Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3]
[2014] WASC 162
•7 MAY 2014
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: LAMPSON (AUSTRALIA) PTY LTD -v- FORTESCUE METALS GROUP LTD [No 3] [2014] WASC 162
CORAM: EDELMAN J
HEARD: 1 MAY 2014
DELIVERED : 7 MAY 2014
FILE NO/S: CIV 1658 of 2008
BETWEEN: LAMPSON (AUSTRALIA) PTY LTD (ACN 003 919 051)
Plaintiff
AND
FORTESCUE METALS GROUP LTD (ACN 002 594 872)
First DefendantTHE PILBARA INFRASTRUCTURE (ACN 103 096 340)
Second DefendantCHICHESTER METALS PTY LTD
Third Defendant
Catchwords:
Practice and procedure - Strike out application - Paragraphs of statement of claim struck out - One remaining opportunity to re-plead
Unjust enrichment - Nature of a claim for unjust enrichment - Relationship with common counts of forms of action - Whether Australian law recognises or might recognise an unjust factor of free acceptance - Elements of a plea of failure of consideration when an anticipated contract fails to materialise
Legislation:
Builders Licensing Act 1971 (NSW)
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1970 (NSW)
Result:
Paragraphs of statement of claim struck out with a final opportunity to replead
Category: A
Representation:
Counsel:
Plaintiff: Mr M Christie SC
First Defendant : Mr M Hotchkin
Second Defendant : Mr M Hotchkin
Third Defendant : Mr M Hotchkin
Solicitors:
Plaintiff: Hewitts Commercial Lawyers
First Defendant : Hotchkin Hanly
Second Defendant : Hotchkin Hanly
Third Defendant : Hotchkin Hanly
Case(s) referred to in judgment(s):
Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248; (2002) 5 VR 577
Aquital Holdings Pty Ltd v Marlin Group Pty Ltd [2012] WASC 198
Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [No 3] [2010] WASC 141
Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662
Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2011] NSWSC 267
Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14
Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344
BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2010] NSWSC 1352
Boase v Axis International Management Pty Ltd [2009] WASC 331
Brenner v First Artists Management Pty Ltd [1993] 2 VR 221
British Steel Corp v Cleveland Bridge & Engineering Co Ltd [1984] 1 All ER 504
Chidiac v Maatouk [2010] NSWSC 386
Cobbe v Yeoman's Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752
Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492
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
Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (in liq) [No 3] [2006] SASC 7; (2006) 94 SASR 103
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 88 ALJR 76
Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd [No 2] [2011] WASC 136
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129
Henderson v McSharer [2013] FCA 414
Ideas Plus Investments Ltd v National Australia Bank Ltd [2006] WASCA 215; (2006) 32 WAR 467
Joyce v Palassis [No 4] [2008] WASC 45
Kimberley Downs Pty Ltd v Western Australia (Unreported, WASC, Library No 6414, 25 August 1986)
Kirika v Zurich Australian Insurance Ltd [2002] WASCA 233
Lahoud v Lahoud [2010] NSWSC 1297
Lamb v Bunce (1815) 4 M & S 275; (1815) 105 ER 836
Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347
Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635
Martin v Andrews (1856) 7 El & Bl 1; (1856) 119 ER 1148
Moses v Macferlan (1760) 2 Burr 1005; 97 ER 676
Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583
Natuna Pty Ltd v Cook [2007] NSWSC 121
Neilson v City of Swan [2006] WASCA 94
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221
R (Rowe) v Vale of White Horse District Council [2003] EWHC 388 (Admin); [2003] 1 Lloyd's Rep 418
R J Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2009] WASC 206
Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516
Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880
Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309
Slade’s Case (1602) 4 Co Rep 92; (1602) 76 ER 1074
Stocznia Gdanska SA v Latvian Shipping Company [1998] 1 WLR 574
Talbot & Olivier (A Firm) v Witcombe [2006] WASCA 87; (2006) 32 WAR 179
Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd [2002] NSWCA 263
Trimis v Mina [1999] NSWCA 140
Update Constructions Pty Ltd v Rozelle Childcare Centre Ltd (1990) 20 NSWLR 251
Vivian Fraser & Associates Pty Ltd v Shipton [1999] FCA 60
Wasada Pty Ltd v State Rail Authority of New South Wales (No 2) [2003] NSWSC 987
Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277
Text(s) cited:
Baker, J 'The History of Quasi Contract in English Law' in Cornish, W et al (eds) Restitution: Past, Present and Future (1998)
Birks, P An Introduction to the Law of Restitution (1989 rev ed)
Birks, P 'In Defence of Free Acceptance' in A Burrows Essays on the Law of Restitution (1991)
Blackstone, W Commentaries on the Laws of England (vol 2, 1776)
Burrows, A 'Free Acceptance and the Law of Restitution' (1988) 104 Law Quarterly Review 576
Chambers, R A Course of Lectures on the English Law delivered at the University of Oxford 1767-1773 (T M Curley ed, vol 2, 1986)
Getzler, J 'Quantum Meruit, Estoppel and the Primacy of Contract' (2009) 125 Law Quarterly Review 196
Ibbetson, D A Historical Introduction to the Law of Obligations (1999)
Kremer, B 'The Action for Money Had and Received' (2001) 17 Journal of Contract Law 93
Lodder, A Enrichment in the Law of Unjust Enrichment and Restitution (2012)
Mitchell, C, Mitchell, P & Watterson, S (eds) Goff & Jones: The Law of Unjust Enrichment (8th ed, 2011)
Stephen H J A Treatise on the Principles of Pleading in Civil Actions (2nd ed, 1827)
Wilmot-Smith, F 'Reconsidering "Total" Failure' (2013) 72 Cambridge Law Journal 414
Wilmot-Smith, F 'Replacing Risk-Taking Reasoning' (2011) 127 Law Quarterly Review 610
Table of Contents
Introduction
The case and its recent history
The claims that are now advanced
The basis upon which the claims are advanced
Principles on strike out applications
Pleading a claim in the category of unjust enrichment
Free acceptance as an unjust factor
Failure of consideration
Quantum meruit and failure of consideration are not always separate claims
A claim based on failure of consideration can arise without a contract
The importance of characterising the benefit for a failure of consideration claim
Can the failure of a contract to materialise be sufficient for failure of basis?
Conclusion
EDELMAN J:
Introduction
This is the defendants' strike out application in a case that has an unfortunate history. The strike out application was mostly resolved with a series of reasons that I gave orally during the hearing. The following paragraphs were struck out: pars 13, 16, 23, 24, 25, 26, 27, 33(a), 33(b), 34, 35, 36, 37, 38, 43, 44, 48, 49 and 50. The reasons I gave for striking out those paragraphs involved matters which I accepted could be addressed in a re‑pleading. This judgment addresses three matters of greater significance.
The first matter is the history of the action and the reason why I ordered, and senior counsel for Lampson Australia properly conceded, that Lampson Australia not be permitted to make any further amendment to its statement of claim after the amendments consequential upon my oral reasons. This matter is considered in pars [5] ‑ [19] below.
The second and third matters concern submissions by counsel for the defendants that raise important and fundamental issues of legal principle. They are submissions that, if accepted, would mean that leave to re‑plead various paragraphs should be denied because the claim by Lampson Australia would be doomed to failure. These matters raise issues concerning the nature of the pleading of a claim in the category of unjust enrichment. They concern
(i)the nature and basis of a claim in the category of unjust enrichment (pars [45] – [55]) and whether it is open for a plaintiff in an action in the category of unjust enrichment to rely upon an unjust factor of free acceptance (pars [56] ‑ [90] below), and
(ii) the necessary elements for a pleading of failure of consideration where an anticipated contract fails to materialise (pars [91] ‑ [116] below).
