Ethnic Earth P/L v Quoin Technology P/L (Receivers & Managers Appointed) (in Liq) (No 3) - [2006] SASC 7

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ETHNIC EARTH P/L v QUOIN TECHNOLOGY P/L (RECEIVERS & MANAGERS APPOINTED) (IN LIQ) & ORS (No 3)
Judgment of The Honourable Justice Bleby
18 January 2006
RESTITUTION - RESTITUTION RESULTING FROM UNENFORCEABLE, INCOMPLETE, ILLEGAL OR VOID CONTRACTS - RECOVERY OF MONEY PAID OR PROPERTY TRANSFERRED - WHERE CONTRACT VOID OR UNENFORCEABLE FOR ILLEGALITY - GENERAL PRINCIPLE
Contract for sale of business declared void under s 6(1) Land and Business (Sale and Conveyancing) Act 1994 (SA) - Whether s 6(2) of the Act confers a right to recover money paid under void contract or whether it preserves common law rights - Consideration of evident legislative policy - Consideration of principles of restitution at common law - Whether failure of consideration constitutes unjust enrichment to make out restitution claim - Whether payments made under mistaken belief - Defences to claim for unjust enrichment considered - Adequate consideration - Change of position - Parties not in pari delicto - Plaintiff not entitled to restitution - Defendant's counterclaim for restitution dismissed - Order for return of physical assets to defendant.
Land and Business (Sale and Conveyancing) Act 1994 (SA) s 6, s 34; Land and Business Agents Act 1973 (SA) s 89; Lottery and Gaming Act 1936 (SA) s 50, s 50A; Income Tax Assessment Act 1936 (Cth) s 261; Fair Trading Act 1987 (SA) s 22, s 24; Frustrated Contracts Act 1988 (SA) s 7; Sale of Goods Act 1895 (SA) s 7, referred to.
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; Sargood Brothers v Commonwealth (1910) 11 CLR 258; Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328; Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662; Barclays Bank Ltd v W J Simms & Son & Cooke (Southern) Ltd [1980] QB 677, applied.
Rover International Ltd v Cannon Film Ltd [1989] 1 WLR 912; Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32; Hunt v Silk (1804) 102 ER 1142; Whincup v Hughes (1871) LR6CP 78; Rowland v Divall [1923] 2 KB 500; Kariri Cotton Co Ltd v Dewani [1960] AC 192, distinguished.
Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (Receivers & Managers Appointed) (In Liquidation) & Ors (2004) 89 SASR 337; [2004] SASC 257; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, discussed.
Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (Receivers and Managers Appointed) (In Liquidation) & Ors [2005] SASC 112; Pooraka Holdings Pty Ltd v Participation Nominees Pty Ltd & McAuley (1991) 58 SASR 184; Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349; Contract Law In Australia (4th ed, 2002), Carter & Harland; The Law of Restitution (2nd ed, 2002), A Burrows, considered.

ETHNIC EARTH P/L v QUOIN TECHNOLOGY P/L (RECEIVERS & MANAGERS APPOINTED) (IN LIQ) & ORS (No 3)
[2006] SASC 7
BLEBY J:
Introduction

The facts giving rise to these actions are set out in some detail in my decision in Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (Receivers and Managers Appointed) (In Liquidation) & Ors.[1] In brief, the plaintiff (“Ethnic Earth”) and the first defendant (“Quoin”) were parties to a contract (“the sale contract”) for the sale of a business previously carried on by Quoin. The sale contract was entered into on 15 February 2002, the receivers and managers of Quoin having been appointed by Westpac Banking Corporation on 6 February 2002.
[1] (2004) 89 SASR 337; [2004] SASC 257.
The business conducted by Quoin was that of website services, delivery of online documentation services and products, content management services, electronic learning and interactive media products and services and design and development of training material for business and system purposes.
The purchase price was the sum of $396,000. Under the original contract that sum was payable as to a deposit of $100,000 on the date of the contract and the balance on the completion date, 28 March 2002. The original contract was subject to two written variations, the first one (“the first variation”) was made on 28 March 2002. The second one (“the second variation”) was made after a series of exchanges of correspondence culminating in agreement on 13 May 2002. In the decision referred to above I held that the second variation had the effect of rendering the whole contract void by virtue of s 6 of the Land and Business (Sale and Conveyancing) Act 1994. That section relevantly provides:
6.(1) A contract for the sale of land or a business that provides for the payment of part of the purchase price of the land or business (except a deposit) before the date of settlement is void.
(2)Money paid under a contract that is void under subsection (1) may be recovered by action in any court of competent jurisdiction.
(3)In this section –
“deposit” means an amount paid by a purchaser in a lump sum, or in not more than three instalments, towards the purchase price of land or a business before the date of settlement.
I held that Ethnic Earth was entitled to a declaration that the contract was rendered void by the second variation. I then said[2]:
By virtue of s 6(2) of the Act, Ethnic Earth would normally be entitled to an order for payment by Quoin of the moneys paid by Ethnic Earth pursuant to the terms of the contract. However, I am conscious that there are other outstanding issues to be resolved. These include the effect on the proceedings of the liquidation of Quoin and whether such a claim is stayed by s 471B of the Corporations Act. There are also unresolved questions concerning Quoin’s counterclaim against Ethnic Earth and whether any claim for damages or restitution can be set off against the claim by Ethnic Earth. It would also seem to follow that the second action should be dismissed.
[2] Ibid at 351.
The second action referred to is an action by Quoin against a number of individuals as guarantors under a deed of guarantee entered into on 15 February 2002 whereby the guarantors guaranteed the performance by Ethnic Earth of the contract. Quoin claimed from the guarantors the balance of the purchase price and interest alleged to be due under the contract. Quoin now accepts that that action must be dismissed.
The observation I made about s 471B of the Corporations Act was made in ignorance of the fact that on 29 August 2002 Ethnic Earth was given leave to proceed not only for the declaration that the contract between it and Quoin was void but for an order for the return of moneys paid with interest. Leave was given in terms that permit restitutionary remedies against Quoin being pursued to entry of judgment. There is therefore no current impediment to the entry of a declaratory judgment and, if it is otherwise justified, an order for the repayment of moneys paid by Ethnic Earth under the contract.
I made no orders at that time, as the only issue that had been argued before me was whether the contract was void.
Following further submissions as to the effect of my previous decision, the defendants filed a notice for specific directions seeking leave to amend the defence and counterclaim, leave to re‑open their case on Ethnic Earth’s claim and on Quoin’s counterclaim, leave to withdraw certain admissions and for the recall of my reasons for judgment delivered on 26 August. On 30 March 2005 I dismissed that application.[3] I indicated that, if there was an argument open on the evidence that had been placed before me at the trial that Ethnic Earth was not entitled to return of the moneys paid, then that remained open to the defendants to pursue.
[3] Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (Receivers and Managers Appointed) (In Liquidation) & Ors [2005] SASC 112.
Accordingly, the issues which remain outstanding are as follows:
1.Whether an order should be made that Quoin repay to Ethnic Earth the sum of $150,000 paid pursuant to what is now a void contract. In this regard, Quoin denies that Ethnic Earth is so entitled on any principles of restitution. It also raises defences of estoppel, that the parties were not in pari delictu, Quoin being the party at a disadvantage by Ethnic Earth’s conduct, and change of position by Quoin.
