ABL Custodian Services Pty Ltd v Smith
[2010] VSC 548
•2 December 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST C
No. 10876 of 2009
| ABL CUSTODIAN SERVICES PTY LTD IN ITS CAPACITY AS TRUSTEE OF THE ABL PORTFOLIO FUNDING TRUST 2007-1 | Plaintiff |
| v | |
| GREGORY POWELL CAMERON SMITH | Defendant |
AND BETWEEN:
| GREGORY POWELL CAMERON SMITH | Plaintiff by Counterclaim |
| v | |
| GREAT SOUTHERN FINANCE PTY LTD (ACN 009 235 143) (IN LIQUIDATION) ABL CUSTODIAN SERVICES PTY LTD IN ITS CAPACITY AS TRUSTEE OF THE ABL PORTFOLIO FUNDING TRUST 2007-1 (ACN 097 889 720) GREAT SOUTHERN MANAGERS AUSTRALIA LIMITED (ACN 083 825 405) JOHN CARLTON YOUNG PETER JOHN PATRIKEOUS JEFFREY ARTHUR SYDNEY MEWS CAMERON ARTHUR RHODES PHILLIP CHARLES BUTLIN | First Defendant by Counterclaim Second Defendant by Counterclaim Third Defendant by Counterclaim Fourth Defendant by Counterclaim Fifth Defendant by Counterclaim Sixth Defendant by Counterclaim Seventh Defendant by Counterclaim Eighth Defendant by Counterclaim |
---
JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 October 2010 | |
DATE OF JUDGMENT: | 2 December 2010 | |
CASE MAY BE CITED AS: | ABL Custodian Services Pty Ltd v Smith | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 548 | |
---
PRACTICE AND PROCEDURE – Application to amend a statement of claim – Rules 36.03 and 36.01 of the Supreme Court (General Civil Procedure) Rules 2005 – Commonwealth v Verwayen (1990) 170 CLR 394 – Whether pleading is bad in law – Pleading of a restitutionary claim – Assignment of restitutionary rights – Haxton v Equuscorp Pty Ltd (formerly Equus Financial Services Ltd) (2010) 265 ALR 336; [2010] VSCA 1 – Categories of unjust enrichment relied upon – David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P.D. Crutchfield SC with Mr P.A. Neskovcin | Allens Arthur Robinson |
| For the Defendant | Mr G.T. Bigmore QC with Mr T. Warner | McPherson + Kelley |
| For the First and Third Defendants by Counterclaim | Mr H.N.G. Austin | Norton Rose Australia |
HIS HONOUR:
The present application was made by summons dated 6 September 2010 whereby the plaintiff seeks, among other things, an order pursuant to rule 36.03 of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”) that leave be granted to file and serve a Further Amended Statement of Claim substantially in the form of Exhibit BHT-1 to the affidavit of Belinda Heather Thompson sworn 6 September 2010 (“the Proposed Pleading”).
The same application was made on behalf of the plaintiffs in proceedings numbered 757, 758, 759, 760, 761 and 762 of 2010. These proceedings, together with this proceeding (Number 10876 of 2009), are referred to as “the Individual Proceedings” where it is necessary to identify them. Additionally, an application that raises similar issues was made on behalf of the first defendant, Scott Wynd Enterprises Pty Ltd in its capacity as trustee of the S & J Wynd Family Trust (ACN 066 308 325), in proceeding numbered 4763 of 2010 (“the Wynd proceeding”). The plaintiff in the Wynd proceeding is ABL Nominees Pty Ltd (ACN 106 756 521) (“ABL Nominees”). In the Wynd proceeding, the first defendant’s application by summons dated 4 October 2010 seeks orders pursuant to rule 23.02 of the Rules or the inherent jurisdiction of the Court that paragraphs 31 to 34 of ABL Nominee’s Statement of Claim be struck out. These paragraphs are in a similar form to the paragraphs of the Proposed Pleading that are the subject of this application.
A reference to the Bendigo and Adelaide Bank parties is a reference to the plaintiff or plaintiffs in the Individual Proceedings, including in this proceeding. A reference to ABL Nominees is a reference to the plaintiff in the Wynd proceeding. Also, unless otherwise indicated, any reference to the defendant or defendants is a reference to the defendant in each of the Individual Proceedings and the Wynd proceeding, or to the defendant in each of these proceedings collectively. The submissions made by the Bendigo and Adelaide Bank parties and ABL Nominees, and the submissions made by the defendants, while made in support of their positions in all the Individual Proceedings and the Wynd proceeding, referred to the documents and evidence in the present proceeding (Number 10876 of 2009). I have adopted this approach in the judgment. No issues were raised by any of the parties to suggest that there are relevant differences between the documents and evidence in the present proceeding, the other Individual Proceedings and the Wynd proceeding. This collective treatment of these proceedings is appropriate as relevantly similar issues arise and so these reasons in the present proceeding provide the basis and reasoning for orders made in response to each of the summonses in the other Individual Proceedings and also the Wynd proceeding.
The defendant opposed the application to amend the amended statement of claim in the form of the Proposed Pleading on the basis that the purported alternative cause of action, a claim for restitutionary relief, as set out in the Proposed Pleading is bad in law.[1] It was submitted that, even if the material allegations of fact, as opposed to conclusions of law, were made out at trial, they would not constitute a sustainable cause of action. Nevertheless, in the course of oral submissions at the hearing of this application on 22 October 2010, Mr Bigmore QC, said on behalf of the defendant, that:
“There’s no doubt that a plea could be fashioned on the basis of what in our learned friend’s written submissions, total failure of consideration, illegality and so on. Frankly, we’ve said candidly that we missed that. We didn’t see that coming. It doesn’t hang together on the pleadings that they’ve presented to us and if they want to plead – if they want to talk about total failure of consideration and they want to talk about illegality, well we’d like to look at that and we’ll decide what we’ll do with it then, …”.[2]
[1]In the Wynd proceeding, the application by the first defendant is to have the paragraphs relating to the alternative cause of action, based on restitutionary relief, struck out. The Wynd proceeding was commenced later than the Individual Proceedings, on 31 August 2010, with a statement of claim that already included the restitutionary claim.
[2]Transcript (22 October 2010) pp 31 and 32.
As to the rules of pleading contained in Order 13 of the Rules, see Clarke & Ors v Great Southern Finance Pty Ltd & Ors.[3]
[3][2010] VSC 473 at [5] to [10] (Croft J).
Legal principles
Rule 36.03(b) provides that a party may amend any pleading served by that party at any time by leave of the Court. The general power of the Court with respect to the amendment of pleadings is set out in rule 36.01, which relevantly provides:
“For the purpose of-
(a)determining the real question in controversy between the parties to any proceeding; or
…; or
(c)avoiding multiplicity of proceedings-
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.”
