Gray v Lavan (a firm) - [2022] WASC 417

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   GRAY -v- LAVAN (A FIRM) [2022] WASC 417
CORAM:   CURTHOYS J
HEARD:   27 & 28 JUNE 2022
DELIVERED          :   8 DECEMBER 2022
FILE NO/S:   CIV 3179 of 2018
BETWEEN:   BRUCE NATHANIEL GRAY
Plaintiff
AND
LAVAN (A FIRM)
Defendant

Catchwords:

Restitution - Unjust enrichment - Interest - 'Free standing' right to interest - Compound or simple interest

Legislation:

Legal Practice Act 2003 (WA)

Result:

Claim dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	J Moore KC & F Maher
Defendant	:	M D Howard SC & S Stewart

Solicitors:

Plaintiff	:	Williams & Hughes
Defendant	:	Popperwell & Co

Cases referred to in decision:

Anderson v McPherson [No 2] [2012] WASC 19; (2012) 8 ASTLR 321
Australian Financial Services and Leasing Pty Ltd v Hills [2014] HCA 14; (2014) 253 CLR 560
Commonwealth v SCI Operations Pty Ltd [1998] HCA 20; (1998) 192 CLR 285
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353
Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd [2005] NSWCA 83; (2005) 63 NSWLR 203
Golden West Resources Ltd v Maxim Litigation Consultants [2016] WASC 384
Heydon v NRMA Ltd [No 2] [2001] NSWCA 445; (2001) 53 NSWLR 600
Lahoud v Lahoud [2010] NSWSC 1297
Meerkin & Apel v Rossett Pty Ltd [No 2] [1999] VSCA 10; [1999] 2 VR 31
Northern Territory of Australia v Griffiths [2019] HCA 7; (2019) 269 CLR 1
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221
Prudential Assurance Co Ltd v Her Majesty's Revenue and Customers [2018] UKSC 39; [2019] AC 929
Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516
Sempra Metals Ltd (Formerly Metallgesellschaft Ltd) v Inland Revenue Commissions [2008] 1 AC 561
Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669

CURTHOYS J:

Introduction

Between 1 August 2006 and 29 June 2008, the plaintiff, Dr Bruce Gray, paid $4,477,068.33 in fees to the defendant, Lavan, for the provision of legal services relating to litigation in this court and in the Federal Court of Australia.
There was no written costs agreement between Dr Gray and Lavan.
In June 2008, a dispute arose as to the amount of costs properly payable.
Dr Gray gave notice to Lavan of his intention to apply to have the costs taxed on 14 October 2015. The application for taxation was compromised on 13 July 2018 by deed of settlement (Settlement Deed), some 10 years after the last invoice for legal services was rendered.
By the Settlement Deed, the parties agreed that, between September 2006 and 29 June 2008, Dr Gray had overpaid Lavan $900,000. Lavan agreed to repay that sum to Dr Gray.
However, the parties did not resolve the question of interest on the $900,000 overpaid. Dr Gray's claim for interest was expressly excluded from the Settlement Deed.
Dr Gray claims an entitlement from Lavan to compound interest for the time that Lavan possessed the overpaid $900,000 between 30 June 2008 and 13 January 2019.[1] Lavan denies that it is liable to pay interest on any basis.
[1] The $900,000 was paid in three equal instalments: 13 July 2018, 8 October 2018 and 13 January 2019. The amount of interest sought accommodates those dates. Interest is sought on (a) $300,000 from 30 June 2008 to 13 July 2018; (b) $300,000 from 30 June 2008 to 8 October 2018; and (c) $300,000 from 30 June 2008 to 13 January 2019.
The parties proceeded on the basis that in the event that the court finds that Dr Gray has an entitlement to interest, the payment of $900,000 to Lavan is to be treated as if it was paid by Dr Gray on 30 June 2018.
Dr Gray submits that the justice of the case is clear. It would be an injustice if, as Lavan contends, its only liability was to repay $900,000 10 years later without interest given Lavan has had the benefit of the loan for 10 years. Accordingly, it seeks that the court order payment of compound interest at normal commercial rates on the basis that:
(a)when the Settlement Deed was executed on 13 July 2018, the legal justification for Lavan to retain the $900,000 was removed;
(b)the basis for the transfer by Dr Gray to Lavan of $900,000 failed on that date, and thus a restitutionary claim, on the ground of failure of consideration (in terms of a failure of basis), thereby accrued; and
(c) on well-established authority, the interest payable by Lavan by way of restitution is backdated to the dates of payment of the overpaid fees to enable proper restitution to Dr Gray.