2.If Ethnic Earth is entitled to such an order –
(a)     Whether there is any liability upon the second and third defendants, being the receivers and managers of Quoin, to make the payments;
(b)    Whether the moneys are held on trust for Ethnic Earth or whether Ethnic Earth merely has a money claim against Quoin, now in liquidation; and
(c)    Whether there is any obligation on Ethnic Earth to make counter‑restitution of the benefits Ethnic Earth received under the sale contract.
3.Quoin’s counterclaim for the value of the business less the payments already received. This is put on the following basis:
(a)     That Ethnic Earth is obliged to make counter‑restitution of benefits received on the basis that Quoin was mistaken as to the validity of the sale contract;
(b)    Total failure of consideration;
(c)    Conversion or detinue of the physical assets and conversion of the revenue derived by Ethnic Earth by exercising its rights under the sale contract.
The facts
It is necessary to refer briefly to the nature of the evidence before me at the trial, to repeat some of the facts set out in the earlier judgment and to make some further findings of fact which were not necessary for that decision.
The evidence placed before me by Ethnic Earth comprised an affidavit and some further oral evidence of Mr Challen, the solicitor for and a director of Ethnic Earth. Mr Challen was a principal of a firm of solicitors practising in Brisbane. Ethnic Earth also tendered an agreed book of documents relating to the various transactions.
The defendants tendered some file notes of Mr Challen, two notices to admit facts and documents and, by consent, a written statement of evidence of Mr Taylor, Manager in the Transactionary Advisory Services Division of Ernst & Young, the firm to which the receivers and managers belonged. The notices to admit related principally to the sending and receipt of documents in the agreed book of documents. Mr Taylor’s evidence related only to the handling of moneys received on account of Quoin. The defendants called no oral evidence.
The business the subject of the sale contract was defined as “the plant and equipment, the computers, the stock, the contractual rights, the intellectual property, the goodwill, the Vendor’s shares and the business names”. The plant and equipment was defined as meaning all items of plant, equipment, machinery and furniture owned by Quoin at the date of the sale contract and which were utilised in the business by Quoin prior to the date of the sale contract. The expression “computers” was defined in the sale contract as meaning the vendor’s right, title and interest in and to all computers, computer systems and the contents thereof owned by the vendor as at the date of the sale contract.
Of the purchase price of $396,000, the sum of $385,000 was apportioned in the sale contract to the value of “plant and equipment and computers”. I have no evidence before me as to the actual value of those items. I would not be prepared to act on the figure stated in the sale contract, as that may have been agreed at an artificially high figure for taxation reasons. Furthermore, it is likely to have depreciated in value significantly since then.
The expression “stock” was defined as meaning the raw materials and finished stock used or to be used or sold in connection with or as part of the business which were owned by Quoin as at the date of the sale contract. There was no value attributed to stock in the sale contract. It could only have been covered by an item described as “remainder of the assets” to which a value of $1,100 was attributed.
The expression “the contractual rights” was defined as meaning the rights of Quoin under certain contracts, together with all rights arising from any tender or offer submitted or made by Quoin prior to the date of the sale contract and which were accepted after the date of the sale contract. Those contracts were described in Schedule 3 of the sale contract as being contracts with 26 commercial organisations of some standing defined in the sale contract as “the contracting parties”. The Schedule disclosed intended revenue from those contracts for calendar year 2002 of $1,687,000. The Schedule also suggested that, with other contracts to be generated Quoin had a total budgeted revenue of $3,842,800 for 2002 generating an estimated net profit of $939,726. Those contracts and the expected revenue were obviously significant aspects of the business being purchased.
The expression “intellectual property” was defined as meaning Quoin’s right, title and interest to and in a variety of intellectual property described in the contract. It is not necessary to go into detail. It was attributed a value in the sale contract of $8,800.
The expression “goodwill”, as one might expect, was defined as meaning such of the goodwill of the business as subsists at the date of the contract. The contract attributed a value of $1,100 to this item.
What became of the various components of the business which I have just described is addressed later in these reasons.
As mentioned above, a deposit of $100,000 was paid by Ethnic Earth upon the signing of the contract. The business was being sold by receivers and managers who had been appointed a little over one week before the date of the contract. It is clear from Mr Challen’s evidence that the receivers and managers were in no position to carry on the business at that time. The “key man” in Quoin, Mr Clifford, had resigned on 6 February. The receivers and managers had terminated the employment of other staff. It was obviously in the interests of all parties to ensure as far as possible that the business continued as a going concern. This probably explains the haste to enter into the sale contract and the rather unusual provisions of clauses 19-23 of the sale contract:
19.The Vendor shall permit the Purchaser to obtain possession of the assets on the date of this contract. The Vendor shall do all such things as are reasonably required by the Purchaser to facilitate the Purchaser obtaining possession, including access to the premises in order to remove the assets, provided that the removal of the assets from the premises shall be at the Purchaser’s own expense and nothing in this clause creates an obligation on the part of the Vendor to make any payment or give any other consideration to any person.
20.As from the date of this contract, the Vendor gives to the Purchaser permission to approach the contracting parties with a view to obtaining the consent of the contracting parties to the Purchaser performing the obligations of the Vendor under the contracts from the date of this contract to the completion date.
21.Subject to the Purchaser obtaining the consent of the contracting parties, pursuant to clause 20, the Purchaser shall be entitled to perform the obligations of the Vendor under the contracts from the date of this contract to the completion date.
22.If a Purchaser performs the obligations of the Vendor under any contract pursuant to clause 21, it shall perform those obligations in its own capacity for its own benefit and not as an agent, or otherwise on behalf of, the Vendor.
23.If the Purchaser performs the obligations of the Vendor under the contracts pursuant to clause 21, the Purchaser shall perform the obligations of the Vendor fully and punctually and with all due care, skill and diligence.
Subject to certain other conditions contained in the contract, clause 26 provided that, on the completion date, Quoin assigned to Ethnic Earth all of Quoin’s rights under the contracts.
According to the evidence of Mr Challen, Ethnic Earth obtained consent under clause 21 of the sale contract of only two of the contracting parties to perform the obligations of Quoin under their respective contracts. One was a contract with Logan City Council which came to an end soon after the date of the sale contract. The other was a contract with LINZ, engaged through the firm of PricewaterhouseCoopers (“PwC”). I will refer to that contract as “the PwC contract”. That was a contract involving the payment of $139,042.50 over nine instalments after the date of the sale contract. Mr Challen maintained that neither of the contracts was profitable.
While, by virtue of clause 19 of the contract, Ethnic Earth was entitled to obtain possession of the assets from the date of the contract, clause 10 provided that property in the assets would only pass to Ethnic Earth upon payment of the whole of the purchase price together with any interest payable under the contract. One infers that, until then, and subject to the rights conferred by the sale contract, they remained subject to the charge under which Westpac Banking Corporation had appointed the receivers and managers.
