Unjust Enrichment in Commercial Law

Unjust Enrichment in Commercial Law

By Simone Degeling, James Edelman

Book

$335.01 RRP

Date: 28/10/2008

Code: 9780455225043

Lawbook Co., AUSTRALIA

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Description

This superb collection of essays from the world’s leading minds offers insight into a difficult area in commercial law.  The authors include judges from the House of Lords, High Court of Australia, intermediate Australian appellate courts, leading practitioners and professors of law from all across the Commonwealth. 
As Lord Rodger writes in his chapter, unjust enrichment “is little over 40 years old…we are still groping for a satisfactory analysis of the law of negligence 75 years after Donoghue v Stevenson…The analysis of unjust enrichment will [likewise] mature further over the coming decades and generations”. This book, spanning many of the controversial issues at the cutting edge of unjust enrichment, is an indispensable guide through this area of law for all commercial practitioners.
Edited by Drs Simone Degeling and James Edelman, the book draws on papers presented at the “Restitution in Commercial Law” Conference in Sydney in August 2007.
This new book is in the tradition of Equity in Commercial Law, earlier essays also edited by Degeling and Edelman. Writing of the earlier book in the Modern Law Review, Kit Barker said: “The vigorous debates which rage throughout the book about the role of equity in commerce are…not simply historic and abstract, but concrete, salient and imminently important…There can be no doubt that this book refines and redefines the debate about fusion in commercial law and beyond. It is fascinating throughout not least because of the difficulty and intensity of the controversies that it addresses.” 
The list of contributions to Unjust Enrichment in Commercial Law follows.
INTRODUCTION
James Edelman and Simone Degeling
PART I: THE NATURE AND THEORY OF UNJUST ENRICHMENT
Robert Stevens, Is there a Law of Unjust Enrichment?
Lionel Smith, Unjust Enrichment: Big or Small?
Adrian Briggs, Misappropriated and Misapplied Assets and the Conflict of Laws
PART II: ENRICHMENT
John McGhee, The Nature of Enrichment Inquiry
Steve Hedley, Enrichment
PART III: AT THE EXPENSE OF THE CLAIMANT
Mitchell McInnes, Hambly v Trott and the Claimant’s Expense: Professor Birks’ Challenge
Charles Mitchell, Liability Chains
Graham Virgo, Causation and Remoteness within the Law of Unjust Enrichment
PART IV: UNJUST FACTORS
James Edelman and Simone Degeling, What is an Unjust Factor?
Marilyn Warren, Mistake and Unjust Enrichment—The Double Life of the Law and its Progress
Carmel McLure, Failure of Consideration and the Boundaries of Restitution and Contract
Kenneth Hayne, Anticipated Contracts that Fail to Materialise
Robert Chambers and James Penner, Ignorance
Keith Mason, Economic Duress
Michael Bryan, Unconscionable Conduct as an Unjust Factor
Alan Rodger, An Introduction to Sempra Metals Ltd
PART V: PROPRIETARY REMEDIES
Andrew Burrows, The Relationship between Unjust Enrichment and Property: Some Unresolved Issues
William Swadling, Policy Arguments for Proprietary Restitution
PART VI: DEFENCES
John McCamus, Wrongful Conduct and Change of Position
Bret Walker, The Defence of Illegality to a Claim in Unjust Enrichment
Peter Watts, Imputed Knowledge in Restitutionary Claims—Rationales and Rationes
 

Editorial Reviews

From: (2009) 29 Qld Lawyer 221
Reviewed by Chris Tam

The High Court of Australia has recently had cause to discuss the reach of what is a dynamic creature within the private law (Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; [2008] HCA 27). For this reason alone, this compilation of papers delivered by the “worldwide protagonists” in the debate concerning the boundaries of the law of unjust enrichment is of some moment.

In a joint judgment (Gummow, Hayne, Crennan and Kiefel JJ), it was emphasised that unjust
enrichment is simply a concept that gives coherence to a “variety of distinct categories of case” (see Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 257 (Deane J); [1987] HCA 5). Moreover, unjust enrichment is not a principle which can be taken as a sufficient premise for direct application in particular cases (See Lumbers at 665).