Background

The material facts are largely undisputed and are substantially taken from the statement of agreed facts filed on 15 September 2020 and Dr Gray's submissions filed on 23 May 2022.
Lavan is and was at all material times a legal partnership carrying on the business of providing legal services under the Legal Practice Act 2003 (WA) (repealed) (the 2003 Act) and a legal practitioner for the purposes of pt 13 of the 2003 Act. The 2003 Act governed the relationship between the parties at the time Lavan rendered its invoices.
On 21 December 2004, the University of Western Australia (UWA) commenced Federal Court proceeding WAD 292 of 2004 (WAD 292) against Dr Gray and others.
On 6 January 2005, Dr Gray retained Bennett + Co to act for him in WAD 292 and signed an associated costs agreement within the meaning of s 221 of the 2003 Act (Bennett + Co Costs Agreement). Bennett + Co rendered itemised invoices to Dr Gray in accordance with the Bennett + Co Costs Agreement.
Bennett + Co acted for Dr Gray in WAD 292 until 30 March 2006.
On 30 March 2006, Bennett + Co ceased to carry on business providing legal services.
On 4 April 2006, Lavan employed the former principals and employees of Bennett + Co. From that date, Dr Gray provided instructions to Lavan, and Lavan provided legal services to Dr Gray, in relation to WAD 292.
From around 25 September 2006, Dr Gray also provided instructions to Lavan, and Lavan provided legal services to Dr Gray, in relation to Supreme Court proceeding CIV 2022 of 2006 (CIV 2022).
From around 6 November 2006, Dr Gray provided instructions to Lavan, and Lavan provided legal services to Dr Gray, in relation to Supreme Court proceeding CIV 2275 of 2016 (CIV 2275).
At no time from 4 April 2006 did Dr Gray and Lavan enter into a costs agreement within the meaning of s 221 of the 2003 Act in relation to WAD 292, CIV 2022 or CIV 2275 (Lavan Proceedings).
Over the period from around September 2006 to 29 June 2008, Lavan rendered invoices to Dr Gray in relation to the Lavan proceedings (the Invoices). Dr Gray made payments to Lavan on the Invoices.
Dr Gray accepted that the oral retainer agreement between Dr Gray and Lavan entitled Lavan to charge and obliged Dr Gray to pay the fees set out in the Invoices.[2]
[2] Plaintiff's substituted outline of submissions filed 23 May 2022 [93] (Plaintiff's Submissions).
On 17 April 2008, judgment was delivered in WAD 292. UWA was ordered to pay Dr Gray's costs. On 29 October 2009, UWA agreed to pay Dr Gray $2,500,000 in discharge of Dr Gray's claim against UWA for his costs of WAD 292.
A dispute arose between Dr Gray and Lavan in relation to the Invoices. During negotiations between Dr Gray and Lavan to settle the dispute, the parties agreed that Lavan would file bills of costs in relation to each of the Lavan Proceedings with this court for taxation (the Bills). Around 14 October 2015, Dr Gray gave notice to Lavan of his intention to have the Bills taxed. Around 29 October 2015, pursuant to div 3 of the 2003 Act, Lavan filed the Bills for taxation.
On 13 July 2018, Dr Gray and Lavan entered into the Settlement Deed. The Settlement Deed contained express terms that:
(a)Lavan would pay Dr Gray $900,000 inclusive of costs and disbursements (Taxation Settlement Sum): cl 2(a);
(b)Dr Gray and Lavan acknowledged that:
(i)the Taxation Settlement Sum represented the amount that would have been ordered to be refunded to Dr Gray by Lavan if there had been a taxation of the Bills: cl 3.1(a);
(ii)the Taxation Settlement Sum did not include interest: cl 3.1(b);
(iii)Dr Gray claimed that he was entitled to and therefore had a claim to interest on the Taxation Settlement Sum: cl 3.1(c);
(iv)Lavan disputed that it had any liability to pay interest to Dr Gray on the Taxation Settlement Sum: cl 3.1(d); and
(v)the issue whether Dr Gray had a claim to interest on the Taxation Settlement Sum remains in dispute between the parties: cl 3.1(e) (Interest Dispute).
(d)if Dr Gray commenced an action in the Supreme Court to litigate the Interest Dispute (Interest Dispute Action), it was agreed that:
(i)the net amount in legal fees which Lavan would have been obliged to refund to Dr Gray had there been a taxation was the Taxation Settlement Sum: cl 3.3(a);
(ii)the Taxation Settlement Sum was the amount on which Dr Gray claims that interest was to be calculated for the purposes of the Interest Dispute Action: cl 3.3(b); and
(iii)for the purposes of the Interest Dispute Action, the date of the taxation at which the Taxation Settlement Sum would have been ordered to be refunded to Dr Gray by Lavan was the date the final part of the Taxation Settlement Sum was paid: cl 3.3(c).
Pursuant to the Settlement Deed, the taxation of the Bills did not proceed. The effect of the Settlement Deed was to settle the dispute (excluding the Interest Dispute) as if there had been a taxation of the Bills, and on the basis that a taxing officer, that is, a registrar, had certified that Dr Gray had overpaid the Taxation Settlement Sum to Lavan.
The Taxation Settlement Sum was paid in three instalments of $300,000. Lavan paid those instalments on 13 July 2018, 8 October 2018 and 13 January 2019.

