Independent Grocers Co-operative Limited v Noble Lowndes Superannuation Consultants Limited

[1994] HCATrans 447

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No AS of 1994

B e t w e e n -

INDEPENDENT GROCERS

CO-OPERATIVE LIMITED

Applicant

and

NOBLE LOWNDES SUPERANNUATION

CONSULTANTS LIMITED

Respondent

Application for special leave

to appeal

MASON CJ TOOHEY J McHUGH J

Independent 1 25/8/94

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON THURSDAY, 25 AUGUST 1994, AT 11.12 AM

Copyright in the High Court of Australia

MR N.L. STRAWBRIDGE:  May it please the Court, I appear for

the applicant with MR D.O. SIMPSON.	(instructed by
Baker O'Loughlin)

MR A.J. BESANKO:  May it please the Court, I appear for the

respondent. (instructed by Adams Kandelaars)

MASON CJ:	Mr Strawbridge.
MR STRAWBRIDGE:	Your Honour, our argument can be quite

succinctly stated by looking at the text in Burrows
which is in the applicant's list of authorities.

It is behind tab 4, and it is page 16, the second page under that tab in the second full paragraph.

The learned author has been discussing the

structure, if you like, of applications for

restitution on the basis of unjust enrichment. In

that paragraph, it says:

As might be expected a close study of the

English decisions, and those of other common law jurisdictions, reveals a reasonably

developed and systematic complex of rules. It

shows that the principle of unjust enrichment

is capable of elaboration and refinement. It

presupposes three things. First, the

defendant must have been enriched by the

receipt of a benefit. Secondly, that benefit

must have been gained at the plaintiff's

expense. Thirdly, it would be unjust to allow

the defendant to retain that benefit.

Your Honour, there is of course a fourth matter and

that is the question of what defences are available
but that is not referred to in the text.

These three subordinate principles are closely interrelated, and cannot be analysed in

complete isolation from each other.

Examination of each of them throws much light

on the nature of restitutionary claims and the

principle of unjust enrichment.

And then the author - - -

MASON CJ: All this is very interesting, but is a case in

which the amount at issue is $15,000 an appropriate

vehicle for the determination of this point? It is

astonishing to me that a case involving such an

insignificant sum should get to this Court.

MR STRAWBRIDGE:  Your Honours, we say it is, because the law

in the area is quite uncertain and we complain of

the decision of the Full Court of the Supreme Court

of South Australia because it did not go about

looking at the individual factors that must -

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certainly on this text writer's analysis and indeed

our analysis of the law - be looked at. One must

establish whether there has been an enrichment, and

we say the court did not do that.

Secondly, the subsidiary question of whether

it is at somebody else's expense is a fairly minor

matter, but the third and most important matter is

the question of whether it is unjust to allow the

retention.

MASON CJ:	What is the question of principle involved?
MR STRAWBRIDGE:	The question of principle involved,

Your Honour, is that when one considers the

decision of this Court in Pavey, and one then looks

at the two text writers who have considered that,

Goff and Jones, and Burrows, one finds that the

text writers analyse the decision of the Court

quite differently. One text writer says that the

reason for the decision was based on total failure

of consideration. If that is the case, we say we

succeed because there has been partial performance

of the contract in this case. The other author

says that the decision is based on free acceptance,

which is a new concept in Australian law, and

indeed in the Commonwealth as we can find. No

judgment has come out and said that that is one of

the bases on which you find that there has been an
unjust factor. There are 11 categories of unjust

factors and they are referred to in the work by

Burrows, again at page 21, and that is behind tab 5

of the book of authorities.

Your Honour, the unjust factors are set out in

about the sixth line of that text:

The factors which the law regards as rendering the enrichment unjust - the "unjust factors" -

can be regarded as the grounds for restitution

roughly analogous to the different torts in
the law of tort.	And to reiterate what was

said at the start of this chapter -

and then it goes on and deals with that. The

11 grounds are in the second paragraph under (a)

and the cases have analysed that they stand in:

mistake, ignorance, duress, exploitation,

legal compulsion, necessity, failure of

consideration, illegality, incapacity, ultra

vires demands by public authorities, and the

retention of the plaintiff's property without

his consent.

We say an analysis of any of those factors on the

facts of this case would ensure that the applicant

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succeeds and the respondent fails. We say that the

Full Court did not address itself to those

11 autonomous factors. If there is a new factor

being established it should have been spelt out and

it was not. If the factor was free acceptance
then, we say, the respondent's case is defeated by

a concession of counsel for the respondent that it

was anticipated by both parties that the particular

superannuation fund which has been set up may never

come into being because it had to get through the

industrial commission, get past the unions, and

receive other persons' consents.

MASON CJ:  Why do you say that the decision in Pavey &

Matthews give rise to a question of principle?

MR STRAWBRIDGE:  Your Honour, because of the way in which

the two text writers have looked at that decision

and analysed it.

MASON CJ: But is that not partly because there is a

suggestion by some critics that Pavey & Matthews

fails to give effect to the notion of free

acceptance?