As I explain below, the submissions in relation to the second and third matters must be rejected for the purposes of this strike out application.
The case and its recent history
The claim is not complex. It has now been substantially clarified, simplified, and crystallised by the considerable efforts of senior counsel who was recently briefed in the matter. All contractual claims have been abandoned. A claim based on estoppel has been abandoned. Claims described as the 'materials claim' and the 'container claim' have been abandoned. And 'free acceptance' claims in relation to off-site cranes and related equipment have been abandoned.
The claim now brought by Lampson Australia is only for restitution of $2,228,179, with interest, for work done in anticipation of a contract that did not materialise. The claim is brought against Fortescue and its subsidiary companies, Pilbara Infrastructure, and FMG Chichester. It concerns work done by Lampson Australia for the benefit of any or all of the defendants in relation to the Cloud Break mine site in the Pilbara region of Western Australia.
The facts, assumed as correct only for the purposes of this strike out application, are taken from the latest version of the statement of claim. I will describe this document as the Further Amended Statement of Claim. Senior counsel undertook to file this document.
The action was commenced by Lampson Australia filing a writ on 11 June 2008. Little progress was made for the next five years. When the matter came into my list, a strategic conference was held on 23 August 2013. The parties were asked to account for the delay. The defendants submitted that the reason for the delay was related to a request for documents by Lampson which required potential consideration of hundreds of thousands of files from defendants which had had no central document management system at the time.[1]
[1] ts 122 ‑ 123 (23 August 2013).
At a later directions hearing, I was subsequently informed of the death several years ago, in tragic circumstances, of the managing director of Lampson Australia. Senior counsel for Lampson Australia said that the managing director had been providing instructions for this litigation.
These events may explain the delay but there remains a grave concern arising from the fact that in the intervening six years after this action was brought the legal advisers have accumulated costs which counsel at the strategic conference described as 'just huge [on] both sides to date'.[2]
[2] ts 128 (23 August 2013).
At the strategic conference on 23 August 2013, I explained that the matter must move to a trial 'very, very soon'[3] after mediation and that there must be no further delays in the programming of the matter.[4] The matter was mediated on 6 November 2013. But following the mediation, interlocutory disputes continued to be raised.
[3] ts 103 (23 August 2013).
[4] ts 103 (23 August 2013).
A second strategic conference was listed for 11 March 2014. At that strategic conference Lampson Australia produced a proposed further amended statement of claim. There were immediate problems with that further amended statement of claim. It was not filed. As I explained, after six years it was well and truly time for Lampson Australia to inform the defendants of the precise case that they are expected to meet.[5] I explained to the parties that 'one way or the other the pleadings were required to be resolved by the end of April'.[6] I also foreshadowed at this strategic conference that I would soon make an order that no further amendments be made to the pleadings without leave.[7] The parties were directed to confer urgently about any proposed amendments. Any strike out application was required to be brought by 8 April 2014.[8]
[5] ts 173 (11 March 2014).
[6] ts 199 (11 March 2014).
[7] ts 195, 197 (11 March 2014).
[8] ts 197 (11 March 2014).
On 13 March 2014, the solicitors for the defendants provided Lampson Australia with a schedule of objections to the proposed further amended statement of claim produced at the second strategic conference.[9]
[9] Affidavit of Mr Hotchkin, 11 April 2014 [4], Annexure MCH1.
The solicitors for Lampson Australia did not respond.
On 1 April 2014, the solicitors for the defendants followed up with another letter asking for a response.
The solicitors for Lampson Australia did not respond.
On 7 April 2014, the solicitors for Lampson Australia provided the defendants with a further amended statement of claim.[10]
[10] Affidavit of Mr Hotchkin, 11 April 2014 [7].
On 11 April 2014, the defendants brought this strike out application.
After the filing of submissions in anticipation of the defendants' strike out application by both sides, Lampson Australia provided the defendants with a further amended statement of claim, which contained further proposed amendments.
The claims that are now advanced
Almost six years after Lampson Australia filed its writ, it appears that its claim is now, in broad summary, as follows below. This summary is derived from many paragraphs which I struck out for reasons including ambiguity and incompleteness. It is a summary which suffices to address the two fundamental points of objection raised by the defendants.
Lampson Australia is a supplier of heavy lift equipment and crane hire.[11] It is a specialist in the provision of equipment and personnel for heavy lift and transport projects and associated support services.[12]
[11] Further Amended Statement of Claim [1(b)].
[12] Further Amended Statement of Claim [1(c)].
At relevant times, Fortescue was engaged in the exploration, development and construction of iron ore mines in the Pilbara region in Western Australia. One mine was known as the Cloud Break iron ore mine.[13]
[13] Further Amended Statement of Claim [2].
FMG Chichester is the registered tenement holder of mining tenements at Cloud Break.
Fortescue controlled a project alliance, operated under an unregistered business name 'Team 45', which was comprised of representatives of a professional services company, WorleyParsons, and representatives of Fortescue.[14] Team 45 was engaged to complete the construction of Fortescue's Pilbara mining project.
[14] Further Amended Statement of Claim [5] ‑ [6].
Team 45 acted as the agent for Pilbara Infrastructure. From around January 2007, Team 45 acted as agent for both Pilbara Infrastructure and FMG Chichester.
Around August 2006, Lampson Australia and five other contractors formed a consortium. The consortium made proposals to representatives of Team 45 about the services that could be provided at the Cloud Break mine.[15]
[15] Further Amended Statement of Claim [7] ‑ [9].
Lampson Australia pleads the negotiations between members of Team 45 and the consortium for the provision of the infrastructure works.[16] There is a plea (which I struck out) which was intended to convey the meaning that in all the negotiations the basis upon which the parties had proceeded was that if a contract were concluded then the agreed price would be reasonable cost plus 15%, where 8% was to cover overheads and 7% was to be profit.[17]
[16] Further Amended Statement of Claim [7] ‑ [15].
[17] Further Amended Statement of Claim [16].
No contract was concluded with Lampson Australia.[18]
[18] Further Amended Statement of Claim [51].
Lampson Australia brings its claim for work done in anticipation of a contract. There are three categories of work which it says was done.
First, a category of work done in anticipation of contract is said to concern cranes and related equipment. One aspect of this concerns on‑site cranes and related equipment described in par 19(a)(i) to (iv).[19] A second aspect concerns off‑site cranes and related equipment identified in par 19(a)(v) to (xiv).
[19] Lampson Australia's written submissions, 22 April 2014 [13(i)].
The claim for the cranes and related equipment is quantified in various alternative, and potentially overlapping, ways:
(i)'the value of the benefit conferred';[20]
(ii)the reasonable cost to Lampson Australia of mobilisation and demobilisation of the cranes and related equipment with a margin for profit;[21] or
(iii)a fixed amount for mobilisation and demobilisation of the cranes and related equipment, unpaid invoices in respect of periods that the cranes and related equipment had been placed by Lampson Australia on standby for the exclusive use of the defendants at the Cloud Break mine site, labour, and profit margin.[22]
[20] Further Amended Statement of Claim [33(a)].
[21] Further Amended Statement of Claim [33(b)].