Restitution for failure of consideration

Dr Gray bases his claim for interest on what he said was a failure of consideration or basis that accrued upon the parties entry into the Settlement Deed.
A restitutionary claim for unjust enrichment requires some 'injustice', in the form of a qualifying or vitiating factor such as mistake, duress, illegality or failure of consideration, by reason of which the enrichment of the defendant is treated by the law as unjust.[3] Unjust enrichment so identified gives rise to a prima facie obligation to make restitution. The prima facie liability can be displaced by circumstances which the law recognises would make an order for restitution unjust.[4]
[3] Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [150]; Australian Financial Services and Leasing Pty Ltd v Hills [2014] HCA 14; (2014) 253 CLR 560 [20], [73], [141]; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, 379 (Mason CJ, Deane, Toohey, Gaudron & McHugh JJ).
[4] Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498 [30].
A failure of consideration or basis has been recognised as a factor entitling a plaintiff to recovery.[5] The term 'consideration' in this context is not to be understood according to its modern contractual meaning. Rather, the term is used in a broader sense to refer to the value received by a plaintiff and the value provided by the defendant. In other words, it refers to the basis, specifically, the reason, purpose or condition, for the transfer of the money from the plaintiff to the defendant.
[5] Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 [14] - [15] (Gleeson CJ, Gaudron & Hayne JJ), [62] - [63], [75], [93], [100] (Gummow J); Equuscorp [31] (French CJ, Crennan & Kiefel JJ), [134] (Heydon J).
A failure of consideration 'is not limited to non-performance of a contractual obligation' but 'embraces payment for a purpose which has failed as, for example, where a condition has not been fulfilled, or a contemplated state of affairs has disappeared'.[6] Similarly, in Equuscorp Pty Ltd v Haxton,[7] French CJ, Crennan and Kiefel JJ said:
This Court has, on more than one occasion, described failure of consideration in terms set out by the late Professor Birks: 'Failure of the consideration for a payment … means that 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'.
[6] Roxborough [16] (Gleeson CJ, Gaudron & Hayne JJ).
[7] Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498 [31].
In cases involving bilateral transactions, such as this case, the assessment of the basis for a payment is objective; the focus is upon failure of an (objectively) manifested condition or basis.[8]
[8] Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd [2005] NSWCA 83; (2005) 63 NSWLR 203, [239] - [240] (Mason P); Anderson v McPherson [No 2] [2012] WASC 19; (2012) 8 ASTLR 321 [236].

The characterisation of the Settlement Deed

The characterisation of the Settlement Deed is of critical importance to the resolution of this case. Dr Gray contends that it was the entry into the Settlement Deed that led to Lavan being unjustly enriched. Lavan contends that there was no unjust enrichment arising from the entry into the Settlement Deed.

