Hutchison Pty Ltd v Port Melbourne Land Custodians Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST

S ECI 2021 02610

J. HUTCHISON PTY LTD (ACN 009 778 330)	Plaintiff
v
PORT MELBOURNE LAND CUSTODIANS PTY LTD (ACN 608 911 440) ATF PORT MELBOURNE TRUST	Defendant

---

JUDGE:	Riordan J
WHERE HELD:	Melbourne
DATE OF HEARING:	8 April 2022 Written submissions completed 21 April 2022
DATE OF JUDGMENT:	17 June 2022
CASE MAY BE CITED AS:	Hutchison Pty Ltd v Port Melbourne Land Custodians Pty Ltd
MEDIUM NEUTRAL CITATION:	[2022] VSC 339

---

INTERLOCUTORY APPLICATION – Application for joinder – Principles of joinder considered – Whether joinder would be futile – Application granted.

RESTITUTION – Claim by builder against owner of land not party to the building contract – Whether claim has no real prospect of success – Area of law complex and controversial – Consideration of relevant authorities.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Robins QC with Mr A Baker	Mills Oakley
For the Defendant	Mr G Harris QC	Norton Rose Fulbright Australia

Contents

Litigation history

Proposed statement of claim

Contractual claim
Claims against Abbot Kinney

Principles of joinder

Restitution claim

Plaintiff’s submissions
Defendant’s submissions
Authorities
Conclusion

Indemnity Claim

Orders

HIS HONOUR:

By summons filed 26 November 2021 (‘the joinder summons’), the plaintiff applies for: orders pursuant to r 9.02, or alternatively r 9.03 of the Supreme Court (General Civil Procedure) Rules2015 (Vic) (‘the Rules’) that Abbot Kinney Pty Ltd (ACN 082 873 694) as trustee for the Glen Iris Trust (‘Abbot Kinney’) be joined as the second defendant to the proceeding.

Litigation history

By summons and originating motion both filed 26 July 2021, the plaintiff applied for a declaration that the defendant was not entitled to call on two unconditional undertakings each to the value of $3,840,625 in favour of the defendant from the Bank of Queensland (‘the Securities’), given on behalf of the plaintiff; and associated injunctions.
On 25 July 2021, interim injunctions were granted by Justice Nichols on the basis of the plaintiff depositing $3,471,416.99 into an interest bearing trust account. On 27 August 2021, I dismissed the plaintiff’s summons upon Abbot Kinney giving the following undertaking (‘the undertaking’):
Upon Abbot Kinney Pty Ltd atf the Glen Iris Trust (‘Abbot Kinney’) undertaking that if, as a result of an accounting the subject of final judgment of the Court or the Victorian Civil and Administrative Tribunal (as the case may be), the defendant is found liable to pay an amount to the plaintiff, then, upon 14 days’ written notice from the plaintiff of the defendant’s failure to pay that amount, Abbot Kinney will pay that amount to the plaintiff on behalf of the defendant up to the value of the Securities ($7,681,250).
On 28 September 2021, I gave directions for the filing of short points of claim and short points of defence and any counterclaim principally relating to the defendant’s entitlement to liquidated damages.
On 6 December 2021 the plaintiff filed draft points of claim, which included claims against Abbot Kinney for:
(a)‘Additional Work’ on restitutionary principles; and
(b)a declaration that Abbot Kinney indemnify the defendant for any amount up to $7,681,250 the defendant is judged liable to pay under the undertaking.
On 16 February 2022, I ordered that the plaintiff file and serve a proposed statement of claim by 11 March 2022.
On 8 April 2022, I gave directions for the filing of submissions by the parties with respect to the joinder summons.