It is common ground that the Court’s discretion with respect to the grant of leave to amend pleadings is broad. The Bendigo and Adelaide Bank parties and ABL Nominees submitted that it is enough to show that the new claim or defence is arguable because whether or not it ought to succeed is ultimately a question for the trial judge.[4] In Commonwealth v Verwayen, Dawson J said:[5]
“In granting leave to amend, a court is concerned with the raising of issues and not their merits. Of course, an amendment which is futile because it is obviously bad in law will not be allowed. But it is no ground for refusing an amendment that it raises a claim or defence which ought not to succeed. That will be an issue upon trial.”
[4]See Abela v Giew (1964) 81 WN (Pt 1) (NSW) 344 at 345-346; Commonwealth Dairy Produce Equalisation Committee Ltd v McCabe (1938) 38 SR (NSW) 397 at 400; Woodhead Australia (SA) Pty Ltd v Paspalis Group of Companies (1991) 103 FLR 122 (NTSC) at 126-130.
[5]Commonwealth v Verwayen (1990) 170 CLR 394 at 456.
The defendant‘s submissions cautioned against any suggestion that the characterisation of a cause of action as “arguable”, as opposed to being sound in law, in any way lowered the bar as to what is permissible by way of a pleadings amendment. It was noted that in Woodhead Australia (SA) Pty Ltd v Paspalis Group of Companies,[6] the phrase “obviously futile” used in Abela v Giew[7] was cited with approval and the term “arguable” was used; however it was not suggested that this in any way lowered the bar in terms of the appropriate test.
[6](1991) 103 FLR 122 (NTSC).
[7](1964) 81 WN (Pt 1) (NSW) 344.
The parties agreed that similar principles apply in the strike out application in the Wynd proceeding. The Bendigo and Adelaide Bank parties and ABL Nominees submitted that “[a] Court will only use its power to strike out a claim which is clearly hopeless.[8] Such a power ‘is not to be used in cases of doubt or difficulty or where the pleading raises a debatable point of law’.[9]” If, as the defendant submits, the pleadings are bad in law, the power to strike out will be exercised.
[8]See General Steel Industries Inc. v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129; Brimson v Rocla Concrete Pipes Ltd [1982] NSWLR 937 at 942.
[9]Dey v Victorian Railways commissioners (1949) 78 CLR 62 at 91.
The proposed pleading
The contentious amendments contained in the Proposed Pleading include an alternative cause of action against the defendant brought upon the basis of an alleged right to restitutionary relief on the part of the Bendigo and Adelaide Bank parties and ABL Nominees. In broad summary, it is alleged in the Proposed Pleading that even if the Loan Deed (“the Loan Deed”) under which Great Southern Finance Pty Ltd (in liquidation) (“GSF”) lent money to the defendant for the purpose of financing his investment in the Managed Investment Scheme (“the MIS”) is unenforceable, the Bendigo and Adelaide Bank parties and ABL Nominees are nevertheless entitled to a sum equivalent to the money payable under the Loan Deed as restitution for the claimed unjust enrichment of the defendant at the expense of the Bendigo and Adelaide Bank parties and ABL Nominees. These parties also claim interest pursuant to statute and scale costs, in the alternative (rather than the higher interest rate and indemnity costs claimed in the cause of action founded upon the Loan Deed).
Purported assignment of restitutionary rights
The allegations of the Bendigo and Adelaide Bank parties and ABL Nominees that they have a right to restitution against the defendant for unjust enrichment were, at least in part, based on a claim that those rights were assigned by GSF in their favour as part of the first assignment of rights under, as it was proposed to be pleaded, the Loan and the Loan Deed with effect from 1 March 2006, as set out in paragraphs 8 and 9 of the Proposed Pleading. The defendant submitted that this first assignment critically limited the ambit of the claimed assignment of restitutionary rights. The first assignment is contained in a deed between GSF, Adelaide Bank Limited (ACN 061 461 550) (“ABL”) and ABL Nominees dated 19 July 2005 and signed a “Loan Sale and Servicing Deed” (“the LSSD”).
It was further submitted by the defendant that it is significantly uncertain whether, as a matter of law, restitutionary rights are even capable of assignment.[10] In this case, it was submitted that the controversy does not even arise since, even if such an assignment was capable of being effected as a matter of law, the first assignment did not encompass and therefore assign any such restitutionary rights.
[10]See Haxton v Equuscorp Pty Ltd (formerly Equus Financial Services Ltd) [2010] VSCA 1 at [305] and [310].
It was submitted by the defendant that, in this context, the relevant provisions of the LSSD are contained in clause 2.4, which provides that:
“The delivery to a Purchaser [ABL] of a Sale Notice … constitutes an offer by the Seller [GSF] to assign to that Purchaser … the Seller’s entire right, title and interest in, to and under the following:
(a) (Loans): each Loan identified in the Settlement Report;
(b)(Payment Rights): all moneys, present and future, actual or contingent, owing at any time in respect of or in connection with each Loan referred to in clause 2.4(a) under the corresponding Loan Documents including all principal, interest, reimbursable costs and expenses and any other amounts incurred by or payable to the Seller (including any payments made by the Seller on behalf of the Debtor in relation to the Loan) irrespective of whether:
(i)such amounts become due and payable before or after the Cut-Off Date for the Loan; and
(ii)such amounts relate to advances made or other financial accommodation provided by the Seller to the Debtor before or after the Cut-Off Date for that Loan;
(c)(Related Securities): all Related Securities in existence from time to time in relation to each Loan referred to in clause 2.4(a); and
(d)(Loan Documents): all Loan Documents in existence from time to time in relation to each Loan referred to in clause 2.4(a).
[emphasis added]”
Further, clause 2.6 of the LSSD provides that:
“Acceptance by a Purchaser … of the offer contained in a Sale Notice … constitutes an immediate assignment with effect from the Cut-Off Date specified in that Sale Notice of the Seller’s entire right, title and interest in the Loan Rights specified in that Sale Notice to that Purchaser …” [emphasis added]”
The LSSD contains a number of definitions which are relevant to these provisions:
“’Loan’ is defined as ‘any debt owing by a Debtor to the Seller under a Loan Agreement from time to time (including, without limitation, a Partial Loan or any further advance made after the date of the Loan Agreement)’;
‘Loan Agreement’ is defined as, ‘in relation to a Loan, the agreement that evidences the terms of, or any obligation under, the Loan which agreement is, in relation to an Interest Free Loan, contained in a Prospectus or is, in relation to any other Loan, substantially in one of the forms contained in Schedule 6’; and
‘Loan Rights’ are defined as ‘each of the items (together with all rights, title and interest in each of those items) referred to in clause 2.4 assigned, or which may be assigned, as the case may be, in accordance with this Deed to a Purchaser’.