The parties' submissions

Dr Gray relevantly submitted:[9]
The legal basis for Dr Gray's payment of the Taxation Settlement Sum failed on the parties' entry into the 2018 Settlement Deed. On that date, Lavan's legal entitlement to charge and retain the Taxation Settlement Sum ceased. Before then, the oral retainer agreements between Dr Gray and Lavan - although not costs agreements within the meaning of s 221 of the 2003 Act - entitled Lavan to charge, and obliged Dr Gray to pay, all of the fees set out in the Invoices. The oral retainer agreements provided a legal justification for these payments. That is precisely what Lavan pleads, and Dr Gray agrees.
[9] Plaintiff's Submissions [93].
Dr Gray accordingly submitted that the Settlement Deed removed the legal justification of Lavan to charge and retain the Taxation Settlement Sum. In particular:[10]
(a)By the Deed, the parties agreed that the Taxation Settlement Sum represented the amount that would have been ordered to be refunded to Dr Gray had there been a taxation. In other words, on a taxation, the taxing officer would have found that Lavan was not entitled to retain the Taxation Settlement Sum.
(b)As Lavan admits, the effect of the 2018 Settlement Deed was to settle the parties' dispute, except as to interest, as if there had been a taxation, and on the basis that a taxing officer had certified that Dr Gray had overpaid the Taxation Settlement Sum to Lavan.
(c)In other words, the deed had the same effect as a taxation. It gave effect to a deemed taxation.
(d)By the deed, therefore, the parties agreed that, as from the date of the 2018 Settlement Deed, Lavan was not entitled to retain the Taxation Settlement Sum.
(e)Accordingly, from the date of the 2018 Settlement Deed, the basis for the payment of the Taxation Settlement Sum by Dr Gray - that Lavan was entitled to charge and retain, and Dr Gray was obliged to pay, that amount - failed.
[10] Plaintiff's Submissions [94].
Lavan submitted that Dr Gray cannot establish a factor that qualified or vitiated his payments to Lavan. It contended there was no failure of consideration or basis brought about by the Settlement Deed.[11] The correct characterisation, it submitted, is that Dr Gray duly paid Lavan pursuant to the oral retainer contracts. Then, later, the parties agreed by another contract - the Settlement Deed - that Lavan would pay the Taxation Settlement Sum to Dr Gray.[12]
[11] Outline of defendant's submissions filed 6 June 2022 [4], [6] (Defendant's Submissions).
[12] Defendant's Submissions [7].
Insofar as the Taxation Settlement Sum is taken to represent the amount that would have been ordered to be refunded following taxation, Lavan submitted that a taxation order of the court would not have invalidated or modified any earlier retainer.[13]
[13] Defendant's Submissions [9] - [12].
Lavan further submitted that the Taxation Settlement Sum is not a refund of particular fees paid in respect of any particular invoice rendered by Lavan. Rather, it is a payment made pursuant to an agreement in respect of 'non-distinguished and non-distinguishable' payments made by Dr Gray.[14]

Analysis

[14] Defendant's Submissions [13] - [14].

I agree with Lavan's submissions that entering into the Settlement Deed did not lead to the unjust enrichment of Lavan.
The Settlement Deed was a compromise deed. It was entered into by the parties to settle Dr Gray's potential claim to a refund of fees.
It cannot be said that the Settlement Deed rendered Dr Gray's payments to Lavan under the retainer contracts unjust. There is no suggestion that the payments were vitiated by mistake, duress, illegality, failure of consideration or any other matter.
It is not contended by Dr Gray that the payments by Dr Gray to Lavan pursuant to the retainer constituted unjust enrichment; rather, that Lavan's unjust enrichment occurred when the parties entered into the Settlement Deed.
The effect of the Settlement Deed was that Dr Gray's potential claim was settled for a lump sum. There was no individual assessment of items as there would have been had a taxation by a registrar taken place.
In effect, if Dr Gray's submission is accepted, every settlement could potentially lead to a claim of unjust enrichment.
Every settlement inevitably arises from a right accruing earlier, or potentially earlier, in time.
As Lavan submits, Dr Gray paid fees to Lavan pursuant to the contracts of retainer and later, the parties entered in a separate compromise agreement in the form of the Settlement Deed for the payment of the Taxation Settlement Sum.
Lavan paid the sum due under the Settlement Deed in accordance with its terms.
If Lavan's bills had been taxed, the taxing officer could not have backdated the order to pay costs. No unjust enrichment or failure of basis arises even if the Settlement Deed is equivalent to a taxation, since a taxation by a registrar does not give rise to a statutory right to backdate the order for the payment of the amount taxed off the bill.
Dr Gray asserts that by the Settlement Deed, Lavan was not entitled to retain the Taxation Settlement Sum. It was not a matter of Lavan retaining the Taxation Settlement Sum. The Settlement Deed created a debt which Lavan was contractually bound to pay and which it did pay. It is artificial to suggest that Lavan lost its right to retain the Taxation Settlement Sum.
Dr Gray's assertion that when the Settlement Deed was executed, the legal justification for Lavan to 'retain' the Taxation Settlement Sum was removed, is not sustainable.
Dr Gray's right to a taxation of the invoices arising from retainers merged in the Settlement Deed. Further, Dr Gray's right to the Taxation Settlement Sum arose from the Settlement Deed.
There was no failure of basis. Lavan paid a debt - the Taxation Settlement Sum - created by the Settlement Deed.
There is no reference in the Settlement Deed to Lavan having retained the Taxation Settlement Sum. The parties did not agree that as from the date of the Settlement Deed, Lavan was 'not entitled' to retain the Taxation Settlement Sum. The Settlement Deed required the payment of the Taxation Settlement Sum.
Dr Gray has failed to establish any grounds for unjust enrichment or failure of basis. Lavan's use of the money does not indicate an unjust enrichment at the expense of Dr Gray.
Despite the large number of cases cited, the real issue is the proper characterisation of the Settlement Deed.
I agree with Lavan's submissions that Dr Gray's case fails at the outset having regard to the terms of the Settlement Deed. Accordingly, Dr Gray's claim should be dismissed.