There was no evidence before me as to the precise nature and extent of the plant and equipment and computers the subject of the sale contract. The evidence of Mr Challen was that the physical assets had been removed from the various business premises occupied by Quoin and had been placed in storage in various locations in Brisbane, Sydney, Melbourne and Adelaide. No stock‑take had been done at that time. Some office furniture in Adelaide was sold by agreement between the parties for the sum of $660, which sum was paid to Quoin on 24 June 2002. Mr Challen’s evidence was that plant and equipment from the Melbourne office had been placed in storage by the receivers and managers. Ethnic Earth had never taken possession of it. In the other locations Ethnic Earth had arranged for the storage of the plant and equipment which had never been used by Ethnic Earth or a related company. Mr Challen’s evidence was that it was only being held pending return of the $150,000 which had been paid to Quoin pursuant to the provisions of the now void sale contract. Mr Challen’s evidence concerning the physical assets was not qualified by any evidence to the contrary. I have no reason to reject it.
I have very little information concerning the stock. I infer that some or all of it may have been taken over by Ethnic Earth soon after the date of the sale contract and was used for purposes associated with the exercise of Ethnic Earth’s rights under clause 21 of the sale contract.
As mentioned above, the only continuing contract of any significance in which Ethnic Earth became involved was the PwC contract. That was in fact performed by another company known as Quoin Technology Services Pty Ltd (“QTS”), a company which had the same directors as Ethnic Earth. Payments by PwC under that contract were to assume some significance in the events which followed. I infer that the other contracting parties referred to in the sale contract engaged other providers to supply their information technology requirements when those requirements could no longer be met by Quoin.
So far as intellectual property is concerned, Mr Challen maintained that there had been no assignment of any intellectual property to Ethnic Earth under the sale contract and that Ethnic Earth had received none. Once again, there is no evidence to the contrary.
As previously mentioned, the completion date provided for in the original contract was 28 March 2002. On that day the first variation was agreed, whereby the completion date was extended to 1 May 2002 upon Ethnic Earth agreeing to pay the sum of $50,000 on or before 4 April 2002, the payment being described as a “non-refundable payment which will be forfeited by Ethnic Earth in the event of default”. Ethnic Earth also agreed to pay interest on the unpaid part of the purchase price from 29 March 2002 until the date of payment. The additional sum of $50,000 was duly paid. As explained at the time by Mr Challen, there had been difficulty in obtaining finance from Westpac Banking Corporation because the receivers and managers of Quoin had been appointed by Westpac. In the light of that refusal, Mr Challen informed Quoin’s solicitors that an application for finance had been lodged with an organisation known as GE Capital.

The extended completion date of the sale contract under the first variation was 1 May 2002. On 24 April Mr Challen sent an email to Quoin’s solicitors in Adelaide requesting a further extension of the completion date to 31 July 2002. He also proposed that payments then still to be made under the PwC contract should be made direct to Quoin in reduction of the purchase price. He informed Quoin’s solicitors that the application to GE Capital had been unsuccessful and that a fresh application for finance had been made to Westpac Banking Corporation which he was then confident would be granted.
On 1 May 2002 Quoin’s solicitors replied, agreeing to extend the completion date to 31 May 2002 if the application for finance to Westpac was successful, or to 31 July 2002 if it was unsuccessful or had not been approved by 31 May. A number of other conditions were required by Quoin, one of which was that Ethnic Earth would immediately authorise and direct PwC to pay to Quoin all moneys which became payable to Ethnic Earth in connection with the PwC contract. Quoin also required an acknowledgement that Quoin was the “absolute owner of the deposit paid under the sale contracts to date, comprising the sum of $150,000” and that Quoin would be the absolute owner of all additional amounts received from PwC.
On 3 May 2002 Mr Challen requested clarification of certain of the conditions specified by Quoin, including confirmation that payments made by PwC would be in reduction of the purchase price, and pointing out that the further sum of $50,000 which had been paid was “never a further deposit payment but always a further instalment payment of the purchase price. Your client did not request nor did our client agree that the deposit was to be extended from $100,000 to $150,000”.
Quoin’s solicitors acknowledged Mr Challen’s response the same day and noted that Ethnic Earth anticipated a response to its application for finance to Westpac Banking Corporation on 7 May. In the light of that they indicated that they would respond formally after the result of the application to Westpac Banking Corporation was known.
The application to Westpac Banking Corporation was successful and Ethnic Earth advised Quoin on 7 May that finance had been approved.
On 8 May Quoin’s solicitors responded, agreeing to a new completion date of 14 June, with provisions as to the payment of interest on the unpaid purchase price, noting that the sum of $246,000 remained unpaid as at that date, comprising the purchase price specified in the contract “less the deposit of $100,000 and the additional sum of $50,000 paid to Quoin on 4 April 2002”. A further condition specified was that Ethnic Earth would immediately authorise and direct PwC to pay to Quoin all moneys which were then or which would become payable to Ethnic Earth in connection with the PwC contract until completion of the sale contract. Those payments were to be treated as payments of the purchase price.
On 10 May Mr Challen replied seeking a variation to the condition regarding payment of moneys due under the PwC contract. He explained that, because the work under that contract was in fact being carried out by QTS, the moneys payable by PwC were due to QTS and not to Ethnic Earth. Nevertheless, he proposed that Ethnic Earth would borrow and would pay to Quoin the same amounts as PwC had paid to QTS within three banking days of the payments from PwC being cleared in the bank accounts of either Ethnic Earth or QTS. A schedule of those intended payment dates and amounts was then set out. As will be seen, that was a significant variation to the proposal.
That variation was accepted by letter from Quoin’s solicitors on 13 May 2002, thus completing the agreement as to the second variation. It was because of the payment of the purchase price by those instalments which had been agreed for the first time on 13 May 2002 that I held that the sale contract was void by virtue of the provisions of s 6(1) of the Land and Business (Sale and Conveyancing) Act 1994.
Four days after the second variation had been agreed Mr Challen wrote to Quoin’s solicitors asserting that the sale contract was void, not on the basis of the second variation, but by virtue of the first variation. In his view, the only amount comprising the deposit was the initial sum of $100,000, with the payment of $50,000 in consideration of the first variation constituting an instalment. From 17 May 2002 Ethnic Earth refused to complete the sale contract. Quoin considered that Ethnic Earth was in default and that it was therefore entitled to retain the non‑refundable payments amounting to $150,000.
It is apparent from the facts I have recited so far that some time between 28 March 2002, the date of the first variation, and 17 May 2002, Ethnic Earth decided that it no longer wished to proceed with the sale contract. It may be that Ethnic Earth still wished to proceed when it renewed its application for finance with Westpac Banking Corporation some time shortly before 24 April 2002, the earlier application to G E Capital having been unsuccessful. On the other hand, the application to Westpac Banking Corporation, within a week of the extended completion date under the first variation, is equally consistent with demonstrating an intention to proceed under the sale contract while at the same time making other arrangements to secure the position of Ethnic Earth. It is therefore necessary to view the dealings between Ethnic Earth and Quoin in relation to the second variation against an overlay of other events which were occurring at the same time.
Mr Challen’s evidence was that, after he received the letter from Quoin’s solicitors on 1 May 2002, the reference in that letter to a deposit of $150,000 surprised him, as he believed that he had an instalment contract which, under Queensland law was not invalid. This caused him to enquire as to the position in South Australia. He was informed by a solicitor on his staff of the existence of s 6 of the Land and Business (Sale and Conveyancing) Act, and was surprised to find that, if the contract was an instalment contract, it was void. The staff solicitor’s information had only come from a textbook, and Mr Challen then put in train enquiries of an agent in South Australia in order to ascertain whether s 6 was still in force. On the basis of the information that he then had, Mr Challen thought that the contract was void on 1 May.