[emphasis added]”.
It was submitted on behalf of the defendant that, even assuming there were restitutionary rights capable of assignment to the Bendigo and Adelaide Bank parties and ABL Nominees, the provisions of the LSSD did not effect such an assignment. It was submitted that the “touchstone concept” within the assignment provided for in clauses 2.5 and 2.6 is the debts owing under the relevant Loan Agreements (as defined in the LSSD). It was noted that in the defendant’s case, this is the debt owing under the Loan Deed.
It was further submitted that the nature of the restitutionary rights alleged by the Bendigo and Adelaide Bank parties and ABL Nominees in the Proposed Pleading differ fundamentally from any right to the debt or debts owing under the Loan Agreement or the Loan Deed. Restitutionary rights, it was said, arise from an obligation imposed by law and do not depend upon debts owing, or other rights, under an unenforceable contract from which they may spring.[11]
[11]See Haxton v Equuscorp Pty Ltd(formerly Equus Financial Services Ltd) (2010) 265 ALR 336 at 392, [312], Dodds-Streeton JA, with whom Ashley and Neave JJA agreed.
It was submitted, therefore, that the proper inquiry is whether the first assignment “comprehend[ed] alternative rights or remedies of [GSF] based on restitution or unjust enrichment should the loan contracts be unenforceable”.[12] It was submitted that, as a matter of construction, the portions of the LSSD set out above make it plain that the subject matter of the assignment to the Bendigo and Adelaide Bank parties and ABL Nominees was the right to “moneys … owing … in respect of or in connection with” the debts owing under the Loan Agreements only. It was said that there is no mention in the LSSD of any contingencies in the event of a Loan Agreement being found to be unenforceable, and nor is there any language to suggest that restitutionary rights that may arise in such an eventuality were part of the contemplated assignment. In this respect, reference was made to Haxton v Equuscorp Pty Ltd(formerly Equus Financial Services Ltd)[13] which is, for convenience, referred to as Equuscorp where the Court of Appeal found that the words “or legal and other remedies for [the relevant debts and interests]”, similarly, did not contemplate rights to restitution arising as a consequence of the agreements underpinning those debts being unenforceable.[14] It was also submitted that, because of the “entire agreement” provisions of clause 18.8(a) of the LSSD, which provides that its terms embody “the entire understanding of the parties, and constitute the entire terms agreed by the parties”, the Bendigo and Adelaide Bank parties and ABL Nominees are precluded from contending that the provisions of the LSSD would accommodate assignment of restitutionary rights of the type asserted by way of implication.
[12]See the Defendant/Plaintiff by Counterclaim’s Submission in opposition to the Plaintiff’s application to amend its Statement of Claim (16 September 2010), paragraph 24; and see above, paragraphs 10 and 11.
[13](2010) 265 ALR 336.
[14](2010) 265 ALR 336 at 392 – 396, [312]-[326[, Dodds-Streeton JA, with whom Ashley and Neave JJA agreed.
In summary, the defendant submitted that any argument that restitutionary rights arising out of an obligation imposed by law was contemplated as part of the assignment to the Bendigo and Adelaide Bank parties and ABL Nominees in the event that the Loan Deed was unenforceable is not maintainable. Consequently, it was said that there is no basis to find that any restitutionary rights that might possibly have been enjoyed by GSF were assigned to the Bendigo and Adelaide Bank parties and ABL Nominees.
The assignability, or otherwise, of restitutionary rights was considered in significant detail by Dodds-Streeton JA in the Equuscorp case. For present purposes, it is helpful and sufficient to set out the conclusion of her Honour’s detailed analysis of the authorities in relation to this issue:[15]
[15]Equuscorp at 391-2, [305]-[310].
“[305] There is no unambiguous, authoritative statement indicating that the restitutionary claims in this case, if established, were capable of assignment. On balance, the preponderance of the admittedly sparse and relatively oblique indications by the High Court tends to throw doubt on, rather than affirm, that proposition.
[306] In Trendtex [Trendtex Trading Corporation v Credit Suisse [1982] AC 679], the House of Lords considered that although the purported assignment of a cause of action (in relation to a dishonoured letter of credit) to a third party with no genuine and substantial interest in the success of the litigation was void for champerty, if the potential assignee had such an interest, the assignment of the bare right action would not offend the law against maintenance and champerty.
[307] In TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3),[16] Finkelstein J held that confidential information, while not property “in any normal sense” or indeed property at all, but, rather, the subject matter of protection by equity by “the notion of an obligation of conscience …”[17] was capable of assignment, particularly where it related to rights owned, or likely to be owned, by the assignee. His Honour stated:
[16](2007) 158 FCR 444; 239 ALR 117; [2007] FCA 151 (TS & B Retail Systems).
[17]TS & B Retail Systems at [74] (citations omitted).
‘I said that the receivers “purported” to assign the causes of action for there is a general rule that a personal right to litigate cannot be assigned either at law or in equity, but an impersonal right in the nature of a proprietary right can be assigned provided the circumstances warrant it. Thus, it has been said that causes of action in tort, which are regarded as personal rights, cannot be assigned: Poulton v Commonwealth (1953) 89 CLR 540 at 571 and 602 ; [1954] ALR 1 at 7–8. The bar on assignments of personal actions would include actions in equity that are of a personal kind: Glegg v Bromley [1912] 3 KB 474 at 489–92. An action for breach of confidential information is a personal action.
There is in England an exception to the bar on the assignment of personal rights. In Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 703 ; [1981] 3 All ER 520 at 530 (Trendtex) Lord Roskill (with the concurrence of the other Law Lords) said: “[I]n English law an assignee who can show that he has a genuine commercial interest in enforcement of the claim of another and to that extent takes a assignment of that claim to himself is entitled to enforce the assignment unless by the terms of the assignment he falls foul of our law of champerty, which, as has often been said, is a branch of our law of maintenance … The court should look at the totality of the transaction. If the assignment is of a property right or interest and the cause of action is ancillary to that property right or interest, or, if the assignee has a genuine commercial interest in taking the assignment and in enforcing it for his own benefit, I see no reason why the assignment should be struck down as an assignment of a bare cause of action or as savouring of maintenance.
In Australia there is a debate whether the Trendtex principle should be adopted. The cases for and against (the latter all being decisions of the Federal Court) are collected in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 188 FLR 278 ; 220 ALR 267 ; [2004] NSWSC 1041. It may be that the debate is now over for the High Court in Campbell’s Cash and Carry Ltd v Fostif Pty Ltd(2006) 229 ALR 58 ; [2006] HCA 41 seems to have approved Trendtex. In any event, my own view is that the logic of Lord Roskill’s view is inescapable. This is especially so when, as here, the cause of action is connected with, or relates to, rights or interests owned, or that will fall into the ownership, of the assignee.’[18]
[308] In Trendtex, the House of Lords tended to confine the concept of an unassignable bare right of action, by holding that a chose of action was assignable if the assignee had a general commercial interest in it, even if it were not incidental or subsidiary to a right of property.