Restitutionary right to interest

If the Settlement Deed is not as I have characterised it, the relevant question is whether Dr Gray has a restitutionary right to compound interest.
The parties agreed that there is no statutory right to recover interest on overpaid costs when a registrar taxed costs off.[15]
[15] ts 10 -11 (27/6/2022); see also Golden West Resources Ltd v Maxim Litigation Consultants [2016] WASC 384.
The traditional position at common law is that a plaintiff is precluded from an award of interest upon a restitutionary claim. However, certain exceptions to the general rule have since developed, such as for judgments later reversed or set aside. Equity also has jurisdiction to award interest in certain circumstances.
The starting point for analysis of Dr Gray's claim is the High Court's decision in Northern Territory of Australia v Griffiths.[16]
[16] Northern Territory of Australia v Griffiths [2019] HCA 7; (2019) 269 CLR 1.
It should be noted that Griffiths was a compensation claim by native title holders under the Native Title Act 1993 (Cth).
In Griffiths, it was common ground that interest should be awarded to compensate for the loss suffered by the respondents by being kept out of their money for the time between when the entitlement to compensation arose and the date of judgment.[17]
[17] Griffiths [108].
The majority (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ) identified the issue in Griffiths as whether the interest should be calculated on a simple or compound basis and if on a compound basis, at what rate it should be compounded.[18] The respondents argued that equity dictated an award of compound interest.[19]
[18] Griffiths [108].
[19] Griffiths [109].
The respondents relied on a line of authority said to support a free-standing entitlement to compound interest. At [34] - [36], the majority stated that such a contention relevantly faces the following difficulties and should accordingly be rejected:[20]
First, in The Commonwealth v SCI Operations Pty Ltd, McHugh and Gummow JJ doubted that there is a free-standing right to interest where a defendant has been unjustly enriched by the use of a plaintiff's money at the plaintiff's expense:
'Independently of their reliance upon s 51A of the Federal Court of Australia Act as the source of curial authority to award the interest they seek in these proceedings, SCI and ACI assert a 'free‑standing' right to the recovery of interest where the defendant has had the use of the plaintiff's money in circumstances which indicate an unjust enrichment at the expense of the plaintiff. The existing state of authority does not favour acceptance of such a broad proposition.
The present is not a case where the assertion is that the appellant's breach of contract or negligence has caused the respondents to pay away or the appellant to withhold money and as a result the respondents have been deprived of the use of the money so paid away or withheld. Nor do the respondents seek an award of damages representing compensation for a wrongfully caused loss of their money, which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money.
It is true that in the administration of its remedies, equity followed a different path to the common law with respect to the award of interest. In cases of money obtained and retained by fraud and money withheld or misapplied by a trustee or fiduciary, the decree might require payment of compound interest. However, in Westdeutsche Landesbank Girocentrale v Islington London Borough Council, the House of Lords answered in the negative the question whether, where statutes, of which s 51A(2)(a) is a local example, provide for orders for payment of simple but not compound interest upon common law claims, equity, in its auxiliary jurisdiction, will supplement the statute by providing for an award of compound interest.
In other instances, equitable relief might involve the payment of simple interest. As an element in the relief administered upon rescission of a contract under which the plaintiff had paid over moneys to the defendant, the order might require the defendant to make the repayment with interest calculated from the date of the initial payment. Relief against forfeiture by a vendor of payments under an instalment or terms contract might require repayment with interest from the dates the respective instalments were paid. An account of profits would carry interest. Conversely, a party seeking equitable relief may be obliged to do equity by the payment or repayment of moneys with interest. A purchaser who, after the date fixed for completion, seeks specific performance will be treated in equity as having been in possession from the completion date and, in general, will be required to offer the vendor interest on the purchase price from that date. However, the present litigation does not involve the administration of any equitable relief and so call for consideration of the issue whether it was unconscientious of the appellant to make the refunds on 3 June 1994 without the addition of payments on account of interest. (Footnotes omitted)
Secondly, properly analysed, such authority as there now is in favour of a free-standing right of the kind contended for goes no further than recognising a restitutionary entitlement at law calculated to redress a defendant's unlawful enrichment through use of moneys which the defendant is regarded as having had and received to the use of the plaintiff [203]. The Claim Group's claim is not a claim for restitution of benefits unjustly obtained by the Northern Territory at the expense of the Claim Group. It is a claim for just compensation for the loss caused to the Claim Group by the extinguishment of native title. And the purpose of compensation is to put the Claim Group, so far as money can do, in the position in which they would have been if the native title had not been extinguished. It is not in any sense to provide restitution of benefits which it might be supposed the Crown derived by reason of the extinguishment of native title. Nor is there an analogy to be drawn between a claim for compensation for extinguishment of native title and a claim for money had and received, or with the recovery of money obtained by fraud or money withheld or misapplied by a fiduciary. As the trial judge held such if any benefit as the Northern Territory derived from the extinguishment of the native title is irrelevant.
[20] Griffiths [134] - [136], [138].
The respondents' claim for compound interest was therefore held to have been rightly rejected by the trial judge and the Full Court.[21]
[21] Griffiths [134] - [136].
In his submissions, Dr Gray cited the following passage from Griffiths contained in the above excerpt:
Properly analysed, such authority as there now is in favour of a free‑standing right to interest [of the kind contended for goes no further than] recognising a restitutionary entitlement at law calculated to redress a defendant's unlawful enrichment through use of moneys which the defendant is regarded as having had and received to the use of the plaintiff. (footnote omitted)