I have already pointed out that on 3 May 2002 Mr Challen replied to Quoin’s solicitors refuting their suggestion that the deposit was $150,000 and asserting that the payment of $50,000 was a further instalment of the purchase price. At this stage the agreed extended completion date of the contract under the first variation had passed and no further extension had been agreed. Ethnic Earth was therefore vulnerable by being in default and facing the possibility of forfeiting the $100,000 deposit and the $50,000 further payment which, by virtue of the first variation, would also be forfeited. Further reflection and argument on the facts causes me to depart from the view I expressed earlier[4] that Mr Challen’s assertion was designed to protect his client’s interest in the $50,000 should there be no further extension and should Ethnic Earth be in default. It is clear that in that event the whole of the $150,000 would be forfeited, not merely the $100,000. As Mr Challen then thought that the contract was void, his assertion that the $50,000 was an instalment was a strange assertion to make if Ethnic Earth genuinely wished to proceed with the sale contract. The inevitable inference is that by 3 May 2002 Mr Challen was laying the foundation for an assertion that the sale contract was void and for Ethnic Earth’s right to recover the moneys paid, rather than to forfeit them for being in default.
[4] (2004) 89 SASR 337 at 342, [26].
On the very same day that Mr Challen responded to the letter from Quoin’s solicitors making that assertion, Mr Challen, according to his own file note, had a telephone call with a Mr Phil Parnell from PwC. He explained to Mr Parnell that he felt that the sale contract was void and that it would need a decision of a court in South Australia before they could proceed with the sale contract. That would take some time to obtain. Mr Challen was seeking to have PwC enter into a new agreement with Ethnic Earth or QTS for the performance of the PwC contract in order that the money could be paid directly to Ethnic Earth “and leave us to worry about dealing with the receivers and managers”. Mr Challen asked Mr Parnell not to notify the receivers and managers of his (Mr Challen’s) views, as the matter had only just arisen and he was still investigating it.
There was a further conversation between Mr Challen and Mr Parnell on 7 May, the day on which Ethnic Earth was advised that its application for finance to Westpac Banking Corporation was successful. It is clear from that discussion that Mr Parnell had himself obtained legal advice as to the status of the PwC contract with Quoin. He informed Mr Challen that he was ready to notify the receivers and managers that the PwC contract with Quoin was ended once Mr Challen had officially notified him of the need to effect a termination. He was happy to enter a contract with Ethnic Earth, but did not want to be faced with a demand from the receivers and managers. He could well have been faced with such a demand if the sale contract was enforceable. Mr Challen informed Mr Parnell that Ethnic Earth would be willing to give an indemnity to PwC concerning any demands made by the receivers and managers. Mr Challen told Mr Parnell that he was “95% confident” that the sale contract was void but that he was awaiting some more information before notifying Quoin of that fact. He told Mr Parnell that, once he received notification from Quoin that Quoin could not continue with the PwC contract, he could assume that Ethnic Earth had given notice to the receivers and managers that it considered the sale contract to be void. Only then, of course, would Ethnic Earth be free to enter a fresh contract with PwC.
Thus, by 7 May 2002 Mr Challen was “95% confident” that the sale contract was void, and he had been clandestinely negotiating with PwC to enter into a fresh contract with Ethnic Earth, without yet disclosing to Quoin his view that the sale contract was void.
On 8 May 2002 Mr Challen received advice from his South Australian agents that s 6 of the Land and Business (Sale and Conveyancing) Act 1994 was still in force. On the same day he received the response from Quoin’s solicitors specifying the conditions of their agreeing to a new completion date of 14 June 2002. That was the letter in which the previous payments were described as “the deposit of $100,000 and the additional sum of $50,000”. Mr Challen’s evidence was that, as a result of these two events, he “much more strongly felt” that the sale contract was void. He went on to say that if, for any reason, they did not have a void contract “then it was very important to make sure we still concluded our go forward arrangements”. He went on to explain that if the sale contract was not void as at 28 March, Ethnic Earth was in default as at 1 May and was seeking to avoid that default by coming to some new arrangements, and that that was what the discussions with Quoin’s solicitors were about. I infer from that that if the sale contract was not void, Mr Challen wanted to negotiate a position where his client was no longer in default.
It was against that background that Mr Challen wrote to Quoin’s solicitors on 10 May 2002 seeking the variation to the condition regarding payment of moneys due under the PwC contract. That proposal was that, rather than PwC making payments direct to Quoin in reduction of the purchase price, the payments would be made by Ethnic Earth. If Mr Challen had any doubts at all about the sale contract being void at that time, those doubts must have been removed entirely by his suggestion and the subsequent acceptance of it by Quoin’s solicitors on 13 May that Ethnic Earth itself make a series of further instalment payments, rather than payments being made by a third party. There may have been a question as to whether payments by a third party to Quoin constituted payments of instalments for the purpose of s 6 of the Land and Business (Sale and Conveyancing) Act. It is not necessary to address that question in these proceedings. However, there could be no doubt about it if the payments were made by Ethnic Earth. There were other commercial arrangements by which QTS could have been paid for the work it had performed on account of the PwC contract if PwC continued to make payments direct to Quoin.
In the state of Mr Challen’s knowledge and belief as to the enforceability of the sale contract on 10 May, his suggested amendment to the terms on which the second variation should be agreed to was not the action of a person seeking to preserve his right to enforce the sale contract. Rather, it was consistent with his wishing to ensure that the contract would be held void and unenforceable.
Quoin’s solicitors, having agreed to Mr Challen’s suggested amendments on 13 May 2002, the agreement to the second variation was complete. Ethnic Earth was no longer in default under the first variation. It was not surprising therefore that Mr Challen wrote to Quoin’s solicitors on 17 May suggesting that the sale contract was void, alleging that the recently concluded variation could not be given effect to and requesting repayment of $150,000 paid by Ethnic Earth. Mr Challen maintained in evidence that he held no concluded view that the sale contract was void. His and his client’s actions subsequent to 17 May 2002 and leading to the institution by Ethnic Earth of these proceedings belie that.
In summary, it would appear that Ethnic Earth had good reason not to want to complete the sale contract. Experience with the uptake of rights under clause 21 of the sale contract had shown that the valuable contractual rights which Ethnic Earth had agreed to purchase under the sale contract would not materialise upon completion of the sale contract. By May 2002 it was clear to Ethnic Earth that the receivers and managers of Quoin were in no position to arrange themselves for the performance of any of the contracts with the contracting parties named in the sale contract, even if the contracting parties were willing to continue, as PwC evidently was. Ethnic Earth was in a position where it or a related company could negotiate direct with PwC to provide the services PwC required without paying a large amount for the privilege of doing so. It was also clear that Ethnic Earth had no need for the physical assets of Quoin. However, by 1 May 2002, Ethnic Earth was in default under the sale contract. It was in the interest of Ethnic Earth to secure the second variation in order to avoid forfeiture of the moneys paid. In fact, Mr Challen successfully negotiated the second extension by way of an instalment contract which, to his knowledge, would almost certainly be void, thus preserving and enhancing his client’s ability not only to avoid forfeiture of the moneys paid but to recover such moneys, where Ethnic Earth had no further interest in performing the sale contract.