Proposed statement of claim

In summary, by the proposed statement of claim filed 23 March 2022 the plaintiff pleads as follows.
David Joachim has at all material times been the sole director and shareholder of the defendant, Abbot Kinney and Third Street Pty Ltd (‘Third Street’).
From 25 May 2015, Abbot Kinney was the registered proprietor of the land at 320 Plummer Street, Port Melbourne, more particularly described as Certificate of Title Volume 11208 Folio 293 (‘the Land’); and following subdivision, Abbot Kinney remains the registered proprietor of various lots.
By agreement commencing 23 October 2015 between the defendant and Abbot Kinney, Abbot Kinney engaged the defendant to develop the Land (‘the Development Agreement’). The terms of the Development Agreement included that:
(a)the defendant was appointed to deliver ‘the Works’;
(b)if Abbot Kinney required a ‘Stage of Works’ to be completed by the defendant, it would issue a ‘Stage Development Agreement’; and
(c)the defendant would issue an invoice to Abbot Kinney for services performed under the agreement within 14 days of the ‘Stage Conclusion Date’, which Abbot Kinney would pay no later than seven days after its due date for settlement under the contract of sale of the last ‘Developed Lot’ in the relevant stage of works.
Abbot Kinney and the defendant have not entered to any Stage Development Agreement for the development of the land.
By building agreement dated 27 April 2018 (‘the Building Agreement’) between the plaintiff and the defendant, the plaintiff agreed it would design and construct a mixed residential and commercial development comprising of 11 townhouses, three residential and serviced apartment towers, podium levels, basement car parking, associated services, amenities, common areas and a day spa, gymnasium, retail tenancies and commercial office spaces on the Land for a contract sum of $153,625,000. The terms of the Building Agreement include:
(a)Neoscape Pty Ltd (‘Neoscape’) was appointed superintendent under the Building Agreement.
(b)The plaintiff would give two unconditional undertakings in the amount of 2.5% of the contract sum.
(c)Liquidated damages for delay in reaching practical completion would be payable in accordance with cl 35.6 of AS4300 calculated for each of the ‘Severable Portions’ at pages 122-126 of the Building Agreement.
(d)Variations would be assessed in accordance with General Condition 40 of AS4300.
(e)The Superintendent was (among other things) to act honestly and arrive at a reasonable measure or value of work, quantities or time in the exercise of its functions (‘clause GC 23’).
There were further implied terms of the Building Agreement that the superintendent would act (among other things) reasonably, impartially and fairly; and the defendant was responsible for any failure by the superintendent in that regard.
By two deeds dated 20 March 2020 (‘the Settlement Deed’ and ‘the Termination Deed’, and collectively ‘the March 2020 Deeds’) between the plaintiff and the defendant it was agreed that the contract sum would be reduced in consideration for extensions to the dates of practical completion.
By further agreement dated 18 May 2020 (‘the SD227 Agreement’), the Building Agreement was varied in summary as follows:
(a)The date of Practical Completion of Severable Portion 3 and Severable Portion 5 (‘SP3 and SP5 respectively’) was 8 May 2020 and had been reached. Specified defects as at that date were required to be rectified by the plaintiff.
(b)The plaintiff was required to satisfy ‘Handover Obligations’ with respect to each of the dwellings in SP3 and SP5 by the day before the settlement of the sale or commencement of a lease each dwelling respectively. If the plaintiff failed to complete the Handover Obligations to the superintendent’s reasonable satisfaction by the requisite date, the plaintiff would be liable for liquidated damages (‘the Late Apartment LDs’):
(i)for sold or leased dwelling $2,000 per dwelling per calendar day; and
(ii)for all other dwellings $500 per dwelling per calendar day.
By 4 June 2020, the plaintiff discharged the Handover Obligations to the reasonable satisfaction of the superintendent.
On or about 29 June 2020, Neoscape certified that:
(a)the plaintiff had discharged the Handover Obligations on or about 4 June 2020; and
(b)Late Apartment LDs under the SD 227 Agreement were $127,000.
On 30 June 2020, Neoscape was replaced by Third Street as superintendent.
By letter dated 9 July 2020, Third Street:
(a)purported to certify liquidated damages of $2,163,426 pursuant to clause 35.6 of the Building Agreement in respect of SP3 and SP5 for the delay between the date for practical completion and the date of practical completion (‘the 2020 LD Claim’); and
(b)stated that it would separately certify the amount of Late Apartment LDs.
On 9 July 2020, the defendant demanded payment from the plaintiff of liquidated damages in the amount of $2,163,425 be paid to Abbot Kinney by 14 July 2020.
By letter of 13 July 2020 to the solicitors for the defendant, the solicitors for the plaintiff:
(a)disputed the 2020 LD Claim;
(b)admitted a liability for liquidated damages of $1,848,426 which included liquidated damages in respect of Severable Portions 3, 5, 6, 7, 8 and 10 and $127,000 in Late Apartments LDs; and
(c)offered to resolve all liability in respect of the Late Apartments LDs for the payment of $127,000.
By letter dated 14 July 2020 to Hutchison’s solicitors, the defendant accepted the plaintiff’s offer and stated in the ‘Principal’s response’ column to the ‘Late Apartments’ line item, ‘$127,000 – Amount agreed and paid by HB’.
By reason of the matters alleged, the plaintiff contends that:
(a)there was an accord and satisfaction with respect to the liability for the Late Apartments LDs; and
(b)the plaintiff completely discharged its liability to the defendant in respect of the Late Apartments LDs under the Building Agreement as varied by the SD 227 Agreement.
By reason of the matters alleged, the defendant, Third Street, Abbot Kinney and the plaintiff had reached the common assumption that:
(a)By 4 June 2020, the plaintiff had acted to its detriment in completing the Handover Obligations to the reasonable satisfaction of Neoscape.
(b)On 29 June 2020, Neoscape had determined that the Late Apartments LDs payable by the plaintiff under the SD227 Agreement were in the sum of $127,000.
(c)By 14 July 2020, the parties’ solicitors had exchanged correspondence recording the parties’ agreement in substance that the Handover Obligations were completed and the Late Apartments LDs under the SD227 Agreement were in the sum of $127,000 (save for a separate dispute with respect to liquidated damages payable in respect of Severable Portions 7, 8 and 10).
(d)On or about 14 July 2020, the plaintiff paid and the defendant accepted the sum of $127,000 in discharge of the Late Apartments LDs.
(e)Until 7 June 2021, neither Third Street nor the defendant asserted that the plaintiff had failed to meet their Handover Obligations,
(‘the June-July 2020 Common Assumption and Accord’).
By reason of the above matters, Third Street, the defendant and Abbot Kinney are estopped from:
(a)resiling from the June-July 2020 Common Assumption and Accord;
(b)asserting that the plaintiff failed to complete the Handover Obligations by 4 June 2020 and was in breach of the SD227 Agreement; and/or
(c)asserting that the plaintiff is liable for any further amount above the sum of $127,000 which had been paid in discharge of the Late Apartments LDs.
By letter dated 7 June 2021, Third Street purported to certify $13,934,000 in Late Apartments LDs (‘the 2021 LD Claim’).
The purported certification by Third Street on behalf of the defendant was in breach of:
(a)clause GC 23;
(b)the implied term in the Building Agreement that the Superintendent must act reasonably, impartially and fairly;
(c)Superintendent Direction 227 issued under the Building Agreement; and contrary to
(d)the June-July 2020 Common Assumption and Accord.
By reason of the matters alleged, the defendant’s conversion of the Securities to $7,861,250 in cash on or about 30 August 2021 was a breach of the Building Agreement as varied and the defendant has received that sum to the use of the plaintiff.
Further, it was alleged that the amount claimed in the 2021 LD claim was an unlawful penalty.