The phrase in square brackets was not included in Dr Gray's quotation from Griffiths. When [134] - [136] are read in their entirety, it is apparent a plaintiff claiming interest must establish that the defendant's enrichment is 'unlawful'. Dr Gray has not established that Lavan was unlawfully enriched.
The High Court confirmed that compound interest may be awarded in equity in cases where:
(a)money is obtained or withheld by fraud; or
(b)in breach of fiduciary duty and the award is made in lieu of an account of profits.[22]
[22] Griffiths [125].
Dr Gray submitted:[23]
[I]n equity, there is a broad equitable jurisdiction to award interest independently of statute. For example, in a claim to strip away profits made by a defaulting fiduciary, interest on those profits would be awarded. Moreover, there is a discretion to award compound, rather than simple interest.
In particular, the cases recognise a right to interest on claims for restitution on the ground of failure of consideration. The largest group of these cases involve ineffective contracts - that is, claims for restitution of money paid pursuant to contracts which are, or turn out to be, void, invalid or unenforceable, or contracts subsequently discharged. Importantly for present purposes, those cases cover contracts that are rescinded ab initio, and contracts discharged de futuro for breach or repudiation. As developed further below, these cases are properly analysed as claims for restitution on the ground of failure of consideration, where the consideration or basis for the plaintiff's payment to the defendant either initially or subsequently fails. In these cases, the plaintiff is awarded restitution of the payment, as well as interest on that amount. (footnotes omitted)
[23] Plaintiff's Submissions [26] - [27].
This is no suggestion that the retainer contracts or the Settlement Deed were ineffective contracts. It may be that when contracts are rescinded ab initio or discharged in the future for breach or repudiation, a right to interest or restitutionary claim arises. It is unnecessary to raise the question because this case does not fall within those cases. There is no suggestion that either the retainer contracts or the Settlement Deed should be rescinded. There is no basis for submitting the retainer contracts or the Settlement Deed should be rescinded for breach or repudiation.
Dr Gray did not contend that Lavan's conduct was fraudulent in any way.
Dr Gray does not contend that Lavan breached their fiduciary duty. It simply contends that Lavan was a fiduciary.
Lavan did not breach their fiduciary duty by charging more than would be payable had a taxation taken place.
It follows that there is no basis in equity for an award of compound interest on the Taxation Settlement Sum.
In Commonwealth v SCI Operations Pty Ltd,[24] two importers, SCI Operations Pty Ltd (SCI) and ACI Operations Pty Ltd (ACI), sought a refund of duty and interest on the duty paid from the date on which a Commercial Tariff Concession Order (CTCO) had been made. The entitlement to a refund of duty did not arise until a CTCO had been made.
[24] Commonwealth v SCI Operations Pty Ltd [1998] HCA 20; (1998) 192 CLR 285.
The importers unsuccessfully submitted that a claim for interest arose independently of s 51A of the Federal Court of Australia Act 1976 (Cth) as an independent restitutionary claim.[25]
[25] SCI [19].
Brennan CJ explained that under the Customs Act 1901 (Cth) and associated regulations, neither SCI nor ACI was not entitled to a refund prior to the making of the CTCO.[26] The Commonwealth repaid the excess duty on the day the CTCO was made.[27]
[26] SCI [10].
[27] SCI [11].
Further, Kirby J held that a claim to interest on refunds was excluded by the Customs Act.[28]
[28] SCI [98].
Dr Gray also relied on Sempra Metals Ltd(formerly Metallgesellschaft Ltd) v Inland Revenue Commission[29] where the House of Lords held that a court has jurisdiction to award compound interest where a claimant was seeking restitution of money paid under a mistake in the exercise of the court's common law restitutionary jurisdiction.
[29] Sempra Metals Ltd (Formerly Metallgesellschaft Ltd) v Inland Revenue Commissions [2008] 1 AC 561.
However, in Prudential Assurance Co Ltd v Commissioners for Her Majesty's Revenue and Customs,[30] the Supreme Court of the United Kingdom departed from Sempra. The Court summarised the decision of the House of Lords in Sempra as follows:[31]
(1) By a majority consisting of Lord Hope, Lord Nicholls and Lord Walker, the House held that the court had jurisdiction at common law (Lord Hope and Lord Nicholls) or at least in equity (Lord Walker) to make an award on the ground of unjust enrichment in respect of the time value of money which was paid prematurely as the consequence of a mistake. The basis of the award was that the benefit by which the recipient of the money was enriched was the time value of the money. The benefit was presumptively quantified as the market value of the use of the money during the period before it was lawfully due, that is, the cost of borrowing an equivalent amount in the market.
(2)The same majority held that:
(a) in the instant case, the presumption that the Government had benefited from the premature payment of the tax had not been displaced; but
(b) the Government was in a different position from ordinary commercial borrowers, in that it could borrow at more favourable rates; and accordingly;
(c) the claims should be quantified on a conventional basis applicable to Government borrowing.
[30] Prudential Assurance Co Ltd v Her Majesty's Revenue and Customers [2018] UKSC 39; [2019] AC 929.
[31] Prudential [54].
The relevant issue before the UK Supreme Court was whether Prudential was entitled to compound interest in respect of tax which was levied in breach of European law on the basis that the revenue was unjustly enriched by the opportunity to use the money in question. The UK Supreme Court stated.[32]
As to the basis on which interest is payable, a clear explanation was provided by Lord Wright, a judge who was well aware of unjust enrichment (see, for example, Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32), and had also had to consider interest as a member of the Law Revision Committee which reported in 1934, mentioned earlier. In Riches v Westminster Bank Ltd [1947] AC 390, 400, he stated:
'… the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation.'
Once it is understood that the claim to interest is not truly based on unjust enrichment but on the failure to pay a debt on the due date, the conclusion inevitably follows that interest can be awarded on the claims within categories (b) and (c) under section 35A of the 1981 Act: see BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, and Sempra Metals at paras 104 (Lord Nicholls) and 175 (Lord Walker).
[32] Prudential [76] - [77].
Dr Gray's submissions invited me to follow the House of Lords' decision in Sempra but not the UK Supreme Court's decision in Prudential departing from it.[33]
[33] Sempra [79].
The UK Supreme Court's decision in Prudential is persuasive authority; authority which I should follow.