It is against that factual background that Ethnic Earth’s right to recover the moneys paid under the void contract must now be examined.
The effect of s 6(2)
The question arises whether s 6(2) of the Land and Business (Sale and Conveyancing) Act 1994 confers an unqualified right of recovery or is merely a provision to preserve the common law position where a contract is void at common law.
The recovery of money paid under a contract void at common law will, in the absence of any other statutory provision, be subject to ordinary restitutionary principles and defences. Where, as a matter of policy, a statute declares a particular contractual provision to be void but leaves unaffected the balance of the contract, there is an intention manifested by the legislature to cause minimum interference with the parties’ contractual rights. In those cases, and in the absence of any other statutory provisions, the door will be left open for recovery of moneys paid pursuant to the void provision based on accepted principles of restitution, and subject to any qualifications or defences that may apply to such principles.
Such appears to have been the case in David Securities Pty Ltd v Commonwealth Bank of Australia[5], where s 261(1) of the Income Tax Assessment Act 1936 (Cth) provided that a covenant or stipulation in a mortgage which had the purpose or effect of imposing on the mortgagor the obligation of paying income tax on the interest to be paid into the mortgage should be “absolutely void”. The Act did not affect other provisions of the mortgage. The appellants had sought to set off against the respondent bank’s claim for moneys lent an amount paid by the appellants under a covenant that was void under that provision. There was no statutory authority for the recovery of moneys paid. No question arose as to the right to recovery of the moneys paid subject nevertheless to ordinary principles of restitution, and whether the respondent bank could point to circumstances which the law recognised would make an order for restitution unjust, or where the retention of the payment would not be unjust.[6]
[5] (1992) 175 CLR 353.
[6] Ibid at 379.
There are other instances, however, where Parliament has manifested an intention that not only is a contract to be void as a matter of policy, but that no monies paid under it are recoverable. Such an example is s 50(2) of the Lottery and Gaming Act 1936 (SA) which prevents action to recover monies due under a gaming or wagering contract or to recover monies deposited with a person to abide the event on which a bet has been made.
There are other instances, however, where Parliament has not gone so far. Section 50A of the Lottery and Gaming Act is a suitable contrasting example. That provides in subsection (1) that a contract for the payment of a debt incurred for the purpose of gaming or wagering “shall be deemed to have been made for an illegal consideration”. Subsection (3) provides:
Any moneys paid in or towards satisfaction of a supposed liability under a contract or agreement that is deemed to have been made for an illegal consideration by virtue of this section and any property taken under, or by way of, a security that is deemed to have been given for an illegal consideration by virtue of this section may be recovered by action in a court of competent jurisdiction.
That subsection bears a striking similarity to s 6(2) of the Land and Business (Sale and Conveyancing) Act 1994, but is an example where Parliament has effectively outlawed a contract related to a gaming and wagering contract but where the statutory policy, in contrast to that of s 50 of the Lottery and Gaming Act, permits recovery of monies paid under such a contract.
Pavey & Matthews Pty Ltd v Paul[7] was a case in which the legislation declared contracts of the type in question to be “not enforceable” against the other party. The claim was not for moneys paid under the unenforceable contract but for payment of money on a quantum meruit. One of the questions that arose was whether the legislative policy which rendered the contract unenforceable extended to preventing a claim based on quantum meruit. The basis for allowing the quantum meruit claim is a matter for further consideration later in these reasons, but the expression of a legislative policy interfering with otherwise enforceable commercial relationships does give rise, without more, to questions relating to the effect of that legislative policy on incidental matters.
[7] (1987) 162 CLR 221.
It is not surprising, therefore, that where, as here, the statute provides for particular policy reasons that the whole contract is void, there might, without more, be an implication that the statutory policy, in rendering the contract void and prohibiting any contractual relief, would extend to preventing any recovery of money or property paid or transferred pursuant to the contract. Even if there were not such an implication, a question would arise as to the granting of such relief, as it did in Pavey & Matthews. In such a case, a provision like s 6(2) merely makes clear that such recovery is not prevented, and that ordinary common law principles of restitution are intended to apply.

In my opinion, that is what s 6(2) is designed to do. It is not cast in mandatory terms. It is facultative in nature, providing, in effect, that notwithstanding the statutory disapproval of such contracts, money paid under them may nevertheless be recovered in accordance with ordinary common law principles.
In conferring that right, or even if s 6(2) is intended to be no more than declaratory of the common law right to recover monies paid under a void contract, there is no manifest intention to qualify in any way the right which a defendant may have at common law to any defence to such a claim. The predecessor to s 6[8] has already been described as “draconian in form” and as being required to be “read down to cover what it expressly covers and nothing else”.[9] There is a well entrenched principle of statutory interpretation that legislation is presumed not to alter or invade common law rights unless its language is reasonably capable of no other construction.[10] In Pyneboard Pty Ltd v Trade Practices Commission,[11] Mason CJ, Wilson and Dawson JJ referred to “the general principle that a statute will not be construed to take away a common law right unless the legislative intent to do so clearly emerges, whether by express words or by necessary implication”.
[8] Land and Business Agents Act 1973 (SA), s 89.
[9] Pooraka Holdings Pty Ltd v Participation Nominees Pty Ltd & McAuley (1991) 58 SASR 184, Zelling AJ at 211, Mohr J agreeing at 197.
[10] Sargood Brothers v Commonwealth (1910) 11 CLR 258, O’Connor J at 279.
[11] (1983) 152 CLR 328 at 341.
Ordinary rights of restitution are subject, in appropriate cases, to qualifications and defences of various types. By using the language it has in s 6(2) of the Land and Business (Sale and Conveyance) Act, Parliament must be presumed, in the absence of any clear statutory provisions to the contrary, not to have interfered with any common law qualifications on or defences to the right of restitution recognised in the subsection. That view is fortified by the presence of s 34 of the Land and Business (Sale and Conveyancing) Act 1994 which preserves any civil remedy available apart from the Act, thus preserving right of set off and counterclaim against an action brought to recover moneys paid.
By way of contrast with s 6(2), it is notable, for example, that where Parliament has intended to interfere with common law rights, it has done so in some detail. I mention by way of example the Fair Trading Act 1987. Part 3 of that Act, relating to certain door to door sales contracts, provides, in s 22, for a statutory right of rescission of such contracts. Section 24 contains detailed provisions relating to claims for restitution and how they are to be adjusted. Another example is the Frustrated Contracts Act 1988 which applies to certain frustrated contracts and includes contracts avoided under s 7 of the Sale of Goods Act 1895. Section 7(1) of the Frustrated Contracts Act provides for the adjustment of losses “so that no party is unfairly advantaged or disadvantaged in consequence of the frustration”. Subsequent subsections provide for detailed principles upon which the rights of the parties are to be adjusted.
Absent such provisions in s 6 of the Land and Business Agents (Sale and Conveyancing) Act, I consider that any claims for recovery of moneys paid under a contract rendered void by s 6 must be determined in accordance with common law principles of restitution applicable generally to contracts avoided at common law.
Basis of a claim for restitution
By its very nature, an action for restitution arising out of a void or ineffective contract cannot be contractual. Fault will generally be irrelevant.