Contractual claim

The plaintiff claims $2,757,381.21 on the basis of variations in accordance with General Condition 40 of AS4300 as alleged in paragraphs 57 to 158 of the proposed statement of claim.

Claims against Abbot Kinney

The plaintiff claims that Abbot Kinney is liable for the valuation of variation works on the basis of the following allegations:
(a)Abbot Kinney was the registered proprietor of the Land and the true beneficiary of the works which increased the value of the Land.
(b)Pursuant to the Development Agreement, the defendant was to pay all costs associated with the development of the Land, but was impecunious.
(c)The defendant obtained no benefit from the performance of the works.
(d)Abbot Kinney was aware of the above facts and would be unjustly enriched if it were not to provide reasonable remuneration to the plaintiff for the value of the works.

Principles of joinder

The plaintiff applies for the joinder of Abbot Kinney as a defendant under rr 9.02 and 9.03 of the Rules, which provide as follows:
9.02 Permissive joinder of parties
Two or more persons may be joined as plaintiffs or defendants in any proceeding—
(a)       where—
(i)if separate proceedings were brought by or against each of them, some common question of law or fact would arise in all the proceedings; and
(ii)all rights to relief claimed in the proceeding (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions; or
(b)       where the Court, before or after the joinder, gives leave to do so.
9.03 Joinder of necessary parties
(1)Except by order of the Court or as provided by or under any Act, where the plaintiff claims any relief to which any other person is entitled jointly with the plaintiff—
(a)       all persons so entitled shall be parties to the proceeding; and
(b)any person who does not consent to being joined as a plaintiff shall be made a defendant.
(2)Where the plaintiff claims relief against a defendant who is liable jointly with some other person and also liable severally, that other person need not be made a defendant to the proceeding.
(3)Where persons are liable jointly, but not severally, under a contract, and the plaintiff in respect of that contract claims against some but not all of those persons, the Court may stay the proceeding until the other persons so liable are added as defendants.
(4)The Court may make an order under paragraph (1) before or after the non-joinder.
The rules of joinder are remedial provisions designed to enable parties to litigate the real issues in dispute between them in the most expeditious, effective and cost efficient way; and for this purpose should be given a broad and beneficial interpretation.[1] The Rules confer a broad discretion that should be exercised by reference to considerations of procedural convenience, fairness and practicability, on a case by case basis.[2]
[1]Oswal v Carson & Ors (No 2) [2014] VSC 209, [37] (Sifris J), citing Payne v Young (1979) 145 CLR 609, 611 (Aickin J); Jack v Chief Executive Officer (Housing) (No 2) [2021] NTSC 81, [17] (Grant CJ).
[2]Main-Road Property Group Pty Ltd v Pelligra & Sons Pty Ltd [2007] VSC 43, [20] (Bell J) (‘Main-Road’).
In Lee v Korean Society of Victoria Australia Inc, Dixon J summarised the following relevant factors for the exercise of the discretion as identified by Bell J in Main-Road:
(a)whether there would be common evidence, common questions of fact and law;
(b) the public interest and the need to avoid multiplicity of proceedings;
(c)unfairness or prejudice to any party, understood in the context of the court’s powers to manage the proceeding so as to address or minimise any prejudicial consequences;
(d)delay is relevant but is not decisive and should be explained to enable a rational assessment of competing considerations.
(e)Unless the claim against the proposed defendant is obviously bad in law or futile, the merits of the claim are not a decisive consideration. The court would not refuse to allow an amendment because it raised a claim that ought not to succeed, for this will be an issue at trial.[3]
He noted that, although Main-Road was decided before the introduction of the Civil Procedure Act 2010 (Vic) (‘the Civil Procedure Act’), the observations of Bell J ‘remain apposite’.[4]
[3][2015] VSC 262, [10], citing Main-Road [2007] VSC 43, [20]-[38].
[4]Ibid.
With respect to the question of futility, it had been held that an applicant must show that it has ‘an arguable case against the proposed respondents, at least to the standard of being able to resist an application for summary judgment by the proposed respondent had he or she been sued in separate proceedings’.[5]
[5]Review Australia Pty Ltd v Redberry Enterprise Pty Ltd (2003) 58 IPR 366, [5] (Heerey J). See also Mandhan v Toyota Finance Australia Ltd (No 2) [2020] FCA 3, [5] (Besanko J) and Roberts-Smith v Roberts [2022] FCA 18, [144] (Bromwich J).
Pursuant to s 63 of the Civil Procedure Act, a claim may be summarily dismissed if it has no real prospect of success. It makes good sense that a court would not permit the joinder of a defendant for the purpose of determining a claim that has no real prospect of success. However, if not satisfied there is a real prospect of success, a court may nonetheless permit a joinder if it is satisfied that:
(a)it is in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.[6]

Restitution claim

[6]Applying the test in s 64 of the Civil Procedure Act 2010 (Vic) applicable to applications for summary dismissal.

Plaintiff’s submissions

The plaintiff submitted that the joinder of Abbot Kinney is desirable and necessary to enable the prosecution of two claims being:
(a)a claim in restitution for work and labour done and materials supplied (‘the restitution claim’); and
(b)a claim for indemnity on the basis of the undertaking (‘the indemnity claim’).
The plaintiff submitted that the restitution claim was pleaded on a proper factual and legal basis and was arguable. In particular, the authorities relied on by the defendant do not render the claim futile, for the following reasons:
(a)Lumbers v W Cook Builders (in liq) does not disavow free acceptance as a basis for restitutionary liability.[7] The reasons of the plurality state that ‘the bare fact of conferral of the benefit or provision of the service does not suffice to establish an entitlement to recovery’ and this principle ‘is not unqualified’.[8]
(b)The decision in Lumbers is distinguishable from this case because in Lumbers, the owner was unaware of the contract between the building contractor and the associated company. Accordingly, it could not be said that the owner did not take a reasonable opportunity open to him to reject the proffered services. Here, Mr Joachim, as the common director of both Abbot Kinney and the defendant, was acutely aware of:
(i)the contract between the plaintiff and the defendant; and
(ii)the work being performed by the plaintiff.
(c)The decision in Lumbers stands in contrast to the earlier decision of the High Court, Liebe v Molloy,[9] which held that an implied contract arises when a person does work for another without any express contract.
(d)The proposed statement of claim pleads the necessary ingredients for an unjust enrichment claim on the basis of ‘free acceptance’.
(e)The restitution claim will impose only marginal additional evidentiary burden on Abbot Kinney as Mr Joachim controls both the defendant and Abbot Kinney. The restitution claim is primarily a legal issue and will not add any substantial time or cost to the litigation.
[7](2008) 232 CLR 635 (‘Lumbers’).
[8]Ibid 663 [80] (Gummow, Hayne, Crennan and Kiefel JJ).
[9](1906) 4 CLR 347.