Interest on successful appeal repayments

Dr Gray's claim to restitutionary interest at compound rates essentially seeks to rely on a line of cases, beginning with the decision of the New South Wales Court of Appeal in Heydon v NRMA Ltd [No 2].[34] That case concerned the interest payable when a judgment was set aside on appeal.
[34] Heydon v NRMA Ltd [No 2] [2001] NSWCA 445; (2001) 53 NSWLR 600.
Mason P held at [14] that the right to restitution with interest 'exists at common law and is not based upon some discretionary invocation of statutes or rules relating to appeals. Rather, it is based on the 'unifying legal concept' of unjust enrichment identified by Deane J in Pavey & Matthews Pty Ltd v Paul.[35]
[35] Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 256 ‑ 7.
Mason P noted that in SCI, McHugh and Gummow JJ commented adversely upon the notion that there is a 'free‑standing' right to recover interest in a common law restitutionary claim. However, since their Honours' comments did not form part of the reasoning of the other members of the High Court, Mason P felt free to maintain his position.[36]
[36] Heydon [16].
In so far as Mason P's statement at [14] covers circumstances other than an amount repaid pursuant to the setting aside of a judgment, it was obiter.
Even if McHugh and Gummow JJ's statement in SCI was obiter as Mason P stated, those comments were endorsed by the High Court in Griffiths, as set out earlier in these reasons.[37] The NSW Court of Appeal decision in Heydon and the cases that follow it are not binding on this court following the decision in Griffiths.
[37] See [64].
It is difficult to see how a party receiving payment pursuant to a judgment can be said to be unjust in any sense, even if the judgment on appeal is later set aside. As Mason P notes at [19], an ultimately unsuccessful litigant cannot be at fault in having sought to obtain and retain the fruits of victory awarded by the Court at first instance.
In Meerkin & Apel v Rossett Pty Ltd [No 2],[38] Callaway JA (Charles and Batt JJA agreeing) doubted whether there is a power at common law to award compound interest when a judgment is set aside on appeal. He further stated that if there is it should be exercised only in exceptional circumstances.[39]
[38] Meerkin & Apel v Rossett Pty Ltd[No 2] [1999] VSCA 10; [1999] 2 VR 31.
[39] Meerkin [12].
Callaway JA noted that a court of equity has power to award compound interest. In Westdeutsche Landesbank Girozentrale v Islington London Borough Council,[40] the majority favoured a narrow view of the circumstances in which courts of equity award compound interest.
Callaway JA went on to say that he had found no encouragement in the authorities for the view that compound interest should now be awarded as of course where a judgment for damages is set aside on appeal.[41] I find Callaway JA's judgment more persuasive.
[41] Meerkin [13].
Heydon should be seen as an exception to the general rule that compound interest is not payable. Not, as Mason P held, in effect, that the payment of interest on successfully appealed judgments is an example of a general rule.

