelling David’s obligation ‘a Friday obligation’, neither is there any analytical advantage in labelling that obligation ‘a restitutionary obligation’. That is because neither ‘Friday’ nor ‘restitution’ describe the essential purpose of the obligation generated by the causative event of contract (consent); those terms merely describe the fortuitous content of that obligation. The position can be stated even more strongly. It is not simply that the characterisation of David’s act as ‘restitutionary’ is unhelpful. If, following Birks, responses are to be classified according to their effects, as well as their purposes, the analytical consequences will be positively harmful. Consider again the response generated by the causative event of autonomous unjust enrichment. If Paul mistakenly pays £1,000 to Donna, prima facie she will have an obligation to repay £1,000 to him. As explained above, that obligation undeniably is restitutionary in both effect and purpose. The very aim of the right in question, arising logically from the underlying causative event, is to reverse Donna’s unjust enrichment by requiring her to give back the amount she had received at Paul’s subtractive expense. However, if rights can be classified simply on the basis of their effects, the legal response to

the event of autonomous unjust enrichment also can be labelled ‘compensation’. Although the aim of imposing upon Donna the obligation to pay £1,000 is not per se to compel her to compensate Paul for his loss, that undoubtedly is the outcome; he receives reparation for the injury that he sustained. Birks quite rightly insists that ‘restitution’ and ‘compensation’ should not be used synonymously. As he warns, ‘[t]here is a real danger, if the words are used interchangeably, that it will be assumed that every set of facts which gives rise to restitution (of benefits received) will justify an award of compensation’. Likewise, there is a real danger that it will be assumed that every causative event that supports compensation of loss also supports restitution of gains. However, those are precisely the types of mistakes encouraged by the classification of responses on the basis of effects. At present, lawyers and judges typically classify rights in light of underlying purposes. On that basis, restitution is said to respond to autonomous unjust enrichment invariably and (defining the term to include disgorgement) wrongs occasionally. To suggest, to the contrary, that ‘restitution’ also is the name of the right generated by the causative event of consent in Pamela and David’s case, and (by analogy) that ‘compensation’ is the name of the right generated by the causative event of autonomous unjust enrichment in Paul and Donna’s case, is to invite error. Bar and bench would have to be forgiven for wrongly inferring on the basis of such effect-driven terminology that contracts always support gain-based relief and that autonomous unjust enrichment always supports loss-based relief. For those lacking Birks’ expertise, it would be very difficult to resist the temptation to leap from coincidental specifics to analytical generalisations. The only way to avoid such mistakes, and to ensure that causative events and responses properly align, is to refer to the latter only on the basis of purposes that they serve. Because such purposes flow logically from causative events, rights will be held securely in place.

Notes and questions 1. A pays B $500 and B promises to repay it. The court orders B to repay the $500. Do you agree with McInnes that this is not a case of ‘restitution’? Is it simply a case of enforcement of B’s promise? What does this imply about the accuracy of Birks’s ‘map’ of private law at 2.36? 2. What is the difference between an award that has a restitutionary ‘effect’ and one that has a restitutionary ‘purpose’? Is the latter simply an award that is designed to reverse unjust enrichment? 3. McInnes accepts that there can be gain-based responses to wrongs, as well as to unjust enrichment, but calls such awards ‘disgorgement’, not restitution. In his view, such examples do not, therefore, destroy the ‘quadration’ between restitution and unjust enrichment. Is this pure casuistry, or are there genuine differences between restitution (giving back something obtained from the plaintiff) and disgorgement (giving up to the [page 63] plaintiff something that you obtained from someone else, but in violation of the plaintiff’s rights)? On this debate, see further Chapter 10. 4. Could ‘property’ be an ‘other’ event (see Figure 2.1 at 2.36), which triggers restitution in the same way as unjust enrichment? If not, why not?

UNJUST ENRICHMENT AS A ‘SUBSIDIARY’ DOCTRINE 2.38 Unjust enrichment law is an independent source of rights and duties and to that extent represents a distinct body of law, standing alongside contract, torts and property. Notwithstanding this, questions arise as to the relationship between this field and its private law neighbours. Is it an equal partner, or is it (as some civilian jurisdictions say) ‘subsidiary’ to them? According to theories of ‘subsidiarity (of which there are several distinct versions, as we shall see), if a set of facts supports the application of the law of another area of private law, such as contract, property or torts, unjust enrichment law is excluded. It grows only in the gaps left logically unattended by other principles. The converse view is that an unjust enrichment claim can arise wherever this is dictated by the internal logic of its own rules, even if other areas of law also apply on the facts. The conceptual purity of civilian systems tends to reduce the potential overlap between distinct fields of law (indeed that is one of Birks’s reasons for advocating the civilian approach at 1.37E–1.38), but in the common law such overlaps arise frequently, which makes resolution of issues of priority particularly important. In addition to there being issues concerning the relationship between unjust enrichment law and other doctrinal sources of law, such as property and contract, there are also difficult questions regarding its relationship with statutory regimes. It is, evident, for example, that restitution will not be granted where this would undermine a defendant’s statutory rights, or where it would be inconsistent with the intentions of Parliament as revealed by a legislative scheme.

2.39 The following extracts examine the relationship between unjust enrichment law and two other fields — contract and property. The chapter finishes with an examination of the various arguments about subsidiarity.

Unjust enrichment and contract 2.40 It is now accepted that restitutionary rights do not depend on the existence of an implied contract to pay for benefits received, but respond to different events. The more difficult question is the extent to which restitutionary rights can be displaced by the existence of a contract relating to a benefit a defendant has obtained. 2.41C Pan Ocean Shipping Ltd v Creditcorp Ltd [1994] 1 WLR 161 at 164 (HL) The plaintiff, Pan Ocean, chartered a vessel from its owner, Trident. Hire charges were payable 15 days in advance. At Trident’s request, one of the advance payments was made to a third party, Creditcorp, to whom Trident had assigned its rights to payment as security for a loan. In the event, Trident failed to supply the vessel. Pan terminated the charter and sought to recover its payment from Creditcorp on the basis that the consideration for it had totally failed. While Pan had an express contractual right to the repayment of unearned hire charges from Trident, the latter was insolvent and not worth suing. The House of Lords rejected the claim against Creditcorp, holding that Pan was limited to its (nugatory) contractual remedies against Trident.

Lord Goff of Chieveley: All this is important for present purposes, because it means that, as between shipowner and charterer, there is a contractual regime which legislates for the recovery of overpaid hire. (continued)

[page 64] It follows that, as a general rule, the law of restitution has no part to play in the matter; the existence of the agreed regime renders the imposition by the law of a remedy in restitution both unnecessary and inappropriate. Of course, if the contract is proved never to have been binding, or if the contract ceases to bind, different considerations may arise, as in the case of frustration (as to which see French Marine v Compagnie Napolitaine d’Eclairage et de Chauffage par le Gax [1921] 2 AC 494, and now the Law Reform (Frustrated Contracts) Act 1943). With such cases as these, we are not here concerned.

Notes and questions 1. For explanation of the restitutionary ground known as ‘total failure of consideration’, see Chapter 7. 2. Do you agree with Lord Goff that restitution was neither ‘necessary’ nor ‘appropriate’ on the facts? 3. You agree to compensate me for money that I lose. Should this stop me successfully suing the person who now has it, for its return? How is the above case different? 4. For contrasting critical commentaries on this case, see A Burrows, ‘Restitution from Assignees’ [1994] 2 RLR 52; K Barker, ‘Restitution and Third Parties’ [1994] LMCLQ 305.

2.42C Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at 545 (HCA) For the facts, see 7.6C. Gummow J: … the action to recover the moneys sought by the appellants after the failure of the purpose of funding Rothmans to renew its licence may be illustrative of the gap-filling and auxiliary role of restitutionary remedies. [Dietrich, Restitution: A New Perspective, 1998, pp 29–35; Grantham and Rickett, ‘On the Subsidiarity of Unjust Enrichment’ (2001) 117 Law Quarterly Review 273 at 289–93] These remedies do not let matters lie where they would fall if the carriage of risk between the parties were left entirely within the limits of their contract. Hence there is some force in the statement by Laycock: [‘The Scope and Significance of Restitution’ (1989) 67 Texas Law Review 1277 at 1278] The rules of restitution developed much like the rules of equity. Restitution arose to avoid unjust results in specific cases — as a series of innovations to fill gaps in the rest of the law.

Notes and questions 1. What does Gummow J mean when he says that restitution had a ‘gap-filling’ role on the facts of this case? Was there actually any gap for it to fill, given that there the license-fee payment had been made under a valid contract? Contrast the views of Gummow J, Gleeson CJ, Gaudron and Hayne JJ with that of Kirby J (dissenting) at [165]–[166]. 2. On whether there was a ‘gap’ in contractual riskallocation, compare further P Birks, ‘Failure of Consideration and its Place on the Map’ (2002) OUCLJ 1,

pp 4–5 (there was a gap, despite the valid contract) with J Beatson and G Virgo, ‘Contract, Unjust Enrichment and Unconscionability’ (2002) 118 LQR 352, pp 355–7 (the plaintiff could not prove a gap, so the claim should have failed). 2.43C Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27 at [45]–[48], [79]–[80] (references omitted) The Lumbers engaged a building company (‘Sons’) to construct a house on their land. No fixed price was ever agreed. Sons was chosen specifically for its prestigious name, but unbeknown to the Lumbers, most of the work was in fact delegated to an unlicensed builder (‘Builders’), which belonged to the same corporate group. The work on the Lumbers’ house was completed to standard, but Builders was never fully paid. Builders initially sued both the Lumbers and Sons for the outstanding balance. Its action

[page 65] against Sons was stayed (because it failed to provide the required security for costs), but it continued the action against the Lumbers on the basis that the Lumbers had been unjustly enriched by the work it had done. The High Court dismissed the claim. One of the grounds on which it did so was that the rights and obligations of Builders and the Lumbers were exclusively governed by their respective contracts with Sons. The following extracts relate to the relationship between the unjust enrichment claim and the contractual arrangements. Gleeson CJ: The restitutionary claim [45] In considering Builders’ restitutionary claim, the contractual

relations between the Lumbers and Sons, and between Sons and Builders, cannot be put to one side as an inconvenient distraction … . The case was conducted and decided in the South Australian courts on the basis that, as Builders alleged, there was a contract between the Lumbers and Sons. Builders claimed that there was an assignment to it by Sons of the benefit of that contract. That claim failed. The primary judge held that the work performed by Builders was performed pursuant to a further contract which was made between Sons and Builders; a contract that was entered into without the knowledge of the Lumbers. That finding was not reversed in the Full Court, although it is not clear how the majority accommodated it to their reasoning. It was adopted by Vanstone J. The finding should be accepted … . There was, therefore, a head contract between the Lumbers and Sons, and a subcontract between Sons and Builders. [46] So far as appears from the evidence, Builders had, and may still have, a viable claim against Sons. The claim was not defeated on the merits or otherwise in any relevant respect rendered worthless … . The contractual arrangements that were made effected a certain allocation of risk; and there is no occasion to disturb or interfere with that allocation. On the contrary, there is every reason to respect it. There was no mistake or misunderstanding on the part of Builders. It was accepted on both sides in argument that in the ordinary case a building subcontractor does not have a restitutionary claim against a property owner, but must look for payment to the head contractor. That was said to be subject to exceptions, but the difficulty for Builders was to show that the case fell within any recognised exception or within general principles justifying a new exception. [47] In said:

Pan Ocean Shipping Co Ltd v Creditcorp Ltd,

Lord Goff of Chieveley

I am of course well aware that writers on the law of restitution have been exploring the possibility that, in exceptional circumstances, a plaintiff may have a claim in

restitution when he has conferred a benefit on the defendant in the course of performing an obligation to a third party (see, eg, Goff and Jones on the Law of Restitution, 4th ed (1993), pp 55 et seq, and (for a particular example) Burrows on the Law of Restitution, (1993) pp 271–272). But, quite apart from the fact that the existence of a remedy in restitution in such circumstances must still be regarded as a matter of debate, it is always recognised that serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract. [48] In some Australian jurisdictions, there has been legislation enacted to protect the interests of building subcontractors, but such protection is confined within a certain statutory framework. The fact that such legislation exists should discourage, rather than encourage, attempts to extend the scope of restitutionary claims beyond the bounds set by legal principle, especially where to do so would be to cut across or disturb contractual relationships and established allocation of risk. Gummow, Hayne, Crennan and Kiefel JJ: [79] … as is well apparent from this court’s decision in Steele v Tardiani, an essential step in considering a claim in quantum meruit (or money paid) is to ask whether and how that claim fits with any particular contract the parties have made. It is essential to consider how the claim fits with contracts the parties have made because, as Lord Goff of Chieveley rightly warned in Pan Ocean Shipping Co, ‘serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract’. In a similar vein, in the comments upon §29 of the proposed Restatement (3d), ‘Restitution and Unjust Enrichment’, the reporter says: Even if restitution is the claimant’s only recourse, a claim under this Section will be denied where the imposition of a liability in restitution would overturn an existing allocation of

risk or limitation of liability previously established by contract. (continued)

[page 66] [80] … For the purposes of this case the critical observations to make are, first, that Builders’ restitutionary claim does not yield to analysis as a claim for work and labour done or money paid and, secondly, that Builders’ restitutionary claim, if allowed, would redistribute not only the risks but also the rights and obligations for which provision was made by the contract the Lumbers made with Sons.

Notes and questions 1. All members of the High Court had additional reasons, other than the danger of ‘redistributing’ contractually allocated risk, for denying the claim. Gleeson CJ hence supported rejecting it on the alternative basis that the various contracts meant that the Lumbers did not benefit by the work done, or that their enrichment was at the expense of Sons, not Builders (at [51]–[53], [54]). Gummow, Hayne, Crennan and Kiefel JJ were generally sceptical of unjust enrichment reasoning for reasons already canvased in Chapter 1 and, like Gleeson CJ, doubted whether the Lumbers could be said to have ‘accepted’ a ‘benefit’ at Builders’ ‘expense’ ‘when proper account is taken of the rights and obligations that existed between Sons and the Lumbers under their contract’ (at [77]). On the question whether the Lumbers ‘benefitted’ at

Builders’ expense, see further 3.54 et post. 2. Which allocation of risk was the High Court concerned about ‘redistributing’ — the allocation contained in the contract between Builders and Sons, or that in the contract between the Lumbers and Sons? Should Builders be burdened by the terms of the contract between the Lumbers and Sons, to which it was not a party? 3. Why was restitution denied in this case, but allowed in Roxborough (2.42C)? 4. For further demonstrations of the principle in Lumbers, see Nikolic v Oladaily Pty Ltd [2007] NSWCA 252; Skilled Group Ltd v CSR Viridian Pty Ltd [2012] VSC 290.

Unjust enrichment and property 2.44 The relationship between property and unjust enrichment law is complex and vexed. Property rights (by which we mean rights in respect of things20) clearly exist outside of the law of unjust enrichment. They can be brought into being in a number of ways, the most common of which is through consent and conveyance. They may also, as we shall see in Chapter 15, come into being in response to unjust enrichments, where they carry significant remedial advantages for plaintiffs. Such rights, operating in rem, rather than in personam, bind third parties and provide priority for the plaintiff in respect of particular assets in a defendant’s insolvency. 2.45 From one point of view, it has rightly been suggested that there is no taxonomic competition as such between unjust enrichment and property, because property rights

belong in the category of legal responses to events, whereas unjust enrichment belongs in the category of legal events themselves.21 Some property rights are the product of agreements or promises;22 and some are created as remedies for wrongs.23 It is nonetheless the case that once property rights have been brought into being (whether in consequence of consent, unjust enrichment or indeed any other significant legal event), they attract legal protection in their own right.24 In civilian jurisdictions, this protection is provided directly, through the means of an action to ‘vindicate’ the property right (vindicatio), but in common law systems, the law has not [page 67] developed in the same way and the protection is indirect. It normally takes the form of an action against a defendant for wrongfully interfering with the property right (at common law, via the torts of trespass, detinue, or conversion and, in equity, the action for knowing receipt of trust property). Actions of this type often give the plaintiff a personal claim for monetary compensation for any loss resulting from the wrongful interference.25 They can also give rise to personal claims for monetary restitution of gains the defendant has made as a result of the wrong and indeed (sometimes) to rights to claim specific restitution of the property itself,26 where that property is unique and the defendant continues to possess it. In such instances, Professor Birks was always reluctant to describe the underlying property rights as the ‘legal events’ giving rise to restitution, but he nonetheless

ultimately accepted that ‘coming into possession’ of another’s property is an event, lying outside of unjust enrichment law, that can give rise to restitutionary remedies, even where no wrong is committed.27 2.46 The main controversy about the relationship between property rights and unjust enrichment that concerns us here is whether, when a plaintiff has a continuing property right in respect of an asset, the plaintiff may, in addition to the actions listed above,28 bring an unjust enrichment claim against anyone receiving the property. Three arguments are commonly put as to why an unjust enrichment claim might be precluded. The first is that a defendant cannot claim to be enriched by receiving property which the plaintiff continues to own. The defendant’s possession is worthless. The second is that where a plaintiff continues to own property, the defendant has not obtained it ‘at the plaintiff’s expense’.29 Neither of these arguments concerns the subsidiarity of unjust enrichment law to property law. They relate to the internal logic of unjust enrichment claims themselves and we therefore address them in Chapter 3. The third argument is that, where property law provides the basis of a claim, unjust enrichment claims are simply precluded for systemic, policy reasons. This is a true claim of subsidiarity. Precisely what the reasons for precluding an unjust enrichment claim in these circumstances might be is unclear in common law jurisdictions, since such systems normally respect the principle of concurrency of actions. Many civilian systems are different in this regard.30 2.47C Foskett v McKeown [2002] 2 WLR 1299 at 1304, 1322 (HL)

Mr Murphy took out a whole-of-life policy for the sum of £1m on his own life. The policy required the payment of annual premiums, although after the payment of the first two premiums the policy would not lapse for non-payment for quite some time due to a formula that allocated ‘investment units’ to the payment of later premiums. Mr Murphy paid the first two premiums on the policy out of his own funds. He then settled the benefit of the policy on trust for his children. The fourth and fifth premiums (and perhaps part of the third premium) were paid by Mr Murphy out of funds held by him on trust for the plaintiffs. Mr Murphy committed suicide. The plaintiffs claimed not only to be entitled to recover the amounts of the fourth and fifth premiums from the proceeds of the policy, but also to be entitled to a proportionate share of the (continued)

[page 68] proceeds. This claim was on the basis that, as the plaintiffs had contributed to the acquisition of the policy, they should thus be regarded as co-owners of the policy and its proceeds, along with Mr Murphy’s children, in proportion to their contribution. The children resisted this claim on the ground that the right to the proceeds had been acquired by the payment of the first two premiums and that, because Mr Murphy had died so soon after this, the related investment units would have kept the policy on foot even if the last three premiums had not been paid. The plaintiffs’ claim to a proportionate share of the proceeds

was upheld by a majority of the House of Lords. Lord Browne-Wilkinson: Nor is the purchaser’s claim based on unjust enrichment. It is based on the assertion by the purchasers of their equitable proprietary interest in identified property. … Lord Millett: The process of ascertaining what happened to the plaintiff’s money involves both tracing and following. These are both exercises in locating assets which are or may be taken to represent an asset belonging to the plaintiffs and to which they assert ownership. … Having completed this exercise, the plaintiffs claim a continuing beneficial interest in the insurance money. Since this represents the product of Mr Murphy’s own money as well as theirs, which Mr Murphy mingled indistinguishably in a single chose action, they claim a beneficial interest in a proportionate part of the money only. The transmission of a claimant’s property rights from one asset to its traceable proceeds is part of our law of property, not of the law of unjust enrichment. There is no ‘unjust factor’ to justify restitution (unless ‘want of title’ be one, which makes the point). The claimant succeeds if at all by virtue of his own title, not to reverse unjust enrichment.

Notes and questions 1. Did Lord Millett here reject any unjust enrichment claim because he thought such claims were subsidiary to property law, or simply because he thought that unjust enrichment doctrine did not apply on the facts? Does it matter? See further note 3 to the extract from Grantham and Rickett (2.48E) below. 2. Not everyone accepts that the claims in this case were based on the plaintiffs’ continuing property rights, the contention being that the plaintiffs lost these rights when

their money was mixed and their right to the proceeds of the policy were new proprietary rights based on the defendants’ unjust enrichment. Which view one takes turns on one’s understanding of what happens to property rights when property is ‘traced’ through different forms. For the debate, see further 14.14–14.17C.

Subsidiarity arguments 2.48E R Grantham and C Rickett, ‘On the Subsidiarity of Unjust Enrichment’ (2001) 117 LQR 273, pp 273–4, 288–93 While the law of unjust enrichment is a core doctrine of the private law, it is a subsidiary doctrine. Subsidiarity describes the relationship between two claims or doctrines where the scope and operation of one claim are constrained by another claim, even where all the elements of the former claim are made out. At its weakest, subsidiarity denotes the subordination of one claim where another claim in fact offers the plaintiff a basis of recovery. At its strongest, subsidiarity denies the availability of a claim because another claim is in principle available, even though on the facts it does not avail the plaintiff. Restorable or unjust enrichment, defined as a generic conception, is subsidiary in the sense that the scope and operation of the principle of unjust enrichment are necessarily constrained by the scope and operation of the other core doctrines of the private law, being consent-based obligations (dominantly but not solely the law of contract), the law of property, and the law of wrongs (dominantly but not solely the common law of torts). While the extent or strength of the subsidiarity of unjust enrichment will depend upon the proper construction of the primary doctrine, and in particular whether in denying the plaintiff a claim the primary doctrine

continues, by negative implication, to regulate the relationship, the point for present

[page 69] purposes is that the principle of unjust enrichment is not a primary regulator of rights and duties. Rather, it is one that operates either to supplement these primary doctrines or in the interstitial spaces between the primary doctrines. This results from the very doctrinal structure of unjust enrichment itself … II. IMPLICATIONS FOR THE ROLE OF UNJUST ENRICHMENT The province of the law of unjust enrichment is defined by two factors. First, there must be a defect in the plaintiff’s subjective consent. Unjust enrichment intervenes where an apparently consensual transfer of wealth is accompanied by defective subjective consent. This defect renders the defendant’s retention of the enrichment unacceptable. Second, there must be a transfer of wealth effective to vest in the defendant not merely possession but also rights to the enrichment. Such a transfer is necessary to support the conclusion that the defendant is enriched, but, furthermore, the objective of the law of unjust enrichment, to restore the status quo ante, can only be understood against the background of a transaction that is prima facie effective. These two requirements seem rather obvious, and are revealed by just a moment’s reflection on the factual matrix of a typical case of unjust enrichment. However, this description of unjust enrichment has two important and far less obvious implications for understanding the place and nature of unjust enrichment in the wider scheme of the private law. A. A supplementary doctrine Although unjust enrichment is a source of rights and not merely a remedial response to other rules, its sphere of operation is

nevertheless defined by and dependent upon the operation of other rules of law. It is necessarily supplementary of other doctrines of the private law, particularly contract and property. Its concern with transfers of wealth vitiated by a defect in the plaintiff’s subjective consent means that it is, and can only be, relevant where there has been an expression of objective consent and a transfer of wealth that is consequently prima facie effective. It is only where the doctrinal elements of the law of contract and the law of property are satisfied, so that unless modified by an external rule the defendant would be entitled to retain that wealth, that the law of unjust enrichment can have any role. Moreover, this is not merely to say that a defendant is not enriched without the acquisition of rights. While enrichment is obviously a functional prerequisite to an unjust enrichment claim, the point is one of more fundamental doctrine and policy. The objective is to reverse transfers of wealth that, ex aequo et bono, cannot be allowed to stand. The notion ex aequo et bono is given concrete expression by the concern with defects in the plaintiff’s subjective consent. Therefore, unjust enrichment can be invoked only where there is at least some manifestation of (objective) consent, because, doctrinally, unjust enrichment is concerned with manifestations of consent that are subjectively defective. Quite simply, if there is no manifestation of (objective) consent at all (or no defect in subjective consent), and no prima facie effective transfer of wealth, there is nothing calling into play the objectives of unjust enrichment: there is neither an apparent consent to correct, nor a status quo ante to restore. This means that the law of unjust enrichment is, therefore, essentially modificatory in nature. It modifies the normal consequences that would flow from the apparent manifestation of consent by the plaintiff to the transfer of the enrichment. As a doctrine supplementing or modifying the law of contract and the law of property, unjust enrichment fulfils a function similar to that historically attributed to equity. Like equity, unjust enrichment operates to mitigate the rigidities and shortsightedness of other doctrines, and to ‘reverse’ transactions that

on closer inspection cannot be allowed to stand. For most purposes, the law is and can only be concerned with objective manifestations of consent. An inquiry into subjective intention imposes problems of proof, does little to promote security of receipt, and is time-consuming to administer. If, for example, every contractual dispute required a ‘tour through [the plaintiff’s] cranium’ the institution of contracting would cease to have utility. The law thus provides straightforward mechanisms that promote certainty and deal with the vast majority of cases. This means that the law in general will not admit considerations relating to a party’s genuine subjective intention to contradict appearances. However, while such an approach efficiently regulates the rights and duties of the parties in the vast majority of cases, it is necessarily shortsighted and as such may work injustice. Moreover, where this shortsightedness takes the form of a failure to respond to a defect in the plaintiff’s subjective consent, that failure undermines the philosophical and theoretical basis for holding the plaintiff responsible for the consequences of his actions. Responsibility is predicated upon voluntary choices, and decisions made under the influence of factors such as mistake and coercion are not voluntary. While, therefore, in most cases the law may safely infer voluntariness from the outward manifestation of consent, it must nevertheless respond to (continued)

[page 70] those cases where that inference is not in fact justified. That supplementary response is the province of the law of unjust enrichment. B. A subsidiary doctrine A further and important implication of the doctrinal limitations of the law of unjust enrichment is that it has no role to play where the

consequences of a defect in subjective consent are already regulated, such that the restoration of the status quo ante is already provided for. This is most obviously the case where the parties have dealt with the matter by express agreement. Thus, for example, where the parties have agreed that if, in making payment, the assumptions upon which the plaintiff paid later turn out to have been mistaken, the defendant will return the payment, the doctrinal basis for restoration of the payment to the plaintiff is the express agreement, not the law of unjust enrichment. Thus, in The Trident Beauty, [Pan Ocean Shipping Ltd v Creditcorp Ltd: The Trident Beauty [1994] 1 WLR 161 at p 164 per Lord Goff. See also Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574 HL, where it was held that the contract itself dealt with the consequences of rescission of the contract] it was held that ship charterers could not recover advance hire payments from the vessel’s owners in unjust enrichment, since the charterparty provided expressly for repayment and that was thus the basis for restitution. This conclusion, furthermore, does not turn merely on some ill-defined hierarchical notion of the primacy of contract, but rather on the simple fact that, since the parties have already provided for the possibility of restoration if the plaintiff’s subjective consent was defective, there is no longer any call for the intervention of the law of unjust enrichment. The agreement means that it is no longer the case that, but for the imposition of a restitutionary obligation, the defendant would be able to retain an enrichment in circumstances that make it unjust to do so. A right to restoration of the enrichment, quite apart from the law of unjust enrichment, may also be implicit in the nature of the particular rights held by the plaintiff. For example, central to the notion of property rights are the right to protection from interference and the right to exclusive benefit of the asset. [See Foskett v McKeown [2000] 2 WLR 1299.] Where the plaintiff retains title to an asset that passes into the defendant’s possession, the mechanism for recovery is the right, inherent in his title, to the wealth represented by that asset. While it is possible to describe the defendant in such a case as enriched in lay terms, as a matter

of legal doctrine there is no enrichment. The defendant’s receipt was always encumbered with an obligation, arising from the plaintiff’s title, to return the property. That obligation means that there is nothing calling for the intervention of the law of unjust enrichment. The persistence of the plaintiff’s property rights entails that the means are already at hand to reverse the defendant’s unjust enrichment. Instances of the provision of restoration outside of the law of unjust enrichment are, however, relatively rare. In many cases the law may nod in the direction of the quality of the plaintiff’s consent but leave the consequences to be regulated by the law of unjust enrichment. The law of contract, for example, grants limited recognition of the effects of mistake by allowing the parties to avoid their obligations. It does not, however, provide for restoration of the status quo ante. These instances do, however, serve to highlight the wider issue of the inherent subsidiarity of the law of unjust enrichment. Since the province of the law of unjust enrichment is defined by an outwardly effective consent to a transfer of wealth, which consent is nevertheless vitiated at the subjective level, the role of unjust enrichment is to respond to that defect and to reverse the transfer of wealth. That response, however, is called for only where, but for the intervention of the law of unjust enrichment, the defendant would be able to retain the enrichment. It follows that, if at the moment of transfer, the law or the parties have already provided for restoration in the event of the plaintiff’s subjective consent being defective, the conditions which would otherwise call unjust enrichment into play do not arise. In such cases, the presence of a mechanism to restore the status quo ante, which encumbers the enrichment, denies the possibility both that the defendant is enriched and that such enrichment is unjust. There can be no enrichment because the defendant receives no right to it and can be compelled to return it. The receipt is not unjust because, in being compellable to restore the value inherent in the enrichment, the defendant ‘buys’ an entitlement, in much the same way as a converter does, to what he has received.

Professor Birks has suggested that, notwithstanding the presence of some other right to restoration, the law of unjust enrichment will be available by way of an alternative analysis. That is, even though the plaintiff has a right which will effect restoration, the law will or should recognise unjust enrichment as an alternative basis for restoration. In some cases this may no doubt be so. However, where the mechanism for restoration provided outside of unjust enrichment arises at or before the moment of transfer, there

[page 71] can be no alternative analysis. The defendant’s receipt is already encumbered with a right to recover the enrichment. That right not only provides a more than sufficient means of restoration, but also leaves no room for unjust enrichment. The possibility of the defendant retaining wealth that, ex aequo et bono, he should not, is already precluded.

Notes and questions 1. Is there a natural hierarchy among the law of contract, tort, property and unjust enrichment, or are all equal in terms of value? 2. The authors were cited with approval by Gummow J in Roxborough, but their approach to the relationship between unjust enrichment and other fields of private law comprises a number of distinct propositions and it is unclear which (if any) of them was judicially supported. In fact, some have suggested that Roxborough is wholly incompatible with the ‘subsidiarity’ of unjust enrichment to contract, because it allowed recovery even though a valid contract existed between the parties (see above). Do

you agree? 3. The authors’ first proposition (contained in the idea that it is ‘supplementary’ or ‘modificatory’ of other legal principles) is that unjust enrichment law is, by virtue of its own doctrine, only triggered where there has been a transaction which contract and property law have prima facie held to be effective. This is because the inner logic of unjust enrichment claims is to reverse apparently effective transfers of value. (If there has not been a transfer which property and contract law rules recognise as valid, there is nothing for unjust enrichment law to ‘reverse’.) But is this actually the inner logic of such claims? For one thing, is restitution actually simply about reversing transfers? Think about the following example: A is forced to discharge a debt which B owed to C. Or consider this one: B forces A at gun-point to transport his goods from Sydney to Melbourne. Does restitution from B in either of these circumstances really ‘modify’ an otherwise effective transfer from A to B? Also, assuming a defendant has been enriched, why would the validity of a transfer from the point of view of one set of legal principles (contract/property) make it more likely that another set (unjust enrichment rules) would reverse it? Would it not actually seem to make this less likely (on the basis that it seems contradictory)? Finally, isn’t the idea that unjust enrichment is merely ‘modificatory’ of contract and property law in tension with the idea that its own doctrine is ‘independent’? 4. A second proposition (‘weak subsidiarity’) is that unjust enrichment law cannot operate if restitution is already available under a distinct principle of law. This contradicts

the general principle of concurrency of actions in AngloAustralian law, which allows more than one cause of action to be triggered by the same set of facts, though a plaintiff may then be forced to elect which it wishes to pursue if they are inconsistent, or if their combination will lead to double recovery. Note that the authors’ proposition is said not to be based on any policy prioritisation, but on the internal logic of unjust enrichment claims, which simply prevents rights arising whenever another (distinct) right of recovery is already present. Is this convincing? Does the fact that a claimant already has another legal right of recovery really logically preclude a claim based on unjust enrichment, or is this actually a disguised policy choice? Would not everything then turn on which cause of action (unjust enrichment or other) happened to arise first? On concurrency generally, see A Burrows, ‘Solving the Problem of Concurrent Liability’ in A Burrows (ed), Understanding the Law of Obligations (Hart, Oxford, 1998), Ch 2. For an argument in favour of full concurrency of actions as between contract and unjust enrichment, see S Smith, ‘Concurrent Liability in Contract and Unjust Enrichment: The Fundamental Breach Requirement’ (1999) 115 LQR 245. 5. The third proposition (‘strong subsidiarity’) is that unjust enrichment claims are precluded where the principles of another area of law logically apply, but offer no remedy. This proposition [page 72]

is on firmer ground. There is clear evidence, for example, that courts have in the past regarded the existence of a valid contractual regime as ousting the possibility of restitution. Nonetheless, even the idea of strong subsidiarity has to be qualified, because the absence of a remedy in contract, property or tort on a set of facts to which those fields logically apply could actually indicate one of two things. It could either be deliberate (in which case, allowing an unjust enrichment claim is clearly likely to frustrate a conscious legal stance and cause problematic contradictions), or it might simply indicate a genuine ‘gap’ in protection (which would leave open the possibility of an unjust enrichment claim, if the latter’s own logic suggests this is right). Unjust enrichment claims should in principle be excluded in the first type of case, but allowed in the second, although it may sometimes be hard to tell the cases apart. While contracting parties’ intention to exclude restitution should therefore always be respected, there is something to be said for recent academic views, which tend to favour allowing unjust enrichment claims even where there is a valid contractual regime between the parties, provided there is a ‘gap’ in the way the parties have allocated the risk of payment. Might Roxborough be an example of such a case? For a recent example of a case in which an Australian court appears to have been prepared to grant restitution within an existing contractual relationship on the basis that there was a ‘gap’ in the contractual risk allocation, see John Nelson Developments Pty Ltd v Focus National Developments Pty Ltd [2010] NSWSC 150 (Ward J). See further on the availability of restitution in contractual

‘gaps’, G Meade, ‘Restitution within Contract?’ (1991) 11 LS 172; J Beatson, ‘Restitution and Contract: Non-Comul?’ (2000) 1 Theoretical Inquiries in Law 83; ‘The Temptation of Elegance: Concurrence of Restitutionary and Contractual Claims’ in W Swadling and G Jones (eds), The Search for Principle: Essays in Honour of Lord Goff of Chieveley (OUP, Oxford, 1999), p 142. 6. Do Foskett v McKeown, The Trident Beauty and Lumbers illustrate (a) the ‘supplementary’ nature of unjust enrichment doctrine; (b) its weak ‘subsidiarity’; (c) its strong ‘subsidiarity’; or (d) some completely different proposition? (If so, what proposition?) See on this question A O’Brien, ‘The Relationship Between the Laws of Unjust Enrichment and Contract: Unpacking Lumbers v Cook’ (2011) 32 Adelaide Law Review 83. 7. See further generally on the idea of subsidiarity in civilian and common law jurisdictions, L Smith, ‘Property, Subsidiarity and Unjust Enrichment’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (CUP, Cambridge, 2002), p 588.