Notions of recovery based on some form of implied contract were discarded by the High Court in Pavey & Matthews Pty Ltd v Paul[12] in favour of the “unifying legal concept” of unjust enrichment. Speaking of the concept, Deane J said:[13]
It constitutes 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.
[12] (1987) 162 CLR 221.
[13] Ibid at 256-257; see also Mason and Wilson JJ at 227.
The basis of recovery was clearly restated in the joint judgment of the High Court in Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation:[14]
The basis of the common law action of money had and received for recovery of an amount paid under fundamental mistake of fact should now be recognized as lying not in implied contract but in restitution or unjust enrichment: see, generally, Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd; Goff & Jones, Law of Restitution, 3^rd ed. (1986), p.5ff; Birks, English and Roman Learning in Moses v Macferlan”, Current Legal Problems, vol.37 (1984) p.1. In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment: cf. Pavey & Matthews Pty Ltd v Paul. The common law right of action may arise in circumstances which also give rise to a resulting trust of specific property or funds or which would lead a modern court to grant relief by way of constructive trust. However, notwithstanding that the grounds of the action for recovery are framed in the traditional words of trust or use and that contemporary legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience, the action itself is not for the enforcement of a trust or for tracing or the recovery of specific money or property. It is a common law action for recovery of the value of the unjust enrichment and the fact that specific money or property received can no longer be identified in the hands of the recipient or traced into other specific property which he holds does not of itself constitute an answer in a category of case in which the law imposes a prima facie liability to make restitution. Before that prima facie liability will be displaced, there must be circumstances (e.g., 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. [Footnotes omitted]
[14] (1988) 164 CLR 662, Mason CJ, Wilson, Deane, Toohey and Gaudron JJ at 673.
Speaking generally of the concept of unjust enrichment, the authors of Carter and Harland, “Contract Law in Australia” point out that there are three elements to the concept:[15]
(1)an element of benefit received, retained, realised or realisable by the defendant;
(2)an element which provides the plaintiff with the opportunity to make the claim, namely that the benefit was at the plaintiff’s expense and not at the expense of some other person; and
(3)an element of injustice, that is, some recognised circumstance showing that it was unfair, unconscionable or inequitable for the defendant to obtain (or retain) the benefit. [Original emphasis]
[15] J.W. Carter and D.J. Harland, Contract Law in Australia (4th ed, 2002) at [2309].
In this case there is no question that the first two elements are satisfied. Ethnic Earth’s right to recover turns on the existence of the third element.
Of that third element the High Court said, in David Securities Pty Ltd v Commonwealth Bank of Australia:[16]
[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. As this Court stated in Westpac Banking Corporation:[17]
“In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment.”
…
The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution. Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognises would make an order for restitution unjust. There can be no restitution in such circumstances because the law will not provide for recovery except when the enrichment is unjust. It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust. [Footnote omitted] [Original emphasis]
[16] (1992) 175 CLR 353 at 379.
[17] Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673.
In the case of claims for restitution of moneys paid under a void contract, those qualifying or vitiating factors seem to be limited to a mistake either of fact or, since the decision in David Securities Pty Ltd v Commonwealth Bank of Australia,[18] of law, duress, total failure of consideration or pursuant to some manifest statutory policy. We are not here concerned with duress.
[18] (1992) 175 CLR 353.
Professor Burrows in “The Law of Restitution”[19] argues, with respect, convincingly, that total failure of consideration is an unsatisfactory basis of a claim to restitution of this nature.[20] The High Court in David Securities[21] treated failure of consideration not as a qualifying or vitiating factor but rather treated provision of valuable consideration as a defence to a claim for unjust enrichment. The Court adopted the well-known formulation of Robert Goff J in Barclays Bank Ltd v WJ Simms & Son & Cooke (Southern) Ltd:[22]
(1) If a person pays money to another under a mistake of fact which causes him to make the payment, he is prima facie entitled to recover it as money paid under a mistake of fact. (2) His claim may however fail if (a) the payer intends that the payee shall have the money at all events, whether the fact be true or false, or is deemed in law so to intend; or (b) the payment is made for good consideration, in particular if the money is paid to discharge, and does discharge, a debt owed to the payee (or a principal on whose behalf he is authorised to receive the payment) by the payer or by a third party by whom he is authorised to discharge the debt; or (c) the payee has changed his position in good faith, or is deemed in law to have done so.
[19] A. Burrows, The Law of Restitution (2^nded, 2002) 386-401.
[20] For arguments to the contrary see Butler, “Mistaken payments, change of position and restitution” in Finn (ed.), Essays on Restitution (1990) 88; Matthews, “Money paid under mistake of fact” [1980] New Law Journal 587.
[21] (1992) 175 CLR 353 at 379-380.
[22] [1980] QB 677 at 695.
I propose to follow the same course. That means that in this case the only qualifying factors giving rise to a successful claim by Ethnic Earth based on unjust enrichment are mistake and evident legislative policy. If either of these bases are made out, the question of possible defences on the part of Quoin will need to be considered.
Mistake of fact or law
Once again, guidance on this topic can be obtained from the High Court’s decision in David Securities Pty Ltd v Commonwealth Bank of Australia.[23] The basis on which recovery was considered in that case was the plaintiff’s prima facie entitlement to recover moneys paid under a provision of a contract which was void by statute if it was paid in the mistaken belief by the payer that it was under a legal obligation to pay the moneys. The Court held[24] that it was not necessary for the plaintiff to prove “unjustness” over and above the mistake. The fact that the payment was caused by a mistake was sufficient to give rise to the prima facie obligation on the part of the defendant to make restitution.
[23] (1992) 175 CLR 353.
[24] Ibid at 379.
The difficulty for Ethnic Earth is that it cannot prove the necessary mistake at the time of making the payments. At the times when the two payments of $100,000 and $50,000 respectively were made, they were made under what was then a valid and binding obligation on the part of Ethnic Earth. The obligation to make the payments only ceased upon agreement being reached for the second variation, well after the two payments had been made. Ethnic Earth, at the time of each payment, was fully aware of its obligations and had made the payments in satisfaction of them.
There is also no suggestion of any mistaken belief on the part of Ethnic Earth in entering into the second variation which gave rise to the sale contract becoming void. On Mr Challen’s evidence he believed that the contract was then void, but on other grounds, and that entry into the agreement for the second variation was done in the knowledge that that variation would almost undoubtedly render the sale contract void. Not only did Ethnic Earth have that knowledge, but it entered into the second variation in order to preserve what it perceived to be a right to recovery of the moneys paid and to avoid being in default itself under the sale contract.
Accordingly, Ethnic Earth’s claim fails on this ground. No payment was made under a mistake.
Policy of the statute
As King CJ observed in Pooraka Holdings Pty Ltd v Participation Nominees Pty Ltd[25] the mischief which the legislature sought to overcome by the enactment of s 6 of the Land and Business (Sale and Conveyancing) Act 1994 was the loss to purchasers who pay the whole or part of the purchase price of a business without obtaining title, and who then find that the vendor is unable to make title and to give an effective transfer. In most cases, such payments will be made by a purchaser under the mistaken belief that he or she is obliged to make them in accordance with the terms of a contract which the statute renders void, and will prima facie be entitled to recovery. The policy of the Act is plainly to protect purchasers faced with that situation.
[25] (1991) 58 SASR 184 at 188.