The restitution framework elucidated by Professor Peter Birks (An Introduction to the Law of Restitution (revised ed, Oxford University Press, 1989) and upon which the chapters of the book are organised, is not universally accepted by some influential members of the High Court (see in particular Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at 553 (Gummow J); [2001] HCA 68) This only goes to illustrate the tension between the aims of “restitution lawyers” and “equity lawyers” (see Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 685 (Lord Goff)).

Despite this tension there was a strong consensus amongst the majority of participants at the conference (this work is a compilation of papers presented at the Restitution in Commercial Law
Conference held in Sydney in August 2007) that unjust enrichment is a recognised category of law.

The opening chapters of the book from Professors Robert Stevens and Lionel Smith speak generally of the concepts underpinning unjust enrichment theory and argue strongly that courts in England, Canada and Australia have clearly articulated and firmly recognised the law of unjust enrichment as a distinct category. Professor Stevens notes that the sorts of claims that exist beyond the recognised categories of contract and tort cannot be “lost in the dark, linked together by nothing more than preventing injustice” (p 34). Professor Stevens also points out that the essential reason for the independence of the law of unjust enrichment is the defence of change of position (explored by Professor John McCamus in Ch 19). At the outset of his paper, Professor Smith recognises the urgency in which the boundaries of this field of law need to be clarified, its existence having been confirmed by even the most “sceptical” appellate courts (p 35).

The next group of papers deals with the first element of Professor Birk’s inquiry – has the defendant been enriched? It is here that the sole rejector of the law of unjust enrichment at the conference, Professor Steve Hedley, argues that the inherent complexity in determining whether the defendant has been enriched cannot be overcome. Professor Hedley asserts “[that] Restitution might almost be defined as the waste-basket of the common law” (p 102). John McGhee QC in Ch 4 similarly considers the differing conceptions of enrichment and proffers his preferred two-pronged approach whereby enrichment is assessed as a question of fact and then against whether the retention of the enrichment by the defendant infringes upon the claimant’s autonomy.

The next three chapters consider the second inquiry – has the enrichment been at the expense of the claimant? Professor Mitchell McInnes’s approach to this difficult question centres on a broader conception of what constitutes loss beyond mere financial disadvantage. Using the famous example posited by Lord Mansfield in Hambly v Trott ((1776) 1 Cowp 371; 98 ER 1136.) Professor McInnes demonstrates that the claimant in that case does suffer an expense that is equal to a defendant’s gain even though her horse is returned none the worse for wear. He does so by arguing that a “temporary and non-harmful interference with property that triggers compensatory relief under the user principle in tort law may simultaneously constitute a transfer of economic value for the purposes of unjust enrichment” (p 106). By contrast, Professor Charles Mitchell argues, through the examination of complex multi-party scenarios, that examination of causal links between the claimant and the defendant or by establishing transactional linkages via tracing satisfies the second enquiry. Professor Mitchell also addresses the inherent danger in these types of cases in double recovery and double liability. In Ch 8, Professor Graham Virgo argues that examining the second enquiry with reference to causation and remoteness principles can help resolve long standing difficulties in unjust enrichment law.

Chapters 9 to 16 consider what is at the core of any unjust enrichment claim – the unjust factors. Associate Professor Simon Degeling and Professor James Edelman open the section with an
introductory chapter examining those unjust factors which are already well established (such as mistake, duress and failure of consideration) which fall into two distinct well-recognised categories – imperfect consent and policy – and those which are more contentions (“ignorance”, “free acceptance”  and “exploitation of weakness”).

Warren CJ discusses the archetypical unjust factor of mistake. The Chief Justice explores in detail
the concept of voluntariness and its relationship to causation in the context of mistaken payments. In so doing, her Honour comments on the reasoning of Ormiston JA in Hookway v Racing Victoria Ltd (2005) 13 VR 444; [2005] VSCA 310, and warns that “restitutionary principles should not be used to re-rationalise otherwise established equitable doctrines”. Nevertheless, Warren CJ appears happy to accept the inevitably rocky incremental progression and “gap filling” that will occur in this area of law in the years to come (p 208). McLure J’s exciting and insightful chapter is concerned with failure of consideration and whether it can be considered an unjust factor, thereby triggering the restitutionary mechanism, in circumstances where a valid and enforceable contract exists. Necessarily, McLure JA explores in considerable detail, and questions, the reasoning of the High Court in Roxborough which, broadly, stands against the rationale that a claim in restitution ordinarily is not permitted to subvert contractual obligations.