The plaintiff further submitted that the defendant’s reliance on MacDonald Dickens & Macklin v Costello,[10] is misplaced, for the following reasons:
(a)The ‘general rules’ set out by Etherton LJ in that case should not form a basis to shut out a claimant from making a claim before the facts had been decided and where the question of whether equity should intervene will turn on the ultimate facts found at trial.
(b)The critical findings of facts about the relationship between the defendant and Abbot Kinney and Mr Joachim and Mr O’Leary’s knowledge and actions will distinguish the ‘general rules’ from the present proceeding.
(c)In MacDonald, the Costellos were passive in their dealings with the builder. Here, the defendant has twice demanded that liquidated damages be paid to Abbot Kinney directly. Further, under the Development Agreement, Abbot Kinney is ultimately liable for the construction costs but there are no similar agreement referred to in MacDonald.
[10][2012] QB 244 (‘MacDonald’).
There is no binding authority disavowing a restitutionary claim on the basis of free acceptance in Australia.

Defendant’s submissions

The defendant submitted that the Court should refuse the plaintiff’s application to join Abbot Kinney because neither the restitution claim nor the indemnity claim discloses an arguable cause of action.
The defendant submitted that the cases (which I have referred to below, from paragraph 45) establishes the principle that the law will not superimpose an obligation to pay a reasonable remuneration on an open contractual regime.
The cases where restitutionary claims have succeeded were based on the absence of a contract. In this case, the work and labour done was provided by the plaintiff in consideration of its entitlements under the Building Contract and, to the extent that Abbot Kinney benefits from that work and labour, it is not freely accepted because it is accepted in consideration of the terms of the Development Agreement.