[22] Further Amended Statement of Claim [33(c)].
The total of the fixed amount claimed in this first category is $1,666,423.
Secondly, another category of work done in anticipation of contract is said to concern a claim for provision of transport services.
Lampson Australia pleads that Team 45 decided that Lampson Australia would be given the contract for provision of transport services for the project (although, oddly, it does not plead that Lampson Australia was told this).[23]
[23] Further Amended Statement of Claim [34].
Lampson Australia again claims for work done in relation to these transport services quantified in the following alternative, and potentially overlapping ways:
(i)'the value of the benefit conferred';[24]
(ii)the reasonable cost to Lampson Australia of providing the transport services;[25] or
(iii)a fixed amount for Lampson's costs of freight, third party contractors, hired utilities and flattracks, and profit margin.[26]
[24] Further Amended Statement of Claim [42(a)].
[25] Further Amended Statement of Claim [42(b)].
[26] Further Amended Statement of Claim [42(c)].
The total of the fixed amount claimed in this second category is $302,323.
Thirdly, the final pleaded category of work done by Lampson Australia is based on a request by the defendants for Lampson Australia to develop and provide for Team 45 and the consortium a materials tracking system known as 'E Trak'.
Lampson Australia claims for work done in relation to engaging third parties to develop and arrange to provide the E Trak system.
Lampson Australia again quantifies this third claim in the following alternative, and potentially overlapping, ways:
(i)'the value of the benefit conferred';[27]
(ii)the reasonable cost to Lampson Australia of providing the goods and services;[28] or
(iii)a fixed amount for Lampson's payments for various services in engaging the third parties, and profit margin.[29]
[27] Further Amended Statement of Claim [50(a)].
[28] Further Amended Statement of Claim [50(b)].
[29] Further Amended Statement of Claim [50(c)].
The fixed amount claimed for this third category of work is $259,433.
The total amount claimed for all three categories of work is $2,228,179 (excluding interest).[30]
[30] Lampson Australia's written submissions, 22 April 2014 [10].
The basis upon which the claims are advanced
Critical to this strike out application is the basis upon which Lampson Australia advances its claims for each category of work.
In each category (the cranes, transport services, and E Trak), Lampson Australia says that the claims are brought for restitution of unjust enrichment. The three alternative bases upon which the claims for restitution of unjust enrichment are as follows.
(i)Request. The 'cranes and related equipment' were 'provided pursuant to a request by or on behalf of the defendants' either express[31] or implied.[32] The transport services were provided pursuant to an implied request.[33] The E Trak system was provided pursuant to an express[34] or implied[35] request.
(ii)Total failure of consideration. Each of the 'cranes and related equipment', the 'transport services', and the E Trak system was provided for the benefit of the defendants, and in circumstances in which a total failure of consideration arose because an anticipated contract did not materialise.[36]
(iii)'Free acceptance'. In each case of the 'cranes and related equipment', the 'transport services', and the E Trak system, the defendants (a) accepted the benefit of those goods or services; (b) knew or should have known that Lampson Australia was not providing the services gratuitously but expected to be paid for them; and (c) did not take a reasonable opportunity that was open to them to reject the goods or services.[37]
[31] Further Amended Statement of Claim [23] (the word 'express is missing and defendant is singular).
[32] Further Amended Statement of Claim [24].
[33] Further Amended Statement of Claim [36].
[34] Further Amended Statement of Claim [46].
[35] Further Amended Statement of Claim [47].
[36] Further Amended Statement of Claim [25], [37], [48].
[37] Further Amended Statement of Claim [26], [38], [49].
Principles on strike out applications
The principles in relation to strike out applications are well known.[38] They are one of the few matters in the course of these proceedings which are not controversial. The principles were summarised by Master Staples in Kimberley Downs Pty Ltd v Western Australia[39] in a passage which has been quoted with approval on numerous occasions[40]
(1)The rule is intended to apply only to cases which are really not arguable and not to cases where under the previous practice demurrer would have been the proper course: Packhard v TransportTrading and Agency Co Ltd (1912) 14 WALR 191 per Burnside J at 195.
(2)On the application, not only must all the facts alleged in the statement of claim be accepted as true, but it must be taken for granted that on all other points the pleading is unassailable: Nivenv Grant (1903) 29 VLR 102 per Holroyd J at 106.
(3)Great care must be exercised to ensure that the plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal: General Steel Industries Inc v Commissioner for Railways NSW (1964) 112 CLR 125 at 130.
(4)But the rule should not be reserved for those cases where argument is unnecessary to show the futility of the plaintiff's claim. Argument, even extensive argument, may be necessary to demonstrate that the plaintiff's case is so clearly untenable that it cannot succeed: General Steel Industries Inc v Commissioner for Railways NSW (1964) 112 CLR 125 at 130.
(5)As a general rule, a plaintiff is entitled ... as of right to have his case heard, to have the facts found and then to argue the question of law as it arises before the trial judge upon the facts as found. It is only in cases in which it can be seen from the outset that, however the facts be found, there is no basis for the legal conclusion contended for by the plaintiff that the pleading should be struck out: Dalgety Australia Ltd v Rubin (Unreported, WASC Full Court, Lib No 5485, 24 August 1984, per Burt CJ).
(6)A court at first instance should be careful not to risk stifling the development of the law by summarily rejecting a claim where there is a reasonable possibility that, as the law develops, it will be found that a cause of action will lie: Hospitals Contribution Fund ofAustralia v Hunt (1983) 44 ALR 365 per Master Allen.
[38] Rules of the Supreme Court 1971 (WA) O 20 r 19(1).
[39] Kimberley Downs PtyLtd v Western Australia (Unreported, WASC, Library No 6414, 25 August 1986) 6 ‑ 7.
[40] At first instance: Joyce v Palassis [No 4] [2008] WASC 45 [33] (Le Miere J); Boase v Axis International Management Pty Ltd [2009] WASC 331 [3] (Beech J); Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd [No 2] [2011] WASC 136 [21] ‑ [22] (Allanson J); Aquital Holdings Pty Ltd v Marlin Group Pty Ltd [2012] WASC 198 [11] (Pritchard J). On appeal: Kirika v Zurich Australian Insurance Ltd [2002] WASCA 233 (Wheeler J, Murray & Miller JJ agreeing); Talbot & Olivier (A Firm) v Witcombe [2006] WASCA 87; (2006) 32 WAR 179, 186 [22] (Steytler P, Pullin JA & Buss JA agreeing); Neilson v City of Swan [2006] WASCA 94 [18] (Buss JA, Wheeler & Pullin JJA agreeing).
Pleading a claim in the category of unjust enrichment
It is necessary to make some brief remarks about an action for restitution that falls within the category of unjust enrichment. I make these remarks as background to my consideration of the two primary objections by the defendants. It is also necessary to explain why I reject the defendants' submission that for a plea involving unjust enrichment, 'the plea of an element relevant to a claim based on monies had and received is irrelevant and confusing, and ought to be deleted'.[41] In broad summary, a plea of money had and received is a plea in the 'taxonomic category' of unjust enrichment.
[41] Defendants' Responsive Submissions on Strike‑Out Application, 30 April 2014 [1(b)].
A plea of money had and received describes a form of action. The form of action involving a count of money had and received was expressed as follows:[42]
Not regarding his said several promises and undertakings, but conniving and fraudulently intending craftily and subtly to deceive and defraud [the plaintiff] hath not yet paid the said several sums of money or any part thereof … [and] hath hitherto wholly refused and still refuses.