[309] While in the present case the loan agreements are illegal and do not give rise to enforceable debts, at the date of the assignment, no step had been taken to terminate them. Although the restitutionary claims (it established) would be alternative, rather than incidental to, the debts, the broad approach in Trendtex would probably encompass such a circumstance.
[310] In summary, although the authorities provide no clear guidance on the assignability of a lender’s restitutionary claim to recover the funds advanced under an unenforceable loan contract, it appears, on the better view, to be capable of assignment, particularly if the lender has a general commercial interest of the kind recognised in Trendtex. The nature of the restitutionary right, infused with equitable considerations and subject to defences such as change of position, may pose difficulties in the context of assignment. In my view, such potential problems would affect the availability and nature of the remedy, rather than posing an absolute barrier to assignment.”
[18]TS & B Retail Systems at [79]-[81].
On the basis that the claimed restitutionary rights were assignable, the Bendigo and Adelaide Bank parties and ABL Nominees pointed to the differences in the critical provisions of clauses 2.4 and 2.6 of the LSSD as compared to the terms of the assignment the subject of the Equuscorp case.
In particular, it is noted that the operative part of the assignment considered in the Equuscorp case was cast in more narrow terms than, particularly, the provisions of paragraph 2.4(b) of the LSSD. Clause 1 of the operative part considered in the Equuscorp case provided:[19]
“Pursuant to clause 5.2(a) of the Asset Sale Agreement, Rural, as legal and beneficial owner, hereby sells, assigns, transfers and sets over the debts, its interests under the loan contracts, its interests under the guarantees and its interests under the securities, free from all encumbrances to Equus and all interest due and becoming due on the debts for Equus to hold absolutely (‘the assignment’).”
It will be observed in relation to paragraph (b) of clause 2.4 of the LSSD that the emphasised words contain additional expressions, particularly “in respect of or in connection with each Loan”.[20] It is not the function of the Court in a proceeding of this nature to finally determine any issues but, rather, to consider whether the relevant claim or defence is arguable in the context of the tests referred to in the authorities to which reference has been made.[21] On this basis, I observe that there are references in the authorities to the breadth of expressions such as “in connection with” and similar expressions which would tend to suggest that the net cast under the LSSD is wider than that which was the subject of the Deed of Assignment considered in the Equuscorp case.[22]
[19]Equuscorp at [312].
[20]See above, paragraph 12.
[21]See above, paragraphs 6 to 8.
[22]See, for example, Exford Pines Pty Ltd v Vlado’s Pty Ltd [1992] 2 VR 449 at 451-2 (Tadgell J).
The Bendigo and Adelaide Bank parties and ABL Nominees submitted that the Court of Appeal in the Equuscorp case decided against an assignment of restitutionary relief on the facts of that case and by reference to the particular provisions of the assignment under consideration. In this respect, it was noted that on 3 September 2010 the High Court granted special leave to appeal.[23] Consequently, it was said that it cannot be that a claim that restitutionary relief was assigned to the Bendigo and Adelaide Bank parties and ABL Nominees is unarguable. For this additional reason, and in light of the pending appeal to the High Court, it was submitted that the Bendigo and Adelaide Bank parties and ABL Nominees should be permitted to have this issue determined, on the facts of this case, at trial.
[23]See Equuscorp Pty Ltd v Haxton [2010] HCA Trans 231 (per French CJ and Crennan J): see p 3-5 (total failure of consideration) and p 6, 9, 13-14 (assignment of restitutionary relief) for a reference to the issues likely to be raised in the appeal.
It was also submitted by the Bendigo and Adelaide Bank parties and ABL Nominees, that the defendant’s assertion that “[A]ny right to restitution against Smith in the circumstances contemplated by the Proposed Pleading only arises by reason of the unenforceability/failure of the Loan Deed”[24] was misconceived in relation to the availability of restitutionary relief. It was submitted that since the High Court’s decision in Pavey & Matthews v Paul,[25] it is accepted that restitutionary relief is not founded on notions of quasi-contract. The right to restitutionary relief arises, it was said, from the operation of law upon the circumstances. The unenforceability of a contractual agreement does not of itself form the basis of such a right. Rather, it was submitted, it is the absence of a contractual remedy that is a precondition to the provision of restitutionary relief. In this respect, Deane J, in Pavey & Matthews v Paul, said:[26]
“[I]t is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.”
[24]Defendant/Plaintiff by Counterclaim’s Submissions in Opposition to the Plaintiff’s Application to Amend its Statement of Claim (16 September 2010) at paragraph 14.
[25](1986) 162 CLR 221.
[26](1986) 162 CLR 221 at 256.
On the basis of the authorities to which reference has been made and for the reasons indicated I accept the submissions of the Bendigo and Adelaide Bank parties and ABL Nominees that there is, in the context of an application to amend a claim or defence, an “arguable” position on their part, in the sense that word is used in the authorities to which reference has been made,[27] that the provisions of the LSSD did have the effect of assigning whatever restitutionary rights might possibly have been enjoyed by GSF to those parties.
[27]See above, paragraphs 6 to 8.
Nature of restitutionary relief
The Bendigo and Adelaide Bank parties and ABL Nominees submitted that it was not correct, as it was submitted on behalf of the defendant, that the claim for restitutionary relief must be based upon an implicit premise that such right to relief was assigned from GSF to those parties.
It was submitted that this assumption is misplaced because if the Loan Deeds are found to be unenforceable, the Bendigo and Adelaide Bank parties and ABL Nominees assert a right to restitution arising by operation of law in circumstances where:
(a)the benefit of the loans was provided at the expense of the Bendigo and Adelaide Bank parties and ABL Nominees;
(b)the defendants have accepted the benefit of the loans and associated benefits, including the acquisition of interests in the schemes and substantial tax deductions; and
(c)the retention by the defendants of the benefit of the loans in circumstances where the Bendigo and Adelaide Bank parties and ABL Nominees paid full value for the assignment of the loans and it would be unjust in a manner recognised by law were restitutionary relief not available.[28]
[28]Pavey & Matthews v Paul (1986) 162 CLR 221 at 225 (Deane J).
Broadly speaking, it may be said that restitution provides a remedy for “unjust enrichment”. Unjust enrichment has been described by the High Court as:[29]
“[A] unifying legal concept which explains why the law recognises, 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, recognise such an obligation in a new or developing case …”.