Authorities

In Pavey & Matthews Pty Ltd v Paul, the High Court held that a builder who had performed work under an agreement, which was unenforceable by statute, was not prevented from bringing a claim to restitution on quantum meruit for the value of the work.[11] However, Deane J relevantly said:
Indeed, if there was a valid and enforceable agreement governing the claimant's right to compensation, there would be neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration. The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.[12]
[11](1987) 162 CLR 221 (Mason, Wilson, Brennan, Deane and Dawson JJ) (‘Pavey’).
[12]Ibid 256.
In Lumbers, the High Court considered a claim for restitution in the following circumstances:[13]
(a)The owner of land entered into a contract with a building contractor for construction of a house on the land.
(b)Unbeknown to the owner, the building contractor entered into an arrangement with its associated company for that company to perform much of the work required under the building contract.
(c)After completion of the house, the owner paid all amounts claimed by the building contractor, but the building contractor did not pay the full amount due by it to the associated company.
(d)The associated company made a claim from the owner on restitutionary principles.[14]
[13]Lumbers (2008) 232 CLR 635.
[14]Ibid 640-1 (Gleeson CJ).
Gleeson CJ noted that, in an ordinary case, and subject to exceptions, a building subcontractor does not have a restitutionary claim against a property owner and must look for payment to the contractor.[15] The associated company had not demonstrated that this case fell within one of the exceptions to that general rule because:
(a)the existing contractual arrangements affected a certain allocation of risk between the building contractor and the associated company and there was no occasion to disturb that allocation;[16]
(b)the associated company had not performed its services at the request of the owner, but pursuant to its contract with the building contractor;[17] and
(c)the owner did not acquiesce in the provision of the services and was unaware of the existence of the associated company.[18]
The Chief Justice quoted with approval,[19] the statement of Lord Goff of Chievely’s in Pan Ocean Shipping Ltd v Creditcorp Ltd:
I am of course well aware that writers on the law of restitution have been exploring the possibility that, in exceptional circumstances, a plaintiff may have a claim in restitution when he has conferred a benefit on the defendant in the course of performing an obligation to a third party. But, quite apart from the fact that the existence of a remedy in restitution in such circumstances must still be regarded as a matter of debate, it is always recognised that serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract.[20]
[15]Ibid 654-5 [46].
[16]Ibid.
[17]Ibid 655 [49].
[18]Ibid.
[19]Ibid 655 [47].
[20][1994] 1 WLR 161, 166 (citations omitted) (‘Pan Ocean Shipping’).
The plurality similarly rejected the claim on the following bases:
(a)Pavey does not support the proposition that the acceptance of a benefit, without a request, suffices to found an action for ‘work and labour done’.[21]
(b)After reference to the legal relations between the parties, it was not correct that the associated company did the work and the building contractor did not.[22] Neither is the question of whether the owners ‘accepted’ the benefit relevant, because it distracts attention from the legal relations between the parties.[23] The plurality observed:
[I]dentification of the rights and obligations of the parties, in this as in any matter, requires close attention to the particular facts and circumstances of the case. Necessarily that requires close attention to what contractual or other obligations each owes to the other.[24]
(c)The owner had not gained a ‘windfall’ on the basis that it had not paid enough. The owner had satisfied its obligations to the building contractor and the fact that the actual construction costs may have exceeded the amount payable under an improvident contract was not relevant.[25]
(d)Accordingly, the owner accepted no benefit at the expense of the associated company and it would be unconscionable to retain.[26]
[21]Lumbers (2008) 232 CLR 635, 665 [86] (Gummow, Hayne, Crennan and Kiefel JJ).
[22]Ibid 668-672 [96]-[114].
[23]Ibid 674 [126].
[24]Ibid 674 [127].
[25]Ibid 672-3 [119]-[122].
[26]Ibid 674 [125].
The plurality emphasised the importance of the contractual relations between the parties, observing:
The application of a framework for analysis expressed only at the level of abstraction adopted in this case, by reference to ‘benefit’, ‘expense’ and ‘acceptance’ coupled with considerations of unconscionability, creates a serious risk of producing a result that is discordant with accepted principle, thus creating a lack of coherence with other branches of the law. There are two reasons of particular relevance to this case why that is so. … First, does applying the posited framework for analysis to the facts of the present case extend the availability of recovery beyond the circumstances in which a claim for work and labour done (or money paid) for and at the request of the defendant would be available? Secondly, and no less importantly, how is the result of applying this framework for analysis consistent with the obligations relevant parties undertook by their contractual arrangements?