1. 2.

3.

Nicomachean Ethics, Book V, Ch IV.

For a recent account of private law that sets out to provide a moral explanation of the rights and wrongs, the infringement of which corrective justice corrects, see A Ripstein, Private Wrongs (Harvard University Press, Cambridge, Mass, 2016). E Weinrib, The Idea of Private Law (Harvard University Press, Cambridge, Mass, 1995). See also E Weinrib, Corrective Justice (OUP, Oxford, 2012), esp. Chs 4 (‘Gain-

4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

16. 17.

Based Damages’) and 6 (‘Unjust Enrichment’). A Beever and C Rickett, ‘Interpretive Legal Theory and the Academic Lawyer’ (2005) 68 MLR 320. Nicomachean Ethics, Book V, Ch VIII. Nicomachean Ethics, Book V, Chs III, IV. Weinrib, The Idea of Private Law, pp 140–2. See, for example, S Smith, ‘Justifying the Law of Unjust Enrichment’ (2001) 79 Texas Law Rev 2177, pp 2193–4. Weinrib, Corrective Justice, pp 203–17; and see note 2 to 2.11E. Klimchuk, ‘The Normative Foundations of Unjust Enrichment’, pp 87–8. See 15.40C–15.42C. P Cane, ‘Distributive Justice and Tort Law’ [2001] 4 NZ Law Rev 401. K Barker, ‘Theorising Unjust Enrichment Law: Being Realist(ic)’ (2006) 26 OJLS 609, pp 620–1. See further Barker at 2.31E. E McKendrick, ‘Taxonomy: Does it Matter?’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment – Key Issues in Comparative Perspective (Cambridge University Press, Cambridge, 2002), p 627. V Villa, La Science du Droit (Story/LGDG, 1990; trans O Nerhot and P Nerhot), p 84. See, for example, C Wonnell, ‘Replacing the Unitary Principle of Unjust Enrichment’ (1996) 45 Emory Law Journal 153; J Dietrich, Restitution — A New Perspective (Federation Press, Annandale, 1998); I Jackman, The Varieties of Restitution (2nd ed, Federation Press, Annandale, 2017); P Jaffey, The Nature and Scope of Restitution (Hart, Oxford, 2000); S Hedley, Restitution: Its Division and

Ordering (Sweet & Maxwell, London, 2001); H Dagan, The Law and Ethics of Restitution (Cambridge University Press,

18. 19.

20.

21. 22. 23. 24.

25. 26. 27. 28.

Cambridge, 2004). J Edelman, ‘A Principled Approach to Unauthorised Receipt of Trust Property’ (2006) 122 LQR 174, pp 177–8. Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 at [150]. The view that restitution for wrongs is distinct from restitution for unjust enrichment is also supported by Lord Nicholls in Sempra Metals Ltd v Her Majesty’s Commissioners of Inland Revenue [2007] UKHL 34 at [116]. Rights in things are usually conceptualised as a bundle of rights between persons in respect of the thing. The greatest bundle is referred to as ownership, but it can be broken up or restructured in a number of ways. P Birks, ‘Property and Unjust Enrichment: Categorical Truths’ [1997] NZ Law Rev 623. See, for example, those property rights that respond to proprietary estoppels. For example, the ‘remedial constructive trust’: 15.40C–15.42C. R Grantham and C Rickett, ‘Property as a Legal Event’ [2003] CLJ 717; G Virgo, The Principles of the Law of Restitution (3rd ed, OUP, Oxford, 2015), Chs 21, 22. Knowing receipt is currently the exception. See 6.14C. See 15.3. P Birks, ‘Property, Unjust Enrichment, and Tracing’ (2001) 54 CLP 231, pp 249–51. On the broad conception of the category of unjust enrichment identified at 2.28E, cases in which wrongdoing defendants are held liable for profit made through interfering with property are themselves

29.

30.

members of the unjust enrichment genus. The first two arguments are strongly connected, but for the second, see W Swadling, ‘A Claim in Restitution’ [1996] LMCLQ 63. For example, Germany. See L Smith, ‘Property, Subsidiarity and Unjust Enrichment’ in D Johnston and R Zimmermann (eds), Unjustified Enrichment: Key Issues in Comparative Perspective (CUP, Cambridge, 2002), Ch 21, pp 591–6.

[page 73]

3

The elements of an unjust enrichment claim CHAPTER SUMMARY

Introduction Benefit A broad conception Restatement of Restitution (1st) Positive and negative Peel (Regional Municipality) v Canada

Legal and factual A Lodder, Enrichment in The Law of Unjust

3.1 3.5 3.7E 3.7E 3.8 3.9C 3.10

Enrichment and Restitution 3.11E Portman Building Society v Hamlyn Taylor Neck (a firm) 3.12C Port of Brisbane Corporation v ANZ Securities Limited (No 2) 3.13C

Examples of types of benefit 3.14 J Beatson, ‘Benefit, Reliance and the Structure of Unjust Enrichment’ 3.17C N Dearle, Economics: An Introduction for the Student and for Everyman 3.18E Brenner v First Artists’ Management Pty Ltd 3.19C Ford (by his tutor Watkinson) v Perpetual Trustees Victoria Ltd

3.21C

Birks, Unjust Enrichment Sempra Metals Limited v HM Inland Revenue Commissioners

Objectivity, subjectivity and freedom of choice P Birks, An Introduction to the Law of Restitution Legal ‘tests’ of benefit Planché v Colburn

R Goff and G Jones, The Law of Restitution Brenner v First Artists’ Management Pty Ltd

3.23E 3.25C 3.26 3.29E 3.31 3.34C 3.36E 3.37C [page 74]

Lumbers v W Cook Builders Pty Ltd (in liq) Peel (Regional Municipality) v Canada McDonald v Coys of Kensington

Valuing the benefit Sempra Metals Limited v HM Inland Revenue Commissioners Benedetti v Sawiris

3.38C 3.42C 3.43C 3.44 3.45C 3.46C

K Barker, ‘Riddles, Remedies and Restitution: Quantifying Gain in Unjust Enrichment Law’ 3.47E Unjust 3.48 A recognised reason for restitution 3.48 Moses v Macferlan 3.50C Defendant has no right to the benefit 3.51 At the Plaintiff’s Expense 3.54 The minimum requirement: causation and the ‘but for’ test 3.55 Recovery from indirect recipients: ‘leapfrogging’ 3.58 P Birks, ‘At the Expense of the Claimant: Direct and Indirect Enrichment in English Law’

3.60E 3.61C

Menelaou v Bank of Cyprus UK Ltd Commissioners for Her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq) 3.62C

Claims in respect of assets never owned: interceptive subtraction Birks, Unjust Enrichment Huntley Management Ltd v Australian Olives Ltd

3.63 3.64E 3.65C

INTRODUCTION 3.1 There is danger, to which we alluded in Chapter 1, in thinking of unjust enrichment as ‘a’ claim giving rise to restitution. Deane J made it clear (see 1.21C) that it does not state ‘a’ claim as such, in the sense of describing a single event or ‘cause of action’ which can be pleaded in its own terms so as to give rise to restitutionary relief, any more than ‘tort’ describes ‘a’ claim. Rather, the idea operates at a higher conceptual level, grouping a variety of different gain-based claims, the details of which must always be spelled out in detailed, concrete terms and pleaded accordingly. Nevertheless, to establish any of these claims, three general preconditions must be met. These can be regarded as analytical ‘elements’ of an unjust enrichment claim. These ‘elements’ are not definitive legal ‘tests’, but provide ‘broad headings’, or ‘signposts toward areas of inquiry’, which

structure the resolution of claims in accordance with more detailed rules.1 First (and by definition), the defendant must have received a benefit. Secondly, the benefit must be ‘unjust’ in a defined, legal sense. That is, there must be a specific reason recognised at law or in equity for the plaintiff claiming it and the defendant must have no valid legal right2 to keep it. Thirdly, the benefit must have been received ‘at the plaintiff’s expense’ either in the sense that it was ‘subtracted from’3 the plaintiff’s assets, or in the sense that it was obtained through the infringement of his or her legal rights.4 3.2 While each of these elements can give rise to complication, the third is the most difficult to pin down. At its most basic level, it expresses a minimum requirement that there be a [page 75] causal connection between a defendant’s gain and any injustice that has been done to the plaintiff. Causation is a familiar requirement in private law actions in contract and tort, linking plaintiff and defendant in the crucial way which justifies allowing the one to make a monetary claim against the other. It is also required in unjust enrichment law, albeit that the search is for a connection between an injustice and the defendant’s gain, not, as is standardly the case in contract and tort, for a connection between an injustice and the plaintiff’s loss. In straightforward two-party cases like the mistaken payment case, this causal link is usually easy to

establish, but in more complex cases in which benefits have found their way to the defendant through the hands of a third party, or a bank clearing system, tracing rules will sometimes be needed to help establish the link between the defendant’s benefit and some entitlement that the plaintiff has lost. Similarly, in cases in which the defendant has gained by committing a wrong against the plaintiff (for example, by using her patent or copyright to develop a business), there can be difficult questions as to whether the profits of the defendant’s business are causally attributable in their entirety to her wrongful infringement of the plaintiff’s rights, or due to her own business acumen and resources. 3.3 The requirement that the defendant’s gain be ‘at the plaintiff’s expense’ is also used, however, to deal with two entirely distinct questions of policy and principle that have nothing to do with whether or not the defendants’ gain is causally related to the injustice a plaintiff has suffered. The first of these (see 3.58) is the question whether plaintiffs may reach beyond the immediate recipient of a benefit to claim against other, remoter parties who may have benefitted from the same transaction. This is sometimes referred to as the question whether the plaintiff is entitled to ‘leapfrog’ over the immediate recipient of a benefit to claim against a remoter defendant. The answer currently given by the law is ‘generally not’. The second question is whether a plaintiff can sue a defendant for benefitting by money or other property which the plaintiff never actually owned, but which the defendant ‘intercepted’ before such ownership could be acquired (see 3.63). In such cases, the issue is whether the plaintiff is an appropriate person to sue for the gain, given

that she never originally owned that which the defendant acquired. The answer given is again ‘generally not’. 3.4 It should be noted that in some other civilian and mixed jurisdictions, such as Canada, the requirement that a defendant’s unjust gain be made ‘at the expense’ of a plaintiff has been taken to stand for yet another and more radical limitation — namely, that the plaintiff can claim only if she has suffered a loss (deprivation) which ‘corresponds’ in amount to the gain the defendant has made.5 This effectively places a ‘cap’ on restitutionary claims, limiting them to the amount of a plaintiff’s provable loss. A logical consequence of this requirement is that the claim will fail if the plaintiff has ‘passed on’ that loss to another person.6 In England and Australia, this more radical proposition has been rejected. Provided the defendant’s gain was either made by subtraction from assets originally belonging to the plaintiff, or by infringing his or her rights, the plaintiff is entitled to claim the gain even if its final value exceeds the plaintiff’s provable factual loss.

BENEFIT 3.5 The first requirement is often framed in terms of ‘enrichment’ rather than ‘benefit’. There is nothing wrong in this, but the latter term is preferred for two reasons. First, the term ‘enrichment’ conjures up the mental image of a positive accretion to the wealth of a defendant, whereas the cases are clear that she can equally well gain negatively, by being saved an expense or by being relieved of a legal duty or liability. Both logic and economics tell us that a dollar

[page 76] saved is as good as a dollar made and the law respects that logic. Secondly, the term carries with it residual implications of tangibility, whereas some benefits are strikingly intangible. Shares, bonds, options and futures add to the stock of our economic wealth, yet consist in nothing other than abstract rights exercisable against particular persons at particular times. Although we may think of bank notes in physical terms, they actually provide another example. I benefit from a ten-dollar note not because the paper is worth anything in itself (though it may of course have a nominal value), but because it gives me an enforceable, abstract right to its face value, exigible against the issuing bank. There is, indeed, increasing recognition in the law of unjust enrichment that rights are themselves valuable assets in respect of which restitution can be ordered.7 There is also a substantial body of authority to the effect that services can be beneficial, even where they yield no tangible end-product or commodity.8 3.6 The benefit requirement is central to all genuine unjust enrichment claims. We start with a broad general statement of the concept. The extracts which follow then address a number of key debates which serve to more carefully define its scope. When you have read the chapter, return to the general statement and refine it appropriately.

A broad conception 3.7E

Restatement of Restitution (1st)

American Law Institute, St Paul, Minnesota, 1937, Comment b to § 1 b. What Constitutes a Benefit. A person confers a benefit upon another if he gives to the other possession of or some interest in money, land, chattels, or choses in action, performs services beneficial to or at the request of the other, satisfies a debt or a duty of the other, or in any way adds to the other’s security or advantage. He confers a benefit not only where he adds to the property of another, but also where he saves the other from expense or loss. The word ‘benefit’ therefore denotes any form of advantage. The advantage for which a person ordinarily must pay is pecuniary advantage; it is not, however, necessarily so limited, as where a physician attends an insensible person who is saved subsequent pain or who receives thereby a greater chance of living.

Notes and questions 1. The above approach discloses a very broad conception of benefit as ‘any advantage’. It reflects the view that, as a matter of both justice and economics, the categories of ‘benefit’ cannot logically be closed (see Phillips v Homfray (1883) 24 Ch D 439 at 471–2 (Baggalay LJ) (dissenting)). 2. From what standpoint is an ‘advantage’ to be judged — that of the plaintiff, the defendant, or the market? See further 3.26. 3. Does a defendant benefit by receiving something that still belongs to the plaintiff? Is the benefit question to be approached legally or factually? See 3.10 and 3.22–3.23E. 4. The most recent Restatement of Restitution and Unjust Enrichment (Third) also provides a broad definition of benefit, but differs slightly from that in the First

Restatement, above. Comment (d) to § 1 hence now states: ‘Restitution is concerned with the receipt of benefits that yield a measureable increase in the recipient’s wealth. Subject to that limitation, the benefit may take any form, direct or indirect. It may consist of services as well as property. A saved expenditure or discharged obligation is no less beneficial to a defendant than a direct transfer.’ Is this definition wide enough to cover the example of the treatment [page 77] received by the insensible patient in the First Restatement? Do such acts increase a patient’s wealth? See further 3.16 on the question whether there are ‘benefits’ that are not ‘wealth’ in the strictly economic sense.

Positive and negative 3.8 The discharge of a defendant’s debts, or the performance of her contractual obligations is just as valuable as her receipt of property, or rights. 3.9C Peel (Regional Municipality) v Canada [1992] 3 SCR 762 at 790 (SCCan) McLachlin J: Since the establishment of … a benefit is essential for recovery under any of the traditional categories, as well as under the general test for recovery which this Court has adopted, the remainder of these reasons focus on that concept. To date, the cases have recognised two types of benefit. The most common

case involves the positive conferral of a benefit upon the defendant, for example the payment of money. But a benefit may also be ‘negative’ in the sense that the benefit conferred upon the defendant is that he or she was spared an expense which he or she would have been required to undertake, ie the discharge of a legal liability.

Notes and questions 1. In Phillips v Homfray (1883) 24 Ch D 439 (Eng CA), the actionability of negative gains was thought controversial and the case has sometimes been thought to stand against it. But that interpretation has been convincingly challenged: W Swadling, ‘The Myth of Phillips v Homfray’ in W Swadling and G Jones (eds), The Search for Principle: Essays in Honour of Lord Goff of Chieveley (Clarendon, Oxford, 1999), p 277. Note also that the same (albeit differently constituted) court subsequently granted restitution in a variety of cases involving discharged debts (Brookes Wharf and Bull Wharf Ltd v Goodman Brothers [1937] 1 KB 534) and savings in rental expenditure (Ministry of Defence v Ashman (1993) 66 P&CR 195). More recently still, the House of Lords held that a mistaken payer of money is entitled to compound interest on the sum paid, even where the payee never actually earns any interest through investment of the sum: Sempra Metals Limited v Inland Revenue Commissioners [2007] UKHL 34 (extracted at 3.25C). The interest component of the award was rationalised as the ‘use value’ of the money to the recipient and therefore as a form of enrichment. This is a further example of a defendant benefitting negatively by being saved the expense of borrowing.

2. For a narrow conception of ‘benefit’ as positive accretion to wealth, see G Muir, ‘Unjust Sacrifice and the Officious Intervener’ in P D Finn (ed), Essays on Restitution (Law Book Co, Sydney, 1990), p 297.

Legal and factual 3.10 The question of benefit can be approached from either a factual or a legal point of view. The legal point of view focuses on whether a defendant has received some beneficial entitlement (a right), or has been released from a legal duty, or liability. The factual approach focuses on whether or not, as a matter of fact, the defendant is better off after the relevant transaction than she was beforehand. 3.11E

A Lodder, Enrichment in The Law of Unjust

Enrichment and Restitution

Hart, Oxford, 2012, pp 1–2 [A] defendant’s enrichment can be characterised in two different ways — factually, in terms of economic value, and legally, in terms of rights and obligations … [T]his theoretical bifurcation has important (continued)

[page 78] substantive implications for determining when a defendant is enriched and, accordingly, the form restitution will take. The division of enrichment into factual and legal enrichment challenges the prevailing orthodoxy in a fundamental way. It shows that enrichment is not a unitary element satisfied by a single test;

rather, the same benefit may be understood in two different ways: (i) by the value of the benefit received (‘factual enrichment’); or (ii) by the change in the legal relations of the defendant effected by the acquisition of a right or the release of an obligation (‘legal enrichment’). For instance, the transfer of title to a car may be characterised factually — as the receipt of the value of the title to the car — or legally — by the change in the defendant’s rights and obligations … . The recognition of two kinds of enrichment reveals the connection between enrichment and the nature of the claim for restitution of an unjust enrichment. Rather than asking whether the defendant is enriched and then determining whether restitution should be monetary or proprietary, it is necessary to ascertain whether the claimant is asserting: (i) (ii)

that the defendant is enriched by the value of the benefit received and seeks monetary restitution of that value; or that the defendant is enriched by the acquisition of a right (or release of an obligation) at the claimant’s expense and seeks specific restitution of that right (or reinstatement of that obligation) in law.

Notes and questions 1. The examples in the next section suggest that Lodder is correct in his view that both legal and factual benefits can count in unjust enrichment law. He builds on the work of R Chambers, ‘Two Kinds of Enrichment’ in R Chambers, C Mitchell and J Penner (eds), Philosophical Foundations of the Law of Unjust Enrichment (OUP, Oxford, 2009), Ch 9. The same view is taken by J Edelman and E Bant, Unjust Enrichment (2nd ed, Hart, Oxford, 2016), pp 54–62. For examples of ‘legal benefits’, see Restatement of Restitution (1st) (American Law Institute, St Paul, Minnesota, 1937) and the cases involving rescission of rights, considered at

2.

3.

4. 5.

15.46–15.53C. For examples of factual benefits, consider cases involving the receipt of ‘pure’ services, such as Brenner v First Artists’ Management Pty Ltd, extracted at 3.19C. Lodder says (p 10) that the receipt of economic value is to be contrasted with the receipt of rights. Is this correct, or are rights simply another type of economic ‘value’? A consequence of regarding rights as a type of benefit distinct from value is that a defendant can be enriched and liable to make restitution, even when the rights he or she has received have no value. As Chambers puts it (‘Two Kinds of Enrichment’, p 243), ‘there can be worthless enrichment.’ Is this not an oxymoron? How can one explain the restitution of ‘worthless’ rights on an unjust ‘enrichment’ analysis? If legal rights are benefits, do all such rights count? What limits are there? Must the rights be transferable? Lodder’s bifurcated approach to the benefit question has additional repercussions when it comes to the fifth analytical question in unjust enrichment law concerning whether or not a plaintiff is entitled to a proprietary remedy, or only a personal one. Courts in Australia currently regard this as a matter that is at the discretion the court, at least in certain cases. On Lodder’s view, however, there is no choice for the court to exercise. What the plaintiff gets depends simply on what kind of benefit the plaintiff claims — rights, or value. Does this reflect the current law? See further Chapter 15.

3.12C firm)

Portman Building Society v Hamlyn Taylor Neck (a

[1998] 4 All ER 202 at 206 (Eng CA) The plaintiff building society loaned £92,100 to a borrower to enable him to purchase a property by the sea. The loan was secured by a mortgage on the property and subject to the condition [page 79] that the latter was to be used for residential purposes only. In fact, the borrower intended to use the property as a guesthouse. The defendant firm of solicitors acted for the borrower in the house purchase and also for the plaintiff in the matter of the loan. It received the loan money from the plaintiff into its client trust account and then paid it on to the vendor’s solicitors to complete the house purchase. The plaintiff subsequently sought restitution of the money advanced from the defendant on the basis that it had been mistaken as to the purpose to which the property was to be put. The Court of Appeal dismissed the claim, one of the grounds being that the defendant firm had not been enriched. Millett LJ: But a person cannot be unjustly enriched if he has not been enriched at all. … In the present case the firm was not enriched by the receipt of the £92,100. The money was trust money, which belonged in equity to the society and was properly paid by the firm into its client account. The firm never made any claim to the money. It acknowledged that it was the society’s money, held to the order of the society, and it was applied in accordance with the society’s instructions in exchange for a mortgage in favour of the society. The firm did not receive the

money for its own use and benefit, but to the society’s use.

Notes and questions 1. Is this a case in which the defendant was neither legally, nor factually enriched? Where a trustee holds legal title to money on behalf of another party, why is he or she unlikely to benefit from either a legal, or a factual point of view? 2. Note that even if the defendant had been regarded as enriched, it would still have had a defence, having acted as the plaintiff’s agent and paid away the money at the plaintiff’s order under a valid, unrevoked mandate. The validity of the unrevoked mandate between plaintiff and defendant precluded restitution. 3. A fraudster sets up a bank account in your name without your knowledge and induces a third party to pay money into it. Are you enriched? If not, why not? See Perpetual Trustee Co Ltd v El-Bayeh [2010] NSWSC 1487. 3.13C

Port of Brisbane Corporation v ANZ Securities Limited (No 2)

[2003] 2 Qd R 661 at 670, 677 (QCA) A thief stole $4.5 million from the plaintiff Port Corporation and paid it to the defendant, a firm of stockbrokers, for the account of a company (Windermere), of which he was the director. The defendant invested the money in accordance with the company’s instructions and then paid all the proceeds away in good faith to accounts overseas. The plaintiff sought restitution of the money from the defendant in an action for money had and

received and/or under a resulting trust. The Court of Appeal rejected both claims. McPherson JA: If these statements of their Lordships in Lipkin Gorman are applied literally, it is not altogether easy to see that the Port Corporation succeeded in establishing an essential element in its cause of action. On each of the dates referred to, ANZ Securities neither retained money to which the Port Corporation had title; nor (except perhaps to the extent that it had benefited from receiving commissions on stockbroking transactions conducted for Windermere) can it be said to have been or to have remained enriched, unjustly or otherwise, by receipt of money to which the Port Corporation was entitled. Having received and dealt with the money throughout, not beneficially, but as trustee for Windermere, ANZ Securities was never enriched by its receipt. Perhaps because of the common law origins of the action for restitution, trusts and beneficial ownership are, despite the Judicature Act, to be disregarded here. … … In my opinion, the Port Corporation’s claim against ANZ Securities cannot be sustained on the basis of restitution, whether that is because ANZ Securities has not itself been enriched by receiving in good faith the benefit of the proceeds of the Port Corporation’s cheque for $4.5 million; or because, having received that sum in good faith, it has on the faith of its receipt acted to its detriment by paying (continued)

[page 80] out the proceeds pursuant to Windermere’s instructions. It follows that, in my respectful opinion, the Port Corporation’s restitutionary claim against ANZ Securities ought to have been dismissed.

Notes and questions 1. Did the claim fail for lack of benefit or because the defendant had a good defence? 2. At first instance, Chesterman J had held ([2001] QSC 466 at [28]) that the defendant was enriched, even though it was only a trustee of the money, because the money was ‘in its account, if not its pocket’. Otherwise, he said, if the money had still been in the account, it would have been irrecoverable by the plaintiff. Is this right? 3. On the reasons why claims against agents or trustees fail, see R Stevens, ‘Why Do Agents Drop Out?’ [2005] LMCLQ 101. Contrast Edelman and Bant, Unjust Enrichment (2nd ed), pp 78–80, who suggest that the problem in claiming restitution from such parties (which is acknowledged) has nothing to do with the defendant not being ‘legally’ enriched, but rather with whether or not he or she chose to accept the benefit as a principal, rather than as an agent for someone else.

Examples of types of benefit 3.14 The categories of benefit are never closed, but the following provide examples of the most common types of benefit that have been recognised in the case law. The important question of what methodological approach is to be taken in identifying or valuing a benefit is discussed at 3.26 and 3.44. Money

3.15 The most common restitutionary claims are for money that a defendant has received. This is unsurprising, since money is the ‘very measure’ of value in most societies and therefore always a benefit to any defendant that uses it. A more difficult question, considered at 3.24, is whether the mere opportunity to use money is a benefit. Services and ‘non-wealth’ benefits 3.16 It is clear from the old forms of action that restitution was always available in respect of services provided, just as it was in respect of money or goods. One remaining controversy focuses on cases involving ‘pure’ services (for example, advice, or transportation services) that result in no marketable end-product. Do such services constitute or increase ‘economic wealth’? Is it necessary for a benefit to consist in ‘wealth’? 3.17C J Beatson, ‘Benefit, Reliance and the Structure of Unjust Enrichment’ (1987) 40 CLP 71, p 74 (some references omitted) If exchange-value, transferability and capacity to produce income are the hallmarks of wealth it is difficult to see how pure services qualify, at any rate when one is asking whether they are wealth in the hands of the recipient. Services may be the source of wealth [Locke, Two Treatises of Government (Laslett ed, CUP 1960) p 306, 314 (Second Treatise, Chap V, paras 27, 40)] or they may be its product. Services may be a source of wealth where they result in an endproduct or an improvement to property, as where a tailor makes a suit or a builder constructs a house. Services may also be the product of wealth; in the above examples the services are products of the skills constituting the human capital of the tailor and the

builder. These are very different items of wealth from that which may result from the service. A service can be the product but not the source of wealth as where a physician treats a patient or a lawyer advises a client without success. The right to a service may in some sense be a form of wealth, although the non-assignability of rights to personal services means that even this proposition requires qualification. But the service itself does not fit comfortably into this notion of wealth; it ceases to exist when it has

[page 81] been rendered and cannot be exchanged, transferred or turned to account in any other way. According to Alfred Marshall, ‘services and other goods, which pass out of existence in the same instant that they come into it, are of course, not part of the stock of wealth.’ [Principles of Political Economy (8th ed, 1947) p 56]

3.18E

N Dearle, Economics: An Introduction for the

Student and for Everyman

Longmans, London, 1939, pp 58–9 (references omitted) It is generally agreed that all the utilities which are the result of economic effort are the concern of economists; but it is not agreed whether all of them should be treated as wealth, and, if not, which classes shall be excluded. At first sight, it would seem that all such utilities, whether material or not, ought to rank as wealth. For all possess the qualities of utility and scarcity; and even when they cannot be physically transferred, as in the case of many services, they are exchangeable, and the right to use or enjoy them can be bought, sold, or given away. In consequence modern economists tend increasingly to adopt wide definitions of wealth. ‘Economic wealth is anything which satisfies, directly or indirectly, a human want and is not unlimited in

quantity.’ [H Clay, Economics for the General Reader] Or, again, ‘wealth may be defined as consisting of all potentially exchangeable means of satisfying human needs,’ [JN Keynes, Scope and Method of Political Economy] and includes material commodities and personal services as well as rights to hold, use and enjoy them. …

Notes and questions 1. Do Beatson’s and Dearle’s definitions of wealth differ? If so, which is preferable? 2. In Attorney-General v Blake [2001] 1 AC 268 (UKHL) at 296, Lord Hobhouse described restitution as ‘concern[ing] wealth or advantage which ought to be returned or transferred by the defendant to the plaintiff.’ Should unjust enrichment law be concerned only with ‘wealth’ or more broadly with ‘benefits’ and ‘advantages’? What is the difference? 3. In Beatson’s view, ‘pure’ services (those which have no marketable end-product, as where goods are transported from A to B, or music played) entail losses to P, but no benefit to D. This is because, in the ordinary case, they neither create, nor preserve, wealth. Do you agree? See contra, P Birks, ‘In Defence of Free Acceptance’ in A Burrows (ed), Essays in the Law of Restitution (Clarendon, Oxford, 1991), Ch 5, pp 132–4; BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783 at 801–2 per Goff J. 4. One view is that ‘pure’ services do not count because they are not ‘restorable’: R Grantham and C Rickett, Enrichment and Restitution in New Zealand (Hart, Oxford, 2000), p 61. I cannot, for example ‘un-mow’ your lawn. This is clearly true, but should it matter? Is restitution about literal ‘restoration’ of that which has been obtained

from another, or about liability to account for its value? 5. Two alternative explanations for services cases are sometimes given. One is that they are examples of ‘unjust sacrifice’ (for which read ‘unjust loss’): S Stoljar, ‘Unjust Enrichment and Unjust Sacrifice’ (1987) 50 MLR 603, pp 611–13; G Muir, ‘Unjust Sacrifice and the Officious Intervener’ in Finn (ed), Essays on Restitution, p 297; E Pegoraro, ‘Recovery of Benefits Conferred Pursuant to Failed Anticipated Contracts: Unjust Enrichment, Equitable Estoppel or Unjust Sacrifice?’ (1995) 23 ABLR 117. The reasons why a loss should be regarded as ‘unjust’ when it has not been caused by a tort, breach of contract or other recognised legal or equitable wrong remain obscure, however, and this solution has not found judicial favour. A more popular explanation of services cases is that they are genuine extensions of the law of contract, involving implied (non-contractual) promises to pay. See, for example, I Jackman, The Varieties of Restitution (2nd ed, Federation Press, Sydney, 2017), pp 7, 104–43. Is either of these explanations attractive? Can they explain the case of Brenner (3.19C)? [page 82] 6. A tailor makes a suit to order. Is the benefit the suit (the end-product) or the value of the service? Does it matter? For discussion of this type of problem, see BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783. For different solutions, compare and contrast G Virgo, The Principles of the Law of Restitution (3rd ed, OUP, Oxford,

2015), pp 76–7 (the benefit is the suit); K Barker, ‘Riddles, Remedies and Restitution: Quantifying Gain in Unjust Enrichment Law’ (2001) 54 CLP 255, pp 265–6 (it depends whether it is the service or the suit that satisfies the defendant’s desires or needs — so it could be either); Edelman and Bant, Unjust Enrichment (2nd ed), pp 56–7 (it depends on what the defendant asked for and hence chose). 3.19C Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221 at 257–8 (Supreme Court of Victoria) The first defendant was a 1970s pop star set on making a comeback. He engaged the plaintiffs as managers, but on terms that were too vague to constitute binding contracts. The second defendant, First Artists’ Management, was a management company set up to handle the first defendant’s affairs at a later stage. For a period, the first defendant therefore had two sets of management arrangements. The plaintiffs and defendants eventually parted company. The plaintiffs initially brought restitutionary claims against both defendants for the value of management services provided to them, but the second defendant was dissolved in 1992, so that the claims were ultimately brought against the first defendant alone. Some of the services were requested by the first defendant and some by the second. The Supreme Court granted the plaintiffs’ claims in respect of work which the first defendant himself had requested, on the basis that he had accepted them when he knew or ought reasonably to have known that the plaintiffs expected to be paid for them. It rejected the claims for work which only the second

defendant had requested. Byrne J: Counsel for the defendant fastened attention on the essential requirement of benefit. He submitted in respect of many of the services for which payment was sought that they did not confer a benefit upon the defendant. Where a manager attends a meeting with a view to obtaining work for an artist and no work results, he said, the plaintiffs do not demonstrate a benefit. I should state at the outset that I do not accept the two unstated premises in this submission. First, that the failure of the manager to prove that any particular service produced an engagement or other profit or, indeed, some other economic benefit for the artist, means that no benefit was conferred for the purposes of a claim in restitution. It may be that the benefit is something other than a direct consequence of any particular service, as for example the promotion of the artist or advice given to him. Second, that ‘benefit’ for the purpose of the rule of restitution for services must be an economic benefit: the statements of principle in Pavey’s Case are not so limited. The defendant’s submission, however, exposes a difficulty which arises in different ways in this area of law. Where a person pays money to another it is not difficult to see that a benefit has thereby accrued to the recipient. Services present greater difficulty. If the law of restitution is available to oblige the recipient of the benefit of services to make restitution, it must acknowledge that such benefit may take many forms. It seems to me unlikely that the law would introduce into this area the difficult and somewhat arbitrary distinction which has been drawn in the law of negligence between pure economic loss and physical loss. To take an extreme case, it may be of benefit to an artist simply that it be known that a particular person has accepted the role of his or her manager or that the manager by accepting the artist as a client is then precluded from acting for a competitor of the artist. I have referred to non-economic benefits which may be requested, conferred and accepted. I would need clear authority to deny a claimant the right

to restitution for such services when all the other requirements of the cause of action are established. If a landowner requests an architect to prepare a design for a building in circumstances where there is no enforceable contract and the architect undertakes the preparatory work but does not produce any design before the defendant abandons the project, it may be said that no benefit exists which is capable of acceptance. Planché v Colburn (1831) 8 Bing 14; 131 ER 305 is authority against such a conclusion. In my opinion, ‘benefit’ in this context must be seen from the perspective of the recipient who is, after all, the person to be charged. It may be that for some idiosyncratic reason a defendant seeks the performance of work which another would see as without benefit or, indeed, as a positive dis-benefit.