On the facts as I have found them, however, Ethnic Earth is not in that situation. It was being advised by a competent solicitor fully aware, after the second variation, that the sale contract was probably void and who, on behalf of Ethnic Earth, negotiated the second variation for the purpose, it would seem, of preventing his client from being in default and liable to forfeit a substantial sum of money, and in order to ensure that if possible, his client could take advantage of s 6(2) of the Act. To order restitution in those circumstances would not be in accordance with the policy of the Act. Accordingly, Ethnic Earth’s claim fails on this basis also.
It follows that there is no basis on which Ethnic Earth is entitled to the restitution it claims, and strictly speaking it is not necessary to consider the defences raised by Quoin. However, if I am wrong and the mere fact that the contract was void enables Ethnic Earth to recover the moneys paid, or if in truth a total failure of consideration remains one of the qualifying and vitiating factors which would justify Ethnic Earth’s claim, those matters still need to be considered.
Total failure of consideration
Whether failure of consideration is a qualifying or vitiating factor justifying a plaintiff’s claim based on principles of unjust enrichment or whether provision of valuable consideration by a defendant is properly regarded as a defence to a claim for unjust enrichment, in my opinion the plaintiff’s claim in this case must also fail. Consideration in this context refers to performance of the contract rather than the criterion for enforceability of promises.
The Full Court of the High Court said in David Securities Pty Ltd v Commonwealth Bank of Australia:[26]
[I]n the context of failure of consideration, the failure is judged from the perspective of the payer. In Rover International Ltd v Cannon Film Ltd[27] Kerr LJ stated:
“The question whether there has been a total failure of consideration is not answered by considering whether there was any consideration sufficient to support a contract or purported contract. The test is whether or not the party claiming total failure of consideration has in fact received any part of the benefit bargained for under the contract or purported contract.”
On the other hand, there has been an insistence that the failure of consideration be total. The law has traditionally not allowed recovery of money if the person who made the payment has received any part of the “benefit” provided for in the contract.[28] However, as the passage already quoted from Rover International Ltd demonstrates, the notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact. Thus, in Rowland v Divall[29], the plaintiff succeeded in an action for repayment of the purchase price of a car he had bought from the defendant, unaware that the car had been stolen before it came into the defendant’s possession. The defendant resisted the claim with the argument that the plaintiff could not prove total failure of consideration because he had used the car for several months. The Court of Appeal, however, dismissed this argument on the ground that the plaintiff had not received “any part of that which he contracted to receive – namely, the property and right to possession”.[30]
Similarly, in Rover International Ltd itself, the plaintiff succeeded in its claim for restitution of payments made to the defendant even though the defendant had performed some of its obligations under the contract. The plaintiff was to dub and distribute films provided to it by the defendant and receive a share of the box office receipts as its payment. The plaintiff supplied the films to the plaintiff and the plaintiff made the pere-payments before breaching the contract. The plaintiff was then able to recover the pre-payments on the basis that the delivery and possession of the films were not what the plaintiff had bargained for; the “relevant bargain” was the opportunity to earn a substantial share of the gross receipts. [Original emphasis]
[26] (1992) 175 CLR 353 at 382.
[27] [1989] 1 WLR 912, at p.923; [1989] 3 All ER 423, at p.433; see also Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, at p.48, per Viscount Simon LC.
[28] Hunt v Silk (1804) 5 East 449; (1804) 102 ER 1142; Whincup v Hughes (1871), LR6CP 78.
[29] [1923] 2 KB 500.
[30] Ibid at 507.
In this case, at the time when the payments were made, there was a valid and binding contract in accordance with which the payments were made. Despite the contract being later avoided, there was no relevant failure of consideration. In exchange for the first and substantial payment of $100,000 Ethnic Earth had obtained the right, which it exercised to the extent to which it required, to obtain possession of the assets of the business pursuant to clause 19 of the sale contract. It had obtained the right, which it exercised, to approach the contracting parties named in the sale contract in order to enable it to perform the obligations of Quoin under the contract described in schedule 3 of the sale contract. Those rights were conferred by clause 20. Ethnic Earth had obtained the right to perform the obligations of the vendor under those contracts (clause 21) for its own benefit (clause 22) and in the expectation that on completion, the contracts would be assigned to Ethnic Earth. It had exercised those rights to the extent available to it. As I have already observed, those contracts and the right to exercise them appear to have formed the substantial part of the business to be acquired.

In the circumstances, there was very little left for Quoin to perform on completion of the sale contracts. There was the formal assignment of the contracts which, in the events which happened, were reduced to one, and from which Ethnic Earth would receive little further material benefit beyond what it had already achieved or could achieve by other means. There was the transfer of property in the assets of the business in respect of all of which Ethnic Earth either had taken possession or had the right to possession and to use in its own business for its own benefit.
In the circumstances of this contract, there had not been a failure of consideration for what Ethnic Earth had bargained for. A reading of the contract suggests that what it had, in effect, bargained for was the right to conduct and to earn income from the business previously conducted by Quoin. In practical terms it had received the substantial part of that which it had contracted to receive. The fact that, through reasons over which it had no control, the nature of that business had been reduced to one contract was a risk inherent in the sale contract that Ethnic Earth entered into. Not only did Ethnic Earth receive a benefit but it received substantially that which it contracted to receive by the payment of $100,000. Cases such as Rover International Ltd v Cannon Film Ltd[31] and Rowland v Divall[32] referred to by the High Court in the passage quoted above are distinguishable.
[31] [1989] 1WLR 912.
[32] [1923] 2 KB 500.
The second payment of $50,000 was also supported by consideration. That was Quoin’s agreement to the first extension and the enabling of Ethnic Earth, for a further period, to have continued access to and use of the assets of the business in the manner described above.
Ethnic Earth’s claim for restitution must therefore fail on this ground.
Defence of change of position
The only other relevant defence noted by Robert Goff J in Barclays Bank v WJ Simms Ltd[33] is that the payee has changed his position in good faith, or is deemed in law to have done so. That was accepted by the High Court in David Securities[34] as a valid defence to a claim based on unjust enrichment. It arises where the defendant has acted to her or his detriment on the faith of the receipt of the moneys in question.
[33] [1980] 1 QB 677 at 695.
[34] David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 384-385.
In this case, Quoin acted to its detriment on the faith of the receipt of the first $100,000 by parting with possession of the business assets which it would not otherwise have done if the payment had not been made. It acted to its detriment on receipt of the second payment of $50,000 by extending the time for completion and by allowing Ethnic Earth continued access to the assets of the business, whereas if it had not so agreed, it would have been entitled to claim forfeiture from Ethnic Earth of the $100,000 already paid. It acted further to its detriment by agreeing to the second extension upon Ethnic Earth agreeing to pay the further instalments, thereby losing the ability to forfeit both previous payments made by Ethnic Earth.
Therefore, if Ethnic Earth’s claim were otherwise justified, Quoin would necessarily succeed on this defence.
Other defences raised by Quoin
While it is not strictly necessary to consider other defences sought to be relied on by Quoin, it is appropriate that they be referred to briefly, as they were argued before me.
The first is based on an argument that the parties to the sale contract were not in pari delicto, and that this should prevent recovery by Ethnic Earth. It was submitted that Ethnic Earth could not recover because it, but not Quoin, was aware of the possibility that the sale contract would be void and misled Quoin when it ought to have known better. It should therefore be barred from recovery on the ground of mistake.