Interest arising from settlement

Not unsurprisingly there are very few cases concerning a claim for unjust enrichment arising from a settlement.
In Lahoud v Lahoud,[42] Ward J gave detailed consideration to the restitutionary right to interest. That case concerned a payment by one party to litigation to the other, pursuant to the terms of a deed of settlement. Unlike this case, there was a dispute as to the amount payable under the deed of settlement. The deed provided for an audit to be carried out after payment to determine whether the full amount of the payment was payable, and for its repayment in the event that it was not. The audit determined that there had been an overpayment. The party who had made the overpayment sought interest at the overpayment. The claim to interest was put on a restitutionary basis.
[42] Lahoud v Lahoud [2010] NSWSC 1297.
Ward J summarised the reasons of Mason P in Heydon as deciding that '[w]here the principal has been retained unjustly, then there stands independently of, but appurtenant to the obligation to pay, the "principal" sum, a claim for interest representing the benefit or use of the money over the period of time for which it was unjustly retained'.[43]
[43] Lahoud [126].
It is important to note that the first step in establishing a right to restitutionary interest is to establish that the 'principal has been retained unjustly'.
Having reviewed the authorities,[44] Ward J concluded:[45]
As is apparent from the above review of the relevant cases, there is certainly authority which supports a claim in restitution of the kind which has been brought … Relevantly, while I place weight on the seriously considered dicta of McHugh and Gummow JJ in SCI, in the absence of a definitive ruling by the High Court on this issue Mason P's decision in Heydon remains binding authority on me and supports the availability of a claim for interest on the basis of restitutionary principles notwithstanding that the claim brought is 'free-standing' in the sense referred to in SCI.
[44] Lahoud [128] - [147].
[45] Lahoud [148].
Lahoud was decided prior to the High Court's decision in Griffiths.

Ward J held 'more is required than proof of a retention of benefit, that is there must be some additional factor rendering retention of the benefit 'unjust in the relevant sense'.[46]
[46] Lahoud [151].
Ward J therefore 'would have followed the reasoning of Mason P in Heydon … and allowed the claim for interest at the commercial interest rates claimed' had her Honour been satisfied that the defendant's retention of the benefit of the payment in issue was unjust.[47] However, because the payment had been made pursuant to an agreement between the parties - namely, the deed of settlement - the retention was not unjust.[48] The parties had specifically turned their minds to the need for repayment, and did not in their agreement provide that, in addition to repayment of the amount originally paid, interest should also be paid. The repayment without interest was not, therefore, unjust.
[47] Lahoud [149].
[48] Lahoud [150] - [184].
The fact that the parties excluded interest of the Taxation Settlement Sum from the settlement does not distinguish it from Lahoud. Dr Gray failed to establish that the principal had been retained unjustly.
Dr Gray has no entitlement to interest.
Even if Dr Gray had an entitlement to interest, there would be no basis for payment of compound interest.

Conclusion

For the above reasons, Dr Gray's claim should be dismissed.
Costs should follow the event.
Accordingly, I propose to make the following orders:
(1)The plaintiff's claim is dismissed.
(2)The plaintiff is to pay the defendant's costs of the action, including any reserved costs, to be taxed if not agreed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SB
Associate to the Honourable Justice Curthoys
8 DECEMBER 2022

[40] Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 [13].