[page 83] Examples of this are given by Goff J in BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, at 803. But where a person requests another to do something, it is not unreasonable for the law to conclude that the former sees some benefit in its performance, however wrong this view may be on an objective basis and for the law to act upon the perception of the recipient.

Notes and questions 1. The benefits which Byrne J identified included general advice, raising the defendant’s artistic profile, ‘oiling the wheels’ of the music industry, maintaining the defendant’s morale and focusing him on the album project in hand. Would any of these qualify as enrichments under Beatson’s approach? 2. For an extra-judicial statement of Byrne J’s analysis of

3.

4.

5.

6.

benefit in services cases, see D Bryne, ‘Benefits For Services Rendered’ in M McInnes (ed), Restitution: Developments in Unjust Enrichment (Lawbook Co, Sydney, 1996), p 87. The rejection of Beatson’s ‘economic’ conception of benefit in Brenner was affirmed by the Supreme Court of Western Australia in ABB v Power Generation [2001] WASC 412 at [20]. For other cases granting restitution for pure services, see Andrew Shelton & Co Pty v Alpha Healthcare Ltd [2002] VSC 248; Cobbe v Yeoman’s Rowe Management Ltd [2008] UKHL 55; Vasco Investment Managers Ltd v Morgan Stanley Australia Ltd [2014] VSC 455. According to Barker, a defendant gains whenever he or she obtains value (defined as personal satisfaction of desires or needs) which is susceptible to monetary valuation. See Barker, (2001) 54 CLP 255, pp 265–6. On this account, pure services can deliver benefits in the form of the advancement of a defendant’s ends, even when there is no end-product. Does this approach explain Brenner? Does it go too far? If personal satisfaction is the essence of benefit, could not a single televised concert benefit everyone who happens to see and like it? What is then to prevent a band mistakenly playing under an invalid contract from recovering from each and every listener? When, if ever, is a service ‘received’ by a defendant? Does it make a difference whether the service is a ‘pure’ one, or one designed to yield an end-product? Byrne J points out an important methodological question regarding whether a benefit is to be judged from the

point of view of the defendant, or other people. Why does it matter? For discussion of this key question, see 3.26. Rights and the discharge of duties/liabilities 3.20 Legal rights have economic value in so far as they can be bought and sold. The discharge of a person’s legal duties or liabilities is equally beneficial and there are consequently many cases in which restitution has been granted to plaintiffs who have been forced, for one reason or another, to pay off a defendant’s debts.9 The following case involves the discharge of a defendant’s contractual responsibilities to a third party, as well as the crediting of his own bank account. Why, on this occasion, was the discharge of his legal liabilities not regarded as a benefit by the court? 3.21C

Ford (by his tutor Watkinson) v Perpetual Trustees Victoria Ltd

[2009] NSWCA 186 at [127]–[128] The defendant, Ford, was illiterate and intellectually impaired. He was manipulated by his son into taking out a loan of $200,000 from the plaintiff, Perpetual, to purchase a cleaning business, but did not understand any aspect of the loan or associated mortgage transactions. (continued)

[page 84] The defendant banked $24,857 to his personal account, but the rest of the loan monies were applied, at his request, directly to the

purchase price of the business, thereby discharging his legal obligations to the vendors. The business failed. The plaintiff was unable to recover the loan monies in contract, because the contract of loan and associated mortgage were void on the basis that the defendant did not understand any of the documents he had signed (non est factum). Perpetual claimed restitution of the money instead, on the basis that it had been paid in the mistaken belief that the loan contract was valid. The court granted restitution of the $24,857 that the defendant had banked in his account (plus interest), but held that he was not liable for the balance of the money that had been used to purchase the business. Allsop P, Young JA (Sackville AJA agreeing): [127] … Mr Ford was a manipulated intermediary with no understanding of any aspect of the overall transaction. In substance, he received no benefit from the loan, beyond the receipt and retention in his account of $24,857. Executory obligations to the [vendors] were discharged with the loaned funds, but … it can be accepted with confidence that Mr Ford did not know what he was signing in relation to the purchase documentation, giving rise to a likely defence of non est factum, or at least a claim under the Contracts Review Act which would have entitled him to a release from such executory obligations. Looking at the matter as one of substance, Mr Ford was the innocent, mentally incapable dupe of his son. Save for the $24,857, in no real or substantive sense did he receive and retain benefits such that it would be unjust for him not to repay the loan. Further, given the success of the plea of non est factum, there was no written request in substance (or in form) by Mr Ford for the loan. All the writing submitted to him and which he allegedly ‘signed’ was the subject of the imposition by his son and, as found correctly by the primary judge, the loan agreement was not signed by Mr Ford. [128] In all these circumstances, as a matter of substance, apart from the $24,857 placed in his account, Mr Ford did not receive the benefit of the funds in circumstances that would make it unjust for

him not to pay to Perpetual the balance of the loan.

Notes and questions 1. Do you agree that the defendant did not benefit by the discharge of his obligations as purchaser of the business? The Court went on to provide other reasons that it said ‘reinforced’ this conclusion. A second reason given (at [130]) was that Perpetual had advanced the monies without making any inquiry into the defendant’s financial position. It could therefore be said to have ‘taken the risk’ of its own mistake and any benefit he received would not be ‘unjust’. A third reason (at [131]) was that allowing restitution would undermine the policy of protecting vulnerable people which underpins the doctrine of non est factum and the invalidity of the contractual loan. Which of these is the best explanation for the result? Would the second and third reasons be consistent with the Court allowing Perpetual’s claim to the $24,857 Ford had actually banked? 2. Is this a case where a person benefitted legally, but not in fact? Or did Ford not even benefit legally? Is it legally possible to discharge the debt of another without his or her informed consent? 3. Another possible explanation of the outcome in this case is that the losses Ford suffered through the subsequent collapse of the business constituted a detrimental change of position extinguishing his prima facie restitutionary liability to pay for the benefit received. This would be a rare example of the defence operating without the need for any proof that the defendant relied on the payment,

similar to the case discussed at 12.9 and 12.43C, where an innocent donee of money has the money stolen from him before he can return it. On this analysis, Ford’s incapacity established beyond doubt that his change of position (the collapse of the business) was not simply a loss sustained in good faith, but one for which he was not even prima facie responsible and which was therefore to be set off against his liability to repay the sum loaned. See further E Bant, ‘Incapacity, Non Est Factum and Unjust Enrichment’ (2009) 33 MULR 368 and K Barker [2010] 18 RLR 103. [page 85] Possession of property 3.22 The possession of property belonging to another without that person’s consent may be wrongful and give rise to a claim by the property owner for loss-based damages.10 The use of another’s property to one’s own ends can also clearly be beneficial and give rise to restitution. Here, we consider whether the mere possession of such property is beneficial for the purposes of a restitutionary claim. Assuming the correctness of the view expressed above that either legal or factual benefits can advance a person’s welfare, this appears to be a viable position and one that is preferable in principle. 3.23E Birks, Unjust Enrichment 2nd ed, Clarendon, Oxford, 2005, p 64

Can it be said that D is enriched by C’s £50 in his wallet or C’s car in his garage? To the layman, D’s position is ambiguous. On the one hand he can see that there is a sense in which D is not enriched, because nothing has been added to his wealth, and on the other there is a robust sense in which he is enriched, since the fact is that he is in control of the asset. English law agrees with the layman that both analyses make sense.

Notes and questions 1. Birks maintains that whether or not D is to be regarded as enriched in the cases discussed depends on the type of claim C chooses to bring. If C is trying to vindicate his title to the car (a pure property claim to the car itself based on continuing title to it), he must renounce any ‘incompatible’ claim that D is enriched by it. His assertion of title ‘passively prevents’ D’s enrichment. On the other hand, if he renounces title, he may have an unjust enrichment claim. Is this approach helpful? Does it make sense that the question whether D is enriched turns upon the type of claim the plaintiff chooses to make? 2. In previous work (see P Birks, ‘On Taking Seriously the Difference between Tracing and Claiming’ (1997) 11 Trust Law Int 2, pp 7–8) Birks suggested that benefit should be judged factually and that ‘technical’ arguments about the passage of legal title should be disregarded. This more practical approach is now taken by Edelman and Bant, who argue that D’s adverse possession, while bringing with it no legal title that is good against C, nonetheless provides D with a valuable factual opportunity to use the car, or sell possession of it to a third person: Unjust Enrichment (2nd ed), pp 58–9. There is also some support

for the factual approach in the case law: see Gold v Rosenberg [1997] 3 SCR 767 (SCC) (where a defendant’s ‘receipt’ of trust property was equated not with obtaining legal ownership but with ‘at least physical control’); Citadel Insurance Co v Lloyds Bank Canada [1997] 3 SCR 805 (SCC). Cf contra, Grantham and Rickett, Enrichment and Restitution in New Zealand, pp 61–3; Ilich v R (1987) 162 CLR 110 at 140–1 per Brennan J; National Bank of New Zealand v Waitaki [1999] 2 NZLR 211 at 226 per Thomas J (obiter); Foskett v McKeown [2000] 1 AC 102 (HL). Factual opportunities 3.24 Since the loss of a factual opportunity has been accepted in both contract and tort cases as an actionable form of harm,11 there is a good case for recognising that [page 86] obtaining such an opportunity can also constitute a valuable benefit for the purposes of a restitutionary claim.12 The following case considers whether the mere opportunity to use money constitutes a benefit. On the question of how such a benefit is valued, see the further extracts at 3.45C–3.46C. 3.25C

Sempra Metals Limited v HM Inland Revenue Commissioners

[2007] UKHL 34 at [101]–[103], [231], [241] Sempra prematurely paid advance corporation tax (ACT)

on its dividends to the Inland Revenue, in accordance with provisions which were later found to be in breach of European Union law. Sempra claimed interest on the sums prematurely paid, on the basis that they had been made under a mistake of law. The current appeal concerned the question whether Sempra was entitled to claim compound interest on the sums advanced, or only simple interest, from the date of payment. The House of Lords held by a majority (Lords Hope, Nicholls and Walker) that Sempra was entitled to claim compound interest calculated at the commercial rate that would normally be payable by government to borrow the prematurely paid sum in the market during the relevant period. The minority (Lords Mance and Scott) took the view that the award of interest should reflect only the value of any actual gains realised by the revenue’s use of the money during that time. Lord Nicholls of Birkenhead: [101] Sempra’s claim is that … the Inland Revenue … pay Sempra the value of the benefit the Inland Revenue obtained by having use of the money Sempra paid as ACT. [102] In principle this claim is unanswerable. The benefits transferred by Sempra to the Inland Revenue comprised, in short, (1) the amounts of tax paid to the Inland Revenue and, consequentially, (2) the opportunity for the Inland Revenue, or the Government of which the Inland Revenue is a department, to use this money for the period of prematurity. The Inland Revenue was enriched by the latter head in addition to the former. The payment of ACT was the equivalent of a massive interest free loan. Restitution, if it is to be complete, must encompass both heads. Restitution by the revenue requires (1) repayment of the amounts of tax paid prematurely (this claim became spent once set off occurred) and (2) payment for having the use of the money for the

period of prematurity. [103] In the ordinary course the value of having the use of money, sometimes called the use value or time value of money, is best measured in this restitutionary context by the reasonable cost the defendant would have incurred in borrowing the amount in question for the relevant period. That is the market value of the benefit the defendant acquired by having the use of the money. This means the relevant measure in the present case is the cost the United Kingdom Government would have incurred in borrowing the ACT for the period of prematurity. Like all borrowings in the money market, interest charges calculated in this way would inevitably be calculated on a compound basis. Lord Mance: [231] In my view (and in agreement with my noble and learned friend Lord Scott of Foscote), if any claim to restitution is to be recognised in relation to the use of money had and received, at common law or in equity, it must refer to any actual benefit obtained by the recipient, here the Revenue. The critical point is that Sempra’s restitutionary claims — based on the Revenue’s demand or on Sempra’s own mistake — are not for damages or in respect of any wrong. They are for simple restitution of the unjust enrichment achieved by the Revenue … . The distinction is important. … it is fundamental to restitution for unjust enrichment that any recovery must relate to the actual benefit obtained. … [241] … I consider that Sempra should be able to recover from the revenue an award of interest on a compound basis to reflect any actual benefit which the court may be find to have been made by the revenue on such a basis through its receipt and retention of the ACT payments … .

[page 87]

Notes and questions 1. Lord Hope at [33] agreed with Lord Nicholls that the benefit to the Inland Revenue was to be characterised as ‘the opportunity to turn the money to account.’ Lord Walker agreed that the interest award reflected the defendant’s unjust enrichment by the overpayment, concluding that the Inland Revenue ‘must be supposed to have taken full advantage of its premature receipts’ (at [186]). It is not clear, therefore, whether Lord Walker thought that the benefit was an opportunity to use the money in itself; or that there was to be a presumption that the money had actually been used to yield additional, inpocket gains. 2. Is an opportunity to use money itself a benefit? How do the judgments of Lords Hope and Mance differ on this issue? Which view is preferable? 3. A mistakenly pays B $50. B receives $10 in interest on the sum from his bank. It would have cost B $5 to borrow the money during the relevant period at commercial rates. How much is B liable to repay to A — $50, $60, $65 or some other sum? 4. You mistakenly pay me $50,000. I pay it back 10 days later, having earned no interest on it. I could have borrowed the money from my brother for free. The commercial rate of interest in the market is 10 per cent. Have I benefitted from the receipt of the money and, if so, by how much? See further 3.26 and 3.46C. 5. To date, Australian courts have not rationalised compound interest as a possible remedy for a defendant’s unjust enrichment by the ‘use value’ of money. Should they?

Objectivity, subjectivity and freedom of choice 3.26 On a wholly objective approach, a defendant benefits when she receives something that has market value, or (when there is no ‘market’ as such) where a reasonable person in her position would value it. On a subjective approach, she benefits only where she herself values what she has got. 3.27 The need to respect a defendant’s own preferences and freedom of choice before imposing a duty to make restitution has always been implicit in the language of the old forms of action, which emphasised the need for goods or services to have been ‘requested’ before a defendant could be liable to pay for them.13 Liability to pay for a benefit is not, Lord Justice Bowen famously said, to be ‘forced upon people behind their backs’.14 This respect for a defendant’s freedom of choice is now reflected in the ‘tests’ of enrichment that have been developed by courts, which we examine in the next section. Establishing that the defendant requested the benefit is still regarded as the surest way of establishing his or her enrichment, precisely because (perverse motives aside) a request expresses a desire for that which is requested. 3.28 While all writers and systems accept the importance of respect for this principle of freedom of choice, they currently suggest different ways in which it should be accommodated in unjust enrichment law. The first approach is to regard freedom of choice as relevant both to the question whether the defendant is enriched and to the precise valuation of that enrichment. This allows a defendant to admit that she has received a benefit, but to claim that it is

worth less to her than its market value – a principle known as ‘subjective devaluation’.15 [page 88] The second approach suggests that a defendant’s freedom of choice is relevant only to the question whether she is in fact enriched, not to the valuation of that enrichment. Provided the defendant ‘desired’ or ‘chose’ the benefit, it should therefore be valued objectively, without regard for the defendant’s own preferences, or priorities.16 The third approach suggests that the defendant’s freedom of choice is irrelevant to the benefit question and that it goes instead to the question whether or not it is ‘just’ to impose any liability on her.17 Like the second approach, this analysis leads to an objective analysis of the value of the benefit in cases in which liability is imposed, but takes a very different analytical tack. English law takes the first of these approaches, but Australia is yet to choose between them. In this and the section that follows, we first examine the impact of the argument about freedom of choice upon the question whether a defendant has been enriched and upon courts’ development of ‘tests’ of enrichment. The impact of the argument on the valuation of awards is postponed to 3.44. 3.29E P Birks, An Introduction to the Law of Restitution Clarendon, Oxford, 1989, pp 109–11 Where the defendant received money, it will be impossible on all ordinary facts for him to argue that he was not enriched. For money is the very measure of enrichment. By contrast benefits in kind are

less unequivocally enriching because they are susceptible to an argument which for convenience can be called ‘subjective devaluation’. It is an argument based on the premise that benefits in kind have value to a particular individual only so far as he chooses to give them value. What matters is his choice. The fact that there is a market in the good which is in question, or in other words that other people habitually choose to have it and thus create a demand for it, is irrelevant to the case of the particular individual. He claims the right to dissent from the demand. Market value is not his value. … Suppose I was away and came back to find that my house had been extended. I did not ask for it to be done. For my own reasons, I wanted the house just as it was before. You cannot say that I have been enriched when what I have received is something which I did not choose to have. English law … accept[s] the argument from subjective devaluation. But it looks for its limitations and curbs its excesses.

Notes and questions 1. Which presumptive approach to identifying a benefit — subjective or objective — does Birks favour and why? 2. What are the possible ‘excesses’ to which a wholly subjective approach might be prone? 3. Should the defendant’s freedom of choice be relevant to the question (a) whether she is enriched; (b) by how much she is enriched; (c) to both the fact and the extent of the enrichment; or (d) to the question whether any enrichment received is unjust? Although [page 89]

4.

5.

6.

7.

it is not evident in the above passage, Birks thought freedom of choice was relevant both to whether a person was enriched and to the value of that enrichment. That approach is also taken in the English cases extracted at 3.45C and 3.46C. Some civilian countries (such as France and Italy) take a wholly objective approach to the benefit question. See D Verse, ‘Improvements and Enrichment: A Comparative Analysis’ [1998] RLR 85, pp 87–8. This does not necessarily mean that freedom of choice is ignored in these jurisdictions. In Canada, courts account for the defendant’s freedom of choice in considering whether any objective benefit she obtained is ‘unjust’: Kerr v Baranow [2011] 1 SCR 269. For possible examples of a purely objective approach to benefit in English law, see Greenwood v Bennett [1973] 1 QB 195 (Lord Denning MR) and Planché v Colburn (1831) 8 Bing 14 (although there may be alternative explanations for the outcome in both cases: see further 3.34C, 3.40 and fn 27. A Buddhist hermit lives in a cave in a remote mountain region, living entirely off the land. I put $50.00 cash in his pocket. Does he benefit? Can a person benefit by something that has no objective value, if he himself values it? How would a court assess the value of the benefit in such a case? This question is sometimes framed (in rather awkward terms) as a question of whether or not a defendant can ‘subjectively overvalue’ a benefit: A Burrows, The Law of Restitution (3rd ed, OUP, Oxford, 2011), pp 60–1. For a negative answer, see the Benedetti case (3.46C). Imagine that in Birks’s example I did want my house

extended, but intended to do the work myself. Would I benefit if you did it instead? Would it be enough that I desired the extension, or should you have to prove that it was a current expenditure priority of mine at the time, such that I would have paid someone to do it? For the latter view, see M Garner, ‘The Role of Subjective Benefit in the Law of Unjust Enrichment’ (1990) 10 OJLS 425. 3.30 Anglo-Australian law clearly respects the defendant’s freedom of choice when determining whether or not she has received a benefit. It will nonetheless bar a defendant from denying benefit in some instances. The first (which is not actually an exception to respect for choice but merely a reasoned application thereof) is where the evidence suggests overwhelmingly that the defendant in fact valued what she got, so that the imposition of liability is consistent with respect for her autonomy. The second, (which is less certain on current authority and more controversial) is where the defendant has behaved in such a way as to violate the plaintiff’s own freedom of choice. In such instances, the argument which normally works in the defendant’s favour tends to work against her: one who has diminished the freedom of others cannot reasonably expect the law to respect her own preferences. This second rationale probably explains why ‘subjective devaluation’ arguments very rarely (if ever) appear in cases in which the defendant has committed a tort or other wrong — more often than not, the law simply takes an objective approach to the benefit issue in such cases.18

Legal ‘tests’ of benefit

3.31 This section considers a number of instances in which the case for protecting the defendant’s freedom of choice breaks down. Consider carefully in each instance whether the justification for holding the defendant to have benefitted is of the first (evidential) or second (moral/policy) type. The situations are identified generically. They may loosely be regarded as yielding five general ‘tests’ of benefit: ‘request’; ‘taking’; ‘active encouragement’; ‘free acceptance’; and ‘incontrovertible’ (or, as we prefer to refer to it, ‘presumed’) benefit. [page 90] Request 3.32 A defendant is normally benefitted by that which he or she requested. The classic example of this principle at work in a case involving the receipt of services is Pavey & Matthews Pty Ltd v Paul (1.12C). In Lumbers v W Cook Builders Pty Ltd (in liq) (extracted further at 3.38C), the High Court described requested work as the ‘archetypal’ example of a benefit that it would be unconscionable for a defendant to retain without payment.19 Whether a request is always required to establish benefit in cases involving services is considered further below. 3.33 Where a defendant has received everything requested (as in Pavey) there is little difficulty in proving benefit. The more difficult case concerns the instance in which a defendant receives only part of that which was requested, as in the following case.

3.34C Planché v Colburn (1831) 8 Bing 14 (Court of Common Pleas) The plaintiff was contracted to write a book for the defendant about costume and ancient armour for a series called ‘The Juvenile Library’. He did a substantial amount of research work, but before the manuscript had been delivered, the defendant abandoned the series and repudiated the contract. The main issue considered by the court was whether a contract for the work was still in existence or had been abandoned (terminated). The Court held that the contract had been abandoned and awarded the plaintiff £50 by way of quantum meruit. Tindall CJ: In this case a contract had been entered into for the publication of a work on Costume and Ancient Armour in ‘The Juvenile Library’ … The fact was, that the Defendants not only suspended, but actually put an end to, ‘The Juvenile Library’; they had broken their contract with the Plaintiff; and an attempt was made, but quite unsuccessfully, to show that the Plaintiff had afterwards entered into a new contract to allow them to publish his book as a separate work. I agree that, when a special contract is in existence and open, the Plaintiff cannot sue on a quantum meruit: part of the question here, therefore, was, whether the contract did exist or not. It distinctly appeared that the work was finally abandoned; and the jury found that no new contract had been entered into. Under these circumstances the Plaintiff ought not to lose the fruit of his labour. …

Notes and questions 1. What did the defendant request — research work, or a

manuscript? Did it value the former without the latter? 2. If the defendant did not value the research in itself, how is the award to be explained? There are several possibilities. One is that it is an exceptional example of a court taking a wholly objective approach to the benefit question. A second is that the court barred D from arguing subjective devaluation because D had infringed P’s rights in repudiating the contract. A third is that the award in reality compensated P for his reliance loss. Which of these explanations is realistic, if any? If the claim was for compensation for breach of contract, why did P seek a quantum meruit, rather than damages? 3. In Brenner (3.19C), Byrne J cited Planché for the view that a request for a service in itself proves benefit. That proposition was also accepted by Murray J in ABB Power Generation v Chapple (2002) WAR 158 at [20]. Note, however, that in both cases, the work requested was performed fully and that the defendant accepted it, as well as requesting it. On current authority, it is therefore uncertain whether a request for services is sufficient on its own to prove benefit in a case of part performance. Should it be? 4. It has been suggested that there should be a rebuttable evidential presumption that a person benefits where that person receives part of what he or she ‘bargained’ for (that is, [page 91] where the person requested the service in the context of a

dealing in which it is clear he or she intended to pay for the whole thing): A Burrows, The Law of Restitution (3rd ed), pp 52–3. Is this appropriate? Would such a presumption justify restitution in Planché? 5. Must a request be express, or is an ‘implied’ request for a service sufficient to establish benefit? In what exactly would an ‘implied’ request consist? For a recent illustration, see A & M Green Investments Pty Ltd v Progressive Pod Properties Pty Ltd [2011] NSWSC 502. Taking, encouragement and ‘free acceptance’ 3.35 Where D purposely takes goods or other assets from P, it is almost always possible to infer that she values them.20 Even if she does not and has entirely contrary, perverse motives, it is arguable that, having violated P’s own freedom of choice, she should be barred from denying benefit. Likewise, where D actively encourages P to provide goods or services through words or conduct falling short of an actual request, both the evidence and sound legal policy may prevent her arguing that she did not want what she got.21 In practice, both cases can give rise to independent compensatory remedies via the tort of conversion or the doctrine of estoppel, so that they rarely feature in restitutionary discussion. The most topical and controversial case is therefore where the defendant does nothing active to solicit goods or services, but passively ‘accepts’ them. The idea that such ‘acceptance’ of a benefit can give rise to a claim in unjust enrichment was recognised by Deane J in Pavey & Matthews Pty Ltd v Paul (7.29C),22 and has commanded increasing support both academically and in the case law.23 It

has nonetheless recently been questioned by the High Court in the Lumbers case, extracted at 3.38C. 3.36E R Goff and G Jones, The Law of Restitution 7th ed, Sweet and Maxwell, London, 2007, § 1-019 (references omitted) But a defendant, who is not contractually bound, may have benefited from services rendered in circumstances in which the court holds him liable to pay for them. Such will be the case if he freely accepts the services. In our view, he will be held to have benefited from the services rendered if he, as a reasonable man, should have known that the claimant who rendered the services expected to be paid for them, and yet he did not take a reasonable opportunity to reject the proffered services. [Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221, 257–260, per Byrne J. cf Restatement of Contracts 2d §69(1)]

3.37C Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221 at 259, 261 (VSC) The facts are summarised at 3.19C. The Court rejected the plaintiff’s claim for work that had been requested not by the defendant, but by a third party, First Artists’ Management (FAM). (continued)

[page 92] Byrne J: In my opinion the appropriate enquiry is whether the recipient of the services, as a reasonable person, should have realised that a

person in the position of the provider of the services would expect to be paid for them and did not take a reasonable opportunity to reject those services: Jones, Restitution in Public and Private Law, (1991), at 108. … The claim of the plaintiffs is that they provided services and that the defendant accepted the benefit of them in circumstances giving rise to an obligation to make restitution. In a case such as this, the plaintiffs must show that the defendant accepted the benefit of their services in circumstances where he, as a reasonable person, should realise that the plaintiffs would expect to be paid for them. It is of significance on the facts of this case that it is the defendant who accepts the services in these circumstances for it is the defendant from whom restitution is sought. Where, upon a proper analysis of the facts, it cannot be said that it was the defendant who obtained the benefit of the services or, in this case, it was not in the contemplation of the defendant as a reasonable man that the plaintiffs realised that he would be responsible for payment, then the claim against him in respect of those services must fail … . When, as I have found in this case, certain of the services were provided at a time when the plaintiffs understood that they would in due course be recompensed by FAM and that it was for FAM that they were providing the services, there can be no room for restitution by the defendant, Braithwaite.

Notes and questions 1. Why did the fact that the work had been requested on this occasion by FAM mean that the defendant had not freely accepted it? 2. The fact that I fail to stop you performing a service when I know you wish to be paid for it does not in itself prove that I subjectively value it. I might be ‘indifferent’ to it: see A Burrows, ‘Free Acceptance and the Law of Restitution’ (1988) LQR 576. Modern supporters of ‘free acceptance’

therefore rest their argument on the second, distinct idea that the unconscientiousness of my behaviour undermines my liberty to assert my freedom of choice. See Birks, Unjust Enrichment (2nd ed), p 57; C Mitchell, P Mitchell and S Watterson, Goff and Jones: The Law of Unjust Enrichment (9th ed, Sweet & Maxwell, London, 2016), p 102. 3. Is it morally improper not to speak out when you know (or ought to know?) that another is expecting to be paid for a benefit and where you have a reasonable opportunity to warn them that you will not pay? Or is the provider of the benefit simply taking a commercial risk? See A Burrows, (1988) 104 LQR 576; G Mead, ‘Free Acceptance: Some Further Considerations’ (1989) 105 LQR 460. 4. I clean your shoes. You put them on. Have you accepted the benefit? Both Taylor v Laird (1856) 25 LJ Ex 329 at 332 (Exchequer) and Oliver v Lakeside Property Trust Pty Ltd [2005] NSWSC 1040 suggest not, but why is this? 3.38C Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27 at [81]–[91] (some references omitted) The facts are summarised at 2.43C. Gummow, Hayne, Crennan and Kiefel JJ: A claim for work and labour done or money paid?

[81] At trial, Builders did not frame its claim against the Lumbers as a claim for work and labour done or money paid at the Lumbers’ request. Builders, therefore, did not seek to prove that the Lumbers had ever asked Builders to do whatever Builders did in connection with building the Lumbers’ house. And the evidence that was led at trial showed that the Lumbers had never asked Builders to do

anything in connection with the Lumbers’ house. [82] On the hearing of the appeal to this court, however, Builders submitted that acceptance of a benefit, without a request, would be sufficient, at least in this case, to found an action by Builders for work and

[page 93] labour done or money paid. Builders submitted that this conclusion was supported, if not required, by this court’s decision in Pavey & Matthews Pty Ltd v Paul. That is not so. [83] In Pavey & Matthews, a majority of this court held that the right to recover on a quantum meruit does not depend on the existence of an implied contract but on a claim to restitution or one based on unjust enrichment … [84] It is important to recognise two points about Pavey & Matthews. First, there was no issue in that case about whether the plaintiff, a builder, had a claim for work and labour done and materials supplied. The issue in the case was whether that claim was defeated by a statutory provision analogous to s 4 of the Statute of Frauds 1677 (UK) (‘no action shall be brought upon any agreement … unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised’). In particular, the issue was whether the builder’s action on a quantum meruit was a direct or indirect enforcement of the oral contract the parties had made. The majority in Pavey & Matthews held that because ‘the true foundation of the right to recover on a quantum meruit does not depend on the existence of an implied contract’ the action was not ‘one by which the plaintiff seeks to enforce the oral contract’. [85] The second point to be noted is that unjust enrichment was

identified as a legal concept unifying ‘a variety of distinct categories of case’. It was not identified as a principle which can be taken as a sufficient premise for direct application in particular cases … . [86] Builders’ submission that acceptance of a benefit, without a request, suffices to found an action for work and labour done or money paid thus finds no direct support in Pavey & Matthews. That issue did not arise and was not decided in that case. Rather, the question to which Pavey & Matthews directs attention is whether the long-established and well-recognised category of cases constituted by claims for work and labour done or money paid at the request of another should be extended or developed in the manner for which Builders contended. And in that regard Builders emphasised what had been said by Doyle CJ, for the Full Court of the Supreme Court of South Australia, in Angelopoulos v Sabatino [[1995] 65 SASR 1]. [87] It is convenient to consider the decision in Angelopoulos by reference to Builders’ submission that, subject to one immaterial qualification, all the nine factors identified by Doyle CJ in Angelopoulos as relevant to ‘acceptance’ of a benefit, were present in this case. It is important, however, to preface that consideration by observing that although Builders’ argument was directed immediately to demonstrating that ‘acceptance’ of a benefit suffices to found an action for work and labour done or money paid, its arguments about the availability of an action for work and labour done or money paid were directed ultimately to the proposition that adopting the framework for analysis used by the majority in the Full Court in this case was not inconsistent with long-established principles governing actions for work and labour done or money paid. [88] Adapting what was said by Doyle CJ in Angelopoulos to the facts of this case, the nine factors identified by Builders as supporting its claim were: (a) the plaintiff (here, Builders) did not do the work gratuitously; (b) Builders did not act ‘entirely at [its] own initiative’ but at the

(c) (d) (e) (f) (g) (h)

(i)

implied request of the Lumbers; payment for doing the work was not subject to fulfilment of a subsequent condition; the work was not done ‘on a basis from which [Builders] chose to depart’; the Lumbers benefited from what Builders did; the benefit was conferred at the expense of Builders; the Lumbers ‘approved of or agreed to’ Builders carrying out the work it did; the circumstances were such that the Lumbers ‘must have known as … reasonable [persons] that [Builders] expected to be remunerated for [its] services’; and there is no particular circumstance (such as change of position) by virtue of which it would be unjust to require the Lumbers to remunerate Builders.

[89] It will be noted that the second of the matters identified was the making of an ‘implied request’ by the Lumbers to Builders to do the work and to pay money. At once it should be pointed out that, if Builders (continued)

[page 94] did whatever work it did and paid whatever money it paid at the Lumbers’ request, Builders’ claim for a reasonable price for the work and for the money it paid would fall neatly within longestablished principles. It would matter not at all whether the request was made expressly, or its making was to be implied from the actions of the parties in the circumstances of the case. Builders would have an action for work and labour done or money paid for and at the request of the Lumbers. [90] And if Builders did work or paid money at the Lumbers’ request, it would also follow that it would be neither necessary nor

appropriate to consider any of the other eight factors identified in Angelopoulos in deciding whether Builders could recover a fair price for the work it had done and the amount it had paid for and at the request of the Lumbers. To the extent that Angelopoulos is understood as requiring separate or additional consideration of those other factors, where a plaintiff seeks to recover a fair price for work done at the defendant’s request, or the amount the plaintiff has paid for the defendant at the defendant’s request, Angelopoulos is wrong and should not be followed. [91] But in the end Builders did not submit that it could be found that the Lumbers had made any request directed to Builders. Rather, Builders’ arguments proceeded from the premise that, in the present case, the Lumbers’ request (or requests) for work to be done and money paid was (or were) directed to Sons and not to Builders. [Their Honours concluded that to allow the claim would therefore extend the action for work and labour done and money paid to third parties beyond its traditional limits. They dismissed the claim on the distinct basis that imposing liability on Lumbers would unacceptably ignore (‘put aside’) the contract for the work that existed between Lumbers and Sons — on which see further 2.43C].