MR STRAWBRIDGE: That is one of the criticisms, yes, and the

other is - - -

MASON CJ: But that is a suggestion that the decision was

wrong.

MR STRAWBRIDGE:  No, Your Honour, I do not think so. The

suggestion, as I understood it in the texts, is the

text writers are looking for an explanation of the

basis for the decision, and one text writer says,

"I believe it must be in free acceptance", and the

other text writer says, "No, you must put that

aside even if you believe in it", and it stands in

total failure of consideration. Given what

Your Honours have said in the Baltic case, if there

has been part performance of a contract then there
can be no total failure of consideration.	So that

could not be the basis for the Full Court's

decision in this case because there has been

partial performance of a contract. The respondent,

in its pleadings, pleaded that there was a

contract, and the applicant accepted that. The

respondent then sought to graft on an implied term

that the respondent would be paid if the scheme

never came into fruition. The respondent failed on

that, but none the less their action was in

contract. The judges in the Full Court all found

that the contract came to an end, not because of

any particular act of the applicant. It failed

because there was the stumbling block of getting

this particular scheme approved by the commission, and there was a recognition by my client that that

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was not going to happen, and at that point of time
my client informed the respondent that things were
at an end, there was no point in going further.

Now, if what was said in Baltic does represent the finding of this Court in regard to the unjust

factor, then we say we succeed. If Pavey is

founded in free acceptance, again we say we succeed

on the facts of the case. That is detailed in our

outline of argument.

Your Honour, the comments in the text of

Burrows are borne out in the cases in the sense

that there must be this process of looking at the

individual matters that build up a case in

restitution unjust enrichment. One sees that by

looking at David Securities Pty Ltd v Commonwealth

Bank of Australia which is the second item on our

list of authorities to be read from, and I invite

Your Honours to look there at pages 378 and 379 and

at page 391. That is also repeated in

ANZ v Westpac, (1988) 164 CLR 662, and particularly at page 673 of that report and I would like to take

Your Honours to that briefly.

On page 673, this Court, in dealing with the

submission from the ANZ refers to the Fibrosa case

and shortly after that says:

In other words, receipt of a payment which has

been made under a fundamental mistake -

one pauses there, and that is one of the

11 categories identified by Burrows -

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.

Your Honour, there are the three factors: there

must be a consideration of enrichment or a benefit;

there must be the countervailing detriment; but

more importantly, we say, one must identify the

unjust factor. That is what Pavey did not do, in

the course of Your Honour's reasons, was to say

what the particular factor was, and we complain for

the like reason as to where the Full Court of South

Australia dealt with this matter.

The Sabemo decision has been referred to as

being a case in restitution by the Full Court.	We
say that is not so and Justice Sheppard, who

decided the matter, and it a first instance

decision, in the course of his reasons said it was

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not a case in unjust enrichment. He went on and

dealt with it, we say, in a way that really is

analogous to the Waltons Stores v Masters principle
of estoppel and unconscionability.

MASON CJ:  I can see some merit in that argument. I would

have some doubt, myself, whether circumstances of

this kind fall within accepted notions of unjust

enrichment, but it does seem to me it largely turns

on the view one takes of the facts in this case and

I can understand it being said that this is a case

where the parties enter into arrangements, one

party taking the hazard, that the trouble that it goes to will yield a result that is profitable if

in fact that arrangements go ahead, but not

otherwise. In other words, the party takes its

chance. But, it all depends on what view you take

of the facts.

MR STRAWBRIDGE:  But we remind Your Honour of the concession

made by the respondent that it was always

anticipated by the respondent that the scheme may

never come off. That was a concession that was

clearly made before the trial judge and repeated by Their Honours on appeal, and that is at page 108 of

the application book. It is line 23 on page 108:

Mr Besanko, counsel for the plaintiff,

conceded that the parties accepted from the

beginning that the fund might not go ahead,

not least because of industrial relations

difficulties.

So, Your Honour, there is that additional
background which we say must have its role to play.

Foran v Wright, which is referred to on the lists

of authorities, is also authority for the

proposition that where there is a contract in

place, one cannot then use an application under the

restitution principles to go outside the contract

and obtain a benefit greater than the contract
otherwise provides.	We say that case will also

have a bearing on this matter.

Your Honours, the David Securities decision,

at page 391 of that matter, we say demonstrates

that there is a point of principle that should be

decided. Justice Brennan, in that case, at

page 391 at the foot of the page cites from the

ANZ v Westpac matter, but he deliberately left out

that sentence dealing with Pavey and what he says

is this:

This citation omits, inter alia, a sentence

speaking of "compensation for the benefit of

unjust enrichment, to the person who has

sustained the countervailing detriment". That

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sentence raises a question as to the

availability of restitution as a remedy in

cases where the plaintiff is not seeking a return of money or property with which the

plaintiff has parted. That is not the present

case and the problems which arise in those

cases can be left for another day.

Your Honours, we say this is that day.