The short answer to this submission is that, whatever the stated knowledge of Ethnic Earth after 1 May 2002, there is no evidence that Ethnic Earth was aware or even suspected that the contract would be void at the time when the two payments were made. Indeed, on my previous findings, at those times the sale contract was both valid and enforceable. There is no evidence that, if there was a payment made under mistake, the mistake was induced by Ethnic Earth.
Quoin relied on an approach said to be correlative of the decisions in Hughes v Liverpool Victoria Friendly Society[35] and Kariri Cotton Co Ltd v Dewani.[36] These were both cases in which the person making the payment did so by mistake induced by the other party held to be not in pari delicto. In the latter case, the plaintiff relied on a mistake of law before the bar against recovery for mistake of law was removed in the UK by the House of Lords in Kleinwort Benson Ltd v Lincoln City Council.[37] The payment had been made pursuant to a void agreement, the plaintiff’s mistake of law being that he believed it was valid. Nevertheless, he was entitled to recover. Lord Denning, delivering the judgment of the Privy Council said:[38]
[I]f as between the two of them the duty of observing the law is placed on the shoulders of the one rather than the other – it being imposed on him specially for the protection of the other – then they are not in pari delicto and the money can be recovered back … Likewise, if the responsibility for the mistake lies more on the one than the other – because he has misled the other when he ought to know better – then again they are not in pari delicto and the money can be recovered back.
[35] [1916] 2 KB 482.
[36] [1960] AC 192.
[37] [1999] 2 AC 349.
[38] Ibid at 204.
It may be questioned whether that rule survives the abolition of the bar against recovery based on mistake of law. Even if it does, however, it provides justification for recovery by a plaintiff for moneys paid by mistake. The mere fact that the parties may not be in pari delicto even if the facts were to support such a finding in this case, does mean that that in itself provides a defence to a claim based on unjust enrichment. As the High Court pointed out in David Securities[39], it must be shown that the receipt or retention of the payment by the defendant is not unjust. The operation of the defence does not rely on matters which may have caused the payment to be made in the first place.
[39] David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 379.
The defendant also sought to rely on a defence of estoppel based on Mr Challen’s implied assertion, during the course of negotiations leading to the second variation, that the sale contract was valid. While that may have been an implication from his negotiating the second variation, as I have now found on further consideration of the facts, he was seeking to preserve his client’s position from attack on all fronts. Nevertheless, even if there were an unqualified assertion by Mr Challen that the sale contract was valid at the time he was negotiating the second variation, there was no evidence led by Quoin on which any finding of reliance on that assertion could be made. Rather, if anything, there is an implication that Quoin, being advised at every step by its solicitors in South Australia, was or should have been aware of the consequences of agreeing to the second variation. Accordingly, any defence of estoppel would be bound to fail.
Other arguments of Ethnic Earth
Given the findings I have made and the conclusion I have reached it is unnecessary to deal with the extensive arguments put by Ethnic Earth as to a number of topics which can now only be regarded as peripheral to the principal argument. Those topics include arguments as to the title to the moneys received by Quoin following the contract becoming void and Quoin going into liquidation, whether the receivers and managers are personally liable to repay the money or whether the moneys are subject to any form of trust in favour of Ethnic Earth. Accordingly, I refrain from commenting on those arguments, as they simply do not arise.
Quoin’s counterclaim
By its pleadings, Quoin denies that the sale contract was void and seeks orders for its enforcement against Ethnic Earth. That aspect of Quoin’s counterclaim must fail as a result of the decision that the contract is void.
Quoin also counterclaims for the value of the business reflected in the sale price of $396,000 less the payments already received plus interest. In effect, Quoin makes its own claim for restitution of the value of the assets, as defined in the sale contract, of which Ethnic Earth took possession at the time of entering into the contract.
This claim must fail for some of the reasons I have already expressed for rejecting the claim of Ethnic Earth. At the time when Ethnic Earth took possession of such assets as it did, it did so lawfully and was entitled, under the sale contract, to use them for its own purposes and for its own benefit. At that time there was no mistake or failure of consideration (assuming that to be relevant) or other vitiating element rendering Ethnic Earth’s actions unlawful or justifying any restitutionary remedy in favour of Quoin. The sale contract was valid at all times until 13 May 2002 upon the second extension being agreed.
Quoin’s claim for restitution must therefore be rejected. As in the case of Ethnic Earth, its claim for restitution would fail based on Ethnic Earth’s change of position in making the two payments to its detriment on the faith of gaining access to the assets of the business in the manner which I have described before completion of the contract. Any restitutionary claim by Quoin must therefore be dismissed.
However, at all material times, property in the assets remained in Quoin subject only to Ethnic Earth’s rights in respect of those assets, until the contract became void on 13 May 2002. From that point on Ethnic Earth had no contractual rights to use the assets, and in particular no rights to continue performing Quoin’s obligations under the contract mentioned in the third schedule. Property in the assets has since remained in Quoin.
Subject to one qualification to be mentioned, there is no evidence that Ethnic Earth has converted to its own use since 13 May 2002 any assets of which it was or has remained in possession since then. Its only reason for retaining possession of the physical assets is as security for its claim to recover the sum of $150,000.
In respect of those assets of which Ethnic Earth took and has remained in possession, Quoin is entitled to an order for return of those assets. According to the undisputed evidence of Mr Challen, that relates only to the physical assets. None of the other assets have been transferred or assigned to Ethnic Earth, and Quoin has remained at liberty to make such use of them as it might wish.
The qualification relates to the only other right which Ethnic Earth was lawfully exercising at the time when the sale contract became void, namely the performance, for its own benefit, of the PwC contract. That right came to an end upon the avoidance of the sale contract. Strictly speaking, Quoin is entitled to an account of the profits from that contract derived by Ethnic Earth after 13 May 2002. However, I infer that much of the work under that contract had been performed before 13 May, even though the first payments were actually made by PwC to Ethnic Earth or QTS on that day.
Mr Challen maintained that the contract was unprofitable in any event, although no details in support of that assertion were provided. The practical reality is, however, that Quoin was in no position to resume performance of the PwC contract itself, and had the parties then accepted the fact that the contract was void, Ethnic Earth would thereupon in all probability have immediately negotiated a new contract with PwC, as it would then have been entitled to do, and as indeed it subsequently did.
While I am not prepared to accept Mr Challen’s assertion that the contract was unprofitable, if there was any profit to Ethnic Earth in the continued performance of the PwC contract, the cost of an account of that profit, if there was any, would probably exceed any profit to which Quoin was entitled.
Given all these practical considerations I would not be prepared to make any order for an account of profits against Ethnic Earth.
Conclusion
For all these reasons, there will be a declaration on the application of Ethnic Earth that the sale contract was rendered void on 13 May 2002. There will be an order that Ethnic Earth’s claim for recovery of the $150,000 against the defendants be dismissed. On Quoin’s counterclaim there will be an order that Ethnic Earth deliver up to the defendants or their authorised representatives at the place where the assets are presently located such of the assets described in the sale contract as remain in possession or control of Ethnic Earth. In the action brought by Quoin on the guarantee there will be judgment for the defendants.
I will hear the parties further as to the precise terms of the orders to be made and as to costs.