Notes and questions 1. For the facts of the Angelopoulos case, see 7.38C. 2. Did the claim fail because the Lumbers did not request Builders to do the work, or for some other reason? 3. Although Gummow, Hayne, Crennan and Kiefel JJ appear to take the view that a request for work is necessary in claims for ‘work and labour done’, they acknowledge elsewhere in their judgment (at [80]) that there are some exceptional cases in which a defendant can be liable for services when he or she has made no such

request, citing cases in which the service is ‘necessary’, such as cases of maritime salvage. Why do they not think that ‘free acceptance’ can provide an additional, exceptional case? Are they right to limit the significance of the Pavey case in the way that they do? 4. Some courts have since interpreted Lumbers as stating a rule that there must always be an express or implied request for services before there can be any restitutionary liability, effectively ruling out free acceptance as a source of restitutionary liability. See, for example, A & M Green Investments Pty Ltd v Progressive Pod Properties Pty Ltd [2011] NSWSC 502 at [56]–[61] per Windeyer AJ; Stewart v Atco Controls Pty Ltd [2015] HCA 15 at [48] per Crennan, Kiefel, Bell, Gageler and Keane JJ. Others maintain that the High Court never ruled out such a claim. In Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3) [2014] WASC 162, Edelman J refused to strike out a claim based on free acceptance on the basis that the High Court said nothing definitive in Lumbers to preclude one (see esp. [79]–[85]). Similarly, in Vasco Investment Managers Ltd v Morgan Stanley Australia Ltd [2014] VSC 455 (Vickery J), a claim based on free acceptance was allowed. There was also a request for the relevant services on the facts, but Vickery J regarded free acceptance and ‘request’ as alternative ‘classes’ of case in which a plaintiff may claim a quantum meruit: at [339]–[345]. See also Urusoglu v MSU Management Pty Ltd [2011] NSWSC 54 (Ward J, obiter — the claim failed); Caves Beachside Cuisine Pty Ltd v Boydah Pty Ltd [2015] NSWSC 1273 (Kunc J, obiter — the claim failed); Di Rico v Cominos [2015] NSWCATCD 75 at [85] (General Member Charles) and Edelman and Bant, Unjust

Enrichment (2nd ed), pp 76–7, all of which assume that the free acceptance of services can give rise to a claim, even in the absence of a request. How should the current uncertainty be resolved? [page 95] 5. How often in practice will a plaintiff confer a nongratuitous benefit on a defendant without the defendant requesting it? Does this explain the current uncertainty surrounding the status of free acceptance in unjust enrichment law? ‘Incontrovertible’ or ‘presumed’ benefit 3.39 It is sometimes said that a defendant will be taken to have benefitted where his or her enrichment is ‘incontrovertible’. An incontrovertible benefit is one that no reasonable person in the position of the defendant would deny. The concept has been recognised in a number of Australian, as well as English, cases.24 Recently, in Atco Controls Pty Ltd v Stewart,25 Warren CJ said: If it were established that realising the settlement sum conferred an incontrovertible benefit on [the defendant], the concerns raised … about conferring benefits (and their associated burdens) upon an individual in the absence of a request or consent are overcome. This is because, being incontrovertible, the benefit cannot be denied even when not requested.

3.40 Cases of incontrovertible benefit can be divided into a number of sub-categories. These are: (a) money;26 (b) non-money benefits which a defendant has ‘realised’ in money;27 (c) non-money benefits which were legally and/or factually necessary from the defendant’s point of view;28 (d) ‘easily returnable’ benefits; (e) non-money benefits which the defendant intends to realise in money through sale (although he or she has not as yet sold them); and (f) non-money benefits which are ‘realisable’ in the sense that it would be reasonable to expect the defendant to sell them, even though he or she has no apparent actual intention to do so. 3.41 The first three examples are well accepted and in such instances the defendant has been regarded as benefitted even in the absence of any request for the relevant asset or service. The last three are more controversial. They are discussed in McDonald v Coys of Kensington at 3.43C. It is also unclear whether it is correct to describe the concept of ‘incontrovertible benefit’ as a definitive test of benefit, or simply as raising a very strong presumption of benefit, which a defendant can still rebut in exceptional cases, by proving (always by reference to objective evidence) that she did not value what was received. If the concept works in the latter way, it would be more accurate, we suggest, to refer to categories of ‘presumed’ rather than ‘incontrovertible’ benefit.

3.42C Peel (Regional Municipality) v Canada [1992] 3 SCR 762 at 795–8 (SCCan) Under powers provided by the Juvenile Delinquents Act 1970, courts ordered the plaintiff local authority to contribute to the cost of supporting juveniles in its care. The plaintiff paid (continued)

[page 96] for the support of a number of delinquents but later successfully challenged the relevant legislation as being ultra vires and void. It claimed restitution from both the provincial and federal governments, on the basis that it had discharged payment duties which it properly fell to the governments to discharge. The Supreme Court dismissed the claim on the basis that the governments had not been enriched. McLachlin J: An ‘incontrovertible benefit’ is an unquestionable benefit, a benefit which is demonstrably apparent and not subject to debate and conjecture. Where the benefit is not clear and manifest, it would be wrong to make the defendant pay, since he or she might well have preferred to decline the benefit if given the choice. According to Justice Gautreau of the District Court of Ontario, where an unjust benefit is found ‘one discharges another’s debt that is owed to a third party or discharges another’s contractual or statutory duty’: Gautreau, ‘When Are Enrichments Unjust?’ (1989), 10 Advocates’ Q 258, at p 269. The late Justice Gautreau cites this Court’s decision in Carleton (County of) v Ottawa (City of), supra, as an example of such a case but adds the following pertinent

remarks at pp 270–71: While the principle of freedom of choice is ordinarily important, it loses its force if the benefit is an incontrovertible benefit, because it only makes sense that the defendant would not have realistically declined the enrichment. For example, choice is not a real issue if the benefit consists of money paid to the defendant or paid to a third party to satisfy the debt of the defendant that was owing to the third party. In either case there has been an unquestionable benefit to the defendant. In the first case, he can return it or repay it if he chooses; in the second, he had no choice but to pay it, the only difference is that the payee has changed. Likewise, the principle of freedom of choice is a spent force if the benefit covers an expense that the defendant would have been put to in any event, and, as an issue, it is weak if the defendant subsequently adopts and capitalizes on the enrichment by turning it to account through sale or profitable commercial use. The principle of incontrovertible benefit is not the antithesis of freedom of choice. It is not in competition with the latter; rather, it exists when freedom of choice as a problem is absent. [Emphasis added.] Gautreau’s comment takes us back to the terms of the traditional test; the discharge of a legal liability creates an ‘unquestionable’ benefit because the law allowed the defendant no choice. Payment of an amount which the defendant was under no legal obligation to discharge is quite another matter … It is thus apparent that any relaxation on the traditional requirement of discharge of legal obligation which may be effected through the concept of ‘incontrovertible benefit’ is limited to situations where it is clear on the facts (on a balance of probabilities) that had the plaintiff not paid, the defendant would have done so. Otherwise, the benefit is not incontrovertible. …

Accepting for the purposes of argument that the law of restitution should be extended to incontrovertible benefits, the municipality still falls short of the law’s mark. The benefit conferred is not incontrovertible in the sense in which Goff and Jones define that concept; the municipality has not shown that either level of government being sued ‘gained a demonstrable financial benefit or has been saved an inevitable expense.’ Nor is it ‘unquestionable’, to use Gautreau’s test; the federal and provincial governments were under no legal obligation and their contention that they were not benefited at all, or in any event to the value of the payments made, has sufficient merit to require, at the least, serious consideration. It was neither inevitable nor likely, in McInnes’ phrase, that in the absence of a scheme which required payment by the municipality the federal or provincial government would have made such payments; an entirely different scheme could have been adopted, for example. To admit recovery in this case would be to extend the concept of benefit in the law of unjust enrichment much further than contemplated by any of the authorities to date. It would open the door to recovery wherever a payment has been made under compulsion of law which arguably has an incidental beneficial effect of a non-pecuniary nature. In short, it would take the law of unjust enrichment far beyond the concept of restoration of property, money, or services unfairly retained, which lies at its core.

Notes and questions 1. On the facts, the Supreme Court of Canada concluded that there was no incontrovertible benefit to the governments because they were under no legal duty to pay for the delinquents’ care themselves. Nor was it factually inevitable that they would have paid for such care if the plaintiff had not. For a critical appraisal of the Court’s approach, see M McInnes, ‘Incontrovertible

Benefit in the Supreme Court of Canada’ (1994) 23 CBLJ 122. [page 97] 2. Is the idea of an incontrovertible benefit consistent with respect for a plaintiff’s freedom of choice? Does it identify cases in which it can be clearly presumed that the defendant actually did want the benefit, despite not having solicited it, or cases in which the defendant will simply not be permitted to deny benefit? Why does it matter which of these views is correct? 3.43C McDonald v Coys of Kensington [2004] EWCA Civ 47 at [33]–[37] (Eng and Wales CA) The plaintiff auctioneers sold a car to the defendant on the instructions of their client, but also mistakenly transferred to him a personalised number-plate, which was not part of the bargain. The plaintiff had to compensate the client for breach of contract and sought to recover a 100 per cent contribution from the defendant, claiming that he was unjustly enriched by the plate. The defendant registered the plate in his own name, as he was legally entitled to do. At the time he did so, he knew that its transfer had been a mistake and that its former owner wanted it back. He nonetheless refused to transfer it to the client when asked to do so, though he claimed never to have had any intention of selling it. He also claimed to have given both the car and the plate to his partner. He was held liable for

the value of the plate. Mance LJ: The alternative basis of restitutionary recovery on which Coys rely is ‘incontrovertible benefit’. This does not depend on analysis of the circumstances in which the benefit came to be acquired and fully enjoyed. It depends on the nature and value of the benefit as and when acquired. This basis of recovery was approved in principle by Hirst J in a dictum in Procter & Gamble Philippine Manufacturing Corpn v Peter Cremer GmbH & Co (The Manila) [1988] 3 All ER 843. In BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 805D Robert Goff J used a similar phrase in relation to the Law Reform (Frustrated Contracts) Act 1943, which he explained, at p 799D, as grounded on principles of unjust enrichment. Professor Birks suggests as the test of incontrovertible benefit whether ‘no reasonable man would say that the defendant was not enriched’: An Introduction to the Law of Restitution, at p 116. However, he emphasises the major difference, in his view, between this and ‘the adoption of a straightforward objective standard of value’, at p 116, and identifies two main cases in which the test should, in his view, be satisfied. They are cases of necessary expenditure (not here in issue) and cases of realised benefit. While he also identifies, at p 124, under a third heading of ‘(c) Others’, some cases in which courts ‘simply took the view that the recipient’s benefit was “obvious”’, he evidently regards them as incompletely explained and exceptional cases of recourse to an objective standard. In contrast, Goff & Jones in addressing incontrovertible benefits submit that it should be sufficient ‘that the benefit is realisable’ and that it should not be necessary to show that it has been realised: The Law of Restitution, para 1-023. They comment: It is said that the principle of respect for the subjectivity of value would be subverted if this were accepted. But it may not be unreasonable, in some circumstances, to compel a person to sell an asset which another has mistakenly improved. Goff & Jones

recognise that not every financial gain may be said to

be realisable, and refer in this connection to the landowner who ‘subject to the equitable doctrine of acquiescence, is not obliged to make restitution to the mistaken improver even though the land can, of course, be sold or mortgaged’. In The Manila [1988] 3 All ER 843, 855F Hirst J recorded that it had been common ground between the parties that the test in cases of receipt of services was appropriately set out in Goff & Jones as being whether the defendant had ‘gained a financial benefit readily realisable without detriment to himself’. In Marston Construction Co Ltd v Kigass Ltd (1989) 46 BLR 109, Judge Bowsher QC preferred Goff & Jones’s to Professor Birks’s approach. Professor Burrows advocates an approach lying midway between realisation and realisability. He suggests as the test of benefit whether it is reasonably certain that the defendant will realise the positive benefit in the future. He puts the position as follows, The Law of Restitution, p 19: A problem with the narrow Birks view is that the date of trial is made crucial. Realisation of the benefit after trial is ignored and wily defendants may therefore be encouraged simply to wait before realising the benefit. Goff & Jones’s view avoids this problem but has its own weakness because what is realisable cannot depend (continued)

[page 98] just on whether it is land or a chattel that is improved. The circumstances of the individual are also relevant. An improvement to a car is not realisable to the person who cannot afford to sell it and buy a suitable replacement. An improvement to land may be realisable to an owner who does not live on the land. In any event if it is clear that the defendant will not realise the benefit can it be said that he is

so obviously benefited just because he could easily realise it? The best approach seems to be to take Birks’s realised test but to add that the defendant will also be regarded as incontrovertibly benefited where the court regards it as reasonably certain that he will realise the positive benefit. Assessment of the defendant’s future conduct is necessarily speculative but the courts commonly have to predict future conduct in assessing damages for loss, precisely to avoid the nonsense of rigidly cutting off loss at the date of trial. Mr Purchas for Coys supports Goff & Jones’s approach, while Mr Swirsky submits on behalf of Mr McDonald that we should adopt Professor Burrows’s intermediate approach. However, I think that Professor Burrows’s approach might perhaps be open to the comment that it is too restrictive, and that a requirement of proof of intention might itself also encourage tactical stances or manoeuvring not too dissimilar to that which he fears on Professor Birks’s approach. Here, Mr McDonald received the mark. He did not realise any financial benefit from it, so if one were to treat Professor Birks’s suggested requirement of actual realisation as relevant, it would not be met. However, Mr McDonald could easily have arranged for retransfer of the mark to any car nominated by the estate and its financial value was easily realisable on the market, if he had so wished. If the test suggested by Goff & Jones were accepted, there would of course be no difficulty in concluding that Mr McDonald received a readily realisable benefit. That he subsequently gave it away to his partner could go at most to a possible defence of change of position. Professor Burrows’s modified approach, requiring us to consider whether it was also reasonably certain that Mr McDonald would realise the financial benefit, would seem difficult to apply in or adapt to the present situation. It would fit a case where the defendant retains the alleged benefit at trial, not a case where he has apparently chosen to give it away, in knowledge of the relevant facts and claims (unless perhaps one could treat the gift away as the realisation of a benefit). Even if one were to

attempt to ignore the gift away, it would be difficult, if not impossible, to consider what a defendant’s intention would have been regarding realisation, if he had not given the benefit away, when giving it away is what he actually chose to do. Looking at the matter generally, I have no doubt that justice requires that a person, who (as a result of some mistake which it becomes evident has been made in the execution of an agreed bargain) has a benefit or the right to a benefit for which he knows that he has not bargained or paid, should reimburse the value of that benefit to the other party if it is readily returnable without substantial difficulty or detriment and he chooses to retain it (or give it away to a third party) rather than to retransfer it on request. Even if realisable benefit alone is not generally sufficient, the law should recognise, as a distinct category of enrichment, cases where a benefit is readily returnable. … Mr McDonald knew that he had not bargained or paid for the mark. The mark or its benefit was in practice easily returnable. If Mr McDonald chose to keep it, then I see every reason for treating him as benefited.

Notes and questions 1. The defendant’s attempt to claim a change of position was rejected, because he knew about the mistake when he gave the plate to his partner. See further Chapter 12. 2. What constitutes a ‘readily returnable’ benefit? You mistakenly fix a drinks machine to a wall belonging to me. Is the machine ‘readily returnable’? 3. Should a defendant be regarded as enriched when he or she has received a ‘realisable’ benefit? What are the risks? How does one assess whether a benefit is ‘realisable’? 4. On the facts, the defendant was also found to have freely accepted the benefit, because he had gone ahead and registered the plate in his name when he knew that it was

not intended to be part of the bargain.

Valuing the benefit 3.44 Assuming that the defendant can be proven to have benefitted by reference to one of the preceding tests, courts must then value the benefit. Should the defendant’s freedom of choice [page 99] and preferences be relevant to the quantification of the benefit obtained, as well as to the question whether the defendant benefitted at all? Or should courts simply accord the benefit an ‘objective’ value? The principle that a defendant’s preferences can be taken into account so as to lower a valuation below the market rate is referred to as the principle of ‘subjective devaluation’. The principle that they can be used to raise that valuation above the market rate has been referred to as the principle of ‘subjective overvaluation’, or ‘subjective revaluation’. The former principle is currently accepted in English law. The latter is not. Defendants may hence be liable for less than the objective market value of the benefit received, but not for more than that value. 3.45C

Sempra Metals Limited v HM Inland Revenue Commissioners

[2007] UKHL 34 at [49]–[50], [116]–[119] (HL) For the facts, see 3.25C. The House of Lords held by a majority of 3:2 (Lords Hope, Nicholls and Walker in the

majority) that Sempra was entitled to compound interest, calculated not at the standard commercial rate, but at the lower rate which the Inland Revenue might have negotiated in the market for borrowing the relevant sums. Lord Hope: [49] The proposition that a conventional rate [of interest] should be used [to calculate the Inland Revenue’s enrichment] leaves open for further discussion questions of detail such as how that rate is to be arrived at and what tests should be adopted. The enrichment principle indicates that these questions should be resolved by looking at the circumstances of the enrichee. The use of ordinary commercial rates of interest, at ordinary rates, would be appropriate if those rates were relevant to the enrichee’s circumstances. But I would hold that it is open to the enrichee to show that it would have been able to borrow money at rates or on terms more favourable to it than those available in the ordinary commercial market. If it can do that, then ordinary rates and other terms must give way to those that are relevant to the circumstances of the enrichee. The unusual position of the Revenue has been sufficiently demonstrated. … [50] For these reasons I agree with Lord Nicholls and Lord Walker that Sempra’s claim for restitution ought to be measured by an award of compound interest at conventional rates calculated by reference to the rates of interest and other terms applicable to borrowing by the Government in the market during the relevant period Lord Nicholls: Measuring the value of the use of money

[116] I mentioned above that in cases of personal restitution the value of the use of money is prima facie the reasonable cost of borrowing the money in question. … [118] In the present case there can be nothing unjust in requiring

the Inland Revenue to pay compound interest, by way of restitution, on the huge interest free loan constituted by Sempra’s payment of ACT. But this will not always be so. For instance, a recipient of a payment made by a mistake shared by both parties might make no actual use of the money. He might pay the money into a current account at a bank yielding little or no interest. When the mistake comes to light he repays the money. In such a case, depending on the circumstances, it might well be most unfair that he should be out of pocket by having to make an additional payment, whether as compound interest or even simple interest, in respect of the ‘time value’ of the money he received. [119] Here, as elsewhere, the law of restitution is sufficiently flexible to achieve a just result. To avoid what would otherwise be an unjust outcome the court can, in an appropriate case, depart from the market value approach when assessing the time value of money or, indeed, when assessing the value of any other benefit gained by a defendant. What is ultimately important in restitution is whether, and to what extent, the particular defendant has been benefited: see Professor Burrows, The Law of Restitution, 2nd ed, (2002), page 18. A benefit is not always worth its market value to a particular defendant. When it is not it may be unjust to treat the defendant as having received a benefit possessing the value it has to others. In Professor Birks’ language, a benefit received by a defendant may sometimes be subject (continued)

[page 100] to ‘subjective devaluation’: An Introduction to the Law of Restitution (1985), page 413. An application of this approach is to be found in the Court of Appeal decision in Ministry of Defence v Ashman [1993] 2 EGLR 102.

3.46C Benedetti v Sawiris [2013] UKSC 50 at [12]–[30], [34], [100]–[123] (some references omitted) Benedetti was instrumental in brokering a deal in which the defendant, Sawiris, purchased the share capital in a company, Wind. The sale price was €3 billion. Benedetti received €67 million for his services under an ‘acquisition agreement’ with Sawiris, but sought further remuneration in a restitutionary claim. The market value of the services rendered was found by the trial judge to be €36.3 million, but the judge awarded him €75.1 million on the basis of an offer Sawiris had at one stage made to pay him this sum. The Court of Appeal awarded him only €14.52 million (40 per cent of the €36.3 million sum), on the basis that the value of the services was to be measured by market rates and the €67 million Mr Benedetti had already been paid represented prior payment for 60 per cent of the services rendered. The Supreme Court held that Sawiris was not unjustly enriched and owed nothing by way of restitution to Benedetti, since Benedetti had already been paid more than the market value of his services. The following extracts address the question of how the benefit to Sawiris was measured by the Court. Technically, the question which it had to decide was whether Sawiris should be found to have subjectively revalued Benedetti’s services above the market rate, by virtue of its offer to pay €75.1 million, but the Court also considers the question of subjective devaluation in its comments. The case therefore assists in understanding the extent to which a defendant’s preferences can result in an award that is either higher or lower than the prevailing market value of a benefit.

Lord Clarke (Lords Kerr and Wilson agreeing): Market value and subjective devaluation

[12] There are essentially two issues which arise. The first is whether Mr Sawiris is liable to pay the market value of the services or something more than the market value and, if so, what. That issue requires consideration of whether it is permissible to have regard to a defendant’s subjective opinion of the value of services rendered to him in order to: (i) reduce the amount which he would have to pay on a market value basis for those services (sometimes known as ‘subjective devaluation’, a phrase first coined by Professor Peter Birks in 1985 in An Introduction to the Law of Restitution at p 109); or (ii) to increase that amount (sometimes known as ‘subjective revaluation’). As appears below, the consensus of academic opinion seems to favour the recognition of subjective devaluation. The second issue is whether Mr Benedetti has already been paid all or part of the sum so determined out of the €67m he received as explained in more detail below. [13] The basic principle is that a claim for unjust enrichment is ‘not a claim for compensation for loss, but for recovery of a benefit unjustly gained [by a defendant] … at the expense of the claimant’… The question is whether an objective or subjective approach should be adopted when calculating that gain … . [15] In my view, the starting point in valuing the enrichment is the objective market value, or market price, of the services performed by Mr Benedetti. That is consistent with the view taken by Professor Graham Virgo in The Principles of the Law of Restitution, 2nd ed (2006) (‘Virgo’): Much of the uncertainty concerning the definition of enrichment stems from the lack of consensus about where the analysis should start. Essentially there are two options available. Either we start with an objective test, ascertained by asking whether reasonable people would consider the defendant to have received something of value, or we start with a subjective test, by considering whether the defendant

considers that he or she has received something of value. Whilst both the objective and subjective tests are relevant to the identification of an enrichment, the better view is that the objective test should always be considered first … (p 64) [16] I agree … [17] There is a question as to exactly what the objective approach entails. Professor Virgo states the test (at p 98) as the identification of the market value, namely the sum ‘a willing supplier and buyer would

[page 101] have agreed upon’. However I agree with Etherton LJ (at para 140) that the test is ‘the price which a reasonable person in the defendant’s position would have had to pay for the services’. On that approach, although a court must ignore a defendant’s ‘generous or parsimonious personality’, it can take into account ‘conditions increasing or decreasing the objective value of the benefit to any reasonable person in the same (unusual) position’ as the defendant (para 145). The editors of Goff and Jones note that such conditions would seem to include the defendant’s buying power in a market ‘so that a defendant who can invariably negotiate a better price for a product than any other buyer will be allowed to say that this price reflects the ‘objective’ value of the product to him, or in effect that there is one market for him and another for everyone else’ (para. 4-10). Thus far, I detect no difference between my approach and that of Lord Neuberger or Lord Reed. [18] The question then arises whether it is permissible to reduce the objective market value in order to reflect the subjective value of the services to the defendant. In my opinion, it is. The present case does not, of course, concern subjective devaluation, but that is the

hook on which Mr Howard seeks to hang the principle of ‘subjective revaluation’. It is on the possibility of subjective devaluation that my approach and that of Lord Reed is I think somewhat different. A defendant, in my view, is entitled to prove that he valued the relevant services (or goods) provided by the claimant at less than the market value. That principle is widely accepted by academic commentators and is based on the fundamental need to protect a defendant’s autonomy. It is important to note that subjective devaluation is not about the defendants’ intentions or expectations but is an ex post facto analysis of the subjective value of the services to the defendant at the relevant time … . [20] I would not accept Mr Rabinowitz’s submission that a distinction is to be drawn between the identification of a benefit and the value of the benefit to a defendant and that, while the former can be subjective, the latter is to be objective. He relied upon the approach adopted by Justice James Edelman as to ‘The Meaning of Loss and Enrichment’ in Philosophical Foundations of the Law of Unjust Enrichment (eds Chambers, Mitchell and Penner, 2008), pp 211– 241). In my opinion Professor Burrows is correct to conclude … that ‘a sharp distinction between choice and valuation may … be artificial’ because ‘a person may choose something but only at a particular price or even on the basis that it is gratuitously rendered’. [21] After the claimant has adduced evidence of the objective value of the benefit which the defendant received, the burden of proof falls upon the defendant to prove that he did not subjectively value the benefit at all, or that he valued it at less than the market price … That principle was established by the majority of the House of Lords in Sempra Metals … . The minority took a different view, namely that it was for the claimant to establish the actual benefit obtained by the defendant: see especially per Lord Mance at paras 231–232 and Lord Scott at para 147. As I see it, the difference between them is really no more than a different approach to the burden of proof. In each case the question is what was the value to the defendant.

[22] When I first drafted this judgment I thought that Sempra was an example of subjective devaluation in practice. It was held that the claimant could not recover the market interest rate on the sums it had paid to the Revenue by way of unlawfully levied advance corporation tax because the Government was able to borrow money at lower rates than the market rate. The amount saved by the Government was thus less than that which would have been saved by a commercial entity borrowing the same sums of money (see Goff and Jones at para 4-07). However, having read Lord Reed’s judgment I can now see that it may be an example of the objective value of the money to a person in the position of the defendant, namely the Government. This perhaps shows the narrowness of the difference between our two approaches. … [23] Recognising the principle of subjective devaluation raises the question of what a defendant relying on that principle must prove. A defendant can always simply assert that he valued a benefit at less than the market value. However, a court will be very unlikely to accept such an assertion unless there has been some objective manifestation of the defendant’s subjective views. In principle, this can occur before or after a transaction, although conduct after the transaction is likely to carry little weight. Goff and Jones put it thus at para 4-09: A defendant is unlikely to persuade a court that he attached a low value to a benefit simply by relying on self-serving testimony that he has a (previously unexpressed) value system that attributes a low value to such benefits, particularly if this testimony is not borne out by his previous conduct. If a defendant can produce (continued)

[page 102] stronger evidence of his personal spending preferences,

however, then we believe that he should be able to rely on this evidence consistently with the view expressed in the foregoing authorities that the law is concerned to protect his freedom to make his own spending choices. … [His Lordship then discussed, as examples of cases in which the principle of subjective devaluation has been applied in practice, Ministry of Defence v Ashman (1993) 25 HLR 513 (extracted at 10.20C) and Ministry of Defence v Thompson (1993) 25 HLR 552. He continued:] [25] If the principle of subjective devaluation is accepted, it can be defeated by a claimant proving that: (i) the defendant received an incontrovertible benefit (eg if the services saved the defendant necessary expense), or (ii) the defendant requested or freely accepted the benefit … . These sources show that many different problems may arise, but it is fortunately not necessary in this case to define the circumstances in which the principle of subjective devaluation can be defeated. I agree with Lord Neuberger that the difference between my approach and that of Lord Reed is not likely to lead to a different result in more than very few cases. [26] The only real difference may be this. We agree that in the case where services have been rendered which, viewed objectively, confer a benefit on the defendant, but a benefit which the defendant did not and does not want and would not have paid for, as in the examples of Pollock CB’s cleaned shoes … the claimant is not entitled to payment for the services because failure to pay would not unjustly enrich the defendant. The question is whether, in such circumstances, where there was no free acceptance of the services before or at the time they are rendered, but the defendant has accepted that he has received some benefit but not that the value of the benefit is as much as its market value, the defendant’s figure should be accepted. In my opinion it should be open to the court so to conclude on the basis, on the one hand there would be unjust enrichment if the defendant paid nothing but, on the other hand, that it would not be just to award more than the benefit conferred on the defendant so calculated. Such an approach

seems to me to respect the principle of freedom of choice or autonomy and to meet the case where the defendant sees the value of the benefit but would not have ordered the services save perhaps at a substantial discount to the market rate. I see no reason why a court should not take into account a defendant’s subjective opinion of the value of the claimant’s services in order to reduce the value of them to him, provided of course that the court is satisfied that it is his genuine opinion. If Lord Reed’s approach would produce a choice between a nil award and an award of the market value of the services, I would respectfully disagree. I prefer a nuanced approach, which seems to me to be more consistent with principle. However, given Lord Reed’s conclusions in para 138 of his judgment, there may be little, if anything, between us, especially since we both recognise the importance of respect for the defendant’s autonomy or freedom of choice. It is not necessary to reach a final conclusion on these questions on the facts of this case. I certainly agree with Lord Reed that the expression ‘subjective devaluation’ is somewhat misleading. Market value and subjective revaluation

[27] The real issue in the present case is whether a defendant should be required to pay the claimant more than the market value of his services if it can be shown that the defendant subjectively valued the claimant’s services at a sum in excess of the market value (ie subjective revaluation, sometimes called subjective overvaluation). The editors of Goff and Jones suggest … that, if one accepts the principle of subjective devaluation, it might be argued that fairness between the parties requires subjective valuation arguments to cut both ways, so that the claimant is entitled to rely upon subjective revaluation. Professor Burrows says at Burrows p 60: It is possible to argue that the law should go even further than ‘subjective devaluation’ in recognising the subjectivity of value; and that where there is evidence (e.g. using the request test) that the particular defendant overvalues something that has no (or a lower) objective value, it is the

defendant’s own valuation — rather than the objective market value — that should count. So, for example, if the defendant requests services at a higher rate than the market rate then, in so far as there is a claim for restitution of an unjust enrichment (eg because there is no valid contract) it would seem that the contract price is the best guide to the value of the services to the defendant and that that, therefore, should be central to the measure of restitution. [28] In his recent work Restatement of the English Law of Unjust Enrichment, 2012, (‘Restatement’) p 158, Professor Burrows states that ‘the correct view is probably that, without a valid contract, the claimant should not be entitled to overvaluation. In other words … restitution allows downward subjectivity only so as to protect a defendant’. This view is expressed in the light of the decision of the Court of Appeal in the present case and it is possible that Professor Burrows prefers the view expressed at Burrows p 60

[page 103] quoted above. In relation to the question of whether a defendant has received a benefit at all (because the goods or services had no market value), Professor Virgo, after referring to the principle of subjective devaluation, states: … logically and for reasons of consistency it should be possible to use the defendant’s own valuation of what has been received to identify an enrichment, even though the reasonable person would not regard the defendant as having received anything of value. (Virgo, pp 68–69) [29] However, in my view, the principle of subjective revaluation should not be recognised. Unlike the principle of subjective devaluation, it is not necessary in order to protect a defendant’s freedom of choice. It is for this reason, as it seems to me, that it

would not be unprincipled to recognise subjective devaluation whilst rejecting the notion of subjective revaluation. In any event, the principle of subjective revaluation seems to be unnecessary in the context of identifying whether a defendant received a benefit at all, that is in cases where the services or goods have no market value. In such a case, the defendant would in most cases be estopped from denying that the service constituted a benefit: see Virgo at pp 90–91. [30] In the present case, it is accepted that Mr Benedetti’s services had an objective value. The issue is whether subjective revaluation can be relied upon, not in order to identify a benefit, but in order to value the benefit so conferred. In my opinion, that is not permissible. Although there is some academic support for such a solution, there is no authority for the proposition that, in cases where a benefit has an objective market value, the claimant should be entitled to invoke the defendant’s subjective willingness to pay a higher sum for the benefit as a reason for valuing the benefit at a higher rate. … The legal principles — summary

[34] In summary, in my opinion, in a case of this kind, (i) the starting point for identifying whether a benefit has been conferred on a defendant, and for valuing that benefit, is the market price of the services; (ii) the defendant is entitled to adduce evidence in order subjectively to devalue the benefit, thereby proving either that he in fact received no benefit at all, or that he valued the benefit at less than the market price; but (iii) save perhaps in exceptional circumstances, the principle of subjective revaluation should not be recognised, either for the purpose of identifying a benefit, or for valuing a benefit received. Lord Reed: [100] Prima facie, the monetary value of the services can be fairly ascertained by determining what a reasonable person in the position of the defendant would have agreed to pay for them. That will depend on how much it would have cost a reasonable person

in the position of the defendant to acquire the services elsewhere in the market (assuming that a relevant market exists, as will normally be the case). The payment by the defendant of the value of the services to a reasonable person in his position will normally achieve a result which is just to both parties in a case of this kind, since the claimant will receive the amount for which he could have sold his services to another recipient in the same position, and the defendant will pay the amount which the services would have cost a reasonable person in his position to acquire from another supplier in the market. The basis of the valuation is thus consistent with the purpose of the valuation exercise. [101] A question arises as to what is meant by ‘the position of the defendant’. The answer can be derived from the purpose of the valuation exercise. In order to arrive at an award which is just to both parties, it is necessary to take account of circumstances which would affect the value placed upon the services by a reasonable person receiving them. Those are also circumstances which would affect the cost to a reasonable person in that position of acquiring the same services in the market, and the amount which the claimant could have received if he had sold his services to another recipient in the same position. Such circumstances will include in particular the availability and cost of similar services provided by alternative suppliers (as in Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Commissioners [2007] UKHL 34; …, and prevailing rates and practices in the relevant market (as in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; …). They will include any relevant characteristics of the defendant, such as, in the context of borrowing, its credit rating, or whether it belongs to the public or the private sector (as in Sempra Metals). They will include other personal characteristics, such as the defendant’s age, gender, occupation or state of health, if they bear on the price at which such a person could obtain the services in question in the market. To give one example, a film star may not have to pay the ordinary price for a designer dress, as the fashion house may allow her (continued)

[page 104] a discount to reflect the fact that her wearing the dress will enhance its brand image. Her being a film star is thus an objective aspect of her position which affects the cost to her (or anyone else in her position) of obtaining such a dress, and therefore affects the value of the receipt of such a dress to a person in her position. The circumstances which are relevant to determining the value of the services to a reasonable person will not however include the personal preferences of the individual defendant, or any idiosyncratic views which the defendant may hold as to the value of the services, since the preferences or views of the particular recipient do not affect the services’ value to a reasonable recipient. [102] There may of course be goods or services which are so tailored to the preferences of a particular recipient that the idea of a reasonable recipient (other than the actual recipient) becomes unrealistic: an example might be the costumes designed for the stage performances of some pop artists. Even in such cases, however, the value of the goods or services is not assigned by the recipient, but is likely to be ascertainable on the basis of objective evidence (which may, according to the circumstances, relate to such matters as the cost of obtaining the goods or services from alternative suppliers, or the cost in the market of the materials and services involved and the profit margin which the evidence suggests would be reasonable in the circumstances). [103] The adoption of the objective approach to valuation which I have described, as the normal measure of a restitutionary award, is consistent with the relevant authorities … . In Sempra Metals Ltd … [2007] UKHL 34, para 45 Lord Hope of Craighead stated that ‘questions of this kind are normally approached objectively by reference to what a reasonable person would pay for the benefit that is in question’; and Lord Nicholls of Birkenhead said in the same case (para 103) that the measure of a restitutionary award in respect of the use of money was ‘the market value of the benefit

the defendant acquired’. In Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55, para 41 Lord Scott of Foscote observed, in relation to his well-known example of the locksmith, that the extent of the unjust enrichment was ‘the value of the locksmith’s services’. In the case at hand, the developer’s award was to be ‘assessed at the rate appropriate for an experienced developer’ (para 42), that is to say at the rate ordinarily applicable in the market to a developer comparable to the claimant. [104] In relation to this approach, it may be helpful to say a word about the concept of ‘market value’, which has been employed in some of the authorities. It is an expression which can be used in more than one way, but the definition used by the Royal Institution of Chartered Surveyors captures the essence of the concept: The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. [105] So understood, market value is specific to a given place at a given time. That point can be illustrated by the episode in Vanity Fair in which Becky Sharp sells her horses during the panic which grips the British community in Brussels after the battle of Waterloo, when rumours reach the city that Napoleon has defeated Wellington and that his army is approaching. The circumstances create a market in which horses are exceptionally valuable, and Becky obtains a price which is far in excess of the ordinary value. It is, nevertheless, the value of the horses in the market in which they are sold. [106] That example illustrates the general point that market value depends critically on the identification of the relevant market, since there are different markets for many types of goods and services. That is reflected, for example, in the variability in the price of a haircut, or the cost of a meal in a restaurant, or the fees charged by solicitors, or the salaries of professional footballers, depending on the market in which they are operating.