The doing of work, or payment of money, for and at the request of another, are archetypal cases in which it may be said that a person receives a ‘benefit’ at the ‘expense’ of another which the recipient ‘accepts’ and which it would be unconscionable for the recipient to retain without payment. And as is well apparent from this Court’s decision in Steele v Tardiani, an essential step in considering a claim in quantum meruit (or money paid) is to ask whether and how that claim fits with any particular contract the parties have made. It is essential to consider how the claim fits with contracts the parties have made because, as Lord Goff of Chieveley rightly warned in Pan Ocean Shipping Co Ltd v Creditcorp Ltd, ‘serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract’. In a similar vein, in the Comments upon s 29 of the proposed Restatement, (3d), ‘Restitution and Unjust Enrichment’, the Reporter says:
‘Even if restitution is the claimant’s only recourse, a claim under this Section will be denied where the imposition of a liability in restitution would overturn an existing allocation of risk or limitation of liability previously established by contract’.[27]
[27]Ibid 662-3 [78]-[79] (citations omitted).
The Lumbers decision was applied by the Court of Appeal in Hendersons Automotive Technologies Pty Ltd (in liq) v Flaton Management Pty Ltd.[28] In considering the decision in Lumbers, Tate JA observed with respect to the statements in paragraphs 78 and 79 of the plurality’s reasons (as quoted in the preceding paragraph):
The High Court [in Lumbers] held that the majority of the Full Court had wrongly applied the doctrine of ‘free acceptance’ (that is, acceptance of a benefit in the absence of a request), in upholding the plaintiff’s claim in restitution; had wrongly put aside consideration of the contractual arrangements as relevant to the parties’ obligations; and had applied, when it should not have done so, the principles from Angelopoulos v Sabatino. In Angelopoulos, it was held that, in addition to an implied request for work to be done or money paid, there were numerous other factors to be given separate consideration before restitution could be awarded, including, as a factor, whether a benefit was conferred at another party’s expense.
…
[Her Honour then quoted paragraphs 78 and 79 of the plurality’s reasons in Lumbers].
There can be no doubt from these pronouncements that, even where a claim for restitution is properly brought, primacy is to be given to any legal relationships that exist between the parties, as Flaton Management argued on the appeal. Moreover, as Lumbers v Cook makes clear, where there is an agreement between the parties, the scope of that agreement will almost invariably govern the relationship between the parties independently of any questions about so-called incontrovertible benefits or unconscionability.[29]
[28](2011) 32 VR 539 (Ashley, Neave and Tate JJA).
[29]Ibid 551-2 [55]-[56] (citations omitted).
In Skilled Group Ltd v CSR Viridian Pty Ltd, Vickery J considered the policy considerations arising from the application of Lumbers in the context of construction, which he enumerated as follows:
First, in the absence of the principle, commercial uncertainty could arise — a Proprietor could be obliged to meet claims by third party suppliers and contractors of an unknown and unmanageable dimension, notwithstanding the existence of a binding and legally enforceable contract between the Proprietor and a Head Contractor for the work.
Second, multiple obligations in respect of the same work would be imposed on a Proprietor — those agreed under the Head Contract and those imposed in favour of third party Sub-contractors and Suppliers.
Third, the Proprietor would be left with no control or protection in respect of:
i.The price of the works — any agreement as to a lump sum or a schedule of rates would become immaterial;
ii.The cost of the works — any regime for notice and claim in respect of variations, delay costs, etc, would become immaterial.
Fourth, the level of risk for a Proprietor associated with these matters may well impact adversely on the financing of construction projects.
Fifth, the ability of a Proprietor to communicate with those undertaking the works on site may well be inhibited in circumstances where any communication could be later asserted by a disgruntled third party Sub-contractor or Supplier to amount to an implied ‘request’ to perform the works, in turn resulting in liability being imposed on the Proprietor through a quantum meruit claim. As Emmitt and Gorse write in Communication in Construction Teams, which I fully endorse:
Communication is arguably the one aspect of project management that pervades all others, for without effective communication between the participants the project team cannot succeed in realising its objectives.
In order to avoid these consequences, the law recognises under the Lumbers principle that full effect should be given to the binding contractual arrangements of the parties as the basis of their dealings in the administration of a construction contract.[30]
[30][2012] VSC 290, [33]-[38] (citations omitted).
In MacDonald, the English Court of Appeal considered a claim for restitution in the following circumstances:
(a)The first and second defendants, Mr and Mrs Costello had discussions with the claimant builder about constructing eight houses on land owned by them.
(b)Mr and Mrs Costello informed the claimants that, for tax reasons, they would use a company (the third defendant), in which they were the sole shareholders and directors, and through which payments would be made to the builder.
(c)The builder entered into a construction contract with the company, which had no significant assets and was used by Mr and Mrs Costello purely for tax and financial purposes and solely to act as a conduit for the making of payments.
(d)After a dispute arose with respect to the construction, the builder stopped work and the company refused to pay outstanding invoices.[31]
[31][2012] QB 244, 247 [5]-[8] (Etherton LJ, with whom Pill and Patten LJJ agreed).
At trial, it was held that there were amounts outstanding under various invoices for building work in respect of which:
(a)the third defendant company was liable in contract; and
(b)Mr and Mrs Costello were liable under restitutionary principles for unjust enrichment.[32]
[32]Ibid 248 [11].
In the Court of Appeal, Etherton LJ upheld the Costellos’ appeal against the unjust enrichment claim on the basis that it would undermine the contractual arrangement between the parties, through which they chose how to allocate risk and consequences of non-performance.[33] After reviewing the authorities, including Pan Ocean Shipping and Lumbers, he accepted that those cases differed from the instant case on the facts.[34] However, he considered that the appeal of Mr and Mrs Costello had to be upheld for the following reasons:
(a)The authorities support the general policy of refusing restitutionary relief against a defendant who has benefitted from the plaintiff’s services rendered pursuant to a contract to which the defendant was not a party.[35]
(b)The existence of two remedies, one in restitution and one in contract, is capable of producing anomalous results being that contractual damages are calculated by reference to contract price and terms but compensation for unjust enrichment is calculated by reference to the value of the services.[36]
[33]Ibid 251 [23].
[34]Ibid 254 [28].
[35]Ibid 255 [32].
[36]Ibid 254-5 [31].
In Mann v Paterson Constructions Pty Ltd, the High Court considered the quantification of a restitutionary claim brought by a builder, which had been terminated after the owner’s repudiation of the construction contract.[37] The Court held that the quantification of the restitutionary claim was constrained by the terms of the applicable contract.[38]
[37](2019) 267 CLR 560 (Kiefel CJ, Bell, Gageler, Keane, Nettle, Gordon and Edelman JJ).
[38]Ibid 580 [20] (Kiefel CJ, Bell and Keane JJ); 602 [91] (Gageler J); 631 [179] (Nettle, Gordon and Edelman JJ); see also 650-1 [215].
In support of the proposition that restitutionary claims must respect contractual regimes and the allocation of risk made under those regimes, Kiefel CJ, Bell and Keane JJ quoted with approval the following extracts:[39]
[39]Ibid 578-9 [14]-[18].
(a)Deane J in Pavey:
The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.[40]
[40]Pavey (1987) 162 CLR 221, 256, quoted with approval in Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498, 529 [64] (French CJ, Crennan and Kiefel JJ).
(b)Lord Goff of Chieveley in Pan Ocean Shipping:
[A]s a general rule, the law of restitution has no part to play in the matter; the existence of the agreed regime renders the imposition by the law of a remedy in restitution both unnecessary and inappropriate.[41]
(c)Gummow, Hayne, Crennan and Kiefel JJ in Lumbers:
[A]s is well apparent from this Court’s decision in Steele v Tardiani, an essential step in considering a claim in quantum meruit (or money paid) is to ask whether and how that claim fits with any particular contract the parties have made.[42]
(d)Etherton LJ in MacDonald:
The general rule should be to uphold contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations, and, in so doing, have similarly allocated and circumscribed the consequences of non-performance. That general rule reflects a sound legal policy which acknowledges the parties’ autonomy to configure the legal relations between them and provides certainty, and so limits disputes and litigation.[43]
[41]Pan Ocean Shipping [1994] 1 WLR 161, 164.
[42]Lumbers (2008) 232 CLR 635, 663 [79] (citations omitted).
[43]MacDonald [2012] QB 244, 251 [23].