[42] Stephen, H J A Treatise on the Principles of Pleading in Civil Actions (2nd ed, 1827) 312.
The formal system of pleading that was required before the Judicature Acts has now been abolished. Even before the final adoption of the Judicature Act system of pleading in New South Wales, with the commencement of the Supreme Court Act1970 (NSW) as amended, pleadings were not required to specify the particular form of action. And even when the form of action was required to be pleaded, many aspects of the pleaded form could not be traversed. For instance, it was no defence to a claim for money had and received that the defendant was not fraudulent, or that the defendant did not intend to deceive. Nor, since at least 1602, and probably earlier,[43] could the plea of a promise to pay be traversed.[44] But the old language of the forms of action unfortunately still persists.
[43] Ibbetson, D A Historical Introduction to the Law of Obligations (1999) 271.
[44] Slade’s Case (1602) 4 Co Rep 92; (1602) 76 ER 1074.
In Pavey & Matthews Pty Ltd v Paul,[45] a majority of the High Court of Australia recognised that forms of action in indebitatus assumpsit, including money had and received and quantum meruit, were part of a legal concept of unjust enrichment. In a passage in Pavey & Matthews Pty Ltd which was later quoted with approval by five justices of the High Court,[46] Deane J said that unjust enrichment is:[47]
a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case.
[45] Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221.
[46] David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, 379 (Mason CJ, Deane, Toohey, Gaudron & McHugh JJ).
[47]Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 256 ‑ 257.
Deane J had earlier explained in Muschinski v Dodds,[48] that the use of unjust enrichment is an 'informative generic label for the purposes of classification, in Australian law' of a 'notion underlying a variety of distinct categories of case ... [in which] a benefit [is] derived at the expense of a plaintiff.' In 2012, in Equuscorp Pty Ltd v Haxton,[49] French CJ, Crennan and Kiefel JJ said that unjust enrichment 'has a taxonomical function referring to categories of cases in which the law allows recovery by one person of a benefit retained by another'. And, in 2014, in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd,[50] Gageler J referred with approval to remarks made by Dawson J in 1992 that[51]
[t]here is now no longer any question that there is in this country a law of restitution based upon the concept of unjust enrichment which encompasses what was previously the common law of quasi-contract.
[48]Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 617.
[49]Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498, 516 [30].
[50] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 [132].
[51] David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, 401.
The concept of unjust enrichment is, in Australia, limited to this taxonomic function. It has been emphasised on numerous occasions that unjust enrichment is not a 'definitive legal principle', and does not supply 'a sufficient premise for direct application in a particular case'.[52] In this sense, unjust enrichment is not the direct basis of restitutionary relief in Australian law.[53] A comparison might be drawn with the category of torts. A plaintiff cannot plead that a defendant is liable for having committed a 'tort'. 'Torts' decribes the category not the action (which might be assault, battery, conversion etc). At an even higher level of theory, the ultimate basis of restitutionary liability was expressed by the joint judgment in Australian Financial Services[54] as depending upon whether retention is against 'conscience'. Their Honours explained that 'conscience' does not invite subjective evaluation. Instead, it is 'a construct of values and standards against which the conduct of 'suitors' – not only defendants – is to be judged'.[55]
[52] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 [73] (Hayne, Crennan, Kiefel, Bell & Keane JJ) and the authorities cited.
[53] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 [78] (Hayne, Crennan, Kiefel, Bell & Keane JJ).
[54] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 [65] - [76] (Hayne, Crennan, Kiefel, Bell & Keane JJ).
[55] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 [76] (Hayne, Crennan, Kiefel, Bell & Keane JJ).
Provided that unjust enrichment is not applied as a direct source of liability, in Australia the taxonomic category of unjust enrichment has served a useful function and might continue to do so. Like the category of 'torts' the category of unjust enrichment assists in understanding even though it is not a direct source of liability. The category directs attention to a common legal foundation shared by a number of instances of liability formerly concealed within the forms of action or within bills in equity. The common features of actions within the 'label', 'concept', or 'notion' of unjust enrichment has generally been thought to be that, subject to defences, a plaintiff can prove its entitlement to restitution of the value of a benefit derived at the plaintiff's expense, if the Court is satisfied that the plaintiff has succeeded on any issues falling within three broad enquiries:[56]
(i)The defendant must be enriched.
(ii)The enrichment must come at the expense of the plaintiff.
(iii)The enrichment must be unjust.
[56] Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd [2002] NSWCA 263 [34] (Spigelman CJ); Say‑Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309 [222] (Tobias JA, Mason P & Giles JA agreeing); Ideas Plus Investments Ltd v National Australia Bank Ltd [2006] WASCA 215; (2006) 32 WAR 467, 485 - 486 [65] (Steytler P, Buss JA agreeing), 496 [96] (McLure JA); Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (in liq) [No 3] [2006] SASC 7; (2006) 94 SASR 103, 117 [65] (Bleby J); Natuna Pty Ltd v Cook [2007] NSWSC 121 [155] (Biscoe AJ); Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2011] NSWSC 267 [21] (Einstein J); Henderson v McSharer [2013] FCA 414 [73] (Barker J).
This three-fold approach to actions in the category of unjust enrichment was described by Kirby J as the 'generally accepted analysis'.[57] The issue in this application concerns enquiry (iii), which has been described as requiring the presence of an 'unjust factor'.[58]
[57] Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516, 568 [139] fn 257.
[58] See, for instance, Lahoud v Lahoud [2010] NSWSC 1297 [152] (Ward J); Chidiac v Maatouk [2010] NSWSC 386 [223] – [227] (Ward J); Alexiadis v Zirpiadis [2013] SASCFC 64; (2013) 302 ALR 148, 154 - 155 [30] (Kourakis CJ).
The label, 'unjust factor' is not always used within the legal category of unjust enrichment to describe the established basis of 'injustice' or the recognised basis upon which retention is against conscience.[59] But the label usefully directs attention to the requirement for a plaintiff in Australia to prove a reason for restitution or, in the words of the unanimous joint judgment of the High Court in 2007, 'the existence of a qualifying or vitiating factor falling into some particular category'.[60] As Gageler J explained in Australian Financial Services,[61]
'Unjust' is the 'generalisation of all the factors which the law recognises as calling for restitution'. Because we need to search for recognised factors, examination of which involves an analysis of case law, the reference to 'injustice' as an element of unjust enrichment, is not a reference to judicial discretion. Normal judicial processes are involved and it is only in cases where there is no recognised basis for saying that injustice has arisen that problems can arise.
(Original emphasis).
[59] Cf Kremer, B 'The Action for Money Had and Received' (2001) 17 Journal of Contract Law 93, 115 - 116.
[60] Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, 156 [150] (the Court). See also Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 [20] (French CJ), [73] (Hayne, Crennan, Kiefel, Bell & Keane JJ), [141] (Gageler J).
[61] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 [141] quoting Wasada Pty Ltd v State Rail Authority of New South Wales (No 2) [2003] NSWSC 987 [16] (Campbell J) .
The boundaries of what will count as an unjust factor are not fixed.[62] Examples of unjust factors were given by Lord Mansfield in Moses v Macferlan:[63]
money paid by mistake; or on a consideration which happens to fail; or for money got through imposition, (express, or implied) or extortion; or oppression; or an undue advantage taken of the plaintiff’s situation.
[62] Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498, 516 [30] (French CJ, Crennan & Kiefel JJ).