[107] The case of Sempra Metals provides another example. The defendant, as a public body, could purchase the benefit in question (the use of money) at a lower price than commercial enterprises. The benefit arising from the mistaken payment of tax before it was due was therefore valued on the basis of the public sector borrowing rate rather than ordinary market rates of interest. Equally, it is conceivable that money might be paid mistakenly to, and used by, a defendant with a poor credit rating who could borrow money only at rates above ordinary market levels. In such a case the benefit to that defendant, calculated as in Sempra Metals in terms of the rate of interest … appropriate to the enrichee’s circumstances’ (per Lord Hope at para 46) … would exceed that measured according to ordinary market rates of interest. It would still however be an objective value, which had nothing to do with the defendant’s personal perception of the value of the money … . Indeed, it would be a market value: the defendant in such a case

[page 105] would borrow in a different market from ordinary commercial borrowers, just as public sector borrowers constitute a distinct market. The higher rate of interest would reflect the risk of the defendant’s inability to repay the money, and thus could be said to reflect the value transferred by the claimant, who would be bearing that risk. [108] There may be room for argument in particular circumstances as to whether the variation in the value of a benefit according to the position of the recipient is more aptly described as an aspect of market value or as a departure from it. The fact that the cost of an annuity may depend on the age, gender, state of health and personal habits of the annuitant would probably be regarded by most people as an aspect of market value: the annuity market differentiates between relatively young female non-smokers in

good health and older male smokers in poor health. An economist might take the same view of the more favourable terms on which a film star may be able to buy a designer dress; but most people would probably say that the film star obtained the dress for less than its market value. I shall refer to ‘ordinary market value’ to describe the amount which would be agreed in the market in the absence of some unusual characteristic of the particular purchaser. [109] It follows that some other vocabulary has to be found to describe the departure from ordinary market value which will be required where, as in the case of the film star, the value of the benefit to the reasonable person in the position of the defendant will be different from its ordinary market value. I shall refer to the objective value of the benefit, which will usually be its ordinary market value, but may in particular circumstances be either more or less than that amount. ‘Subjective devaluation’

[110] Counsel for Mr Benedetti argued that there was an established principle of ‘subjective devaluation’, according to which the amount of a restitutionary award could be reduced below the objective value of the benefit in order to reflect the defendant’s personal view of its value, and that by analogy a principle of ‘subjective revaluation’ (or, perhaps more aptly, ‘subjective overvaluation’) could justify on the same basis the making of an award in excess of the objective value. [111] It has to be emphasised that this is not an argument for the uncontentious proposition that the objective value of a benefit to the defendant may be less than its ordinary market value (as, for example, in Sempra Metals, or in my example of the film star), or may conceivably be greater than its ordinary market value (as might be said of the example from Vanity Fair, although that might also be regarded as an illustration of how the ordinary market value can vary according to the specific place and time; or as in my example of a mistaken payment made to a recipient who has a poor credit rating). The proposition being advanced is that the value of a

benefit received by a defendant is not in principle arrived at objectively, but depends on the defendant’s personal opinion of its value, or at least that an objective approach to valuation can be displaced by establishing that the defendant did not in fact value the benefit at its objective value. … [His Lordship referred to the definition of subjective devaluation given by Professor Birks at 3.29E and continued:] [113] Whether the recipient of a service can be taken to have assumed responsibility to pay for it is undoubtedly relevant to the question whether he is under a liability to make restitution of its monetary value on the basis of unjust enrichment (but it is important to add that it is not conclusive of that question: there are circumstances in which the receipt of a service may call for restitution of its monetary value even if the receipt was involuntary). Nothing I say about so-called ‘subjective devaluation’ is intended to question that principle. As Pollock CB famously asked (albeit in the context of an analysis based on implied contract), ‘One cleans another’s shoes; what can the other do but put them on?’ (Taylor v Laird (1856) 25 LJ Ex 329, 332). I am however doubtful of the aptness of the expression ‘subjective devaluation’ to describe that principle, since it seems to me that the reason for declining to make a restitutionary award based on ordinary market value in such a case is most aptly understood as being, not the defendant’s idiosyncratic valuation of the service, but the importance of respecting his right to choose whether, and on what basis, to assume responsibility to pay for it. The issue is therefore not at bottom a matter of valuation; and, on one view, it is to be judged objectively. This point has been noted by a number of academic writers. For example, the Canadian academic Mitchell McInnes has written, ‘The important point is not the defendant’s personal valuation of a benefit, but rather his personal choice to accept the risk of financial responsibility for it’ (‘Enrichment Revisited’, in Understanding Unjust (continued)

[page 106] (2004), eds Neyers, McInnes and Pitel, p 175 fn 44 (emphasis in original). See also Edelman and Bant, Unjust Enrichment in Australia (2006), pp 107–108, and Lodder, Enrichment in the Law of Unjust Enrichment and Restitution (2012), chapter 6). Enrichment

[114] Birks himself recognised that the central issue underlying his concept of ‘subjective devaluation’ was choice: When the argument from the subjectivity of value (subjective devaluation) is available, it does not consist in an appeal to and proof of the tastes and priorities of the particular recipient but, on the contrary, only requires the recipient to show he made no choice to receive the benefit (‘In Defence of Free Acceptance’, in Essays on the Law of Restitution (1991), ed Burrows, p 129). It is of course the benefit by which the recipient has been unjustly enriched which has to be valued for the purpose of making a restitutionary award; but its valuation is conceptually distinct from the identification of the enrichment or the decision whether (or to what extent) it was unjust. [115] The recipient’s freedom of choice is relevant not only to the all-or-nothing case where he either did or did not assume responsibility to pay for the service, but also, as Birks recognised (see eg ‘In Defence of Free Acceptance’, loc cit, p 129), to the case where the recipient assumed responsibility for payment, but only on a particular basis: for example, that the service was to be provided at half price as an introductory offer, or that the cost of the service would be a specific sum. In practice, most such cases are likely to fall within the scope of the law of contract, but some could fall within the scope of unjust enrichment (eg if a contract were void or unenforceable). The qualified nature of the recipient’s acceptance of responsibility may then be relevant to limit any liability based on unjust enrichment. On the other hand, although I

accept that a contract price in excess of the ordinary market value might be evidence of the objective value in particular circumstances, I have difficulty, like Lord Clarke and Lord Neuberger, in seeing how the recipient could be required, in the absence of a contract, to pay more than the objective value of the benefit on the basis of unjust enrichment. [116] Birks’s use of the expression ‘subjective devaluation’ to describe a principle concerned with issues relating to freedom of choice reflects his view that such issues should be addressed at the stage of determining whether the defendant has been enriched. On that approach, since enrichment involves a transfer of value, and the involuntary nature of the receipt of a benefit does not diminish the objective value transferred, the existence of enrichment must be denied, where necessary to protect the defendant’s autonomy, by asserting that, subjectively, no (or only a limited) value was transferred. [117] Since the object of this principle is to protect the defendant’s freedom to choose whether to assume responsibility to pay for a benefit in kind (and if so, on what basis), it seems to me that it might contribute to clarity of analysis if the principle were explicitly concerned with freedom of choice rather than ‘subjective devaluation’. I would also comment that, although the expression ‘subjective devaluation’ reflects Birks’s treatment of the question whether and to what extent the defendant assumed financial responsibility for the benefit as part of the inquiry into whether there has been ‘enrichment’, it is not self-evident that that is the most apt way of addressing the question: indeed, like some other academic authors (eg Goff & Jones, The Law of Unjust Enrichment, 8th ed (2011), eds Mitchell, Mitchell and Watterson, para 17-02), Birks in some of his writings also treats ‘free acceptance’ as an ‘unjust factor’ or ground of liability, so that the question whether the imposition of liability would be consistent with respect for the defendant’s autonomy is taken into account at more than one stage of the analysis.

[118] Another possible approach might be to treat enrichment as dependent upon the objectively beneficial nature of the receipt, and to consider at a later stage of the analysis, when determining whether it would be just to impose liability to make restitution (at all, or on a particular basis), the question whether the imposition of such a liability would be compatible with respect for the defendant’s autonomy or freedom of choice. I note that the Canadian Supreme Court has taken a straightforward economic approach to the questions whether the defendant has been enriched by the plaintiff and whether the plaintiff has suffered a corresponding deprivation, and has dealt with other considerations, including arguments concerning individual autonomy, at the stage of deciding whether the defendant’s retention of the benefit is unjust: see for example Kerr v Baranow [2011] 1 SCR 269 at paras 37, 41 and 45. That approach appears at first sight to have the virtue of simplicity, in so far as it groups normative issues under an explicitly normative heading … .

[page 107] [119] Interesting and important as these issues as to the conceptual framework of unjust enrichment may be, they do not need to be decided in the present case, where there is no doubt that Mr Sawiris freely accepted Mr Benedetti’s services on the basis that a reward would be provided. All that need be said is that, at whatever stage in the analysis the defendant’s freedom of choice is best taken into account, I am inclined to think that it is preferable that it should be done explicitly rather than on the basis of socalled ‘subjective devaluation’. I would also observe that this area of the law is at an early stage in its development, and that it remains to be seen whether we have yet found the most suitable analytical scheme. ‘Subjective over-valuation’

[120] Some academic writers (eg Burrows, The Law of Restitution, 3rd ed (2011), pp 60–61; Virgo, The Principles of the Law of Restitution, 2nd ed (2006), pp 88–89) have also used the expression ‘subjective revaluation’ (or ‘over-valuation’) in relation to the question how the benefit should be valued where services are provided in order to create an end-product which has no objective value. Examples sometimes discussed, which illustrate the nature of the issue, are those of a landowner who chooses to have a folly erected on his land, or a person who chooses to have his house decorated in execrable taste, adding nothing to its value. It is argued by Virgo (ibid) that, in such a case, a reasonable person would not regard the claimant’s work as valuable, and that a restitutionary award is therefore based on the value subjectively attached to the work by the defendant. [121] As Burrows recognises (ibid), however, there is no need in relation to such examples to rely on a notion of ‘subjective overvaluation’. The claimant benefited the defendant by providing his services. Those services had an objective value in the market: competitive quotations could have been obtained for the erection of the folly or the decoration of the house. A restitutionary award would therefore be based on the market value of the services. Subjectivity and value

[122] There is in addition an inherent conceptual difficulty about the notion of subjective valuation. Value, in the economic sense which is relevant in the context of the valuation of services or other nonmonetary benefits, is not established by individual attribution, but by exchanges between different individuals, usually in a market. It is the cumulative preferences of consumers which are important to the interaction of supply and demand that determines economic value, rather than the preferences of an individual party to a specific transaction. Even in situations where goods or services are tailored to the preferences of an individual party, their value is likely to depend on the supply and demand for the materials and services required, as is illustrated by the examples of the folly and the pop artist’s costume. If on the other hand a person declares, for

example, that coal is more valuable than diamonds, and intends to be understood as describing the relative monetary value of the two commodities, then one would be inclined to suppose that he has taken leave of his senses. He cannot make the monetary value of coal greater than that of diamonds by personal fiat. If a character in a science fiction film says that, on her planet, coal is more valuable than diamonds, one imagines a society where that might be true: where diamonds are plentiful and coal is scarce, where jewellery is made out of coal, and so forth: in other words a society in which market forces and consumer preferences could establish the relative value of coal and diamonds in the opposite sense to that operating in our own society. That is not to say that everyone has the same preferences. A woman who had no interest in fashion might not attach any more importance to a handbag from a fashion house than to one from a chain store, and might be unwilling to spend any more on the one than the other. But she would acknowledge that the former handbag was more valuable than the latter (and would doubtless claim its market value under her insurance policy if it were stolen), unless she was using the word ‘valuable’ in a sense other than its economic one. [123] In the particular context of making a restitutionary award for unjust enrichment, there is a further reason why it is problematical for the valuation of a benefit to depend on the idiosyncrasies of the recipient. As I have explained, the purpose of restitution, where unjust enrichment has resulted from the receipt of services, is in my view to achieve a just result by restoring to the claimant the monetary value of the services which he has provided to the defendant. That aim will be compromised if the services are valued on a basis which depends on the idiosyncrasies of one party, rather than one which is even-handed as between them both.

[page 108]

Notes and questions 1. Lord Clarke (Kerr and Wilson SCJJ agreeing) takes the view that subjective devaluation can reduce the legal value of a benefit below its market value. Lord Reed disagrees, arguing that, provided the defendant’s liability is consistent with his or her freedom of choice (as it was in this instance, because Sawiris requested the work), the ‘objective’ value should always apply. In the United Kingdom, the argument has often been used in the manner suggested by Lord Clarke: see, for example, Ministry of Defence v Ashman (1993) 66 P&CR 195 (Eng CA) (extracted at 10.20C); MacDonald v Coys of Kensington [2004] EWCA Civ 47; and the extracts from the judgments of Lords Hope and Nicholls in Sempra Metals Limited v Inland Revenue Commissioners [2007] UKHL 34 at 3.45C. By contrast, it has not as yet been adopted by Australian courts and was described as ‘problematic’ by Edelman J in Hampton v BHP Billiton (No 2) [2012] WASC 285 at [332]–[334]. Which is the preferable view? What moral and policy considerations lead Lord Reed in Benedetti to take the minority view that individual preferences are irrelevant to the value of a benefit? Is it logical to consider the defendant’s choice when deciding whether or not a defendant has benefitted, but ignore it when determining the actual value of the benefit he or she has received? 2. How does one judge the ‘market value’ of a good or service? Can one take into account the individual circumstances of a particular consumer in setting this value? If the ‘market value’ is the reasonable value of the benefit to a person in the plaintiff’s position, how much difference is there in practice between Lord Reed’s

‘objective’ approach and Lord Clarke’s more ‘subjective’ one? 3. Assuming that (almost by definition) most people value things in the same way that a reasonable person would, in how many cases will there be a practical difference between the ‘objective’ approach of Lord Reed and the ‘subjective’ approach to valuation taken by Lord Clarke? 4. In Littlewoods Ltd v Commissioners for Her Majesty’s Revenue and Customs [2015] EWCA Civ 515 at [181] the English Court of Appeal accepted the approach of Lord Clarke (obiter), indicating that although market value may be the starting point for assessing the ‘use value’ of money, a court ‘can order actual [that is, subjective?] use value where the defendant demonstrates that it was lower than objective (or market) use value.’ The plaintiff had overpaid millions of pounds in tax to the defendant. The defendant was held liable not just to repay the money itself, but compound interest thereon amounting to nearly £1 billion. On the facts, however, the Internal Revenue was unable to prove what the ‘actual’ use value of the money was to it, so that the interest award was calculated by reference to the ‘objective’ value of that use. Leave to appeal to the Supreme Court was granted on 23rd December 2015: UKSC 2015/0177. 3.47E K Barker, ‘Riddles, Remedies and Restitution: Quantifying Gain in Unjust Enrichment Law’ (2001) 54 CLP 255, pp 255–7, 264–5, 305 (references omitted) This chapter sets out to provide an integrated quantification framework, which can be applied to all

monetary restitutionary claims. Obstacles to a Common Quantification Framework There are three immediate complications. The first is the fact that, owing to the subject’s youth, there is as yet little explicit guidance available as to the way the framework should look. The second is that such quantification reasoning as history does offer us has tended to be scattered across the various monetary restitutionary remedies, with little or no concerted attempt to co-ordinate its overall direction. Most importantly, however, the foundational aims of restitutionary awards remain obscure. This makes the development of coherent criteria problematic, for remedies can only really make sense when they are properly attuned to the law’s objectives. They cannot rationally drive themselves. Existing awards

[page 109] are in fact shaped by a number of potentially competing foundational aims: corrective justice, protective justice, distributive justice, deterrence (in either a general or specific form) and (though probably to a lesser degree) economic efficiency. No single objective predominates in all instances and some remain normatively highly controversial. Nonetheless, the point is that the extent to which one or more of them is endorsed in a given case inevitably affects the amount of restitution given, just as it affects the way in which rights are initially defined. A coherent quantification system will therefore ultimately require not simply a disciplined analytical apparatus, but a clear appreciation of foundational aims. We must know ourselves better, so as to decide where we are going. The Quantification Scheme There are six stages to the scheme itself. Firstly, the form of the

defendant’s gain must be identified. Secondly, as in loss claims, valuation methodology must be set. The proposed approach is for courts to apply a presumption of market valuation, which the defendant may set aside by proving that he valued the benefit received at a different rate. His entitlement to do so is dependent, however, upon the way he has behaved and, exceptionally, upon considerations of public policy. Thirdly, the basic measure of restitution must be determined. There is debate here as to whether there are two basic measures of gain in the law of restitution — as there are two measures of loss in contract and tort — or only one [the value a defendant received]. This chapter takes the latter view. Fourthly, a causal connection must be established between the gain received and the injustice which has occurred. This inquiry contains both a factual component and a normative (attributive) one, into which a variety of policy factors enter. Fifthly, additions may be made, where gains consequential upon an initial receipt have been received. Finally, courts may make deductions to take account of losses which the transaction has caused to an innocent defendant, or gains, which it has brought to the claimant. At this stage, there is currently a complex interaction between quantification principles and existing and emerging restitutionary defences … . The shifts in thinking required to make an integrated quantification strategy achievable are not … as great as might at first appear to be the case. Remedial integration raises technical difficulties, but no insuperable obstacles of principle. A stable measure of monetary relief base on value received, whether positive or negative, assessed in the ordinary case by reference to market value, but adjusted in accordance with defined principles and policy objectives, should now be attainable. The shift in approach may unsettle a number of crude and comfortable certainties, but in doing so it will yield a system which is more carefully attuned to the equities and policy priorities of particular cases.

Notes and questions 1. Contract and tort are both subjects that have welldeveloped principles of quantification, including defined ‘measures’ of loss (reliance and expectation loss) and principles of remoteness of damage. The law of restitution has not developed the same sophisticated apparatus for assessing and quantifying monetary awards. How much one can get still turns on whether one brings an action for the sum received, claims an ‘account’ of the defendant’s profits, or claims a ‘license fee’ for the use of one’s property. Some attempt was made by Professor Birks to address this deficiency and the domination of historic forms. He suggested that there were two ‘measures’ of restitution — the amount a defendant first receives and the amount he or she retains at the time of the action. He also suggested that all claims for monetary restitution were subject to a ‘remoteness of gain’ principle, such that defendants could be liable for the first additional gain consequential upon their initial receipt (their first ‘non-subtractive’ gains), but not for further gains made on those gains: Birks, An Introduction to the Law of Restitution, pp 351–5. Barker accepts the need for a proper analytical framework, but his own solutions are different. He suggests that there is only one measure of gain (the amount the defendant receives) and that defendants are liable for all consequential gains provided these are causally attributable to the initial injustice and not to inputs of the defendant’s, or a third party’s resources. Even then, there may be liability for the total profit where the defendant is a deliberate wrongdoer. What principles should courts develop to deal with

quantification matters and how different will they be to quantification principles in contract and tort claims based on claiming loss? [page 110] 2. For significant attempts to address these tricky questions of quantification, see further H Hunter, ‘Measuring the Unjust Enrichment in a Restitution Case’ (1989) 12 Sydney Law Review 76; H Dagan, Unjust Enrichment (CUP, Cambridge, 1997); D Friedmann, ‘Restitution for Wrongs — The Measure of Recovery’ (2001) 79 Tex L Rev 1879; J Edelman, Gain-Based Damages: Contract, Tort, Equity and Intellectual Property (Hart, Oxford, 2002).

UNJUST A recognised reason for restitution 3.48 Injustice is not simply a matter of moral argument. The plaintiff must prove one of a number of specific legal reasons for restitution recognised in law (‘unjust factors’). The list of such factors is open and will continue to develop incrementally over time. Currently, most of them arise in the context of unjust transfers of value from plaintiff to defendant. Such a transfer may be ‘unjust’ because: (a) the plaintiff lacked legal or personal capacity to make it (Chapters 4, 9);

(b) it was the consequence of a mistake (Chapter 5); (c) it came about without the defendant’s action or knowledge (Chapter 6); (d) a condition which the plaintiff attached to it has failed (Chapter 7); (d) it was the result of coercion (Chapter 8); or (e) it was a response to an ultra vires demand by a public authority (Chapter 11). 3.49 The final class of case examined in this book entails wrongdoing by a defendant (Chapter 10). Such cases are rarer and in one way obviously different, because no ‘transfer’ needs to have taken place between the parties. The plaintiff’s cause of action flows simply from the fact that the defendant’s gain has been made by infringing his or her rights. Some writers claim that such cases are not just identifiably different to others in the list, but that they fall outside the scope of unjust enrichment law altogether. This is one point of view (see 10.11E) but depends on a particular and narrow construction of that concept’s role. If the function of unjust enrichment is not to act as a cause of action as such, but rather as a super-structural legal principle grouping a variety of different restitutionary causes of action, the inclusion of such cases is much less controversial. Furthermore, if Weinrib and others are to be believed (see Chapter 2, esp. 2.11E and 2.31E), they share important normative similarities to the other cases. 3.50C Moses v Macferlan (1760) 2 Burr 1005, p 1012 (Court of King’s Bench) Lord Mansfield:

This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged. It lies only for money which, ex æquo et bono, [V post, 2133, Dale v Sollet, M 1767, B R accord] the defendant ought to refund: it does not lie for money paid by the plaintiff, which is claimed of him as payable in point of honour and honesty, although it could not have been recovered from him by any course of law; as in payment of a debt barred by the Statute of Limitations, or contracted during his infancy, or to the extent of principle and legal interest upon an usurious contract, or for money fairly lost at play: because in all these cases, the defendant may retain it with a safe conscience, though by positive law he was barred from recovering. But it lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition, (express, or implied;) or extortion; or oppression; or an undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances.

[page 111] Notes and questions 1. How does Lord Mansfield’s list of the instances in which the action for money had and received has been held to lie compare to the list we described at 3.48? What differences are there? 2. Lord Mansfield makes no mention of ‘wrongs’ in his list. Note, however, that the action for money had and received has sometimes been used as a response to wrongdoing, albeit rarely. Why do you think that cases of restitution for wrongdoing are in practice likely to be rare?

3. In Unjust Enrichment (2nd ed), Chs 6 and 7, Edelman and Bant claim that proof of injustice requires not simply proof of an unjust factor, but also proof that a defendant has no juristic reason (no right) to retain a benefit. Is there any hint in the above passage that they may be correct in this observation?

Defendant has no right to the benefit 3.51 Establishing an unjust enrichment claim requires not just that there is a legally recognised reason to make restitution, but also that there is no recognised legal reason against doing so. It is hence generally accepted that claims to restitution cannot succeed where the defendant has a valid legal right (whether at common law or under statute) to the benefit he or she has received.29 Unless the law is to engage in self-contradiction, it cannot insist at one and the same time that a defendant has a legal duty to give up his or her benefit and a legal right to keep it. A plaintiff must hence generally set aside any contract under which a benefit was bestowed on a defendant before being entitled to claim it back; and a plaintiff seeking restitution of tax demanded by government must first show that any regulation according to which the tax was paid is invalid. 3.52 The idea that a plaintiff may have to show that the defendant has ‘no legal right’ to a benefit received has something in common with the civilian form of reasoning we examined in Chapter 1. In truth, both common law and civilian systems have to consider not only reasons for restitutionary claims, but competing rights to the benefit that might preclude them. The way in which such considerations

are structured in legal reasoning is then a matter of form. The important question of substance is upon whom the legal onus of proof lies in proving or disproving a defendant’s right to the benefit. 3.53 In common law systems, it is clear that there is no requirement that the plaintiff prove the ‘absence of any right’ to the benefit on a defendant’s part, unless the defendant first raises the existence of such a right as a potential obstacle to the claim. In this sense, proof of the ‘absence of a basis’ for the defendant’s claim is not a necessary element of an unjust enrichment claim. If, however, a defendant raises the existence of a contractual, statutory or other right to the benefit, then the legal onus lies on the plaintiff to defeat that right.30 The result is that in a straightforward claim for the return of a mistaken overpayment, the plaintiff need plead only the defendant’s enrichment at his or her expense and the existence of causative mistake, not the absence of any legal right on the part of the defendant to retain the money. On the other hand, if the money has been paid under a contract entered into as a result of a misrepresentation, the defendant will raise the existence of the contract and the plaintiff will normally have to show a cause to rescind any such contract before he or she can get his or her money back. [page 112]

AT THE PLAINTIFF’S EXPENSE 3.54

Proving that an injustice has occurred and that the

defendant has benefited is insufficient to make out an unjust enrichment claim. A plaintiff must also show that the gain was made ‘at her expense’.31 At a minimum, this requires the plaintiff to prove a causal connection between the gain and the injustice. It may also, however, express two further limitations that are awkwardly concealed by its deceptively simple terminology. The first is a prima facie policy-based limitation on claims against remote (indirect) recipients. It concerns whether or not an indirect recipient is a ‘proper defendant’ to an action. The second is a bar on plaintiffs claiming that a defendant has subtracted property from her when that property is not something (or a product of anything) to which she originally had any right, but which the defendant ‘intercepted’ before she could obtain it. This is a concern as to whether the plaintiff is a ‘proper plaintiff’ to the action.

The minimum requirement: causation and the ‘but for’ test 3.55 At a basic minimum, the requirement that the defendant be unjustly enriched ‘at the plaintiff’s expense’ expresses the rule that there be a sufficient causal connection between the defendant’s gain and the injustice to the plaintiff. It is similar to32 the rule in contract and tort claims that losses are recoverable only where they are caused by the tort or breach of contract. 3.56 In most cases, proving causation is straightforward. Where, for example, P pays money to D by mistake, it is easy to show that the money obtained by D was at P’s expense, because it so obviously came from P’s pocket. The issue is so

easy, in fact, that it tends not to be addressed explicitly. There are, however, more complex cases. One is where a defendant has received money or property indirectly via the hands of a third party, as where P mistakenly pays $100 to X, and X then pays it on to D:

3.57 In these circumstances, proving that D’s gain has been made at P’s expense is undoubtedly more difficult, especially if X mixed the money he received from P with other money of his own before paying D. But the task is not impossible. P may still be able to prove a causal connection between her own loss and D’s $100 gain if she can show that the money D received from X was attributable to the money X received from her (P). The law provides a set of rules known as ‘tracing rules,’ which can assist P in demonstrating the required [page 113] causal link.33 At this stage, it is appropriate simply to observe that establishing that D’s gain was made at P’s expense in the required causal sense may be more difficult in cases of indirect receipt than in the standard case. In Menelaou v Bank of Cyprus UK Ltd, extracted at 3.61C, Lord Clarke referred

simply to the need for a ‘sufficient causal connection’, ‘nexus’ or ‘link’ between D’s enrichment and P’s payment34 and applied a standard ‘but for’ test of causation.35 This is a logically sound approach in most cases and accords with the basic approach the law takes toward matters of causation in other areas of private law.

Recovery from indirect recipients: ‘leapfrogging’ 3.58 A distinct question of policy which arises in cases of indirect enrichment is whether P should be entitled to sue D, when she has a more obvious claim against X, the ‘immediate’ recipient of her $100. This is a question as to who is the proper defendant for P’s action, but is sometimes also framed in terms of the question whether it is X or D who has gained ‘at P’s expense.’ Assuming that D’s gain is shown to be causally related to the injustice to P, the question is whether P can ‘leapfrog’ over the direct recipient of the benefit, X, and claim from D instead. This question becomes especially important where the ‘immediate’ recipient, X, is insolvent. Whether there is a ‘rule’ against leapfrogging is not currently clear. 3.59 In Birks’s view, there is no rule against P ‘leapfrogging’ over X and suing D instead, provided that P has not deliberately chosen to limit herself to a remedy against X. On this approach, remote recipients as well as immediate ones could potentially be joined to an action for restitution. 3.60E P Birks, ‘At the Expense of the Claimant: Direct and Indirect Enrichment in English Law’

in D Johnston and R Zimmermann (eds), Unjust Enrichment: Key Issues in Comparative Perspective (CUP, Cambridge, 2002), pp 512–14 It will often happen that the first recipient passes the enrichment on to a second recipient. He may do this specifically, by handing over the very res received, or he may do it abstractly, by handing over some other res in reliance on his receipt. The second inquiry [is the enrichment at the plaintiff’s expense?] is directed to discovering whether a claimant can leapfrog the first recipient and sue the second recipient, and so on down the chain of remoter recipients thereafter? It is a very important question, because the first recipient may be immune from suit or not worth suing, and the remote recipient may have the longer purse. … Agency aside, there are two arguments which make a prima facie case for reaching a second or more remote recipient. One is based on property and the other on causation. The proprietary argument says to the remote recipient, ‘You received my property!’ And the causation argument says, ‘You would not have received your enrichment from X but for X’s having been enriched from me!’ Neither stands any chance of success against a second or more remote recipient who is in a position to plead the defence of bona fide purchase for value without notice or who took through such a person. A defendant who cannot use that defence may be able to fall back on change of position. This is not the place to investigate the range of those defences, but it is important to notice that, because of them, these leapfrogging arguments do not threaten any general disruption. If and so far as these arguments can succeed, they will generally prevail only against remote recipients who are either not innocent or are mere donees who have not changed their position. Thus only a rather narrow band of remote recipients is vulnerable.

[page 114] Notes and questions 1. Should P be entitled to ‘leapfrog,’ assuming that a causal correlation between D’s gain and her own unjust loss can be proven? Why would one restrict the range of defendants? See further A Tettenborn, ‘Lawful Receipt — A Justifying Factor’ [1997] 5 RLR 1 (the remote recipient cannot generally be liable because he lawfully obtained it from a party (X) that had a good title to it — the security of his title should be protected); Virgo, The Principles of the Law of Restitution (3rd ed), pp 105–11 (identifying a basic ‘fundamental principle’ against leapfrogging on the ground of remoteness, subject to some exceptions); B McFarlane, ‘Unjust Enrichment, Property Rights and Indirect Recipients’ [2009] 17 RLR 37 (P should only be able to leapfrog if she can first establish an equitable property right against the immediate recipient, X); E Ball, Enrichment at the Plaintiff’s Expense: Attribution Rules in Unjust Enrichment (Hart, Oxford, 2016), Ch 4 and pp 183– 4 (there is no logical bar to leapfrogging — the only concern relates to undermining any contractual allocations of risk between P and X, or X and D). For a more recent restatement of Birks’s liberal position, see Unjust Enrichment (2nd ed), pp 89–98. 2. Direct authority on leapfrogging is scant, probably because in practice there are usually other reasons why claims against remote recipients fail, such as defences, difficulties in proving causation, or the existence of a binding contractual allocation of risk between P and the

first direct recipient which might be undermined if P were allowed to recover against other, remoter parties. In Uren v First National Home Finance Ltd [2005] EWHC 2529 (Eng Ch Div), P’s action against a remote recipient was dismissed summarily on the basis that D’s gain was not at P’s expense. But it is not clear that the claim failed on the independent ground that the claim was indirect. It may simply have been because there was a difficulty in identifying the gain as caused by P’s unjust loss, or because P had deliberately limited itself to its contractual remedies against the direct recipient. Similarly, the case of MacDonald Dickens & Macklin (a firm) v Costello [2011] EWCA Civ 930 (Eng CA), cited by Virgo in note 1 above as authority for the basic fundamental principle against leapfrogging, actually appears to have failed on the basis that restitution from the indirect recipient would ‘undermine the contractual arrangements between the parties’: at [21]. By contrast, in Negri Pty Ltd v Technip Pty Ltd [2010] VSCA 44 at [32], the Victorian Court of Appeal refused to strike out a claim against an indirect recipient of money paid for building work, on the basis that ‘the requirement that the defendant’s enrichment be “at the expense of the plaintiff” can be satisfied even where the defendant received the money from a third party intermediary, rather than from the plaintiff’. It seems arguable on the facts that the contracts between P and X and X and D in this case were both voidable for misleading and deceptive conduct, so that restitution did not threaten any valid allocation of risk. 3. Leapfrogging is allowed in Germany under §822 of the BGB, subject to the condition that P first exhausts his or

her remedies again the immediate recipient. Is this a helpful approach, or is that limitation arbitrary? 4. Is the Lumbers case (2.43C) an example of a claim failing owing to objections to leapfrogging, or were there other reasons for the claim failing? 3.61C Menelaou v Bank of Cyprus UK Ltd [2015] UKSC 66 at [24]–[35] (some references omitted) The plaintiff bank had two charges over property (‘Rush Green Hall’) belonging to the defendant Melissa’s parents, securing loans to them of £2.2 million. The parents wished to downsize the property and pay off some of the loans. The bank agreed, subject to being granted a charge over the new, smaller, property (‘Great Oak Court’). Rush Green Hall was [page 115] sold and the proceeds of sale were payed to a firm of solicitors, Boulters, which was acting for both the parents and the bank. The proceeds were then used, with the bank’s agreement, to buy Great Oak Court in Melissa’s name. Unfortunately, the solicitors failed to secure the required charge over Great Oak Court and the bank thereby lost its security for the remaining debts. The bank claimed that, despite the fact that the money had been paid to the vendor of Great Oak Court, not to Melissa, she was indirectly unjustly enriched at its expense, because the value of the property had been increased by the bank

discharging the vendor’s lien over it. The Supreme Court upheld the claim. Lord Clarke: Was Melissa enriched at the expense of the Bank?