Conclusion

The focus of the authorities referred to above, particularly MacDonald, on the contractual relations between the parties, may provide a substantial obstacle to the plaintiff’s claim to restitution. However, I do not consider it appropriate to refuse the application to join the Abbot Kinney on the basis that the restitution claim would be futile, for the following reasons.
(a)The law of restitution is a notoriously complex and controversial area of law.[44] Whether it is to be applied to a given set of facts will usually be best considered after the finding of all relevant facts at trial. As explained by Edelman J in Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3):
The development of the law relating to an unjust factor of free acceptance is also best considered against the background of findings of fact.[45]
(b)On this application, I do not consider it appropriate to speculate as to all the matters that may be found at trial, on which a court could rely to distinguish the above authorities. However, for example, it may be significant if a court was to find that the interposition of the defendant in the contractual arrangements was an artifice, introduced solely for the purpose of evading contractual obligations.
(c)I do not consider that it can be assumed that the approach of the English Court of Appeal in MacDonald will be adopted as the law of Australia. At least since Pavey, the law of restitution in Australia has developed its own principles. As the learned authors comment in Mason & Carter’s Restitution Law in Australia:
The concern to accommodate restitution within the scheme of ‘unconscionability’ developed by the High Court in the 1980s is to some extent a distinctly local development. It is also a controversial one.[46]
(d)While it may be accepted that Lumbers stands for the proposition that ‘the bare fact of the conferral of some benefit upon another does not suffice to establish an obligation to repay the expenditure in providing that benefit’,[47] the plaintiff will contend that there are other features of this case that support restitutionary relief.
[44]See, e.g, James Edelman and Elise Bant, Unjust Enrichment (Hart Publishing, 2.d ed, 2016) 74 and K Mason, JW Carter and GJ Tolhurst, Mason & Carter’s Restitution Law in Australia (LexisNexis, 4^th ed, 2021) 7 [106].
[45][2014] WASC 162, [88].
[46]K Mason, JW Carter and GJ Tolhurst, Mason & Carter’s Restitution Law in Australia (LexisNexis, 4^th ed, 2021) 7 [106].
[47]Friend v Brooker (2009) 239 CLR 129, 141 [7] (French CJ, Gummow, Hayne and Bell JJ) (emphasis added) (citations omitted).

Accordingly, I will order that Abbot Kinney be joined as a defendant to the proceeding.

Indemnity Claim

As I have found that Abbot Kinney should be joined as a defendant for the purpose of the restitution claim, it is not necessary for me to determine whether Abbot Kinney should be joined for the purpose of bringing the indemnity claim.
However, I reject the defendant’s contention that the claim for a declaration by the plaintiff against Abbot Kinney cannot be brought at this time because the claim is inchoate.
The indemnity claim is contingent on the defendant being found liable to repay the amounts received under the Securities; and the plaintiff giving 14 days written notice of the defendant’s failure to repay such amounts. However, the fact that a claim against an existing defendant has yet to be established is not a basis for refusing:
(a)an application by a defendant for joinder of a third party for indemnity,[48] nor
(b)an application by a plaintiff for the joinder of a defendant to seek a declaration of liability to indemnify in respect of the amount any judgment against the existing defendant.[49]
[48]Cromwell Property Securities Ltd v Financial Ombudsman Service Ltd (2014) 288 FLR 374, 446 [274] (Tate JA); Corti v Rodwell [1985] VR 287, 290 (Tadgell J).
[49]CGU Insurance Limited v Blakeley (2016) 259 CLR 339, 363-4 [67] (French CJ, Kiefel, Bell and Keane JJ); 369 [90] (Nettle J).
Accordingly, I propose to allow the plaintiff to maintain the indemnity claim.
If I had not already determined that Abbot Kinney should be joined as a defendant on the basis of the restitution claim, I may not have decided, in the exercise of my discretion, that its joinder for the indemnity claim alone was justified. However, I do not consider that any significant additional costs will be incurred in allowing the indemnity claim to proceed.

Orders

I propose to order that Abbot Kinney Pty Ltd (ACN 082 873 694) as trustee for the Glen Iris Trust be joined as a defendant to the proceeding and I will hear the parties on directions as to pleadings and other consequential orders.

---

[2022] VSC 339

17 June 2022