Goff and Jones, at page 15 of that text - and

I should indicate to Your Honours that this text

was not published until after the decision of the

Full Court in the Supreme Court of South

Australia - on page 15 says:

The recognition of the principle of unjust

enrichment should not absolve the courts from

determining what is the basis of a particular
restitutionary claim. But not all cases where
a restitutionary claim has been granted can be
readily categorised under such accepted

grounds of recovery as mistake, compulsion,

necessity, total failure of consideration,

free acceptance, or wrongdoing.

I have already quoted to Your Honours from page 16

of that text where the learned author deals with

the various categories. In the same text at

page 65 the authors say this, and it is at the end

of the first major paragraph, in speaking of Pavey:

The Court did not analyse why the defendant

was unjustly enriched; seemingly it was

because she had requested and freely accepted

the services.

Your Honour, that was a case where there was an

oral contract. It was unenforceable because of the

provisions of the New South Wales statute. Here in

this case we have a contract. The plaintiff and

defendant accepted that there was a contract which

is rather different to the position in Pavey

because that contract was unenforceable.

But Burrows, at page 302, and this is the

other side of the coin, beginning at the top of the

page says this:

Nor, even if one believes in free acceptance,

can it be said that she accepted the work by
allowing it to carry on when in all conscience

she ought to have rejected it: as she was

perfectly willing to pay what she thought was

a reasonable sum for the work there was no

'unconscientiousness' in her allowing it to

continue.

Independent 7 25/8/94

It is submitted, therefore, that the High

Court of Australia was wrong to place any

importance on Mrs Paul's 'acceptance' of the

benefit. The key distinguishing feature of

restitution was rather that she had been

benefited because she had received the

building work. Moreover, she could not

subjectively devalue the work because she had

bargained for it at prevailing contract rates

and had received all that she had bargained

for.

Nor did the High Court clarify the unjust

factor. But given that, as just explained,

one must rule out free acceptance, even if one

believes in it, it is clear that failure of

consideration offers the only convincing

rationale.

Your Honours, if that is right, then on our case

the applicant should have succeeded in its defence

because there was no total failure of

consideration. In the Baltic Shipping case the
unfortunate fare-paying passenger was suing for the
return of the full fare that she had paid plus
damages for the loss of the enjoyment of the trip

or the holiday, and at the end of the day the Court

found that because there had been a partial

performance of the contract, albeit not to the
plaintiff's satisfaction, none the less because of

that partial performance there could be no claim in

restitution because there was no unjust factor as

the law knows it. We say the same applies here.

We say the Full Court of this Court and indeed

other courts are being led into difficulties

because the time has come to clarify the

appropriate steps for building up a claim in

restitution, just as one does in tort and in

contract, there are things one must establish to

get to the end result.	We say the time has come on
the facts of this case for those steps to be set

out to enable, in our case, our client to succeed,

and generally to clarify the law in Australia.

Your Honour, I think the rest of all our arguments

are generally set out in our outline.

I would, if I might, make one or two comments

in respect of my friend's response to that. At

paragraph 1.1 we simply say that recognition has

not been given to the findings of the courts below,

which were unanimous there had been partial

performance and, indeed, the plaintiff's own case

is in partial performance of the contract.

1.2, the respondent says there was a

sufficient unjust factor. We say, "What was it?",

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because by reading the judgments of Justices Legoe

and Matheson, one cannot find what that unjust

factor was. It is not stated. Just as it was not

in Pavey, as it happens.

1.3, the response there, we say, simply avoids

the question that we asked in our outline, namely,

what was the unjust factor which was the basis for

the decision of the Full Court?

The answer at 1.4, we say again, begs the

question but does not take into account the

concession from my friend, and the finding at

page 114 of the application book of Justice

Matheson's judgment where His Honour says near the

foot of the page:

I consider His Honour was correct in

stressing that the proposal really stalled

because of industrial considerations -

That was after discussing the question of whether

or not my client had terminated the contract.

Paragraph 1.6 of the response is to the

question we posed in relation to Sabemo which we

say is not a case in restitution. Page 897 of the

report in Sabemo is where Justice Sheppard says

that it is not a case in restitution. It is

answered in this reply by a reference to Pavey v

Matthews which we say, with respect, does not set

out the principles relevant to a claim on a

step-by-step basis, which the text say must be

done.

MASON CJ:	Time has expired, Mr Strawbridge.
MR STRAWBRIDGE:	Thank you, Your Honour.
MASON CJ:	The Court need not trouble you, Mr Besanko.

Having regard to the circumstance that the

decision in this case turns on its own particular
facts and the small amount of money involved, we do
not consider the case to be a suitable vehicle for
the determination of any question of general

principle.

The application is therefore refused.

MR BESANKO:	We apply for costs?
MASON CJ:	You do not oppose that, Mr Strawbridge?
MR STRAWBRIDGE:	I cannot resist that, Your Honour.
MASON CJ:	The application is refused with costs.

AT 11.35 AM THE MATTER WAS ADJOURNED SINE DIE

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