[63] Moses v Macferlan (1760) 2 Burr 1005, 1012; 97 ER 676, 681.
A quarter of a millennium later, although it is well established that liability in the 'taxonomic' category of unjust enrichment requires the existence of an 'unjust factor', there is only limited judicial recognition of unjust factors beyond those in this list. The first fundamental objection in this application concerns one possible additional unjust factor which has been described as 'free acceptance'. The second fundamental objection concerns the boundaries of operation of the unjust factor of failure of consideration. No submissions were made, nor was there any suggestion, alleging any fundamental objection concerning the ground of restitution which relied upon express or implied request.
Free acceptance as an unjust factor
The third, and alternative, basis for Lampson Australia's claim is the unjust factor of free acceptance, which is pleaded in par 26 of the Further Amended Statement of Claim as follows.
Further or in the alternative, the Defendants:
(i)accepted the benefit of the cranes and related equipment referred to in paragraphs 19(b);
(ii)knew or should have known that Lampson was not providing the cranes and related equipment gratuitously but expected to be paid for them; and
(iii)did not take a reasonable opportunity open to them to reject the cranes and related equipment.
Particulars
See the particulars to paragraph 24 above.
The defendants say that Australian law does not recognise a claim for unjust enrichment based upon an unjust factor of 'free acceptance'. They say that the pleading of free acceptance should be struck out without leave to re‑plead it.
In England, an academic debate concerning free acceptance has, I hesitate from personal experience to say, 'raged', for nearly three decades.[64] Professor Birks, whose academic contribution to this area of law was unmatched, regarded free acceptance as established. He gave the instance of a person who cleaned another's windows in the hope of payment as a 'clear and simple' example of free acceptance.[65] He said that 'volunteers who are disappointed risk takers can get restitution on the basis of free acceptance'.[66] This example turned out to be far from clear or simple.
[64] For the early protagonists: Birks, P An Introduction to the Law of Restitution (1989 rev edn) 266 (the proposition); Burrows, A 'Free acceptance and the Law of Restitution' (1988) 104 Law Quarterly Review 576 (the riposte); Birks, P 'In Defence of Free Acceptance' in A Burrows Essays on the Law of Restitution (1991) 105 (the response).
[65] Birks, P An Introduction to the Law of Restitution (1989 rev ed) 266.
[66] Birks, P An Introduction to the Law of Restitution (1989 rev ed) 266.
The editors of Goff & Jones: The Law of Unjust Enrichment articulate the principle of free acceptance in terms that derive from the original formulation by Goff and Jones in 1966:[67]
[A defendant] will be held to have benefited from the services rendered if he, as a reasonable man, should have known that the claimant who rendered the services expected to be paid for them, and yet did not take a reasonable opportunity open to him to reject the proffered services. Moreover, in such a case, he cannot deny that he has been unjustly enriched.
[67] Mitchell, C, Mitchell, P & Watterson, S (eds) Goff & Jones: The Law of Unjust Enrichment (8th ed, 2011) 453 ‑ 454 [17-03].
An unjust factor of free acceptance appears to be established in England. Some decisions have explicitly accepted it.[68] And it may be that, as the editors of Goff & Jones have argued, that the best explanation of the reasoning and result in others is also free acceptance.[69]
[68] R (Rowe) v Vale of White Horse District Council [2003] EWHC 388 (Admin); [2003] 1 Lloyd's Rep 418, 422 [14] (Lightman J); Benedetti v Sawiris [2009] EWHC 1330 (Ch) [574] ‑ [575] (Patten J; this point about the unjust factor was not considered on appeal).
[69] Lamb v Bunce (1815) 4 M & S 275, 277; (1815) 105 ER 836, 838 (Lord Ellenborough CJ); Sumpter v Hedges [1898] 1 QB 673; Mitchell, C, Mitchell, P & Watterson, S (eds) Goff & Jones: The Law of Unjust Enrichment (8th ed, 2011) 456 [17-07].
In Australia, the position is far less clear.
The starting point is the decision of the High Court of Australia in Liebe v Molloy.[70] In that case a builder had claimed for extra work done in the course of building a theatre for the owner of land. A contractual term precluded a claim for extra work without an order in writing from the architect and employer. That requirement was not satisfied but the employer knew that the extra work was being done. The umpire stated a case for the Full Court of the Supreme Court of Western Australia and an appeal from that decision was brought to the High Court of Australia.
[70] Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347.
Griffith CJ delivered the judgment of the High Court. The Chief Justice explained that a contract to pay for the work could be implied if (i) the employer had actual knowledge of the extra work, (ii) the employer knew that the work was outside the contract, and (iii) the employer knew that the builder expected to be paid.
The full passage from Liebe[71] is as follows:
An implied contract may be proved in various ways. When a man does work for another without any express contract relating to the matter, an implied contract arises to pay for it at its fair value. Such an implication of course arises from an express request to do work made under such circumstances as to exclude the idea that the work was covered by a written contract. So it would [also] arise from the owner standing by and seeing the work done by the other party, knowing that the other party, in this case the contractor, was doing the work in the belief that he would be paid for it as extra work.
[71] Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347.
As Basten JA observed in Xu v Jinhong Design & Constructions Pty Ltd, the language of 'implied contract' used by Griffith CJ is ambiguous.[72]
[72] Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 [26].
The ambiguity in the reference to 'implied contract' by Griffith CJ arises because that description might have either of two meanings.
One meaning of 'implied contract' is that it refers to a genuine contract which arises by implication rather than by the express declarations of the parties. On this approach, the Chief Justice might have been describing a genuine contract formed by the conduct of the owner which perhaps involved a waiver by the owner of his rights to insist upon compliance with contractual requirements for an order in writing for additional work.[73]
[73] See Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 88 ALJR 76, 82 [30] (the Court).
An alternative is that the reference by Griffith CJ to 'implied contract' was to a class of claim now recognised as based upon unjust enrichment. Before the express recognition of unjust enrichment in Australia, many claims for unjust enrichment were described as 'implied contract'.[74] In the famous lectures, and Commentaries, of both Sir William Blackstone, and his successor, Professor Chambers, both asserted that implied contracts arise 'such as reason and justice dictate'[75] and that '[a]n implied contract is violated when either of the parties to a transaction refuses to act according to the known or natural relations of things as acknowledged by the customary commerce of life'.[76]
[74] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14 [15] (French CJ).
[75] Blackstone, W Commentaries on the Laws of England (vol 2, 1776) 443.
[76] Chambers, R A Course of Lectures on the English Law delivered at the University of Oxford 1767‑1773 (T M Curley ed, vol 2, 1986) 225.
An example is a plaintiff who mistakenly paid money to a defendant's bank account by a mistake as to the defendant's identity. The plaintiff was, and is, prima facie entitled to recover that mistaken payment. When the action for recovery of the mistaken payment was explained without the language of the forms of action, courts generally followed Blackstone, who had misapplied the Roman label quasi‑contract (meaning that the liability arose as though it were from a contract) and described the action as 'implied contract'.[77] But in 1988, the High Court of Australia rejected 'implied contract' as a description of the basis for recovery of a payment made under a mistake of fact and described the action as based upon unjust enrichment.[78]
[77] Blackstone, W Commentaries on the Laws of England (vol 2, 1776) 443.
[78] Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662, 673 [11] (the Court).