[29]Pavey & Matthews v Paul (1986) 162 CLR 221 at 256-7 (Deane J).
The availability of restitutionary relief for unjust enrichment is dependent upon the existence of a qualifying or vitiating factor. The High Court, in David Securities Pty Ltd v Commonwealth Bank of Australia,[30] stated:
“[I]t is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable. Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality … the law will not provide recovery except where the enrichment is unjust.”[31]
[30](1992) 175 CLR 353; see also the passage in the judgment of Deane J in Pavey & Matthews v Paul (1986) 162 CLR 221 at 256-7 in which it was emphasised that the unifying legal concept of unjust enrichment imposes the obligation of restitution in “distinct categories of cases” (which was also cited in David Securities) at 175 CLR 353 at 379.
[31]David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 379.
These categories provide a starting point for the analysis of restitutionary claims.[32] However, the law of restitution is not frozen, and new situations in which an enrichment is considered sufficiently unjust to give rise to a claim for restitution may be recognised.[33]
[32]Lactos Fresh Pty Ltd v Finishing Services Pty Ltd (No. 2) [2006] FCA 748 at [92].
[33]Haxton v Equuscorp Pty Ltd [2010] VSCA at [3].
On the basis of its submissions, the Bendigo and Adelaide Bank parties and ABL Nominees submitted that the Proposed Pleading discloses an arguable case which satisfies the test with respect to the amendment of a claim or defence in the cases to which reference has been made for restitutionary relief; at least on the basis of the established categories of illegality or total failure of consideration.
Categories of unjust enrichment relied upon
The categories of unjust enrichment relied upon by the Bendigo and Adelaide Bank parties and ABL Nominees were both illegality and total failure of consideration. Although the defendant did not concede that the Bendigo and Adelaide Bank parties and ABL Nominees were able to avail themselves of the total failure of consideration category, it was submitted that this was the only category of unjust enrichment potentially available to those parties. The Bendigo and Adelaide Bank parties and ABL Nominees, however, submitted that this was to overlook the recognised category of illegality referred to by the majority of the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia.[34]
[34](1992) 175 CLR 353 at 379.
Illegality in the context of the law of contract does not admit of easy or precise definition. For present purposes, it is sufficient to observe that courts will not enforce a contract or a contractual term that is expressly or impliedly prohibited by statute or a rule of public policy.[35] This general approach, naturally, has the potential for injustice to innocent parties. Consequently, a person who cannot enforce the illegal contract or contract term may, in certain circumstances, seek restitutionary relief in respect of money paid, property transferred or services rendered under the illegal contract or contract term.[36] The availability of restitutionary relief in these circumstances is an exception to the general principle that a court will not lend its aid to a cause of action founded upon an immoral or illegal act.[37]
[35]See Yango Pastoral Co Pty ltd v First Chicago Australia Ltd (1978) 139 CLR 410; Wilkinson v Osborne (1915) 21 CLR 89.
[36]See Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221.
[37]Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215 at 228-231.
A series of cases of most direct relevance to the present circumstances in this context is provided by the, so-called, “prescribed interest cases”.[38] A common feature of the prescribed interest cases is an investment scheme which proved unsuccessful, a key aspect of which was the entry by investors into loan agreements to finance the purchase of their interest in the scheme. It appears that most, if not all, of these schemes were marketed and seen as offering attractive tax benefits to investors. The approach of the courts in these cases is epitomised in the following passage from the judgement of McHugh JA in Hurst v Vestcorp:[39]
“In the present case the contract of loan is invalid because it was made as the result of a breach of s 83 of the Companies Act 1961. Nothing in ss 83 and 86 of the Act or the Act as a whole indicates that the legislature intended that a loan of money made to an investor who takes up an interest is not recoverable as a matter of restitution.
Although the contract of loan is unenforceable, the appellants have received and have had the benefits associated with the loans. With one exception, they have had the benefit of the tax deductions associated with the amounts of the loans. They have also been able to increase their interest in the films as the result of the loans. Yet the result of my judgment is that the contracts of loan are unenforceable. If appellants are not required to refund the moneys which they borrowed, they will reap an unmerited benefit. That, of course, is often the result of the illegality doctrine. But the modern doctrine of restitution enables the court in appropriate cases to overcome these injustices.”
[38]See Hurst v Vestcorp (1988) 12 NSWLR 394 (unsuccessful tax driven film investment scheme); O’Brien v Melbank Corporation Ltd (1991) 7 ACSR 19 (failed tax driven cattle breeding scheme); Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488 (failed thoroughbred horse breeding venture).
[39](1988) 12 NSWLR 394 at 445-6.
Equuscorp was also a case involving a prescribed interest, namely, a blueberry farm investment scheme. As discussed previously, the Court of Appeal found in that case that the assignee of the benefit of the investor loans was not entitled to restitutionary relief as assignee.[40] Additionally, and more fundamentally in terms of the original parties in that case, the Court of Appeal found that the investors’ retention of the balance of the loan funds was not unjust in the particular circumstances as they had lost their interest in the schemes and there was no evidence that they invested in order to obtain or did obtain any taxation benefit from their participation in the schemes.[41] The Bendigo and Adelaide Bank parties and ABL Nominees submitted that the present circumstances were distinguishable from those considered in Equuscorp on a number of bases, including: [42]
“(a) In Equuscorp the investment scheme failed. In the present proceedings it will be established that a replacement Responsible Entity has been appointed to the 2005 and 2006 Plantations Projects and investors have retained their interest in the Projects … ;
(b) Whilst in Equuscorp there was no evidence that investors had obtained tax deductions as a result of their participation in the scheme, that is unlikely to be the case in the present proceedings and in any event it is pleaded that such deductions were obtained;
(c) In the present proceedings, it will be established that the Bendigo and Adelaide Bank Parties and ABL Nominees purchased the loans at full value. In Equuscorp, the assignee of the loan book paid less than 1% of the value of the loans assigned; and
(d) In Equuscorp, both the original lender and the assignee were on notice of a potential breach of the prescribed interest provisions. In the present proceedings, the allegations of wrong-doing were made after the loans were assigned. Prior to that time, the loans were being repaid. Indeed, there are no allegations of wrongdoing made against the Bendigo and Adelaide Bank Parties and ABL Nominees.”
[40]See above, paragraph 17.
[41]Equuscorp [2010] VSCA 1 at [272].
[42]Outline of Reply Submissions in Support of the Plaintiff’s Application to Amend its Statement of Claim (20 October 2010), pp 8-9.
On the basis of the approach taken in the prescribed interest cases and the distinguishing features in the present circumstances from those considered in Equuscorp, the Bendigo and Adelaide Bank parties and ABL Nominees submitted that they have an arguable case for restitutionary belief on the basis of the established category of illegality.