[24] In my opinion the answer to the question whether Melissa was unjustly enriched at the expense of the Bank is plainly yes. The Bank was central to the scheme from start to finish. It had two charges on Rush Green Hall which secured indebtedness of about £2.2m. It agreed to release £785,000 for the purchase of Great Oak Court in return for a charge on Great Oak Court. It was thus thanks to the Bank that Melissa became owner of Great Oak Court, but only subject to the charge. Unfortunately the charge was void for the reasons set out above. In the result Melissa became the owner of Great Oak Court unencumbered by the charge. She was therefore enriched at the expense of the Bank because the value of the property to Melissa was considerably greater than it would have been but for the avoidance of the charge and the Bank was left without the security which was central to the whole arrangement. [25] As I see it, the two arrangements, namely the sale of Rush Green Hall and the purchase of Great Oak Court, were not separate but part of one scheme, which involved the Bank throughout … . [27] … I would reject the submission that there must be a direct payment by the Bank to Melissa. Such a requirement, while sufficient, is not in my view necessary because it would be too rigid. As I see it, whether a particular enrichment is at the expense of the claimant depends upon the facts of the case. The question in each case is whether there is a sufficient causal connection, in the sense of a sufficient nexus or link, between the loss to the Bank and the benefit received by the defendant, here Melissa. [28] There has been much debate both among academics and judges as to the correct test. The contrast was noted by Henderson J at first instance in ITC. He discussed the problem in considerable

detail … . The contrast is between a rule that requires there to be a direct causal link between the claimant’s payment and the defendant’s enrichment, subject to some exceptions (paras 52–59) and a broader more flexible approach (paras 60–69). He expressed his conclusions on the principles as follows in para 67: 67. I must now draw the threads together, and state my conclusions on this difficult question. In the first place, I agree with Mr Rabinowitz that there can be no room for a bright line requirement which would automatically rule out all restitutionary claims against indirect recipients. Indeed, Mr Swift accepted as much in his closing submissions. In my judgment the infinite variety of possible factual circumstances is such that an absolute rule of this nature would be unsustainable. Secondly, however, the limited guidance to be found in the English authorities, and above all the clear statements by all three members of the Court of Appeal in Kleinwort Benson Ltd v Birmingham City Council [1996] 4 All ER 733, [1997] QB 380, suggest to me that it is preferable to think in terms of a general requirement of direct enrichment, to which there are limited exceptions, rather than to adopt Professor Birks’ view that the rule and the exceptions should in effect swap places (see ‘At the expense of the claimant’: direct and indirect enrichment in English law in Unjustified Enrichment: Key Issues in Comparative Perspective, edited by David Johnston and Reinhard Zimmermann, Cambridge (2002), p 494). In my judgment the obiter dicta of May LJ in Filby and the line of subrogation cases relied on by Professor Birks, provide too flimsy a foundation for such a reformulation, whatever its theoretical attractions may be, quite apart from the difficulty in framing the general rule in acceptable terms if it is not confined to direct recipients. The reference to EWCA Civ 759 … .

Filby

is to

Filby v Mortgage Express (No 2) Ltd

[29] Henderson J continued as follows in para 68.

[2004]

The real question, therefore, is whether claims of the present type should be treated as exceptions to the general rule. So far as I am aware, no exhaustive list of criteria for the recognition of exceptions has yet been put forward by proponents of the general rule, and I think it is safe to assume that the usual preference of English law for development in a pragmatic and step-by-step fashion will prevail. Nevertheless, in the search for principle a number of relevant considerations have been identified, including (in no particular order): (continued)

[page 116] (a) the need for a close causal connection between the payment by the claimant and the enrichment of the indirect recipient; (b) the need to avoid any risk of double recovery, often coupled with a suggested requirement that the claimant should first be required to exhaust his remedies against the direct recipient; (c) the need to avoid any conflict with contracts between the parties, and in particular to prevent ‘leapfrogging’ over an immediate contractual counterparty in a way which would undermine the contract; and (d) the need to confine the remedy to disgorgement of undue enrichment, and not to allow it to encroach into the territory of compensation or damages. [30] It is submitted on behalf of the Bank that on four occasions since the decision in ITC the Court of Appeal has endorsed the considerations identified by Henderson J. They variously described his approach thus: as ‘relevant considerations’ in TFL Management Services v Lloyd’s TSB Bank plc [2014] 1 WLR 2006 (‘TFL’) per Floyd LJ,

para 57, as ‘of assistance’ in Relfo Ltd v Varsani (No 2) [2014] EWCA Civ 360, [2015] 1 BCLC 14 per Arden LJ, para 96; and as ‘relevant considerations … skilfully distilled’ in ITC on appeal, [2015] EWCA Civ 82 per Patten LJ (giving the judgment of the court), paras 67 and 69. [31] Further, in his judgment in this case Floyd LJ described Henderson J’s approach as ‘thoughtful and valuable’ at para 39 and in TFL he said this about Henderson J’s para 68: 57. I agree with Henderson J that these are relevant considerations in deciding the question of whether an indirect benefit was conferred at the claimant’s expense. But the various factors to which he refers are not, and were not I think intended to be, rigid principles. Far less can it be said that if one or more of the factors can be said to be adverse to the claim, the claim is necessarily doomed to failure. That approach seems to me to be consistent with the approach of the Court of Appeal in ITC, where Patten LJ said at the end of para 69: We consider that the correlative of taking a broad approach to the first consideration by taking account of ‘economic’ or ‘commercial’ reality is that it is important not to take a narrow view of what, under the third criterion, would conflict with contracts between the parties or with a relevant third party in a way which would undermine the contract. That seems to me to be a sensible approach. [32] There is scope for legitimate debate as to whether the correct approach is to adopt a narrow test with exceptions or a broader approach. However, it appears to me that, whichever test is adopted the result is likely to be the same. In any event it is not to my mind necessary to consider the issue further in this case because, as the Court of Appeal made clear, the position is clear on the facts of the instant case, which is concerned only with the first of Henderson J’s relevant considerations. In a case in which

more such considerations were relevant, it would be necessary to have regard to a number of different factors, probably with no presumption one way or the other where the starting point is. [33] In short, I agree with the approach of the Court of Appeal. In particular, the position is neatly described by Tomlinson LJ as follows in paras 57 and 58: 57. In the present case, the Bank was to receive £1.9m upon the sale of Rush Green Hall in circumstances where it was owed £2.2m and had charges over Rush Green Hall to secure that indebtedness. The Bank had agreed that it would release its charges over Rush Green Hall upon receipt of £750,000 out of the sale proceeds, in return for a charge over Great Oak Court to secure what would be the remaining indebtedness, £1.45m, thereby enabling the Menelaou parents on the strength of that undertaking by the Bank to use £875,000 out of the sale proceeds of Rush Green Hall for the purchase of Great Oak Court in the name of Melissa. I do not see how this can sensibly be described as anything other than a transfer of value between the Bank and Melissa, in whose name the purchase of Great Oak Court was made. 58. I am glad to be able to reach this conclusion. It gives effect to the reality of the transaction, whereas the conclusion of the judge, in my respectful view, amounts to that pure formalism which Lord Steyn has in this context deprecated … [34] That was of course a reference to the speech of Lord Steyn in Banque Financière referred to in para 18 above. Both Floyd and Moses LJJ expressed much the same conclusions at paras 42 and 48 and 61–62 respectively. I am unable to accept that there is any significance in the point which attracted the judge (para 22) that the benefit to Melissa was complete on 12 September, whereas the detriment to the Bank occurred over a month later when its charges over Rush Green Hall were released. As Moses LJ put it at para 62, everyone knew, as a result of the Bank’s agreement on 9

September 2008, that the

[page 117] Bank’s security in Rush Green Hall would be released and, provided that the terms of that agreement were satisfied, the Bank was bound to release its charge. [35] For all these reasons I agree with the Court of Appeal that Melissa was enriched at the expense of the Bank. I have already expressed my view that she was unjustly so enriched.

Notes and questions 1. Lord Clarke is clear, following Henderson J in the ITC case (Investment Trust Companies v Revenue and Customs Comrs [2012] EWHC 458 (Ch)), that the question whether D is enriched at P’s expense is only in part a question about whether there is a sufficient causal link between D’s gain and P’s loss. On the facts, however, he thought that only this causal question was in issue. Why is this? Why were Henderson J’s other ‘factors’ not relevant? 2. Is the third factor mentioned by Henderson J in ITC (‘leapfrogging’) a concern about claiming against remoter recipients per se, or simply about undermining contractual allocations of risk? 3. Was Melissa’s benefit here a ‘direct’ or ‘indirect’ one? Lord Neuberger (at [61]) thought that her position could be characterised in either way, and that the question was immaterial. Do you agree that it should be irrelevant whether a claim is direct or indirect?

The bank, as Lord Neuberger observed at [76], probably 4. had a good claim against its solicitors for failing to obtain execution of its charge over Great Oak Court. His Lordship said that this was irrelevant to the question whether Melissa was enriched at its expense. Was he right? 5. This was a case in which restitution was granted by allowing the bank to be ‘subrogated’ to the former lien that the vendor of Great Oak Court had had over the property. Unlike in the United Kingdom, the technique of ‘subrogation’ (the process via which one person is entitled to take over another person’s rights, whether extant or extinguished) is not considered in Australia to be part of the law of unjust enrichment. The same doubts about the unjust enrichment analysis were held in the current case by Lord Carnworth JSC. See further 15.54– 15.58C. 3.62C

Commissioners for Her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq)

[2017] UKSC 29 at [32]–[33], [37]–[38], [43]–[55], [59]–[66], [71]–[73] (some references omitted) The claimant investment trust companies (Lead Claimants) mistakenly overpaid tax (VAT) on services supplied to them by their investment managers, when the services were exempt from tax under European law. The claimants’ overpayments were made directly to the managers, and the managers, who were the parties primarily liable to pay the tax (output tax), then paid them on to the revenue authority (HMRC), after first deducting VAT they had themselves paid to their own suppliers (input tax). For

each notional overpayment payment by the claimants of £100 of VAT, the managers therefore retained £25 and paid on £75 to the HMRC. The managers recouped some of the sums from HMRC under a statutory refund scheme and in turn passed the benefit of the refunds on to the claimants, but this did not achieve full restitution for the claimants because the statutory scheme was subject to a 3-year time limit. The claimants sought restitution of the rest of their overpayments directly from the HMRC claiming, in each case, restitution of the full notional £100 mistakenly paid. The Supreme Court unanimously rejected the claims, holding that the HMRC had only been enriched to the extent of the notional £75 actually received by the HMRC, not the full £100 claimed; and that the enrichment of the HMRC by the notional £75 was, in any event, not at the claimants’ expense. (continued)

[page 118] Lord Reed (Lords Neuberger, Mance, Carnwath and Hodge agreeing): Was the enrichment at the Lead Claimants’ expense?

[32] There is no doubt that, in economic terms, the Commissioners were enriched at the expense of the Lead Claimants. On the mistaken premise that the supplies were taxable, the Lead Claimants were charged tax by the Managers, and paid it to them in accordance with their contract. On the same premise, the Managers were obliged to account to the Commissioners for the tax chargeable on their supplies, and to pay them the output tax in respect of each accounting period, after deducting their input tax.

The net result of the mistake was that the Lead Claimants were worse off by the amount of the Managers’ output tax [the notional £100], and the Commissioners were better off to the extent that that amount exceeded the Managers’ input tax [ie by a notional £75]. [33] As the judge noted, however, no payment was made by the Lead Claimants to the Commissioners. Nor were the Managers simply a conduit or, in legal terms, an agent for payment by the Lead Claimants to the Commissioners. The Lead Claimants owed no money to the Commissioners. Furthermore, the payment of the tax element of the invoices submitted by the Managers to the Lead Claimants was not the cause of the payment of tax by the Managers to the Commissioners: as explained earlier, the Managers were liable to account for tax to the Commissioners once they had supplied the relevant services. As the judge found, it could not be said that the tax would not have been paid but for the payments by the Lead Claimants to the Managers … General discussion

[37] Decisions concerning the question whether an enrichment was ‘at the expense of’ the claimant demonstrate uncertainty as to the approach which should be adopted. Such tests as have been suggested have been too vague to provide clarity. For example, in Menelaou v Bank of Cyprus UK Ltd [2015] UKSC 66 … Lord Clarke of Stone-cum-Ebony said at para 27, with the agreement of Lord Neuberger of Abbotsbury, Lord Kerr of Tonaghmore and Lord Wilson, that ‘the question in each case is whether there is a sufficient causal connection, in the sense of a sufficient nexus or link, between the loss to the bank and the benefit received by the defendant’. This leaves unanswered the critical question, namely, what connection, nexus or link is sufficient? The same can be said of Arden LJ’s statement in Relfo that there must be a ‘sufficient link’ (para 95), Floyd LJ’s reference in the same case to ‘proximity’ (para 110), and the Court of Appeal’s finding in the present case that there was ‘a sufficient economic connection’ (para 67).

[38] It would be unwise to attempt in this appeal to arrive at a definitive statement of the circumstances in which the enrichment of a defendant can be said to be at the expense of the claimant. Nevertheless, in view of the uncertainty which has resulted from the use of vague and generalised language, this court has a responsibility to establish more precise criteria. Some observations of a general nature should therefore be made, before turning to the specific context in which the issue arises in the present case. It should be said at the outset that these observations are concerned only with personal claims, and not with proprietary claims … [43] The nature of the various legal requirements indicated by the ‘at the expense of’ question follows from [the] … principle of corrective justice. They are designed to ensure that there has been a transfer of value, of a kind which may have been normatively defective: that is to say, defective in a way which is recognised by the law of unjust enrichment … The expression ‘transfer of value’ is, however, also too general to serve as a legal test. More precisely, it means in the first place that the defendant has received a benefit from the claimant. But that is not in itself enough. The reversal of unjust enrichment, usually by a restitutionary remedy, is premised on the claimant’s also having suffered a loss through his provision of the benefit. [44] This was recognised in Menelaou, as was noted in para 37 above. It was explained more fully by Lord Clyde in Banque Financière, citing a maxim of Pomponius: My Lords, the basis for the appellants’ claim is to be found in the principle of unjust enrichment, a principle more fully expressed in the Latin formulation, nemo debet locupletari aliena jactura [no-one should be enriched by another’s loss] … Without attempting any comprehensive analysis, it seems to me that the principle requires at least that the plaintiff should have sustained a loss through the provision of something for the benefit of some other person with no intention of making a gift, that the defendant should have received some form of

enrichment, and that the enrichment has come about because of the loss. (p 237)

[page 119] [45] It should be emphasised that there need not be a loss in the same sense as in the law of damages: restitution is not a compensatory remedy. For that reason, some commentators have preferred to use different terms, referring for example to a subtraction from, or diminution in, the claimant’s wealth, or simply to a transfer of value. But the word ‘loss’ is used in the authorities, and it is perfectly apposite, provided it is understood that it does not bear the same meaning as in the law of damages. The loss to the claimant may, for example, be incurred through the gratuitous provision of services which could otherwise have been provided for reward, where there was no intention of donation. In such a situation, the claimant has given up something of economic value through the provision of the benefit, and has in that sense incurred a loss. Direct and indirect provision of a benefit

[46] Situations in which the defendant has received a benefit from the claimant, and the claimant has incurred a loss through the provision of that benefit, usually arise where the parties have dealt directly with one another, or with one another’s property. Common examples are the gratuitous payment of money, or provision of goods or services, by the claimant to the defendant, where there was no intention of donation. In such a situation, if the enrichment of the defendant is unjust … then the claimant is prima facie entitled to have the enrichment reversed. [47] There are, however, situations in which the parties have not dealt directly with one another, or with one another’s property, but in which the defendant has nevertheless received a benefit from the claimant, and the claimant has incurred a loss through the

provision of that benefit. These are generally situations in which the difference from the direct provision of a benefit by the claimant to the defendant is more apparent than real. [48] One such situation is where the agent of one of the parties is interposed between them. In that situation, the agent is the proxy of his principal, by virtue of the law of agency. The series of transactions between the claimant and the agent, and between the agent and the defendant, is therefore legally equivalent to a transaction directly between the claimant and the defendant. Similarly, where the right to restitution is assigned, as in Equuscorp Pty Ltd v Haxton [2012] HCA 7 … the claimant stands in the shoes of the assignor, and is therefore treated as if he had been a party to the relevant transaction, and the defendant’s enrichment had been directly at his expense. Another situation is where, as in Relfo Ltd v Varsani (No 2) [2014] EWCA Civ 360, an intervening transaction is found to be a sham (para 121). Since the sham is created precisely in order to conceal the connection between the claimant and the defendant, it is disregarded when deciding whether the latter was enriched at the former’s expense. So, in Relfo, Gloster and Floyd LJJ described the arrangements in question as being ‘equivalent to a direct payment’ (paras 103 and 115). There have also been cases … in which a set of co-ordinated transactions has been treated as forming a single scheme or transaction for the purpose of the ‘at the expense of’ inquiry, on the basis that to consider each individual transaction separately would be unrealistic. There are also situations where the defendant receives property from a third party into which the claimant can trace an interest. Since the property is, in law, the equivalent of the claimant’s property, the defendant is therefore treated as if he had received the claimant’s property. [49] A different type of situation is typified by the case where the claimant discharges a debt owed by the defendant to a third party. Although it is the third party creditor who receives the payment from the claimant, the defendant is directly enriched, since the payment discharges his debt: the enrichment is not the payment

which the third party receives, but the discharge which the defendant receives. Where the transfer of value is defective, and the enrichment is consequently unjust, the law reverses it, as far as possible, by subrogating the claimant to the rights formerly held by the third party (as was explained, for example, by Walton J in Burston Finance Ltd v Speirway Ltd [1974] 1 WLR 1648, 1652). There are many variations on the type of situation where equitable subrogation is an appropriate remedy to reverse or prevent unjust enrichment. The remedy differs from restitution, in that it does not have the effect of restoring the parties to their pre-transfer positions, but it is the most practicable means of reversing or preventing unjust enrichment in the types of situation where it is appropriate. [50] It has often been suggested that there is a general rule, possibly subject to exceptions, that the claimant must have directly provided a benefit to the defendant. The situations discussed in the two preceding paragraphs can be reconciled with such a rule, if it is understood as encompassing a number of situations which, for the purposes of the rule, the law treats as equivalent to a direct transfer, in the sense that there is no substantive or real difference. So understood, the suggested rule is helpful. It may (continued)

[page 120] nevertheless require refinement to accommodate other apparent exceptions, and it would be unwise at this stage of the law’s development to exclude the possibility of genuine exceptions, or to rule out other possible approaches. [51] Where, on the other hand, the defendant has not received a benefit directly from the claimant, no question of agency arises, and the benefit does not consist of property in which the claimant has or can trace an interest, it is generally difficult to maintain that the defendant has been enriched at the claimant’s expense … . The

point is illustrated … by the example, discussed in Relfo, of a claimant who makes a mistaken payment to a third party, who in consequence makes a gift to the defendant out of property in which the claimant has no interest, and into which he is unable to trace. As Arden and Floyd LJJ recognised (paras 78 and 114), the claimant does not have a claim in unjust enrichment against the defendant. The claimant suffers a loss through making the payment to the third party, who is unjustly enriched at his expense. A claim in unjust enrichment therefore lies against the third party (subject to any defences available). But no claim of a personal nature lies at the instance of the claimant against the defendant: the claimant has not incurred any loss through the making of the gift. Incidental benefits

[52] As explained earlier, the ‘at the expense of’ requirement is not satisfied merely by the direct receipt of a benefit. The claimant must also incur a loss through the provision of the benefit. As Lord Clyde put it in Banque Financière, in the passage cited at para 44 above, ‘the plaintiff should have sustained a loss through the provision of something for the benefit of some other person’. That requirement will not normally be satisfied where the provision of the benefit was merely an incidental or collateral result of his expenditure. (In practice, situations where the defendant has received a benefit merely as an incidental consequence of the claimant’s pursuit of some other objective are also often situations in which the enrichment of the defendant is not in any event unjust.) In such a situation, the claimant may have received the consideration for which he bargained as the counterpart of his own expenditure, and in that event will not usually have suffered any loss. Even if he has incurred a loss, it will not normally have arisen through his provision of something for the benefit of the defendant, since the benefit received by the defendant will have been merely incidental or collateral to the reason why the expenditure was incurred. A ‘but for’ causal connection between the claimant’s being worse off and the defendant’s being better off is not, therefore, sufficient in itself to constitute a transfer of value.

[53] The need for the claimant to suffer a loss through the provision of something for the benefit of the defendant is illustrated by the Ruabon case, which concerned a ship which had been damaged during a voyage covered by a policy of marine insurance. She was put into dry dock for repairs at the expense of the insurers. The owners took advantage of her being in dry dock to have her surveyed for the purpose of renewing her Lloyds classification. There was no consequent increase in dock expenses. Even if the insurers might be regarded as having provided a benefit to the owners (by enabling them to have the vessel surveyed without themselves incurring the expense of putting her into dry dock), the insurers incurred no loss through the provision of that benefit: their expenses were not increased, and they received the consideration for which they had paid. The insurers’ claim for a contribution towards their expenses, on the basis that the owners had benefited from it, was rejected. Lord Macnaghten put the point in a nutshell: ‘there is no principle of law which requires that a person should contribute to an outlay merely because he has derived a material benefit from it’ (p 15) … [55] Another illustration of the need for a loss to be incurred through the provision of the benefit … is the case of Edinburgh and District Tramways Co Ltd v Courtenay 1909 SC 99 … . The Lord President illustrated his opinion with an illuminating example: One man heats his house, and his neighbour gets a great deal of benefit. It is absurd to suppose that the person who has heated his house can go to his neighbour and say — ‘Give me so much for my coal bill, because you have been warmed by what I have done, and I did not intend to give you a present of it.’ (p 105) … Economic reality

[59] Nor is the ‘at the expense of’ requirement satisfied by a connection between the parties’ respective benefit and loss merely as a matter of economic or commercial reality. Economic reality is not only a ‘somewhat fuzzy concept’, as Moses LJ described it in

[2014] 1 WLR 854, para 62, but one which is difficult to apply with any rigour or certainty in this context, or consistently with the purpose of restitution on the ground of unjust enrichment. An inquiry into where the economic burden of an unjust Menelaou

[page 121] enrichment has fallen is liable to be a very complex undertaking, especially where there is a chain of suppliers and consumers. The supplier who passes on a tax or other charge by increasing the price of his goods or services might be thought to have shifted the economic burden, but his increased prices may have an adverse impact upon his sales, and accordingly upon the profitability of his operations. Furthermore, in a situation where numerous factors affect the prices which he charges, it may be far from easy to decide to what extent the economic burden of the tax has been reflected in the price charged. Deciding whether the economic burden of an unjust enrichment has been passed on has been described as virtually unascertainable (Hanover Shoe Inc v United Shoe Machinery Corpn (1968) 392 US 481, 493) and a near impossibility (British Columbia v Canadian Forest Products Ltd [2004] 2 SCR 74, para 205). [60] A more fundamental difficulty with an approach based on economic reality arises from the fact that the purpose of restitution is not to compensate for loss, but to reverse the defective transfer. Looking to see who has suffered an economic loss is therefore not, in principle, the correct way of identifying the appropriate claimant. Indeed, even in tort law, which is concerned with compensation for loss, the court is not concerned with where the economic burden of the tort may ultimately have fallen as a matter of economic reality. Co-ordinated transactions

[61] There are, on the other hand, cases in which the court has referred to ‘reality’ in a different sense. These are cases in which, for the purpose of answering the ‘at the expense of’ question, the

court has treated a set of related transactions, operating in a coordinated way, as forming a single scheme or transaction, on the basis that to answer the question by considering each of the individual transactions separately would be unrealistic. [63] The case of Menelaou provides [an] … illustration … [66] … Lord Clarke considered that the conclusion that there had been a transfer of value between the bank and the defendant gave effect to ‘the reality of the transaction’, notwithstanding the absence of a direct payment by the former to the latter (para 33). Lord Neuberger agreed, stating: [T]here was in reality a single transaction, and it was from that transaction that [the defendant] directly benefitted, even though the benefit was effected at the direction of the Menelaou parents. The benefit to [the defendant] was direct because it arose as the immediate and inevitable result of the very transaction to which she was party and which gave rise to the unjust enrichment. (para 73) ‘At the expense of’ in the present case …

[71] Returning … to the question whether the unjust enrichment of the Commissioners was at the expense of the Lead Claimants, and focusing on whether there was a transfer of value from the Lead Claimants to the Commissioners, the answer is in the negative. There was a transfer of value, comprising the notional £100, from the Lead Claimants to the Managers, under the contract between them. It was defective, because it was made in performance of a contractual obligation which was mistakenly believed to be owed. There was a subsequent transfer of value, comprising the notional £75, from the Managers to the Commissioners. It was also defective, because it was made in compliance with a statutory obligation which was inapplicable because it was incompatible with EU law. These two transfers cannot be collapsed into a single transfer of value from the Lead Claimants to the Commissioners. [72] That follows from a number of considerations. First, the Lead

Claimants do not challenge the judge’s rejection of a connection between the payments made by the Lead Claimants and the payments received by the Commissioners based on agency. The intervention of the Managers cannot therefore be disregarded on the basis that they were in law the proxy of one of the other parties. Secondly, since the payments made by the Lead Claimants formed part of the Managers’ general assets, to do with as they pleased, it is impossible to trace those payments into the payments subsequently made by the Managers to the Commissioners, and so to regard the Commissioners as having benefited from the receipt of property in which the Lead Claimants had an interest. Thirdly, the fact that there were two separate transactions — first, between the Claimants and the Managers, and secondly between the Managers and the Commissioners — is not in this context something which can be disregarded. In particular, there is no question of the transactions being a sham or involving an artificial step, or of their comprising a single scheme. The first transfer did not even bring about the second transfer as a matter of causation: the judge’s rejection of a ‘but for’ causal connection between the two transfers is not challenged. (continued)

[page 122] The Lead Claimants rely on a connection established by commercial or economic reality. But, for the reasons already explained, the fact that, as a matter of economic or commercial reality, the Lead Claimants bore the cost of the undue tax paid by the Managers to the Commissioners does not in itself entitle them to restitution from the Commissioners. [73] It follows that the Lead Claimants did not in principle have any right to restitution against the Commissioners. They did, on the other hand, have a right to restitution against the Managers.

Notes and questions 1. The claims were also rejected on the ground that restitution at common law was excluded by the existence of the statutory refund system, which was to be taken as exclusively governing refund entitlements. 2. Did the claimants’ claims fail for lack of a causal relationship between the HMRC’s gains and its own payments, or for some other reason? If the latter, what other reasons are supplied by the Court as to why claims against an indirect recipient of a benefit should ordinarily fail? 3. What exceptions does the Court identify to the general rule that restitution is not available against an indirect recipient? Why did the Menelaou case (3.61C) fall within one of these exceptions, when the instant case did not? 4. How did the claimants seek to argue that HMRC was enriched at its expense ‘as a matter of economic reality’? Why was this argument rejected by the Court? 5. At [52]–[55], the Court indicates (obiter) that even where D receives a benefit directly from P and the benefit is causally related to P’s loss in accordance with the ‘but for’ test, P’s claim will not always succeed. What is the explanation for this? Is the extracted example concerning heating at [55] any reason to doubt the utility of the ‘but for’ test?

Claims in respect of assets never owned: interceptive subtraction 3.63

In another type of problem case, the money or

property that D received never actually belonged to P, but was ‘intercepted’ en route to her. The simplest example is where a third party, X, gives $100 to D to give to P, but D pockets it instead:

The real problem in this type of case again has little to do with causation. We know what caused D’s gain. Rather, the key issue is whether P is the proper person to sue for it, when D obtained it not from the existing stock of P’s assets but from those of X. Can D’s gain be said to have been at P’s expense, as opposed to the expense of X? In the following extract, Birks maintains that P can claim D’s gain even in this type of case, provided it is legally or factually certain that the money received by D was destined for P.36 D’s gain is at P’s expense because it has been ‘interceptively subtracted’ from P. [page 123]

3.64E Birks, Unjust Enrichment 2nd ed, pp 75–8 (some references omitted) In the standard case the asset moves from the claimant’s possession to that of the defendant. Is it sufficient that it was on its way from a third party to the claimant when the defendant

intercepted it? Where there is an interceptive subtraction the enriching assets are never reduced to the ownership or possession of the claimant. They will have been on their way, in fact or law, to the claimant when the defendant intercepted them. The choice has gone in favour of accepting the sufficiency of interceptive subtractions, albeit without much analysis and hence with many untidy loose ends. (a) Illustrations One early example was where D usurped an office of profit which ought to have been occupied by C. D thus received fees which ought to have been paid to C. C could claim those profits intercepted by D. In 1998 in Montana v Crow Tribe of lndians the Supreme Court of the United States upheld the principle, although on the facts the majority found that it did not apply, that where authority D has wrongfully levied a tax payable to authority C, C can recover from D. [523 US 696 (1998) 715–16] Similarly, a self-appointed executor or administrator who receives what was due to the estate is liable to make restitution to the incoming rightful personal representative. [Jacob v Allen (1703) 1 Salk 27, 91 ER26; Yardley v Arnold (1842) C&M 434, 174 ER 577] Again, if D receives rent from X which was due to C, he will have to account to C. [Official Custodian for Charities v Mackey (No 2) [1985] 1 WLR 130, where Nourse J acknowledged the principle but found it not to apply on the particular facts.] Of the same kind but rather more difficult are the cases, which are discussed by Professor Chambers, of land intended to be conveyed by X to C being mistakenly conveyed to D. In such a case C has sometimes been allowed to claim against D. However, the claimant has a heavy onus when his case rests on a factual rather than a legal inevitability the enrichment was en route to him. In Hill v van Erp [(1997) 188 CLR 159 (HCA)] a solicitor’s negligence caused a will to be invalid. The solicitor was liable in tort, but it was said that the intended beneficiaries could not sue the next of kin to whom the estate had gone. They could not say that those who benefited under the intestacy had intercepted

assets which were on their way to those who, but for its invalidity, were entitled under the will. If the boot had been on the other foot and the money been paid out under the invalid will, the mispaid beneficiaries would have been held to have intercepted money destined to those who were indisputably entitled as a matter of law, as in Ministry of Health v Simpson. [[1951] AC 251 (HL)] There, failing to notice the nullity of the bequest, the executors of Caleb Diplock had paid to charities sums which ought as a matter of law to have gone to the next of kin. The next of kin recovered directly from the charities. The money which the charities received was, as a matter of law, destined to go to them. Professor Lionel Smith has exposed difficulties in all these cases, arguing that, where the defendant has received from a third party money which the claimant says should have come through to him, the claimant should never be allowed to recover if his rights against the third party are still intact. He points out that if executors pay the wrong people they remain liable to pay the true beneficiary. Hence those who ought to have been paid cannot be said to have suffered an interceptive subtraction, because they are no less entitled to be paid by the executors after the misdirection than they were before. Ministry of Health v Simpson can only be explained, in his view, by understanding the Court to have complied with the requirement that the next of kin’s continuing claim against the executors be discharged by insisting on prior exhaustion of all possible remedies against them. That requirement has few defenders. It is incompatible with the principle cuius commodum eius periculum (the one who takes the advantage also bears the risk). The money which the executors had paid to the charities, viewed as a mistaken payment, was at the time irrecoverable by the executors themselves, since in those days a payer had to bear the risk of a mistake of law. But the executors’ liability to the next of kin should have been regarded as secondary to that of the charities, who enjoyed all the associated benefits,

with the consequence that, in respect of such sums as they repaid the next of kin, the executors should have been entitled to reimbursement from the charities, just as a surety is entitled to reimbursement from a principal debtor. That in turn makes nonsense of the requirement that the next of kin recover from the charities only those sums irrecoverable from the executors … (continued)

[page 124] (b) False Interceptions Sometimes what looks at first sight to be a clear case of interceptive subtraction turns out on closer inspection not to be. Suppose that, intending a gift to you standing below, I throw down a bundle of notes from an upper window, expecting you to catch them. D jumps up to intercept them. At law the notes are mine, since you have not obtained the possession which is essential to the perfection of the gift by delivery. But equity raises a beneficial interest in you as soon as I have done all that lies in me to do in order to transfer the legal title. [Re Rose [1952] Ch 499] The physical interception comes a second or two later, when you already have a proprietary interest in the notes. The subtraction is not interceptive. The money is yours and is taken from you. Again, suppose that I give X £50 to give to you. We might say that that money is now on its way to you. However, if X absconds with it, the question whether he is enriched at my expense or, interceptively, from you admits of no natural answer. The law therefore adopts an inevitably artificial criterion. The claim stays with me until X has attorned to you, which means until X has informed you that he is holding for you. But the attornment passes the property at law with the result that when X pockets the money the subtraction is no longer interceptive. He has taken the money from you.

Notes and questions 1. If Birks’s theory of interceptive subtraction is accepted, it seems to mean that D’s unjust gain can be at the expense of more than one person. Is this logically possible? Even if it is possible as a matter of logic, is it desirable in principle that there might be more than one potential restitutionary claimant? For criticism, see further L Smith, ‘Three-Party Restitution: A Critique of Birks’ Theory of Interceptive Subtraction’ (1991) 4 OJLS 480; M McInnes, ‘Interceptive Subtraction, Unjust Enrichment and Wrongs — A Reply to Professor Birks’ [2003] 62 CLJ 697. 2. As Birks indicates, if P can establish equitable ownership of the asset or money obtained by D, the problem discussed above simply disappears. There has then been an actual subtraction from P, because he owned the property diverted, even if he never actually factually possessed it. 3. Should P be entitled to sue (a) only when he owned the property intercepted; (b) when he had a personal right to it under a contract or debt; or (c) when he had no prior legal entitlement at all to it, but it is factually certain that he would have obtained it, if it had not been intercepted by D? 3.65C Huntley Management Ltd v Australian Olives Ltd [2010] FCAFC 98 at [34]–[35], [41]–[48], [50]–[52] (some references omitted) The defendant was a company formerly responsible for managing a number of olive investment schemes. At the beginning of each year it had been paid an annual

management fee by investors. It was replaced in 2008 by the plaintiff. The plaintiff claimed a proportion of the management fees the defendant had received from the investors, on the basis that they were referable to parts of the year when it had been running the schemes. Its claim for restitution was dismissed. Jacobson, Gilmour and Foster JJ: [34] … Huntley submitted that it had a cause of action against AOL for money had and received in respect of that part of the management fees for Projects 1, 2 and 6 which was referable to the period of time when Huntley was the responsible entity of those projects. Huntley submitted that this cause of action was ‘independent of any action that the members might have’. [35] There are two fundamental problems with this submission: … (b) … Huntley was unable to point to any authority which supports the proposition that an action for money had and received could be brought by someone other than the person or entity which had made the payment in respect of which suit is brought …

[page 125] [41] Huntley ultimately submitted that: While claims for money had and received are generally available to the payer of the funds, there is no reason in principle why a third party who, pursuant to an obligation owed to the payer, has performed the duties to which the payment relates, should not be able to recover the money directly from the recipient. Such a state of affairs is supported by equity’s preference for substance over form: Roxborough v Rothmans of Pall Mall at [92] per Gummow J… .