In Update Constructions Pty Ltd v Rozelle Childcare Centre Ltd,[79] Priestley JA (with whom Samuels JA agreed) said of the decision in Liebe that '[i]t may be that the basis of such recovery these days would be referred to ideas of restitution rather than implied contract. The point of substance, for present purposes, seems to me to be that facts of a certain kind result in liability.'
[79] Update Constructions Pty Ltd v Rozelle Childcare Centre Ltd (1990) 20 NSWLR 251, 272.
Priestley JA has not been alone in treating the decision of Griffith CJ as potentially explicable on the basis of unjust enrichment and as embodying specific requirements of free acceptance as described above.[80] Another decision relied upon by Lampson Australia is the decision of Heydon JA (Spigelman CJ & Sheller JA agreeing) in Damberg v Damberg:[81]
The son submitted that it was sufficient that in fact the husband had received the benefits conferred by the son's labour whether or not he wanted the son to do the work. The son referred to the following passage in the reasons for judgment of Mason J and Wilson J in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 227:
Deane J, whose reasons for judgment we have had the advantage of reading, has concluded that an action on a quantum meruit … rests, not on implied contract, but on a claim to restitution or one based on unjust enrichment, arising from the respondent's acceptance of the benefits accruing to the respondent from the appellant's performance of the unenforceable oral contract.
They concluded that Deane J was correct in his statement of the basis of recovery.
[80] Trimis v Mina [1999] NSWCA 140 [64] (Mason P, Priestly & Handley JJA agreeing).
[81] Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492, 528 [187].
In that case, Heydon JA ultimately rejected the application of free acceptance to the facts of the case. But, pertinently, when his Honour considered the submission that 'mere receipt of a benefit' was sufficient, his Honour said that this submission was unsound because 'the benefit must have been requested or accepted'.[82]
[82] Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492, 528 [190].
The decision in Damberg was relied upon by Warren J in Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd.[83] Her Honour explained that:
Even more recently the New South Wales Court of Appeal adopted the concept of benefit and free acceptance in Damberg v Damberg. In that case Heydon JA, with whom Spigelman CJ and Sheller JA agreed, specifically cited the relevant extracts of Goff and Jones, Law of Restitution with respect to benefit and free acceptance in the context of a quantum meruit claim.
For my part I regard it as consistent with the law as applied in Australia when contemplating an unjust enrichment claim to be satisfied as to the two components of benefit and free acceptance.
(Footnotes omitted)
[83] Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248; (2002) 5 VR 577, 605 [116] ‑ [117] (Warren J).
In response to this authority potentially supporting the plea of free acceptance as an unjust factor, the defendants rely on the decision of the High Court in Lumbers v W Cook Builders Pty Ltd (in liq).[84] The defendants say that this decision clearly rejects the doctrine of free acceptance in Australia.[85]
[84] Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635.
[85] Defendants' Responsive Submissions on Strike‑Out Application, 30 April 2014 [3].
In broad summary, the Lumbers contracted for builders (described as 'Sons') for a house to be built on the Lumbers' property. Sons arranged for an associated company, described as 'Builders' to perform much of the work. Builders claimed against the Lumbers for the value of the work done. Builders' claim failed.
The claim in Lumbers is conceptually distinct from the claim in this case in at least one significant respect: the existence of a contract between the Lumbers and Builders in relation to work the value of which the Lumbers sought restitution from Sons.
The question for the application in this case is whether the High Court of Australia in Lumbers so clearly rejected the concept of free acceptance that, despite some possible support for free acceptance in earlier authorities, Lampson Australia's claim based on free acceptance should be struck out and Lampson Australia should be precluded from making the claim.
I reiterate that the context in which this question is asked is the need for a trial judge to take care not to risk stifling the development of the law by summarily rejecting a claim where there is a reasonable possibility that, as the law develops, it will be found that a cause of action will lie. For this reason, I have not embarked in a comprehensive examination of the decision in Lumbers. No doubt, this analysis will take place at trial if the facts emerge in a manner in which liability depends upon proof of free acceptance.
For five reasons, the free acceptance plea should not be struck out.
First, the relevant discussion in Lumbers, by Gummow, Hayne, Crennan and Kiefel JJ, did not expressly reject the possibility that liability could be based on an unjust factor arising from acceptance of a benefit, with knowledge that it was not provided gratuitously, and without taking a reasonable opportunity open to reject the benefit.
The defendants in this application rely on the rejection in the joint judgment in Lumbers of a particular submission by Builders. That rejected submission was that acceptance of a benefit, without a request, suffices to found an action for work and labour done or money paid.[86] Although this submission was rejected, it is difficult to see how the mere references to 'acceptance' in the joint judgment High Court can be read as also rejecting the more specific doctrine of 'free acceptance', including the three elements described above.
[86] Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635, 665 [86] (Gummow, Hayne, Crennan & Kiefel JJ).
In one paragraph to which counsel for the defendants pointed, the joint judgment said that 'the bare fact of conferral of the benefit or provision of the service does not suffice to establish an entitlement to recovery' (emphasis added).[87] This is not a reference to the three matters comprising the doctrine of free acceptance. And even in relation to the bare fact of conferral of a benefit, the joint judgment spoke of the general principle that work done to benefit the property of another does not create any obligation to repay the expenditure. Their Honours said that this principle 'is not unqualified' and that 'it is not necessary to examine in this case how extensive are those further qualifications or what is their content'.[88]
[87] Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635, 663 [80] (Gummow, Hayne, Crennan & Kiefel JJ).
[88] Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635, 663 ‑ 664 [80] (Gummow, Hayne, Crennan & Kiefel JJ).
In another paragraph relied upon by the defendants, the joint judgment rejected the proposition that acceptance of a benefit, without a request, would be sufficient, at least in this case, to found an action by Builders for work and labour done or money paid'[89] (emphasis added).
[89] Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635, 664 [82] (Gummow, Hayne, Crennan & Kiefel JJ).
In Friend v Booker,[90] French CJ, Gummow, Hayne and Bell JJ also later explained the decision on this point in Lumbers in even narrower terms: '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' (emphasis added).
[90] Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129, 141 [7] (French CJ, Gummow, Hayne & Bell JJ).
Secondly, in the separate judgment of Gleeson CJ, his Honour emphasised that '[t]here was no acquiescence by the Lumbers in the provision of services by Builders'.[91]The Chief Justice, in a passage cited with approval in this Court,[92] later explained that[93]
The concept of 'free acceptance' invoked by the majority in the Full Court, whatever its exact scope, is commonly related to a defendant who 'did not take a reasonable opportunity open to him to reject the proffered services'. That was not the situation of the Lumbers in the present case.
(Footnotes omitted).
[91] Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635, 655 [49].
[92] Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [No 3] [2010] WASC 141[213] (Murphy J).
[93] Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635, 656 [53].
Thirdly, there was no mention in any of the judgments in Lumbers of the decision of the High Court in Liebe. If the High Court were intending to deny the existence of liability based on free acceptance then one might have expected discussion of Liebe. This is because it had been suggested in cases from Update Constructions onwards that the reference to 'implied contract' by Griffith CJ in Liebe might be understood as a reference to the fiction of implied contract which is now considered to be part of the category of the law which is unjust enrichment.
Fourthly, as I have explained above, at the level of a strike out application it is important not to reject summarily a claim where there is a reasonable possibility that, as the law develops, it will be found that a cause of action will lie. The law of unjust enrichment, and particularly the development and boundaries of unjust factors, are a classic instance of the need for this caution.