It was submitted on behalf of the defendant that, even if the allegations made by the Bendigo and Adelaide Bank parties and ABL Nominees were made out, the absence of a total failure of consideration would be fatal to the claim for restitutionary relief. It was submitted that this established category only operates in the case of a total failure of consideration and that if part of the consideration bargained for (by the payer) does not fail but succeeds and is in fact received, then no right to restitution accrues. In support of this proposition, reference was made to Equuscorp[43] and Baltic Shipping Co v Dillon.[44] It was conceded that an exception to this position is where the element of the consideration that succeeds is divisible or severable from that part of the consideration which fails, referring by way of example to Roxborough v Rothmans of Pall Mall Ltd.[45] In the present circumstances, it was submitted by the defendant that the Bendigo and Adelaide Bank parties and ABL Nominees received part of the consideration promised under the impugned Loan Deeds in the form of monthly payments between 1 July 2005 and 30 June 2008. It was submitted that such payments are unable to be divided or severed from the nature of the consideration that would fail in the event that the Loan Deed is unenforceable, as both forms of consideration (those “received” and “failed”) are simply amounts due under the unenforceable contract. Consequently, it was submitted that the Bendigo and Adelaide Bank parties and ABL Nominees had received, to a significant extent, benefits which were “the substance of the contractual promise, and which a lender would typically have in view in return for making an advance”.[46]
[43][2010] VSCA at [178].
[44](1993) 176 CLR 344 at 350-1 (Mason CJ)and 376-7 (Deane and Dawson JJ).
[45](2001) 208 CLR 516 at 527-9 (Gleeson CJ, Gaudron and Hayne JJ).
[46]Adopting the language of Dodds-Streeton JA in Equuscorp at [189].
The Bendigo and Adelaide Bank parties and ABL Nominees submitted that the Court of Appeal in Equuscorp recognised that where a contract is ineffective, “courts have tended to adopt a more liberal approach to total failure of consideration”.[47] Further, it was submitted that the question whether the requirement that the failure of consideration be “total” and what this means will be considered by the High Court in the Equuscorp appeal.[48]
[47]See Equuscorp at [2010] VSCA at [129].
[48]Referring to Equuscorp Pty Ltd v Haxton [2010] HCATrans 231, p 3-5.
The Bendigo and Adelaide Bank parties and ABL Nominees also submitted that in determining whether there has been a total failure of consideration, a court will consider the claimant’s ability to make counter restitution.[49] Counter restitution operates to do justice between the parties by restoring each party to their original position to the extent practicable. It was submitted that counter restitution is possible in the present proceedings; though this was not elaborated upon.
[49]David Securities Pty Ltd v Commonwealth Bankof Australia (1992) 175 CLR 353 at 383 (Mason CJ and Deane, Toohey, Gaudron and McHugh JJ).
In relation to these submissions, it is of assistance to refer to the Court of Appeal decision in Equuscorp, which, in my view, indicates both a more liberal approach to total failure of consideration emerging from the authorities and the importance of considering the issue of total or partial failure of consideration in the context of the particular bargain between the parties. This is made clear in the judgment of Dodds-Streeton JA, particularly in the following passages:[50]
“[129] Australian courts have predominantly accepted Professor Birks’ view that ‘after discharge of a contract, the recoverability of any payment made before the completion of the contract is dependent on whether the “state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself”’.[51] In that context, consideration is the benefit the claimant bargained for under the contract or purported contract.[52] While the traditional requirement that the consideration for the payment must have totally failed is frequently, if not universally restated, where the contract is ineffective, the payer’s only remedy may be in restitution. In such a case, courts have tended to adopt a more liberal approach to total failure of consideration. Where the payer has received some benefits, the expected consideration or bargain may be so construed that the received benefits do not constitute even a partial satisfaction. Alternatively, the transaction and the consideration may be held to be divisible, leaving a discrete element of the bargain in relation to which consideration wholly failed, despite the claimant’s receipt of some payments or benefits relating only to a different component of the transaction. English courts have analysed payments made under a void contract as an absence, rather than a total or partial failure, of consideration.[53]
…
[189] It does not follow that a payment which lacks juristic justification cannot constitute consideration for which the payer bargained. As recognised in Ovidio Carrideo, consideration in this context is ‘the matter considered in forming the decision to make the payment’.[54] As in Baltic Shipping and Ovidio Carrideo, Rural, prior to the curial determination of unenforceability, received to a significant extent, benefits which were the substance of the contractual promise, and which a lender would typically have in view in return for making an advance. In such circumstances, even if the loan contracts and associated securities are considered in isolation from the other transactions of the schemes, the fact that the benefits received were retrospectively held to lack a legally enforceable character does not render them analogous to the short term use of a car to which the claimant in Rowland v Divall[55] had sought legal title. In Rowland v Divall, the character of legally enforceable rights and title was clearly crucial to the bargain. Further, in the present case, Equus did not advance a basis of severance. The ground of distinction between repayments of capital and interest relied on in Goss v Chillcott[56] was not open.”
[50]Equuscorp [2010] VSCA at [129] and [189].
[51]P Birks, An Introduction to the Law of Restitution (1st ed, 1985), 223, approved by McHugh J in Baltic ShippingCompanyv Dillon (1992) 176 CLR 344, 393 and by the plurality in David Securities (1992) 175 CLR 353, 382.
[52]See David Securities (1992) 175 CLR 353, 382.
[53]See Westdeutsche, discussed from paragraph [154] to [166] of these reasons.
[54][2006] VSCA 6, [28] (Nettle JA).
[55][1923] 2 KB 500.
[56][1996] AC 788.
In relation to the particular circumstances of the present proceedings, the Bendigo and Adelaide Bank parties and ABL Nominees submitted that the loans were provided to the defendant and other defendants for the express purpose of enabling them to purchase interests in the Great Southern Managed Investment Schemes, which the defendant and other defendants acquired and, as a consequence, then obtained significant tax benefits. In return, the Bendigo and Adelaide Bank parties and ABL Nominees received monthly payments of interest on the loan balance. It was submitted that the pleaded (or proposed to be pleaded) facts are therefore distinguishable from Equuscorp.[57] Further, it was submitted that the advances made by the financier were clearly made on the footing that the Loan Deeds were enforceable and they were also made at the request of the relevant borrowers. It was said that if the Loan Deeds are not enforceable, then the payments made, together with interest accruing “insofar as those amounts exceed the monthly repayments and interest received” are recoverable as money had and received to the use of the Bendigo and Adelaide Bank parties and ABL Nominees, by which the borrowers have been unjustly enriched.[58]
[57]Comparing Equuscorp [2010] VSCA at [185] to [191].