Hayne J discusses the elements of an action in unjust enrichment in the context of anticipated contracts that fail to materialise. Hayne J concludes that the articulation of a broad and all-encompassing principle intended to cover these types of cases is an impossibility (p 251) and that the characterisation of the outcomes of commercial transactions as “unfair” or “unjust” ignores not only a fundamental premise of our legal system (that of voluntary entry into commercial relationships) but also the objective nature of contractual analysis conducted by the courts. Hayne J also makes some interesting general comments. His Honour asks, “what would be the purpose of trying to relate the conclusion reached by the application of well-known and (relatively) long-established doctrines to some wider principle, described in general and all-embracing terms?” (p 249).

Professors Robert Chambers and James Penner discuss “ignorance” and misdirected trust assets and conclude that ignorance cannot serve as an unjust factor. In its place, the authors prefer, albeit without absolute conviction, “lack of authority”, ie where there was lack of authority to carry out a transaction, as an unjust factor.

The Hon Keith Mason QC gives an entertaining and learned exposition of the history and
development of “economic duress” or “restitution for improper pressure”. In so doing, he argues for its abandonment stating that it “should not be permitted to distract attention away from established principles of contract, unjust enrichment and equity that already address improper pressure in all its forms in a coherent and efficient manner” (p 277). Professor Michael Bryan advocates in Ch 15 for the recognition of unconscionable conduct as an unjust factor and not as a “wrong” in equity. In so doing, he accepts that the weight of precedent and academic opinion is against him but asserts forcefully and methodically that there is nothing “unsound or radical in recognising unconscientious conduct as an unjust factor” (p 314).

The part concludes with a magisterial exegesis of Sempra Metals Ltd (formerly Metallgesellschaft
Ltd) v Inland Revenue Commissioners [2007] UKHL; [2007] 3 WLR 354 by Lord Rodger of
Earlsferry.

The penultimate section of the book deals with whether remedies for unjust enrichment should be
proprietary or personal. Professor Andrew Burrows opens his chapter by stating “[that] the most
difficult questions in the law of restitution/unjust enrichment continue to be those concerned with
whether unjust enrichment does, or should, trigger a proprietary right” (p 333). Notwithstanding these opening remarks Professor Burrows argues, as he has done previously, that unjust enrichment is the best explanation for the proprietary (and personal) rights conferred in unauthorised substitution cases (eg Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 and Foskett v McKeown [2001] 1 AC 102). He does so by analysing and commenting on the work of those who argue against the recognition of unjust enrichment triggered proprietary rights in these types of cases (Lord Millett, Professor Virgo and Mr Calnan, a partner at firm Norton Rose). William Swadling concludes this section by arguing that the usual justifications for the creation of proprietary rights, particularly in the event of a defendant’s insolvency (such as “arguments from policy” and “doctrinal arguments”) as a response to unjust enrichment are illegitimate.

The final group of chapters concern the defences raised to a prima facie claim for restitution for unjust enrichment. Professor John McCamus’s analysis considers the defence of change of position with a particular focus on the varying conceptions of the role of “fault” with respect to the availability of the defence. In so doing, Professor McCamus attacks the dicta in Dextra Bank & Trust Co Ltd v Bank of Jamaica [2002] 1 All Er 193 and concludes, after a exhaustive examination of the arguments and analysis of the differing models of what constitutes “wrongdoing” with nine thought provoking propositions. Bret Walker SC examines the defence of illegality which, as he considers, is a defence not unique to unjust enrichment but encroaches on many areas of the private law. The book concludes with an examination of the importance of “imputed knowledge” in restitutionary claims by Professor Peter Watts.

Other chapters include a discussion by Professor Adrian Briggs of the interplay between unjust enrichment and conflict of laws and the difficulties that arise when unjust enrichment is proffered in the exercise of characterisation.

The papers in this volume offer a valuable insight into the issues at the core of this fascinating and
emerging area of the law. Each author makes a valuable contribution to the cause of advancing, at the very least, debate and perhaps even acceptance of an area of the law with deep historical roots. Minds, however, will continue to differ as to the acceptable boundaries of unjust enrichment in Australia.

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