[42] We are of the opinion that Huntley’s submissions are incorrect and should be rejected. If Huntley’s submissions were correct, a party who was not the payer of funds would have an action for money had and received which would stand in competition with the conventional form of the action at the suit of the paying party. This cannot be correct. For example, what would be the position if the investors in Projects 1, 2 and 6 had consciously taken the view that AOL was entitled to keep the whole of the amount of management fees paid to it by those investors and had unanimously passed a resolution to that effect? In those circumstances, could Huntley seriously suggest that it could none the less bring the present claims? [43] Further, there is no authority which supports the submissions made by Huntley. There is, however, authority which conflicts with those submissions. [44] In Kleinwort Benson Ltd v 392–3 Evans LJ said: …

Birmingham City Council

[1997] QB 380 … [at]

I can accept Mr Underhill’s submission that the phrase ‘at the expense of’ forms part of the definition of a restitutionary claim and that the central issue is whether that has to be interpreted by reference to the payer/ payee relationship alone, as distinct from other parts of what he calls the overall transaction. But I have no doubt that the former interpretation is correct. This is because the payee’s obligation, which is correlative to the payer’s right to restitution, is to refund or repay the amount which he has received and which it is unjust that he should keep. ‘At his expense’, in my judgment, serves to identify the person by or on whose behalf the payment was made and to whom repayment is due … . That person, having made the payment, is necessarily out of pocket to that extent, and the defendant’s obligation is to replenish his pocket when the circumstances are such that the money should be returned ….

[45] Saville LJ agreed with Evans LJ and with Morritt LJ. At QB 395; All ER 744, his Lordship said: The expression ‘at the payer’s expense’ is a convenient way of describing the need for the payer to show that his money was used to pay the payee. Thus there may well be cases where this cannot be shown, where in truth, for example, the payer was only the conduit through which the funds of others passed to the payee. [47] In his judgment, [Morritt LJ] … discussed authorities from other jurisdictions. The fundamental premise upon which that discussion proceeded was that it is the party deprived of the payment who is the proper plaintiff in an action for money had and received. [48] In the course of summarising the effect of the various authorities which his Lordship discussed, his Lordship went on to say (at QB 400; All ER 749): Second, the words ‘at the expense of the plaintiff’ on which the authority placed such reliance do not appear in a statute and should not be construed or applied as if they did. In my view they do no more than point to the requirement that the immediate source of the unjust enrichment must be the plaintiff. … [50] In the present case, the contentious payments claimed by Huntley were made to AOL by the investors in Projects 1, 2 and 6 at a time when AOL was the responsible entity of those projects and at a time when Huntley was not on the scene. [51] Huntley was not the victim of some interception of its funds … . [52] Huntley’s claimed entitlement does not arise from the circumstance that it was the payer of the management fees in question but rather arises solely from the circumstance that it became the responsible entity of Projects 1, 2 and 6 part way through the year in respect of which the payments were made.

Notes and questions 1. The claim was also rejected on the grounds that (a) it had not been pleaded; and (b) no unjust factor was made out because the sums paid were not apportionable and the consideration for them had therefore not totally failed. 2. If the investors had intended to pay the fees to the plaintiff, but they had instead been collected by the defendant, would the result have been any different?

1.

2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Commissioners for Her Majesty’s Revenue and Customs v The Investment Trust Companies (in liq) [2017] UKSC 29 at [41] per

Lord Reed (Lords Neuberger, Mance, Carnwath and Hodge agreeing). J Edelman and E Bant, Unjust Enrichment (2nd ed, Hart, Oxford, 2016), Ch 6. This sense is relevant in the cases considered in Chapters 4–9, 11. This sense is relevant in the cases considered in Chapter 10. Pettkus v Becker (1980) 117 DLR (3d) 257 (SCC). See 13.42–13.46C. See 3.20. See 3.16–3.19C. Exall v Partridge (1799) 8 Term Rep 308; 101 ER 1405. See 2.45. This is the case at least where the opportunity is a financial one. See, for example, Chaplin v Hicks [1911] 2 KB 786 (Eng CA); Hall v Myrick (1957) 2 QB 455 (QBD); Kitchen v Royal Air Forces Association [1958] 2 All ER 241 (Eng CA);

12. 13. 14. 15.

16.

17.

Golec v Scott [1995] 38 NSWLR 168. Edelman and Bant, Unjust Enrichment (2nd ed), pp 59–62.

See 1.6. See further P Matthews, ‘Freedom, Unrequested Improvements and Lord Denning’ [1981] 40 CLJ 340. Falcke v Imperial Insurance Co (1886) 34 Ch D 234 at 248 (Eng CA) (Bowen LJ). Ministry of Defence v Ashman (1993) 66 P&CR 195 (Eng CA); McDonald v Coys of Kensington [2004] EWCA Civ 47 at [28] (Mance LJ); Sempra Metals Limited v HM Inland Revenue Commissioners [2007] UKHL 34; Benedetti v Sawiris [2013] UKSC 50. See further 3.44–3.46C. Since most plaintiffs in fact value things in the way that reasonable people do, it has been suggested that an evidential presumption of objective value should apply, unless the plaintiff is able to rebut it on the facts: K Barker, ‘Riddles, Remedies and Restitution: Quantifying Gain in Unjust Enrichment Law’ (2001) 54 CLP 255, pp 269–71. M McInnes, ‘Enrichment Revisited’ in J Neyers, M McInnes and S Pitel (eds), Understanding Unjust Enrichment (Hart, Oxford, 2004), Ch 8; J Edelman, ‘The Meaning of Loss and Enrichment’ in R Chambers, C Mitchell and J Penner (eds), Philosophical Foundations of the Law of Unjust Enrichment (OUP, Oxford, 2009), pp 223–39; Lodder, Enrichment in the Law of Unjust Enrichment and Restitution (Hart, Oxford, 2012), Ch 6; Edelman and Bant, Unjust Enrichment (2nd ed), Ch 4, esp. at pp 62–77, 81–4. This approach needs to explain how preference can be relevant to the fact, but not the extent, of a person’s enrichment: Barker, (2001) 54 CLP 255, p 272 (‘this view is very difficult to sustain without self-contradiction’). S Scott, ‘Subjective Devaluation: When is an Enrichment

18.

19. 20. 21. 22. 23.

24.

not an Enrichment’ (1993) NZULR 246. This approach appears to have been adopted in Canada: Kerr v Baranow [2011] 1 SCR 269 at [37], [41], [45]. See also Lord Reed in Benedetti v Sawiris [2013] UKSC 50 at [118] (3.46C). There is a rare exception, where the defendant was acting in good faith and effectively had no choice about whether or not to commit the wrong: see Ministry of Defence v Ashman (1993) 66 P&CR 195 (Eng CA) (trespass). [2008] HCA 27 at [79]. A Burrows, The Law of Restitution (3rd ed, OUP, Oxford, 2011), p 55–6. Angelopoulos v Sabatino [1995] 65 SASR 1 (7.38C); Van den Berg v Giles [1979] 2 NZLR 111. (1987) 162 CLR 221 at 257. See, for example, G Tolhurst and J Carter, ‘Acceptance of Benefit as a Basis for Restitution’ (2002) 18 JCL 52. Judicial support has been significant, but most of it is technically obiter, cases being explicable on other grounds: Steele v Tardiani (1946) 72 CLR 386 (HCA) (7.27C); Angelopoulos v Sabatino [1995] 65 SASR 1 (SASC) (7.38C); Iezzie Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350 (QCA); Bridgewater v Griffiths [2000] 1 WLR 524; Damberg v Damberg (2001) 52 NSWLR 492 at 529– 30 (NSWCA); Andrew Shelton & Co Pty Ltd v Alpha Health Care Ltd [2002] 5 VR 577 at 600–1 (VSC); Rowe v Vale of White Horse District Council [2003] 1 Lloyd’s Rep 418 (QBD Admin Court); McDonald v Coys of Kensington [2004] EWCA Civ 47 (Eng CA); Alma Hill Constructions Pty Ltd v Onal [2007] VSC 86 at [57] (VSC); Roy v Lagona [2010] VSC 250 at [339] (VSC). Monks v Poynice Pty Ltd (1987) NSWLR 662 at 664; Andrew

Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248 at [100]–[104]; Atco Controls Pty Ltd (in liq) v Stewart (in his capacity as liquidator of Newtronics Pty Ltd) [2013] VSCA 132 at [90] per

25. 26. 27. 28.

Warren CJ, [185] per Redlich JA. [2013] VSCA 132 at [90]. See also at [185] per Redlich JA. The decision was reversed: [2014] HCA 15. BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783 at 799 per Goff J. For example, Hughes v Molloy [2005] VSC 240; Greenwood v Bennett [1973] 1 QB 195. ‘Necessary expenditure’ was argued unsuccessfully in Peel (Regional Municipality) v Canada [1992] 3 SCR 762 and Procter & Gamble Philippine Manufacturing Corpn v Peter Cremer GmbH & Co (The Manila) [1988] 3 All ER 843, but see CravenEllis v Canons Ltd [1936] 2 KB 403; Monks v Poynice Pty Ltd

29. 30. 31.

(1987) NSWLR 662. Edelman and Bant, Unjust Enrichment (2nd ed), pp 130–8. Edelman and Bant, Unjust Enrichment (2nd ed), pp 130, 137–8. For a comprehensive examination of the attribution rules implicit in this requirement, see E Ball, Enrichment at the Plaintiff’s Expense: Attribution Rules in Unjust Enrichment

32.

33.

(Hart, Oxford, 2016). As Ball points out, ibid, p 128, it is not quite the same, since there is no rule that the gain must come about after the ‘unjust’ loss. For this reason, he prefers to describe the necessary relationship between gain and loss as a ‘counterfactual’ one (in the sense that the gain would not exist but for the loss), not a strictly ‘causal’ one. See Chapter 14. Note that while these rules can assist in establishing causation, they are not strictly necessary and proof of a causal link may sometimes be possible

34. 35. 36.

without recourse to them. [2015] UKSC 66 at [27]. At [24]. The same test is implicit in the approach of Lord Neuberger at [66]. Note that this in itself may be hard to establish. It requires proof of what would have happened to the property, had D not intercepted it.

[page 127]

4

Defects in legal capacity CHAPTER SUMMARY

Introduction H L Hart, ‘Legal Responsibility and Excuses’ in Punishment and Responsibility: Essays in the Philosophy of Law Brusewitz v Brown

The effect of incapacity on the passing of title Hall v Wells Great Eastern Railway Co v Turner

The Incapacity of Minors Minors’ contracts at common law Bruce v Warwick Nash v Inman

4.1 4.7E 4.8C 4.9 4.11C 4.12C 4.13 4.16C 4.16C 4.17C

Recovery at common law of benefits conferred by a minor 4.18C Valentini v Canali 4.18C Steinberg v Scala (Leeds) Ltd 4.19C Statutory rights of restitution 4.20E Minors Contracts (Miscellaneous Provisions) Act 1979 (SA) ss 4, 6, 7 4.20E Minors’ Contracts Act 1969 (New Zealand) ss 5, 6, 7 4.21E

The Mentally Disordered Guardianship Act 1987 (NSW) ss 3, 16, 21, 21C Guardianship and Administration Act 1986 (Vic) ss 3, 24 Ultra Vires Transactions Private bodies

4.22 4.23E 4.24E 4.25C 4.25C

The Directors, etc, of the Ashbury Railway Carriage and Iron Co v Riche 4.25C

Corporations Act 2001 (Cth) ss 124, 125 Public bodies Auckland Harbour Board v R Attorney-General v Gray

4.26E 4.27C 4.27C 4.28C

[page 128]

INTRODUCTION 4.1 In most Western legal systems, legal responsibility is predicated upon the voluntariness of the choice or action of the individual. Although there are notable exceptions,1 in general an individual is held both morally and legally responsible only for those choices that are the product of his or her free will. In the common law, the link between responsibility and voluntariness manifests itself in those rules and doctrines, such as duress and mistake, which

recognise that on occasion the quality of a person’s consent no longer supports the implication of responsibility. This in turn reflects the fundamental commitment in Western legal and political thought to respect for individual autonomy. An important corollary of this respect, and of the link between responsibility and voluntariness, is that the individual will generally not be held responsible where the apparent ‘choice’ was made as a result of some factor regarded as inimical to the notion of voluntariness.2 4.2 While in general the law may assume a manifestation of consent to reflect an exercise of free will, there are nevertheless circumstances where that assumption must give way to reality. Of these circumstances, perhaps the most compelling cases are those of coercion and ignorance.3 There is near universal agreement that the use of illegitimate pressure to bring about an individual’s consent means that consent apparently given does not support the inference of responsibility, and where an individual is, for example, completely ignorant that his or her property has fallen into another’s hands, that transfer cannot be an expression of consent or free will. In a similar way, but perhaps less extreme, the link between an apparent manifestation of consent and voluntariness is also challenged where the individual in question is labouring under a mistake,4 or where the individual’s consent was made subject to a condition which it turns out was not fulfilled.5 4.3 The concept of voluntariness also speaks to the inherent qualities of the individual. Voluntariness demands that we have the mental or cognitive capacity to make rational choices about our own best interests. In the common

law,6 all adult persons are prima facie assumed to possess sufficient capacity to justify the imposition of responsibility for their choices. 4.4 The assumption about judgemental capacity must nevertheless on occasion give way in the face of evidence of diminished capacity. In some cases, discussed in Chapter 9, the assumption that the individual possesses the judgemental capacity sufficient to justify the imposition of responsibility is displaced only in individual cases where the conditions necessary to support the imposition of responsibility are actually proven to be lacking. This includes cases where the plaintiff placed trust in another to a degree inconsistent with true voluntariness (undue influence) or where the plaintiff was labouring under some special disadvantage that compromised his or her ability to assess where his or her best interests lay (unconscionable bargain). 4.5 The focus of this chapter, however, is upon what, in one sense, is the most extreme case of an apparent expression of consent that does not entail responsibility. In this case, the law [page 129] completely denies the individual the capacity to make a legally effective expression of consent. The law may thus refuse to give legal effect to consent actually and freely given by a minor, one who is mentally defective, or a registered company. The denial of legal capacity in these cases rests on a policy determination that, in respect of certain categories of

persons, the risk of those persons being abused is too high to permit the usual presumption of legal capacity to apply. In the case of minors and the mentally disordered, the risk lies in the abuse by the other party to the transaction of the incapax’s lack of judgement, foresight or experience. In the case of companies, full legal capacity was traditionally withheld through the ultra vires doctrine to prevent abuse by corporate management of shareholders and creditors.7 4.6 Although the decision that a person should be denied legal capacity rests on protective policy grounds, as a matter of principle it is the plaintiff’s legal inability to consent to the transfer of enrichment, not those policy grounds, which justifies restitution.8 Once it is established that the plaintiff could not legally consent to the transfer, regardless of the reasons for the denial of legal capacity, the restitution of benefits transferred is justified by the law’s concern to protect the plaintiff from involuntary dispositions. In most Western legal systems, respect for personal autonomy is of paramount importance. The same consideration underpins the relatively recent recognition of a defence of change of position to restitutionary claims. This is discussed further in Chapter 12. 4.7E

H L Hart, ‘Legal Responsibility and Excuses’ in

Punishment and Responsibility: Essays in the Philosophy of Law

Clarendon, Oxford, 1968, pp 28–30, 44–5 (references omitted) It is characteristic of our own and all advanced legal systems that the individual’s liability to punishment, at any rate for serious crimes carrying severe penalties, is made by law to depend, among

other things, on certain mental conditions. These conditions can best be expressed in negative form as excusing conditions: the individual is not liable to punishment if at the time of his doing what would otherwise be a punishable act he was unconscious, mistaken about the physical consequences of his bodily movements or the nature or qualities of the thing or persons affected by them, or, in some cases, if he was subjected to threats or other gross forms of coercion or was the victim of certain types of mental disease. This is a list, not meant to be complete, giving broad descriptions of the principal excusing conditions; the exact definition of these and their precise character and scope must be sought in the detailed exposition of our criminal law. If an individual breaks the law when none of the excusing conditions are present he is ordinarily said to have acted of ‘his own free will’, ‘of his own accord’, ‘voluntarily’; or it might be said, ‘He could have helped doing what he did’. If the determinist has anything to say on this subject, it must be because he makes two claims. The first claim is that it may be true — though we cannot yet show and may never be able to show that it is true — that human conduct (including in that expression not only actions involving the movements of the human body but its psychological elements or components such as decisions, choices, experiences of desire, effort, etc) are subject to certain types of law, where law is to be understood in the sense of a scientific law. The second claim is that, if human conduct so understood is in fact subject to such laws (though at the present time we do not know it to be so), the distinction we draw between one who acts under excusing conditions and one who acts when none are present becomes unimportant, if not absurd. Consequently, to allow punishment to depend on the presence or absence of excusing conditions, or to think it justified when they are absent but not when they are present, is absurd, meaningless, irrational, or unjust, or immoral, or perhaps all of these. (continued)

[page 130] My principal object in this paper is to draw attention to the analogy between conditions that are treated by criminal law as excusing conditions and certain similar conditions that are treated in another branch of the law as invalidating certain civil transactions such as wills, gifts, contracts, and marriages. If we consider this analogy, I think we can see that there is a rationale for our insistence on the importance of excusing conditions in criminal law that no form of determinism that I, at any rate, can construct could impugn; and this rationale seems to me superior at many points to the two main accounts or explanations which in Anglo-American jurisprudence have been put forward as the basis of the recognition of excusing conditions in criminal responsibility. … It is at this point that I would stress the analogy between the mental conditions that excuse from criminal responsibility and the mental conditions that are regarded as invalidating civil transactions such as wills, gifts, contracts, marriages, and the like. These institutions provide individuals with two inestimable advantages in relation to those areas of conduct they cover. These are (1) the advantage to the individual of determining by his choice what the future shall be and (2) the advantage of being able to predict what the future will be. For these institutions enable the individual (1) to bring into operation the coercive forces of the law so that those legal arrangements he has chosen shall be carried into effect and (2) to plan the rest of his life with certainty or at least the confidence (in a legal system that is working normally) that the arrangements he has made will in fact be carried out. By these devices the individual’s choice is brought into the legal system and allowed to determine its future operations in various areas thereby giving him a type of indirect coercive control over, and a power to foresee the development of, official life. This he would not have ‘naturally’; that is, apart from these legal institutions. In brief, the function of these institutions of private law is to

render effective the individual’s preferences in certain areas. It is therefore clear why in this sphere the law treats the mental factors of, say, mistake, ignorance of the nature of the transaction, coercion, undue influence, or insanity as invalidating such civil transactions. For a transaction entered into under such conditions will not represent a real choice: the individual might have chosen one course of events and by the transaction procured another (cases of mistake, ignorance, etc), or he might have chosen to enter the transaction without coolly and calmly thinking out what he wanted (undue influence), or he might have been subjected to the threats of another who had imposed his choices (coercion). To see the value of such institutions in rendering effective the individual’s considered and informed choices as to what on the whole shall happen, we have but to conduct the experiment of imagining their absence: a system where no mental conditions would be recognised as invalidating such transactions and the consequent loss of control over the future that the individual would suffer. That such institutions do render individual choices effective and increase the powers of individuals to predict the course of events is simply a matter of empirical fact, and no form of ‘determinism’, of course, can show this to be false or illusory. If a man makes a will to which the law gives effect after his death, this is not, of course, merely a case of post hoc: we have enough empirical evidence to show that this was an instance of a regularity sufficient to have enabled us to predict the outcome with reasonable probability, at least in some cases, and to justify us, therefore, in interpreting this outcome as a consequence of making the will. There is no reason why we should not describe the situation as one where the testator caused the outcome of the distribution made. Of course the testator’s choice in this example is only one prominent member of a complex set of conditions, of which all the other members were as necessary for the production of the outcome as his choice. Science may indeed show (1) that this set of conditions also includes conditions of which we are at the present moment quite ignorant and (2) that the testator’s choice

itself was the outcome of some set of jointly sufficient conditions of which we have no present knowledge. Yet neither of these two suppositions, even if they were verified, would make it false to say that the individuals’ choice did determine the results, or make illusory the satisfaction got (a) from the knowledge that this kind of thing is possible, (b) from the exercise of such choice. And if determinism does not entail that satisfactions (a) or (b) are illusory, I for one do not understand how it could affect the wisdom, justice, rationality, or morality of the system we are considering.

4.8C Brusewitz v Brown [1923] NZLR 1106 at 1109 (NZSC) The plaintiff’s husband was a chronic alcoholic who, shortly before his death, transferred practically all his property to the defendant in consideration of an annuity. The husband was [page 131] not independently advised as to the wisdom of the transaction. The plaintiff successfully claimed to have the transfer set aside. Salmond J: The mere fact that a transaction is based on an inadequate consideration or is otherwise improvident, unreasonable, or unjust is not in itself any ground on which this Court can set it aside as invalid. Nor is such a circumstance in itself even a sufficient ground for a presumption that the transaction was the result of fraud, misrepresentation, mistake, or undue influence, so as to place the burden of supporting the transaction upon the person who profits by it. The law in general leaves every man at liberty to make such bargains as he pleases, and to dispose of his

own property as he chooses. However improvident, unreasonable, or unjust such bargains or dispositions may be, they are binding on every party to them unless he can prove affirmatively the existence of one of the recognised invalidating circumstances, such as fraud or undue influence.

The effect of incapacity on the passing of title 4.9 An important and difficult issue is the effect of the limitation of the plaintiff’s capacity on the passing of title to the asset representing the enrichment. On the one hand, the limitation of the plaintiff’s capacity may only justify setting aside the obligation. On the other hand, however, the limitation of capacity might also prevent title to the asset passing to the defendant. If the limitation of capacity were found to prevent title passing, then recovery of the value of the benefits may be more appropriately regarded as a response to, and vindication of, the plaintiff’s persisting property rights rather than to any unjust enrichment of the defendant.9 4.10 Although not free from doubt, the authorities suggest that notwithstanding the plaintiff’s lack of legal capacity, property rights can pass both to and from the incapax. Although at first glance this may seem surprising, it nevertheless seems correct as a matter of principle. The common law, along with most legal systems, draws a distinction between the agreement to transfer title and the actual conveyance of title. The former is a matter dealt with by the law of obligations, while the latter is concerned with the passing of property rights. The mere fact, therefore, that the agreement to transfer is defective does not necessarily

affect the validity of the conveyance of title. This distinction is also manifested in the law on illegal contracts, where, although the contract is defective, it is clear from cases such as Bowmakers Ltd v Barnet Instruments Ltd10 that the conveyance of title is unaffected. 4.11C Hall v Wells [1962] Tas SR 122 at 126–8 (TasSC) Burbury CJ: But in the Supreme Court of New Zealand Adams J in his judgment in Nelson Guarantee Corporation v Farrell [[1955] NZLR 405] did discuss Lush J’s proposition at some length. In that case Adams J held that upon the true construction of the terms of a contract of sale of a motor car to an infant the property in it did not pass until payment of the purchase price. The bold submission was made that as the contract was absolutely void under the Infants’ Relief Act but the motor car had been delivered to the infant under the void transaction the decision in Stocks v Wilson [[1913] 2 KB 235] required the court to hold that the property had passed notwithstanding the expressed intention to the contrary in the contract. Adams J readily rejected that submission but went on to express some views about the validity of the general proposition advanced by Lush J in Stocks v Wilson. He (ie Lush J) was dealing with a case in which the property had been meant to pass, and his meaning was that it would pass accordingly, notwithstanding the statute and notwithstanding fraud of the sort with which he was confronted. In a case of that kind there would, he considered, be no divesting of the property such as would have occurred at common law. More-over, on the facts no question of property or title arose, and the (continued)

[page 132] dictum should, in my opinion, be regarded as merely enunciating the well established rule that a contractual liability destroyed by the statute may not be reimposed in the guise of a liability in tort. That was, indeed, its only relevance in the context. I am not persuaded that Lush J’s statement of the law should be treated as obiter. His opinion that the property in the goods passed to the infant by delivery formed part of his reasoning which led him to the conclusion that the unpaid seller had a remedy equity or none at all. The infant had sold some of the goods for £30 and given a bill of sale over the rest as security for an advance of £100. Lush J held that as the infant had fraudulently misrepresented that he was of full age he was in equity liable to account to the unpaid seller for the sums of £30 and £100. Although the question of title to the goods was not contested Lush J’s judgment proceeds upon the footing that it was a correct view of the law that the infant was the owner of the goods. The proposition that the property in goods delivered under a transaction invalidated by a statute nevertheless passes to a purchaser also finds support in cases decided under statutes other than the Infants’ Relief Act. Many of these cases are referred to in Roberts v Roberts [[1957 ] Tas SR 84 at 87, 99, 100] where the Full Court had to consider the effect, of s 28 of the Hire Purchase Act 1943 providing that a hire purchase agreement entered into in contravention of certain provisions in the Act ‘shall be void except in so far as the rights of the purchaser thereunder are concerned’.

Note The Minors (Property and Contracts) Act 1970 (NSW) s 20 makes a disposition of property by a minor for consideration

presumptively valid. The Minors Contracts (Miscellaneous Provisions) Act 1979 (SA) s 7 authorises the court to grant restitution of property transferred by the minor pursuant to a contract avoided for want of capacity. 4.12C Great Eastern Railway Co v Turner (1872) 8 Ch App 149 at 152–3 (Ch CA) The chairman of the plaintiff company used the company’s money to purchase shares in another company. The shares were held in the name of the chairman. This use of the plaintiff’s funds was ultra vires. The chairman became bankrupt and the issue was whether the shares formed part of the bankrupt’s estate. Lord Selbourne LC held the shares were held on trust for the company. Lord Selborne LC: In this case, without legal authority, and therefore without the consent of the corporation, whose trustees and agents they were, the directors took a part of the company’s money, and therewith purchased a property which this contest proves to be of some value — shares in the Lynn and Hunstanton Railway Company. Those shares so bought — not a farthing of any other person’s money having contributed to the purchase — were placed in the names of three successive chairmen of the company, and were uniformly dealt with as that which they were, the property of the company. True it is that the investment was an unauthorised investment; but I entirely assent to what was said by Sir Richard Baggallay [counsel for the plaintiff], that there is no difference between an unauthorized investment of the money of a public company by its trustees, and an unauthorised investment of the moneys belonging to any other trust by the trustees of that trust. It would be monstrous — it would be extravagant to the very last degree — to say, that because the money of cestuis que trust has been laid out in an unauthorized manner, that therefore they are not to have the benefit of whatever value there is in the property bought

with their money. … Then how can it possibly be said, there being this trust created by the company’s trustees in their own wrong — binding on them, although not binding on the company — created by them, but not assented to by the company — that the company, as the true owners, have consented to allow their property to be placed in jeopardy by creating a reputed ownership in the name of its chairman? I cannot follow the proposition. While in the ordinary case of an authorized trust that order and disposition and reputed ownership which the statue contemplates are wanting, in this case of unauthorized trust the consent of the true owner, that equally essential ingredient to the creation of a reputed ownership, is much more wanting.

[page 133] Notes and questions 1. The crucial question is whether the policy or objective of the rule denying capacity extends only to the obligation or whether it also extends to the conveyance of title. In the case of minors, the defect in capacity is directed only to denying contractual capacity, leaving minors fully competent for other purposes. The limited scope of the policy behind the presumption of incapacity may also explain why it is suggested that minors are fully competent to make gifts: see Report of the Committee on the Age of Majority (Cmnd 3342, London, 1967), p 98. See also A Burrows, A Restatement of the English Law of Unjust Enrichment (OUP, Oxford, 2012), p 84. 2. The Minors (Property and Contracts) Act 1970 (NSW) is

somewhat unusual in that it deals expressly with the issue of the capacity of minors more broadly. The Act regulates ‘civil acts’ performed by minors which includes, inter alia, the disposition of property, acts done in relation to trusts and wills, the grant of any leave or licence, and the release of a cause of action. 3. Determining the ambit of the policy underpinning the ultra vires doctrine is more difficult. On the one hand, the objective of the doctrine, whether in the context of companies, incorporated societies or public bodies, may be said to be to prevent an improper transfer or use of the entity’s property and to this end the improper transfer is itself rendered void. The inability of the entity either to receive or to pass title seems, therefore, a logical consequence of this premise. On the other hand, however, it is increasingly being recognised, particularly in a public law context, that an ultra vires transaction is not wholly without effect and that unless steps are taken to set it aside the transaction will for all intents and purposes be effective. 4. How might the difficulties associated with determining the policy underpinning the rule creating the legal incapacity affect the operation of the absence of basis model of unjust enrichment (discussed in Chapter 1)? Will there be an absence of legal basis where the transferor of the enrichment lacked legal capacity where the rule denying capacity is addressed to the putative obligation pursuant to which the transfer was made, or will there only be an absence of basis where the policy underpinning the incapacity also extends to the conveyance of title to the enrichment?

5. Could the decision in Great Eastern Railway Co v Turner be seen as one based on the plaintiff company’s total lack of consent, that lack of consent being due to the ultra vires nature of the chairman’s actions? Is a transfer of the company’s assets by one acting wholly outside of the legal limits on the capacity of the company really any different to a case where X takes Y’s property without Y’s knowledge (and therefore consent)? Compare Turner to Black v S Freedman & Co (1910) 12 CLR 105, extracted at 15.37C. See also Great Investments Ltd v Warner (as liquidators of Bellpac Pty Ltd) [2016] FCAFC 85, extracted at 6.17C.

THE INCAPACITY OF MINORS 4.13 As pointed out above, prima facie all persons are vested with full legal capacity. In respect of minors,11 this presumption was displaced at common law in favour of the contrary presumption. The effect of this presumption was to render contracts made with minors [page 134] voidable at the minor’s option.12 The displacement of full capacity occurs, however, only with respect to the formation of contracts. A minor thus remains fully competent for the purposes of tortious liability. Accordingly, although denied capacity to assume fully binding contractual obligations, it is not immediately clear that at common law minors are

incompetent for the purposes of the law of restitution. 4.14 In many jurisdictions, the common law position has been substantially altered by statute. In Australia, the Minors (Property and Contracts) Act 1970 (NSW) partially reverses the presumption of the voidability of minors’ contracts, subject to court supervision. The Minors Contracts (Miscellaneous Provisions) Act 1979 (SA) preserves the invalidity of minors’ contracts unless the minor ratifies the contract on reaching the age of majority. In other Australian jurisdictions, there is provision in Sale of Goods legislation that creates contractual capacity in respect of ‘necessaries’13 supplied to minors.14 There are also a number of specific statutory provisions that alter the common law position. Thus, for example, the Life Insurance Act 1995 (Cth) s 199(1) allows a minor to take out a life insurance policy if he or she has the written consent of his or her parents. 4.15 Despite the fact that the common law seems concerned only to deny minors contractual capacity, it is argued by leading commentators that minority is, and ought to be, a ground of restitution in and of itself.15 The essence of this argument is that the common law position with respect to contractual capacity reflects a wider protective policy that justifies the courts in treating minors as more generally incapax. On this basis, the incapacity of minors could be extended by analogy to matters beyond the assumption of contractual obligations. The difficulty with this argument is that it is far from clear that the authorities support the idea that minority (and its associated legal incapacity) is itself a ground of restitution.

Minors’ contracts at common law 4.16C Bruce v Warwick (1815) 6 Taunt 118 at 120 (Ct of Exch) Gibbs CJ: The general law is that the contract of an infant may be avoided or not, at his own option. As to the case put, the infant Gould maintain[s] no such action; for he cannot perform the duties of a steward, and the law would not compel the lord to make an unavailing appointment. If he had paid money for such an appointment, we doubt not that he might recover it back. On the whole we are of opinion, that this is in the same case as other contracts made by an infant, which he may either avoid or enforce at his pleasure.

4.17C Nash v Inman [1908] 2 KB 1 at 11–12 (Eng and Wales CA) Buckley LJ: The defence is infancy. That action is brought in contract. I understand the law before 1874 to have been this: an infant could contract, and under some circumstances the infant could enforce the contract, although it could not be enforced against him — eg, Farnham v Atkins [(1670) 1 Sid 446]. Law of Restitution

(3rd ed, OUP, Oxford, 2011), p 311.

[page 135] At common law, irrespective of statute, the contracts of an infant were voidable except such as were necessarily to his prejudice; these last were void. Speaking generally, the consequence of the infant’s contract was that inasmuch as he was an infant the contract (with the exception of certain contracts) could not during infancy be enforced against him, but when he came to majority he

might, if he pleased, ratify and confirm it, and if he did so both parties were bound. The obligation was in contract, but contract of such a kind that as against the infant at any rate it could not be enforced. It was a voidable contract. In that state of things the Act of 1874 was passed. That Act relates to certain contracts and renders them for the first time void. The classes of contract which are not referred to in the Act remain as they were before. The Act of 1874 provides that ‘all contracts, whether by specialty or by simple contract, henceforth entered into by infants for the repayment of money lent or to be lent, or for goods supplied or to be supplied (other than contracts for necessaries), and all accounts stated with infants, shall be absolutely void’, subject to a certain proviso which mentions voidable contracts. The contract for necessaries therefore is excepted and is left as a contract which is not void. The plaintiff, when he sues the defendant for goods supplied during infancy, is suing him in contract on the footing that the contract was such as the infant, notwithstanding infancy, could make.