[58]See Westdeutsche Landesbank Girozentrale v Islington London BC [1994] 1 WLR 938; and see on appeal Lord Goff at [1996] AC 669 at 682-683.
Extent of benefits obtained
The defendant submitted that the Bendigo and Adelaide Bank parties and ABL Nominees have failed to identify the necessary benefit accruing to the defendant at the expense of the Bendigo and Adelaide Bank parties and ABL Nominees, which is required in order to found a claim based on unjust enrichment.
It was submitted on behalf of the defendant, that in paragraph 29 of the Proposed Pleading, it is alleged that the defendant derived benefits from the loan in the form of:
(a)Acquisition of the wood lots in the 2005 Plantations MIS;
(b)Tax deductions on:
(i) application fees paid to GSMAL in relation to the 2005 Plantations MIS;
(ii) any interest payable on the moneys loaned under the Loan Deed; and
(c)Continued membership of, and interest in, the 2005 Plantations MIS.
In relation to tax deductions, it was submitted that there is no allegation that the interest paid by the defendant on the moneys loaned under the Loan Deed was itself funded out of moneys loaned under the Loan Deed. As such, it was said, the suggestion that any benefit arising by reason of these payments, in the form of tax deductions, was derived from the loan “seems strained”. In any event, it was submitted that, contrary to the allegation contained in paragraph 32 of the Proposed Pleading, any tax benefit derived by the defendant was not enrichment at the expense of the plaintiffs. If it existed at all, it was submitted that the benefit stemmed from the payments themselves, rather than from any detriment suffered by the plaintiffs.[59]
[59]Referring to ABCOS v Jones (1997) 150 ALR 488 at 542 (Wilcox and Lindgren JJ).
In relation to the 2005 Plantations MIS, the defendant submitted that the difference between the purported benefit alleged in sub-paragraphs (a) and (c) of paragraph 29 of the Proposed Pleading was temporal only and disingenuous. Developing this submission, it was said that if the capital loan was used to acquire wood lots in the 2005 Plantations MIS, and that supposed interest in the wood lots has now been replaced by or converted into an interest in the winding up of the 2005 Plantations MIS, that is not capable of constituting two separate prior and presently existing benefits. Further, it was said that the benefit alleged in these sub-paragraphs of the Proposed Pleading can be reduced to the defendant’s interest in the winding up of the 2005 Plantations MIS. It was submitted that such an “interest” is insufficient to found an action for restitution on the basis of unjust enrichment.
Concluding this aspect of the matter, the defendant submitted that since the Bendigo and Adelaide Bank parties and ABL Nominees are unable to identify any more precise form of benefit relating to the 2005 Plantations MIS, the Court cannot be satisfied of the existence of the requisite benefit to found the relief of restitution for unjust enrichment which is sought.
In response, the Bendigo and Adelaide Bank parties and ABL Nominees submitted that the defendant’s submissions do not address the question whether substantial tax benefits as a result of the advance of the Principal Sum under the Loan Deeds was accepted by the defendant, and other defendants. It was said that as pleaded in the plaintiffs’ Replies and Defences to Counterclaim in the Individual Proceedings and set out in the 2005 and 2006 Plantations Projects Product Disclosure Statement, relevant ATO Product Rulings provided for the tax deductibility of the “Application Price” payable to GSMAL in relation to the relevant scheme (also referred to as the “Application or Establishment Fees”).[60] Further, it was submitted that, rather than a nominal or upfront start-up fee, the Application Price was levied on a per wood lot basis and represented the total amount of the investment in the relevant scheme. Accordingly, it was submitted that it is evident that the necessary ingredients of benefit and detriment are present to found a case for unjust enrichment.
[60]See paragraph 21 of the Reply and Defence to Counterclaim filed on 16 September 2010 in Supreme Court Proceeding No. SCI 2009 10876.
Further, in relation to tax deductibility of interest payments under the loans the subject of the present proceedings, it was submitted by the Bendigo and Adelaide Bank parties and ABL Nominees that such a benefit is clearly connected to and results from the advance of the Principal Sum under the Loan Deeds. It was submitted that the decision of Australian Breeders Co-operative Society Ltd v Jones[61] which was relied upon by Smith in support of submissions to the contrary is not analogous to the present proceedings. In the Australian Breeders case, the court considered whether there was unjust enrichment as a result of tax deductions claimable on rental payments under a lease agreement that was subsequently declared void. It was decided that there could be no question of unjust enrichment where the only payments made under the leases were made by the investors because there was no connection between the tax benefits received and any relevant detriment suffered by the defendant in that case.[62] In the present proceedings, it was submitted that the connection clearly exists. Reference was made to other prescribed interest cases where the potential for tax benefits founded a claim based on unjust enrichment.[63]
[61](1997) 150 ALR 488.
[62]See (1997) 150 ALR 488 at 542 (Wilcox and Lindgren JJ).
[63]See Hurst v Vestcorp {1988} 12 NSWLR 394 at 445; Amadio v Henderson (1988) 81 FCR 149 at 200.
In relation to the submission by the defendant that the difference drawn between the benefits alleged in paragraphs 29(a) and (c) of the Proposed Pleading was “temporal only and disingenuous”, it was submitted that this criticism proceeds on the incorrect assumption that the 2005 and 2006 Plantation Projects are to be or have been wound up. However, it was said, that as pleaded in the Replies and Defences to Counterclaim in the Individual Proceedings,[64] it will be established that Gunns Plantations Limited has replaced GSMAL as the Responsible Entity for the Projects and that these Projects continue.
[64]See paragraph 6(d) of the Reply and Defence to Counterclaim filed on 16 September 2010 in Supreme Court Proceeding No. SCI 2009 10876.
Proposed pleadings
On the basis indicated previously, I am of the opinion that it is “arguable” in the relevant sense[65] that any rights to restitutionary relief which existed were assigned to the Bendigo and Adelaide Bank parties and ABL Nominees. However, the submissions of these parties assert that their proposed claims for restitution do not arise only on the basis of assignment.
[65]See above, paragraphs 6 to 8.
The Reply Submissions on behalf of the defendant[66] made the point that if the Bendigo and Adelaide Bank parties and ABL Nominees submit that the defendant is mistaken to assume that their proposed claims for restitution arise only by way of assignment, then the deficiencies in the pleadings in this respect are highlighted. In my opinion, the contents of the Proposed Pleadings do not make it clear that the basis of restitutionary rights claimed by the Bendigo and Adelaide Bank parties and ABL Nominees arise other than as a result of assignment of the Loan Deed. Consequently, if it is alleged, as seems to be the position, that the proposed claims for restitution by the Bendigo and Adelaide Bank parties and ABL Nominees are more broadly based than as a result of the assignment, then the Proposed Pleadings require additional pleadings and clarification of these points.