The development of the law relating to an unjust factor of free acceptance is also best considered against the background of findings of fact. For instance, if it were to be concluded that the defendants, or any of them, (i) did not expressly or impliedly request the performance of any work by Lampson Australia, and (ii) did not share with Lampson Australia a basis or condition that Lampson Australia would be remunerated for the fair value of work performed by it, then questions of principle might arise concerning the principled basis upon which the defendants be required to pay the value of that work? These difficult questions of legal principle are best assessed against concrete findings of fact.
Fifthly, there are considerations of case management that also intrude into the question concerning whether this claim should be struck out. My impression is that the free acceptance claim will add little time and cost to the preparation for, and hearing of, the trial.
For these reasons, I will grant leave to Lampson Australia to re‑plead its claim based on free acceptance.
Failure of consideration
There are three issues that arise in considering whether Lampson Australia should be granted leave to re‑plead its claim for failure of consideration. I have focused upon the first two of these. These were matters raised by the defendants. The third matter was raised by me with senior counsel for Lampson Australia during oral argument. It is not necessary to consider this point in any more detail than passing comment because it was not a matter raised by the defendants. If anything had turned on this point I would have allowed the request by senior counsel for Lampson Australia for the opportunity to consider the point.
Quantum meruit and failure of consideration are not always separate claims
Counsel for the defendants submitted that a claim for quantum meruit is never a claim for failure of consideration or part of the legal category concerning unjust enrichment. I reject this submission.
This submission might derive some support from the reasons of Lord Scott (Lords Hoffmann, Mance and Brown agreeing) in the House of Lords in Cobbe v Yeoman's Row Management Ltd.[94] In his speech in that case which concerned liability for work performed in anticipation of a contract that did not materialise, Lord Scott separately upheld claims based on quantum meruit, failure of consideration, and unjust enrichment.
[94] Cobbe v Yeoman's Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752, 1773 ‑ 1774 [39] ‑ [44].
With the greatest of respect to Lord Scott, and without necessarily casting any doubt on the result of the case, his Lordship's reasoning reflects a fundamental category error. Each of the three categories described in Cobbe described the same claim on the facts of that case.[95] Quantum meruit (more strictly, when pleaded by a plaintiff, a plea to pay quantum mereret) describes a form of action. It was a form of action which, by the 19th century,[96] had been incorporated within indebitatus assumpsit. It said, and says, nothing of the underlying cause of action. It means only 'as much as he or she deserved'. The cause of action might have been contractual. It might have been part of the category of unjust enrichment.[97] This did not matter in a system of pleading by form. In contrast, as I have explained, failure of consideration is part of a cause of action. It can be an element of a claim which is part of the legal, or 'taxonomic', category of unjust enrichment.
[95] Getzler, J 'Quantum Meruit, Estoppel and the Primacy of Contract' (2009) 125 Law Quarterly Review 196, 201.
[96] Baker, J 'The History of Quasi Contract in English Law' in Cornish, W et al (eds) Restitution: Past, Present and Future (1998) 41 fn 20.
[97] British Steel Corp v Cleveland Bridge & Engineering Co Ltd [1984] 1 All ER 504, 509 (Robert Goff J); Lodder, A Enrichment in the Law of Unjust Enrichment and Restitution (2012) 79.
In Pavey & Matthews Pty Ltd[98] Mrs Paul had engaged builders to do building work for her. The contract was oral. The effect of s 45 of the Builders Licensing Act 1971 (NSW) meant that the oral contract was not enforceable by the builders. A majority of the High Court of Australia held that an action could, nevertheless, be brought for restitution of the value of the services provided. In their joint judgment, Mason and Wilson JJ agreed with the views of Deane J that the action, brought as a quantum meruit count of the form of action in indebitatus assumpsit, 'rests' on 'a claim to restitution or one based on unjust enrichment'.[99]
[98] Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221.
[99] Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 227.
In the course of his Honour's reasons, Deane J rejected the previously held view that the basis for the claim for quantum meruit was always genuine agreement. His Honour said the basis of the obligation was restitution or unjust enrichment.[100] Today, the latter label, 'unjust enrichment' might be a better description as it refers to the category of the action rather than the remedy.
A claim based on failure of consideration can arise without a contract
[100] Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 256.
Counsel for the defendants submitted that '[c]onsideration cannot fail unless a contract exists, because the requirement for consideration is an essential element in a formed contract, not one which is merely "contemplated"'.[101] I reject this submission.
[101] Defendants' written submissions, 11 April 2014 [7(d)].
The concept of 'consideration' has a specific meaning in the context of a claim in the category of unjust enrichment based upon a failure of consideration. It does not bear its contractual meaning. Failure of consideration is concerned with the failure of the 'basis' or the 'condition' upon which a benefit was conferred upon another party.
In Roxborough v Rothmans of Pall Mall Australia Ltd,[102] various judgments in the High Court spoke of restitution of money when it was 'paid ... on a basis that later became falsified',[103] or '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'.[104]
[102] Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516.
[103] Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516, 538 [60] (Gummow J).
[104] Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516, 525 [16] (Gleeson CJ, Gaudron & Hayne JJ).
In Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd[105] Lord Wright recognised that the claim for failure of consideration in that case was in the category of unjust enrichment.[106] Lord Wright said this: '[t]he payment was originally conditional. The condition of retaining it is eventual performance. Accordingly, when that condition fails, the right to retain the money must simultaneously fail'.[107]
[105] Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32.
[106] Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 61.
[107] Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 65.
There are many examples of non‑contractual claims for restitution of money paid, or the value of services performed or goods delivered, to a defendant where the basis or condition for the payment, performance, or delivery fails.[108]
The importance of characterising the benefit for a failure of consideration claim
[108] Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516, 525 [16] (Gleeson CJ, Gaudron & Hayne JJ), 555 - 556 [102] ‑ [103] (Gummow J) citing, respectively, Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 619 - 620 and Martin v Andrews (1856) 7 El & Bl 1; (1856) 119 ER 1148.
In oral reasons given during the strike out application, I struck out par 43 of the statement of claim. That paragraph read as follows:
At or about 27 September 2006 or shortly thereafter Lampson was [expressly] requested by or on behalf of the Defendants to develop and provide for use by Team 45 and the Consortium in the performance of their obligations in relation to that [sic] SMPEI works Lampson's electronic materials tracking system known as 'E Trak' or 'Track 'em'.
One reason why this paragraph was struck out was because it emerged during an exchange between me and senior counsel for Lampson Australia that the paragraph was not intended to mean what it says. The natural reading of the paragraph is that Lampson Australia was requested to 'develop and provide for use' the E Trak system. But Lampson Australia did not provide the E Trak system. Senior counsel submitted that the intention was to plead that Lampson Australia was requested to perform work towards producing the E Trak system.[109] His submission was that it was the work that was the benefit, not the end product.
[109] ts 264 (1 May 2014).
Counsel for the defendants submitted that the defendants did not request Lampson Australia to perform work towards producing the E Trak system. He said that what the defendants wanted was only the end product.[110] This falls to be determined in light of the evidence.
[110] ts 259 ‑ 261 (1 May 2014).
The characterisation of a request is important for whichever of the three ways that the E Trak claim is brought. This is because it appears to be common ground that Lampson Australia ceased work before the E Trak system was provided.[111] If the request was only for the provision of the end product of the E Trak system then Lampson Australia's claim based upon request, or based upon failure of consideration, must fail.
[111] ts 258 ‑ 259 (1 May 2014).