Recovery at common law of benefits conferred by a minor 4.18C Valentini v Canali (1889) 24 QBD 166 at 167 (Eng, QB Div) The plaintiff, a minor, agreed to rent a house and to pay a sum for the furniture therein. The plaintiff paid part of this sum, but later sought to recover the amounts paid. The plaintiff argued that the contract was void and that accordingly there had been a failure of consideration. This claim was rejected. Lord Coleridge CJ: I am of opinion that this appeal should be dismissed. Under the contract in question, which was one for his

advantage, the plaintiff, an infant, undertook to pay the defendant a sum of money. He paid the defendant part of this sum, and gave him a promissory note for the balance. The judge satisfied himself that the plaintiff was an infant at the time when he entered into the contract, and, having satisfied himself of this, did, in my opinion, justice according to law. He set aside the contract, and he ordered the promissory note to be cancelled. It is now contended that, in addition to this relief, the plaintiff was entitled to an order for the re-payment of the sum paid by him to the defendant as money paid under a contract declared to be void. No doubt the words of s 1 of the Infants’ Relief Act, 1874 [‘contracts … entered into by infants for goods supplied’ are declared to be ‘absolutely void’], are strong and general, but a reasonable construction ought to be put upon them. The construction which has been contended for on behalf of the plaintiff would involve a violation of natural justice. When an infant has paid for something and has consumed or used it, it is contrary to natural justice that he should recover back the money which he has paid. Here the infant plaintiff who claimed to recover back the money which he had paid to the defendant had had the use of a quantity of furniture for some months. He could not give back this benefit or replace the defendant in the position in which he was before the contract. The object of the statute would seem to have been to restore the law for the protection of infants upon which judicial decisions were considered to have imposed qualifications. The legislature never intended in making provisions for this purpose to sanction a cruel injustice. The defendant therefore could not be called upon to repay the money paid to him by the plaintiff, and the decision appealed against is right.

4.19C Steinberg v Scala (Leeds) Ltd [1923] 2 Ch 452 at 458, 461–2 (Eng and Wales CA) The plaintiff, a minor, applied for shares in a company and paid the amount due on the allotment. Eighteen months later, while still a

minor, the plaintiff repudiated the contract and sought to recover the amounts paid. The Court of Appeal rejected the plaintiff’s claim on the ground that there had been no failure of consideration. (continued)

[page 136] Lord Sterndale MR: There is no doubt that she was entitled to do so and to have the register rectified by the removal of her name therefrom. But then there came another question. She also wanted the 250 [pounds] back, and, to a certain extent, I think the argument for the respondent has rather proceeded upon the assumption that the question whether she can rescind and the question whether she can recover her money back are the same. They are two quite different questions … That seems to me to be only stating in other words the principle which is laid down in a number of other cases that, although the contract may be rescinded the money paid cannot be recovered back unless there has been an entire failure of the consideration for which the money has been paid. Therefore it seems to me that the question to which we have to address ourselves is: Has there here been a total failure of the consideration for which the money was paid? Warrington LJ: The only question we have to deal with is the repayment of the money she has already paid on those shares. The only ground upon which she asserts that she is entitled to have the money repaid is that there has been a total failure of consideration, and that she is therefore entitled to be repaid that money as in the ordinary case where a man has paid money and the consideration for that payment has wholly failed. In my judgement it cannot be said in the present case that there has been a total failure of consideration. She has in fact got the very thing she bargained for, and, not only the thing she bargained for, but the thing which every

other applicant for shares in this company bargained for.

Notes and questions 1. The Infants’ Relief Act 1874 (UK) was the first general attempt to reform the common law position with respect to minors’ contracts. Section 1 declared certain types of contract to be absolutely void. These were: contracts for the repayment of money lent or to be lent; contracts for goods supplied or to be supplied (other than contracts for necessaries); and all accounts stated. 2. Valentini is relied upon by many commentators as authority for the position regarding the recovery of benefits by minors at common law. Given Lord Coleridge’s reliance on s 1 of the Infants’ Relief Act 1874 as the basis for avoiding the contract, is the case really such an authority? To what extent was the contract ‘set aside’? 3. Why did the Court of Appeal in Steinberg require the plaintiff to point to a failure of consideration? 4. In light of these cases, is incapacity by virtue of minority an unjust factor grounding restitution? Should it be? 5. To what extent does the limitation of the grounds of restitution to a failure of consideration suggest that, while lacking contractual capacity, minors are competent to convey title to their property?

Statutory rights of restitution 4.20E Minors Contracts (Miscellaneous Provisions) Act 1979 (SA) ss 4, 6, 7

4 Contract that is unenforceable by reason of minority remains unenforceable unless ratified in writing Where a person has entered into a contract that is, by reason of his minority at the time of entering into the contract, unenforceable against him, the contract shall remain unenforceable against him unless it is ratified by him, in writing, on or after the day on which he attains his majority. 6 Approval of minor’s contract by court (1) A contract with a minor shall have effect as if the minor had, before entering into the contract, attained his majority if, before the contract was entered into by the minor, its terms were approved by a court.

[page 137] (2) An application for the approval of a court in respect of the terms of a proposed contract may be made by — (a) the minor, or his parent or guardian; or (b) any other party to the proposed contract. 7 Restitution of property to minor (1) Where — (a) a person has avoided a contract on the ground of his minority; and (b) before the avoidance of the contract, property passed thereunder to some other contracting party, a court may, on an application made by or on behalf of the minor, order restitution of that property. (2) An order under this section — (a) may be made on such terms and conditions as the court considers just; and (b) may be made notwithstanding that the minor has received some benefit under the contract, or that any other party to

the contract has partly performed his obligations under the contract.

4.21E 5, 6, 7

Minors’ Contracts Act 1969 (New Zealand) ss

5. Contracts of minors of or over the age of 18 years, certain contracts concerning life insurance, and contracts of service — (1) Subject to the provisions of this section, every contract which is — (a) Entered into by a minor who has attained the age of 18 years; or (b) Entered into pursuant to section 66B of the Life Insurance Act 1908 by a minor who has attained the age of 16 years; or (c) A contract of service entered into by a minor; shall have effect as if the minor were of full age. (2) If the Court is satisfied in respect of any contract to which subsection (1) of this section applies that, at the time the contract was entered into, — (a) The consideration for a minor’s promise or act was so inadequate as to be unconscionable; or (b) Any provision of any such contract imposing an obligation on any party thereto who was a minor was harsh or oppressive, it may, in the course of any proceedings or on application made for the purpose, cancel the contract, or decline to enforce the contract against the minor, or declare that the contract is unenforceable against the minor, whether in whole or in part, and in any case may make such order as to compensation or restitution of property under section 7 of this Act as it thinks just. … 6. Contracts of minors below the age of 18 years — (1) Subject to the provisions of this section, every contract (other than a contract to which paragraph (b) or paragraph (c) of subsection (1) of section 5 of this Act applies) entered into by a minor who has not

attained the age of 18 years shall be unenforceable against the minor but otherwise shall have effect as if the minor were of full age. (2) The Court may, in the course of any proceedings or on an application made for the purpose, inquire into the fairness and reasonableness of any contract to which subsection (1) of this section applies at the time the contract was entered into and — (a) If it finds that any such contract was fair and reasonable at that time it shall not be obliged to make any order but it may in its discretion — (i) Enforce the contract against the minor; (ii) Declare that the contract is binding on the minor, whether in whole or in part; (iii) Make such order entitling the other parties to the contract, on such conditions as the Court thinks just, to cancel the contract; (iv) Make such order as to compensation or restitution of property under section 7 of this Act as it thinks just; and (b) If it finds that any such contract was not fair and reasonable at that time it shall not be obliged to make any order but it may in its discretion — (i) Cancel the contract; (continued)

[page 138] (ii)

Make such order entitling the minor, on such conditions as the Court thinks just, to cancel the contract; (iii) Make such order as to compensation or restitution of property under section 7 of this Act as it thinks just. … 7. Compensation or Restitution — (1) Where the Court exercises

any of the powers conferred on it by subsection (2) of section 5 of this Act or where it may exercise any of the powers conferred on it by subsection (2) of section 6 of this Act (whether or not it exercises any of those powers), the Court may grant to — (a) Any party to the contract; or (b) A guarantor or indemnifier under a contract of guarantee or indemnity relating to a contract to which subsection (1) of section 5 or subsection (1) of section 6 of this Act applies; or (c) Any person claiming through or under or on behalf of any such party, guarantor, or indemnifier, such relief by way of compensation or restitution of property as the Court in its discretion thinks just. (2) The Court may by any order made pursuant to subsection (1) of this section vest the whole or any part of any property that was subject of, or the whole or any part of the consideration for, the contract in any party to the proceedings or may direct any such party to transfer or assign any such property to any other party to the proceedings.

THE MENTALLY DISORDERED 4.22 Those suffering from mental illness or imbalance are not thereby automatically deprived of legal capacity. However, where the illness is proved to have deprived the plaintiff’s apparent consent of the necessary qualities of rationality or self-interestedness, the law will set aside the transaction at issue.16 The plaintiff’s mental state may also justify placing the plaintiff in protective care, thereby suspending entirely his or her legal capacity. In all of the Australian jurisdictions, authority exists to place those whose mental or intellectual disability is such that they cannot be

regarded as mentally competent under the protection of another person, or groups of persons. The person or persons so appointed have the authority to exercise the legal capacity of the disabled person. In the majority of Australian jurisdictions, the authority to make protective orders is vested in specially constituted boards or tribunals. 4.23E

Guardianship Act 1987 (NSW) ss 3, 16, 21, 21C

3 Definitions … (2) In this Act, a reference to a person who has a disability is a reference to a person: (a) who is intellectually, physically, psychologically or sensorily disabled, (b) who is of advanced age, (c) who is a mentally ill person within the meaning of Chapter 3 of the Mental Health Act 1990, or (d) who is otherwise disabled, … 16 Guardianship orders (1) A guardianship order: (a) shall appoint a person who is of or above the age of 18 years as the guardian of the person of the person under guardianship, (b) shall specify whether the order is continuing or temporary, (c) shall specify whether the order is plenary or limited, and

[page 139] (d) may be made subject to such conditions as the Tribunal considers appropriate to specify in the order.

(2) A limited guardianship order shall specify: (a) the extent (if any) to which the guardian shall have custody of the person under guardianship, and (b) which of the functions of a guardian the guardian shall have in respect of the person under guardianship. 21 Relationship of guardians to persons under guardianship (1) Subject to any conditions specified in the order, the guardian of a person the subject of a plenary guardianship order: (a) has custody of the person to the exclusion of any other person, and (b) has all the functions of a guardian of that person that a guardian has at law or in equity. (2) Subject to any conditions specified in the order, the guardian of a person the subject of a limited guardianship order: (a) has custody of the person, to the exclusion of any other person, to such extent (if any) as the order provides, and (b) has such of the functions of a guardian of that person’s person, to the exclusion of any other person, as the order provides. (2A) Subject to any conditions specified in the order, the guardian of a person the subject of a guardianship order (whether plenary or limited) has the power, to the exclusion of any other person, to make the decisions, take the actions and give the consents (in relation to the functions specified in the order) that could be made, taken or given by the person under guardianship if he or she had the requisite legal capacity. 21C Acts of guardian take effect as acts of person under guardianship A decision made, an action taken and a consent given by a guardian under a guardianship order have effect as if: (a) the decision had been made, the action taken and the consent given by the person under guardianship, and (b) that person had the legal capacity to do so (if the person would

have had that legal capacity but for his or her disability).

4.24E Guardianship and Administration Act 1986 (Vic) ss 3, 24 3 Definitions … ‘disability’, in relation to a person, means intellectual impairment, mental disorder, brain injury, physical disability or dementia; 24 Authority of plenary guardian (1) A guardianship order appointing a plenary guardian confers on the plenary guardian in respect of the represented person all the powers and duties which the plenary guardian would have if he or she were a parent and the represented person his or her child. (2) Without limiting sub-section (1) an order appointing a plenary guardian confers on the person named as plenary guardian the power — (a) to decide where the represented person is to live, whether permanently or temporarily; and (b) to decide with whom the represented person is to live; and (c) to decide whether the represented person should or should not be permitted to work and, if so — (i) the nature or type of work; and (ii) for whom the represented person is to work; and (iii) matters related thereto; and (continued)

[page 140] (d) except as otherwise provided in Part 4A, to consent to any health care that is in the best interests of the represented

person; and (e) to restrict visits to a represented person to such extent as may be necessary in his or her best interests and to prohibit visits by any person if the guardian reasonably believes that they would have an adverse effect on the represented person. … (4) Where a decision is made, action taken, consent given or thing done by a plenary guardian under an order made under Division 2 the decision, action, consent or thing has effect as if it had been made, taken, given or done by the represented person and the represented person had the legal capacity to do so.

Notes 1. Unlike comparable legislation in other jurisdictions which makes express provision for the avoidance of transactions purportedly entered into by an incapax who is subject to a protective order (for example, Protection of Personal and Property Rights Act 1988 (NZ) s 53), legislation in the Australian states is silent on the matter. It does, however, seem a reasonable implication from the terms of the legislation vesting authority in the guardian to exercise the powers which the incapax would have but for the order, that the incapax no longer has such capacity and thus that any purported disposition by the incapax is void. 2. Even in the absence of a protective order under relevant legislation, mental instability may justify the setting aside of a transaction on the basis either that the other party to the transaction acted unconscionably or that there was insufficient agreement to form a contract. In both cases, however, the court will intervene only where the other

party was aware of the mental instability: The Imperial Loan Co v Stone [1892] 1 QB 599; O’Connor v Hart [1985] 1 NZLR 159 (PC). In the case of gifts by an incapax, however, there is no additional requirment that the recipient be aware of the incapacity: Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186.

ULTRA VIRES TRANSACTIONS Private bodies 4.25C

The Directors, etc, of the Ashbury Railway Carriage and Iron Co v Riche

(1875) LR 7 HL 653 at 667–8, 670, 672–3 (HL) A company was established for the purposes of manufacturing and operating railways. The directors agreed to purchase a concession for the construction of a railway in Belgium, but later assigned the concession to a Belgian company. It was held by the House of Lords that as the memorandum of association did not provide for the assignment of the concession, the assignment was ultra vires and void. Lord Cairns LC: The provisions under which that system of limiting liability was inaugurated, were provisions not merely, perhaps I might say not mainly, for the benefit of the shareholders for the time being in the company, but were enactments intended also to provide for the interests of two other very important bodies; in the first place, those who might become shareholders in succession to the persons who were shareholders for the time being; and secondly, the outside public, and more particularly those who

might be creditors of companies of this kind. … With regard, therefore, to the memorandum of association, if you find anything which goes beyond that memorandum, or is not warranted by it, the question will arise whether that which is so done is ultra vires, not only of the directors of the company, but of the company itself. … It states affirmatively the ambit and extent of vitality and power which by law are given to the corporation, and it states, if it is necessary so to state, negatively, that nothing shall be done beyond that

[page 141] ambit, and that no attempt shall be made to use the corporate life for any other purpose than that which is so specified. Now, I am clearly of opinion that this contract was entirely, as I have said, beyond the objects in the memorandum of association. If so, it was thereby placed beyond the powers of the company to make the contract. … If so, according to the words of Mr Justice Blackburn, every Court, whether of law or of equity, is bound to treat that contract, entered into contrary to the enactment, I will not say as illegal, but as extra vires, and wholly null and void, and to hold also that a contract wholly void cannot be ratified.

4.26E

Corporations Act 2001 (Cth) ss 124, 125

124 Legal capacity and powers of a company (1) A company has the legal capacity and powers of an individual both in and outside this jurisdiction. A company also has all the powers of a body corporate, including the power to:

(a) issue and cancel shares in the company; (b) issue debentures (despite any rule of law or equity to the contrary, this power includes a power to issue debentures that are irredeemable, redeemable only if a contingency, however remote, occurs, or redeemable only at the end of a period, however long); (c) grant options over unissued shares in the company; (d) distribute any of the company’s property among the members, in kind or otherwise; (e) give security by charging uncalled capital; (f) grant a floating charge over the company’s property; (g) arrange for the company to be registered or recognised as a body corporate in any place outside this jurisdiction; (h) do anything that it is authorised to do by any other law (including a law of a foreign country).

A company limited by guarantee does not have the power to issue shares. (2) A company’s legal capacity to do something is not affected by the fact that the company’s interests are not, or would not be, served by doing it. (3) For the avoidance of doubt, this section does not: (a) authorise a company to do an act that is prohibited by a law of a State or Territory; or (b) give a company a right that a law of a State or Territory denies to the company. 125 Constitution may limit powers and set out objects (1) If a company has a constitution, it may contain an express restriction on, or a prohibition of, the company’s exercise of any of its powers. The exercise of a power by the company is not invalid merely because it is contrary to an express restriction or prohibition in the company’s constitution. (2) If a company has a constitution, it may set out the company’s objects. An act of the company is not invalid merely because it is contrary to or beyond any objects in the company’s

constitution.

Notes and questions 1. The effect of the doctrine of ultra vires was to deny a company legal capacity to do acts beyond those provided for in its constitution (the ‘memorandum of association’). This doctrine was a creation of the common law and was based on an inference that the statutory requirement of a memorandum of association setting out the objects of the company was an exhaustive statement of the extent of the company’s legal capacity. 2. The ultra vires doctrine renders void those transactions beyond the powers of the corporate body. The doctrine does not, however, provide expressly for recovery of any property improperly transferred. Would title to property improperly transferred pass to the transferee? How could such property or its value be recovered? [page 142] 3. What is the effect of ss 124 and 125 of the Corporations Act 2001 (Cth)? Does a company now have unlimited capacity? Can a company pursue restitutionary recovery on some basis other than any limitation of its capacity? What basis or bases are the most likely to be relevant?

Public bodies 4.27C

Auckland Harbour Board v R

[1924] AC 318 at 326–7 (PC) The Minister of Railways was authorised by statute to pay £7500 to John Burns & Co when the appellants granted a lease to John Burns & Co. The minister paid the sum even though the lease was not granted. The issue was whether the sum was properly paid and, if not, whether it could be recovered. The Privy Council held that the sum was recoverable. Viscount Haldane: The payment was accordingly an illegal one, which no merely executive ratification, even with the concurrence of the Controller and Auditor-General, could divest of its illegal character. For it has been a principle of the British Constitution now for more than two centuries, a principle their Lordships understand to have been inherited in the Constitution of New Zealand with the same stringency, that no money can be taken out of the consolidated Fund into which the revenues of the State have been paid, excepting under a distinct authorization from Parliament itself. The days are long gone by in which the Crown, or its servants, apart from Parliament, could give such an authorization or ratify payment. Any payment out of the consolidated fund made without Parliamentary authority is simply illegal and ultra vires, and may be recovered by the Government if it can, as here, be traced.

Notes and questions 1. What does Viscount Haldane mean by suggesting that the government’s recovery requires that the payment ‘be traced’? 2. Did the government retain title to the money paid over? 3. What does Viscount Haldane mean when he says this was an ‘illegal’ payment? Was this a case of mistaken payment? Was the mistake one of fact or one of law?

4.28C Attorney-General v Gray [1977] 1 NSWLR 406 at 408–11 (NSWCA) Gray was a sculptor who had only limited formal education. He was employed on a casual basis by the Education Department to teach school children. He was paid at the rate specified for a casual teacher with an undergraduate degree. In fact, he should have been paid at the lesser rate for those without a tertiary qualification. The Attorney-General sued on behalf of the Government of New South Wales to recover the excess payments. Hutley JA: The Education Department is not a separate legal entity, analogous to a statutory corporation. Reading the representation in a way most favourable to the respondent, it amounts to a representation by the State of New South Wales, purportedly acting through the Director, to the respondent as to the amount of his earnings over a period which would be known to him, so that, though the rate is not stated, it can be easily calculated. This is not a case in which the respondent has to rely only upon the Director’s own acts; he gets his salary cheque accompanied by an official form, which I would infer is prepared by proper authority. This form could be read as authorizing the Director to certify as to the salary. As the State can act only through servants or agents, it is only if the servant or agent had the necessary authority to act that the State can be said to act at all. The first problem is whether the Director is authorized to certify as to the respondent’s salary, so that an erroneous representation binds the Crown. In the advice of the Privy Council in Auckland Harbour Board v The King, Viscount Haldane said: ‘For it has been a principle of the British Constitution now for more than two centuries, a principle which

[page 143] their Lordships understand to have been inherited in the Constitution of New Zealand with the same stringency, that no money can be taken out of the consolidated Fund into which the revenues of the State have been paid, excepting under a distinct authorization from Parliament itself. The days are long gone by in which the Crown, or its servants, apart from Parliament, could give such an authorization or ratify an improper payment. Any payment out of the consolidated fund made without Parliamentary authority is simply illegal and ultra vires, and may be recovered by the Government if it can, as here, be traced.’ The correctness of this statement was not challenged. Therefore, no officer can certify so as to affect the State, otherwise than in accordance with actual Parliamentary authority. It was sought to avoid its implications in two ways: (1) in reliance upon the decision of the High Court in New South Wales v Bardolph [(1934) 52 CLR 455], it was argued that, because the relevant Appropriation Act made provision for a sum which it was conceded was adequate to permit the payments actually made, there was a Parliamentary authority for payment; and (2) estoppel. The first submission is answered by s 14(1) of the Public Service Act, 1902, which is in the following terms: ‘There shall from time to time be determined in accordance with the provisions of this Act what salary, fee or allowance is fairly appropriate to the work to be performed by, or assigned to each officer or grade of officers, or to be performed by or assigned to persons temporarily employed, and the salary, fee, or allowance so determined shall, subject to the necessary provision being from time to time made therefor by Parliament, be the salary payable in respect of such work accordingly.’ Though an appropriation act is authority for the payment of money out of consolidated revenue, it is not an authority that other

statutory provisions to safeguard the financial stability of the State can be disregarded: Commonwealth v Colonial Ammunition Co Ltd [(1924) 34 CLR 198]; Victoria v The Commonwealth [(1975) 50 ALJR 157 at 169]. Where a determination has been made as to the salary which is fairly appropriate to the work to be performed, that is the only salary which may be paid for that work. There is no capacity in any servant of the Crown to make an offer capable of acceptance so as to bind the Crown, or accept an offer made to the Crown. Any such arrangement is, qua the Crown, void, and provides no basis for the disbursement of the moneys appropriated by Parliament. There was no statutory restriction in Bardolph’s case upon the expenditure of moneys appropriated for advertising. In order that there can be an estoppel which binds the Crown there must be a representation by someone with actual authority expressly conferred or inherent in the nature of the office held under the Crown: Coogee Esplanade Surf Motel Pty Ltd v The Commonwealth [Court of Appeal, 16 March 1976, unreported]. Where no one can validly make any representation as to the salary to be paid for work done, which is different from the salary determined under s 14(1) of the Public Service Act, there can be no estoppel binding the State of New South Wales. In Howell v Falmouth Boat Construction Co Ltd [ [1951] AC 837 at 844, 845], the general principle was stated by Viscount Simonds, with whom Lord Oaksey, Viscount Radcliffe and Lord Tucker agreed, thus: ‘He (Denning LJ) described the principle that he invoked as of particular importance in these days when the officers of government departments are given much authority by Orders and circulars which are not available to the public. I will state this principle in his own words: “Whenever government officers, in their dealings with a subject, take on themselves to assume authority in a matter with which he is concerned, the subject is entitled to rely on their having the authority which they assume. He does not know and cannot be expected to know the limits of their authority, and he ought not to suffer if they exceed it. That was the principle which I applied in Robertson v Minister of Pensions [ [1949] 1 KB 227 ], and it is applicable in this case also”. My Lords, I

know of no such principle in our law nor was any authority for it cited. The illegality of an act is the same whether or not the actor has been misled by an assumption of authority on the part of a government officer however high or low in the hierarchy. I do not doubt that in criminal proceedings it would be a material factor that the actor had been thus misled if knowledge was a necessary element of the offence, and in any case it would have a bearing on the sentence to be imposed. But that is not the question. The question is whether the character of an act done in face of a statutory prohibition is affected by the fact that it has been induced by a misleading assumption of authority. In my opinion the answer is clearly No. Such an answer may make more difficult the task of the citizen who is anxious to walk in the narrow way, but that does not justify a different answer being given.’ (continued)

[page 144] Having regard to the multifarious activities of government, and the impossibility in many cases of citizens dealing with the State knowing of the limitations upon powers of officials the doctrine may appear harsh: cf article ‘Crown Proceedings: Some Recent Developments’ published in [1957] Public Law, p 321, at p 337. It is firmly rooted in authority binding on this Court: Attorney-General for Ceylon v Silva [[1953] AC 461]. The Supreme Court of Victoria has applied it: Commonwealth v Burns [[1971] VR 825]. The judgment appealed from cannot stand with it. Public moneys disbursed contrary to statute can be recovered, despite representations made by those who disbursed them. As payment of part of the moneys was properly authorized by statute, I can see no difficulty in part being recoverable. The excess payment does not make the services rendered by the respondent illegal, and he is entitled to retain that which he is entitled to receive them.

Note As to the recovery of a payment made by an individual to a public body where that payment was improperly demanded or was ultra vires, see Chapter 11.

1.

2.

3. 4. 5. 6.

7.

8.

In the case of vicarious liability, responsibility is imposed upon the employer for the acts and choices of the employee. Aristotle, Nicomachean Ethics (J Thomson (trans), Penguin, London, 1976), Book III 1109b–11b, identifies ignorance and constraint as two circumstances that render action involuntary. A Wertheimer, Coercion (Princeton University Press, New Jersey, 1987), p 21 states: ‘To enforce agreements made by fraud or coercion would nullify the point of allowing binding agreements in the first place.’ See Chapters 6 and 8. See Chapter 5. See Chapter 7. Under Roman law, legal capacity was restricted, in the main, to the paterfamilias: B Nicholas, Introduction to Roman Law (Clarendon, Oxford, 1962), p 65. Although in most Commonwealth jurisdictions the doctrine of ultra vires has been abolished in respect of registered companies. In the context of minors, see Coras v Webb [1942] St R Qd 73. Cf J Edelman and E Bant, Unjust Enrichment (2nd ed, Hart Publishing, Oxford, 2016), p 302, who conflate the reasons for the rule denying capacity with the effect of

9.

10. 11.

12. 13.

14.

15. 16.

the denial of capacity on the transcation in question. The interrelation between the law of unjust enrichment and the law of property is a difficult and complicated one. See 2.44–2.47C. [1945] KB 65. A minor is a person under the age of majority. The age of majority is specified by statute and in Australia is 18 years of age. See Age of Majority Act 1974 (ACT); Minors (Property and Contracts) Act 1970 (NSW); Age of Majority Act 1981 (NT); Law Reform Act 1995 (Qld) s 17 (replacing Age of Majority Act 1974); Age of Majority (Reduction) Act 1970 (SA); Age of Majority Act 1973 (Tas); Age of Majority Act 1977 (Vic); Age of Majority Act 1972 (WA). That is, the minor could elect to avoid the contract or could opt to hold the contract against the other party. ‘Necessaries’ are goods or services suitable to the condition in life of the minor and to the minor’s actual needs. Sale of Goods Act 1954 (ACT) s 7; Sale of Goods Act 1972 (NT) s 7; Sale of Goods Act 1896 (Qld) s 5; Sale of Goods Act 1895 (SA) s 2; Sale of Goods Act 1896 (Tas) s 7; Goods Act 1958 (Vic) s 7; Sale of Goods Act 1895 (WA) s 2. P Birks, An Introduction to the Law of Restitution (Clarendon, Oxford, 1985), pp 216–18; A Burrows, The The effect of mental instability that does not warrant depriving the incapax of legal capacity is considered in Chapter 9.

[page 145]

5

Mistake CHAPTER SUMMARY

Introduction The Meaning of Mistake P Birks, An Introduction to the Law of Restitution A Farnsworth, Alleviating Mistakes David Securities Pty Ltd v Commonwealth Bank of Australia Kleinwort Benson Ltd v Lincoln City Council Pitt v Holt

The Reason(s) for Recovery H Dagan, ‘Mistakes’ Mistakes of Fact The requirement of causative mistake Kelly v Solari Aiken v Short Barclays Bank Ltd v WJ Simms, Son and Cooke (Southern) Ltd

What test of causation? J Edelman and E Bant, Unjust Enrichment Mistaken gifts Pitt v Holt

Mistakes of Law

5.1 5.4E 5.4E 5.5E 5.6C 5.7C 5.8C 5.9 5.10E 5.10E 5.11C 5.11C 5.12C 5.13C 5.14 5.16E 5.17 5.18C 5.19

Abolition of the mistake of law ‘bar’

5.20C 5.20C

Bilbie v Lumley David Securities Pty Ltd v Commonwealth Bank of Australia

5.21C

Difficult issues: uncertain law, invalid law and changes in the law

5.22C 5.22C 5.23E

Kleinwort Benson Ltd v Lincoln City Council

Judicature Act 1908 (NZ) s 94A

Deutsche Morgan Grenfell Group Plc v Inland Revenue Commissioners 5.24C Commissioner of State Revenue v Royal Insurance Australia Ltd 5.25C

Limitations on Recovery

5.26C

Barclays Bank Ltd v WJ Simms, Son & Cooke (Southern) Ltd

‘Voluntary submission to an honest claim’

5.26C 5.27C

David Securities Pty Ltd v Commonwealth Bank of Australia

5.27C [page 146]

‘Good consideration’ — payments to meet a valid obligation

5.28C 5.28C

Lloyds Bank Plc v Independent Insurance Co Ltd Deutsche Morgan Grenfell Group Plc v Inland Revenue Commissioners 5.29C Hills Industries Ltd v Australian Financial Services and Leasing Pty Ltd 5.30C

Contradiction of statutory regime Mistakes and Contract Bell v Lever Bros Ltd

Non-Monetary Benefits

5.31 5.33 5.37C 5.38

Craven-Ellis v Canons Ltd

5.39C

INTRODUCTION 5.1 We saw in Chapter 4 that individuals, corporations and public bodies may be entitled to restitution of benefits they have transferred to another when they lacked legal capacity. The law’s succour is not limited to these extreme instances, however. It also provides relief to fully capable individuals, where the autonomy of their decision to confer a benefit has been impaired in a particular case. We consider several such instances in the following chapters of this book. The paradigm example, which forms the focus of the current chapter, is where the benefit is conferred as a result of a mistake of fact or law. 5.2 In such instances, restitution is justified on the basis that the mistake ‘vitiates’ a plaintiff’s consent and undermines his or her freedom of choice, but the logical implications of that rationale have not always been fully respected. Historically, the law took a restrictive approach to the types of mistake that gave rise to relief. It denied recovery for mistakes of law altogether and limited recovery for mistakes of fact to cases in which the plaintiff thought himself or herself under a legal liability to pay. These limitations were primarily designed to protect the security of

receipts and have now been relaxed in the light of the modern perception that concerns about transactional insecurity can be more sensitively accommodated through the recognition of a defence of change of position. The current judicial view is that any mistake which causes a transfer is sufficient to make out a prima facie case, although there is some residual uncertainty surrounding cases involving mistaken gifts. Restitution on grounds of mistake has historically been available both at law and in equity. 5.3 The relaxation of the categories of restitution-yielding mistake has focused recent attention on a new set of questions which were previously hidden. These include the issue of what it means to be mistaken and how the pivotal question of causation should be determined. The issue of how to set reasonable boundaries on recovery also persists. Mistakes are extremely common, not simply because our information is practically limited, but also because human rationality itself is bounded — our cognition is subject to constant distraction from the truth. It is not yet clear whether the defence of change of position is sufficient to meet concerns about the security of receipts in all circumstances; or that it can set limits on recovery which are determinate enough to maintain general market confidence in transactions. A key contemporary focus is thus on the formulation of clear and appropriate exceptions to recovery which will suffice to meet these sorts of residual concern. The vast majority of successful claims for mistake involve money, for reasons we canvased in Chapter 3, but there are also cases involving the mistaken provision of services and other non-money benefits, such as the discharge of debts. We also consider cases in which mistakes are made, as they often

are, in contractual contexts. Here, it is essential for a plaintiff to set aside any contract before restitution can be claimed, in order to avoid any contradiction with the way in which the parties have consensually allocated risk. [page 147]

THE MEANING OF MISTAKE 5.4E P Birks, An Introduction to the Law of Restitution Clarendon, Oxford, 1989, pp 147–8 (some references omitted) The first thing is to make a distinction between mistakes and mispredictions. Suppose I look after you because I think you will leave me money when you die [Deglman v Guaranty Trust Co of Canada [1954] 3 DLR 785] or I do months of work preparing plans for your building in the confident belief that you will give me the contract to clear the site and carry out the development. [William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932] These are predictions and, when I find myself disappointed, mispredictions. I may call them mistakes, but they are a kind of mistake which does not count. … A claim for restitution cannot be founded on a misprediction. … The mispredictor still has to bear the risk he ran. The reason is that restitution for mistake rests on the fact that the plaintiff’s judgement was vitiated in the matter of the transfer of wealth to the defendant. A mistake as to the future, a misprediction, does not show that the plaintiff’s judgement was vitiated, only that as things turned out it was incorrectly exercised. A prediction is an exercise of judgement. To act on the basis of a prediction is to accept the risk of disappointment. If you then complain of having been mistaken you are merely asking to be

relieved of a risk knowingly run. The safe course for one who does not want to bear the risk of disappointment which is inherent in predictions is to communicate with the recipient of the benefit in advance of finally committing it to him. He can then qualify his intent to give by imposing conditions, or by making a contract, or sometimes by making a trust. That prepares the ground for restitution on the basis not of mistake but failure of consideration …

Notes and questions 1. The distinction between mistakes and mispredictions can be difficult to apply. For awkward cases, see Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349; Nurdin & Peacock Plc v DB Ramsden & Co Ltd [1999] 1 WLR 1249; Dextra Bank & Trust Company Limited v Bank of Jamaica [2002] 1 All ER (Comm) 193; Hookway v Racing Victoria Ltd [2005] VSCA 310; Re Griffiths [2009] Ch 162; Priestley v Priestley [2016] NSWSC 1096; and Pitt v Holt [2013] UKSC 26. In the last of these cases, the plaintiff, Mrs Pitt, had received damages for the care of her brain-damaged husband, who had been involved in a serious accident. She made the unfortunate decision, having taken advice from two separate tax advisers, to settle the money on discretionary trust. This decision exposed the funds to inheritance tax when her husband later died, when it would otherwise have accrued to her without any tax liability. In the Court of Appeal, her claim for equitable rescission of the disposition was rejected on the basis that she had merely mispredicted its later tax consequences: [2011] EWCA Civ 197 at [216]–[219]. The Supreme Court, by contrast, concluded that she had made a

contemporaneous, mistaken, tacit assumption regarding the legal effect of the arrangement, and granted relief: [2013] UKSC 26 at [133], [142]. Which of these views is the more credible? How workable is the mistake/misprediction distinction in practice? 2. Some writers argue that the distinction between mistake and misprediction is not simply hard to draw, but objectionable in principle: even mispredictors should be entitled to restitution, provided they did not accept the risk of their prediction being wrong. See D de Jesus, ‘Mistakes and Mispredictions’,