[66]Reply Submissions (22 October 2010).
In relation to the parts of the Proposed Pleading which set out the basis for the restitutionary claim, namely, paragraphs 28 to 32, the defendant’s reply submissions contain the following detailed critique: [67]
[67]Reply Submissions (22 October 2010) at [16] to [20].
“16. … the proposed pleading states that the Grower(s)’ unjust enrichment at the Banks’ ‘expense’, supposedly founding their restitutionary rights, arises by reason of the matters pleaded in paragraphs 5A and 28 to 31.
(a) Paragraph 5A pleads the Loan.
(b) By paragraph 28 the Banks state that, in the event of the Loan being void and/or unenforceable, they rely upon the following paragraphs.
(c) Paragraph 29 pleads the supposed benefit flowing to the Grower(s) as a result of the Loan.
(d) Paragraph 30 pleads that ABL paid GSF full value for the ‘assignment of the Loan’, and the particulars thereto refer to the amount paid being ‘in consideration of the assignment of GSF’s rights under the Loan to ABL’; and
(e) paragraph 31 pleads that the First Plaintiff paid ABL full value for the assignment of the Loan’, and the particulars thereto refer to the amount paid being ‘in consideration of the assignment of ABL’s rights under the Loan to the First Plaintiff’.
17. There is no alleged detriment (termed ‘expense’ in the proposed pleading) on the part of the Banks other than that arising as part of the assignment(s).
18. Furthermore, that alleged detriment/expense (the payment) is expressly particularised as being provided in consideration of the assignment of rights under the Loan.
19. The language used (by the Banks) to describe the detriment/expense is obviously contractual in nature.
20. It is submitted that it is likely that the proposed pleading was drawn to allege that the rights to restitution arose by way of assignment from GSF. So much is plain from the language chosen by the pleader – i.e. it would be unnecessary to link the supposed detriment/expense to the assignment transaction itself (as opposed to the Banks’ simply parting with funds) were this not the case.”
Apart from these detailed criticisms of the contents of the Proposed Pleadings, submissions were made on behalf of the defendant, more generally, that the Proposed Pleading does not plead the basis of the restitutionary claim, that is the “qualifying or vitiating factor such as mistake, duress or illegality” in relation to which the law will provide restitutionary relief where there is unjust enrichment.[68]
[68]See David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; and see above, paragraph 28).
Although I accept the submissions of the Bendigo and Adelaide Bank parties and ABL Nominees that their position with respect to the alleged detriment and benefit is “arguable” in the proper sense and the present context,[69] I accept the defendant’s submissions, as set out above, in relation to the deficiencies in the Proposed Pleading with respect to the pleading of benefit and detriment.
[69]See above, paragraphs 6 to 8.
Having reached this position, I am strengthened in my views by the chapter on pleading restitutionary claims and defences in Mason, Carter and Tolhurst’s text, Restitution Law in Australia.[70] It is helpful in the present circumstances to set out some material from that chapter which reflects and confirms my views:
[70](2nd ed, 2008: Lexis Nexis Butterworths Australia); and the relevant chapter is “Chapter 29 – Pleading Restitutionary Claims and Defences”, which commences at p 998.
“[2904] Pleading mere ‘unjust enrichment’. A pleading that asserts in the abstract that P was unjustly enriched at D’s expense will usually be struck out. The authorities require the basis of such an allegation to be explained in the pleading.
In the light of general statements in David Securities Pty Ltd v Commonwealth Bank of Australia, courts have been averse to pleadings which simply appeal to ‘idiosyncratic notions of what is fair and just’, or which plead generalised claims based on unjust enrichment.
…
[2908] General. The shift from implied contract to unjust enrichment as the conceptual basis of most restitutionary causes of action means that the general structure of a pleading in such a claim for restitution of money paid should be:
(1)the payment (benefit) by the plaintiff (at the plaintiff’s expense);
(2)the basis for the claim, that is, the operative unjust factor (for example, mistake); and
(3)the causal link between (1) and (2).
In David Securities Pty Ltd v Commonwealth Bank of Australia the High Court rejected the proposition that a plaintiff who relies on a cause of action falling within an accepted category, such as restitution for mistaken payments, need show superadded injustice of retention or unfairness.
…
[2912] Recovery of money previously paid under contract. Where the payment was equal to or less than the amount required under a contractual obligation, it is not sufficient to plead the payment under the contract and a causative unjust factor such as mistaken or duress. The ineffective nature of the contract itself must also be identified. This means that there are three elements in such claims:
(1)the payment;
(2)the ineffective nature of the contract; and
(3)the basis upon which restitution is claimed.
The first element requires no explanation. Pleading the second element requires a statement of the facts why the contract is ineffective. Reference must be made to the character of the ineffectiveness: that the contract was void when the payment was made, or discharged or rescinded after the payment was made. Of course, this requires reference to the facts relied upon that lead to the conclusion of law that the contract was ineffective. Particulars must be given. The third element looks to matters such as a total failure of the agreed return, or the presence of mistake, improper pressure, fraud or illegality, or the exercise of a judicial (usually statutory) discretion in favour of the plaintiff, such as the basis for relief against forfeiture.”
[Footnotes omitted].
Summary and conclusions
On the basis of the authorities to which reference has been made, and for the reasons indicated, I am of the opinion that the Proposed Pleading fails to properly articulate a claim or claims for restitutionary relief. Though “arguable” in the relevant sense, there is a failure to plead that claim or claims in a manner which sets out the real question in controversy between the parties and the basis on which that question is alleged.
For these reasons, I refuse leave to amend the Amended Statement of Claim as set out in the Proposed Pleading. Nevertheless, it remains open to the Bendigo and Adelaide Bank parties and ABL Nominees to make a further application to amend the Amended Statement of Claim alleging a proper basis for a restitutionary claim or claims having regard to these reasons. It follows, as indicated previously,[71] that I refuse leave to amend in the other Individual Proceedings and that the relevant paragraphs contained in the Statement of Claim in the Wynd proceeding should be struck out, with a similar opportunity to seek to re-plead.
[71]See above, paragraphs 2 to 3.
I will hear the parties in relation to appropriate orders in the various proceedings to which reference has been made[72] and in relation to the question of costs in the various proceedings the subject of the present applications.
[72]Ibid.
On 22 October 2010, there was a separate application for costs made by GSF in the Individual Proceedings and the Wynd proceeding. The application sought the costs of preparing to defend the abandoned leave to proceed against a company in liquidation applications made by the Bendigo and Adelaide Bank parties and ABL Nominees against GSF. I will continue to reserve my decision on this application until the pleadings in the Individual Proceedings and the Wynd proceeding are finalised.
19
0