A useful comparison is the decision in Fibrosa.[112] In that case, a Polish company ordered machines from an English company. The contract provided for an advance payment by the Polish company of £1,600 towards the purchase of £4,800 worth of machinery. The balance was to be paid when the machines were shipped. The Polish company paid £1,000. The English company commenced work manufacturing the machines. After substantial work had been done, but before the machines were shipped, Germany invaded Poland. The contract was terminated by frustration.
[112] Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32.
The Polish company sought restitution of its initial payment. The House of Lords held that the Polish company was entitled to full restitution. The request was for the end product. The Polish company had requested only the machines. It was not a request for the performance of work. Hence, the English company could not resist the claim, nor was the English company entitled to any remuneration for the work it performed.
Both the reasoning and the decision in Fibrosa have been cited with approval on occasions almost without number.
In contrast with the inability of the English company to obtain any credit for the work performed in Fibrosa, a person is sometimes entitled to payment for the value of work done towards an end product even if no end product is ultimately received. The entitlement will arise in circumstances that include a request by the defendant for the performance of work, rather than merely the receipt of an end product.
In Stocznia Gdanska SA v Latvian Shipping Company,[113] the House of Lords held that shipbuilders were entitled to retain payments for work done even though the shipbuilders did not deliver the end product (the ships). The contract was to 'design, build, complete and deliver' six ships. Lord Lloyd distinguished between a contract (and, I interpolate, a request) for an end product, or a transfer of title, and one 'which also includes the provision of services prior to delivery'. His Lordship said that the distinction 'may sometimes be a fine one. But the distinction is sound in principle'.[114]
[113] Stocznia Gdanska SA v Latvian Shipping Company [1998] 1 WLR 574.
[114] Stocznia Gdanska SA v Latvian Shipping Company [1998] 1 WLR 574, 600.
In Brenner v First Artists Management Pty Ltd,[115] in a passage adopted in this Court,[116] Byrne J explained the position as follows:
[W]here a person requests another to do something, it is not unreasonable for the law to conclude that the former sees some benefit in its performance, however wrong this view may be on an objective basis and for the law to act upon the perception of the recipient.
...
I conclude that in a case where the services were requested and accepted, the law will not stop to enquire whether they were, on any other basis, of benefit to the party requesting and accepting them.
[115] Brenner v First Artists Management Pty Ltd [1993] 2 VR 221, 257 ‑ 258.
[116] R J Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2009] WASC 206 [165] (Beech J).
Apart from the fact intensive nature of the exercise of precise characterisation of a request and, therefore, the fact intensive nature of the basis for a defendant's enrichment, there may also be issues concerning whether there has been compliance with a request and the extent of compliance that is sufficient. A leading commentator, Dr Wilmot‑Smith, has argued that despite the rhetoric of 'total failure of consideration', recovery by a plaintiff is possible if a 'substantial part' of a condition has failed.[117] Such an argument cannot be accepted, in those terms, in Australia.[118] But it directs attention to the need to define, with precision, the nature of the condition that fails including, possibly, a condition which itself requires only substantial performance.
[117] Wilmot‑Smith, F 'Reconsidering "Total" Failure' (2013) 72 Cambridge Law Journal 414.
[118] See, for instance, Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 351 (Mason CJ, Toohey J agreeing), 375 (Deane & Dawson JJ), 386 (Gaudron J), 392 (McHugh J).
For these reasons, this second objection does not preclude the grant of leave to Lampson Australia to re‑plead par 43 and its claim in relation to the E Trak system.
Can the failure of a contract to materialise be sufficient for failure of basis?
The final matter involves a point that I raised during the oral argument by senior counsel for Lampson Australia. It concerns the sufficiency of a plea in relation to each claim for failure of consideration. In each case the failure of consideration is said to be that the contemplated contract did not materialise.
There may be doubt whether such a plea, without more (such as a plea that the work was done on the shared basis that it would be remunerated),[119] could ever be sufficient to establish a failure of basis. Suppose, for example, that two parties had contemplated that a contract for work might materialise but that the recipient of the work had manifested its understanding that all work performed prior to the contract would be at the expense of the party performing the work. It is very difficult to see, in those circumstances, why the later failure of a contract to materialise would mean that there was any failure of the basis or condition upon which the work was performed.
[119] Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880, 902 ‑ 903 (Sheppard J); BBB Constructions Pty Ltd v Aldi FoodsPty Ltd [2010] NSWSC 1352 [341] (McDougall J).
It is not necessary to consider this point in any detail for two reasons. First, no objection was taken by the defendants on this ground. Secondly, the example given above is not Lampson Australia's case, and it may be that the pleading can be amended simply to remove this concern. Elsewhere in its statement of claim, Lampson Australia points to numerous payments made to Lampson Australia by the defendants prior to the anticipated contract. It seems that Lampson Australia's case is that there was considerable work done prior to the anticipated contract that was expected to be remunerated, and that some of it was remunerated.
Conclusion
Many of the paragraphs of Lampson Australia's statement of claim must be struck out for reasons I gave orally. Those concerns dominated the strike out application hearing. However, these written reasons have addressed several fundamental matters raised by the defendants that would preclude Lampson Australia from re‑pleading. I have rejected each of the specific, and more fundamental, objections brought by the defendants to Lampson Australia's pleading.
One further, and more general, objection made by counsel for the defendants was that this is a case where Lampson Australia is asking the Court to allow a claim within the category of unjust enrichment to be a 'juridical safety net for commercial investment risk'.[120] This very general submission is not a basis to preclude Lampson Australia from re‑pleading. Nevertheless, two points should be made about this submission.
[120] Defendants' written submissions, 11 April 2014 [24].
First, the language of 'risk' in this area is very common in both the authorities and the voluminous academic literature. However, references to 'risk' are often no more than the statement of a conclusion. Apart from some, controversial, examples of free acceptance that I have discussed, a statement that a plaintiff bore the risk of being unremunerated is usually the expression of a conclusion that the plaintiff cannot recover.[121] For instance, in Vivian Fraser & Associates Pty Ltd v Shipton,[122] Lindgren J said that
Fraser should not be entitled to a reasonable fee for the work done by him not covered by the two contracts if he is properly to be seen as having assumed the risk, not only that W‑D would not win the tender but also, if it did, that the parties would not reach agreement on the terms of his retainer as project architect.
[121] Wilmot‑Smith, F 'Replacing Risk‑Taking Reasoning' (2011) 127 Law Quarterly Review 610.
[122] Vivian Fraser & Associates Pty Ltd v Shipton [1999] FCA 60 [340].
In that case, Lindgren J then proceeded to explain why Mr Fraser did not bear the risk: the work was 'requested and accepted by W‑D and of benefit to it and work for which Fraser would normally be expected to be remunerated.'[123]
[123] Vivian Fraser & Associates Pty Ltd v Shipton [1999] FCA 60 [343].
Secondly, the assertion by the defendants that Lampson Australia bore the risk of being unremunerated is very much in dispute in this case. For instance, senior counsel for Lampson Australia submitted that all the claims for a reasonable fee for work done arose in the context of other, possibly related, pre‑contractual work for which payment had been made by the defendants or some of them.
Lampson Australia should be given leave to re‑plead. It may be in the interests of the legal representatives for Lampson Australia, on this occasion, to confer, preferably in person, with the legal representatives of the defendants before filing the amended statement of claim. It will require very exceptional circumstances to justify departure from my order that this is Lampson Australia's final opportunity to re‑plead.
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