The entry below was originally published in (May 2015) 89(5) Law Institute Journal 34. My thanks go to the Law Institute of Victoria for permitting me to republish it here.
The law of restitution and unjust enrichment has been heavily influenced by academic commentary. However, the High Court has repeatedly stated that concepts such as “unjust enrichment” do not supply the elements of a cause of action.
In 1987, Australian common law experienced a significant shift, at least at a theoretical level. No longer were the old common money counts dependent on the legal fiction of an implied contract. Deane J said in Pavey & Matthews Pty Ltd v Paul (Pavey):1
“To identify the basis of such actions as restitution and not genuine agreement is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate . . . That is not to deny the importance of the concept of unjust enrichment in the law of this country. It constitutes a unifying legal concept which explains why the law recognises, 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, recognise such an obligation in a new or developing category of case . . .”
The passage above has been subject to considerable judicial and extrajudicial analysis. Whatever change in the law that was wrought by Pavey, it is increasingly apparent that it was minimal. Since at least 2007, the High Court has shown that not much has changed since the mid-nineteenth century. Yet it seems courts still have great regard for academic writing on the topic and the early post-Pavey caselaw – so much so that practitioners may be forgiven for thinking that “unjust enrichment” is a cause of action of three or four elements and limited defences. Since at least the recent decision of Australian Financial Services Leasing Ltd v Hills Industries Ltd (AFSL),2 it is clear that this is wrong, and decisions (and pleadings) that depend on an analysis using that framework are misconceived. The recent decision of Macaulay J in Southage Pty Ltd v Vescovi (Southage)3 will be used as an illustration.
Fraud cases with two innocent victims give rise to a tension in the law as to which of them should bear the burden of the fraud. Southage was one such case. Macaulay J usefully opens his judgment as follows:
“Both Southage Pty Ltd . . . and Lisa Vescovi . . . are the victims of a fraud . . .”
“Ms Vescovi became the sole registered proprietor of her family home, a property in the Melbourne suburb of Kew, in February 2010. Initially, her husband, Robert Kalivoda, had contracted to buy the home in his name alone. He paid the deposit on the contract, telling Ms Vescovi he did so out of his own funds (or those of his business). It is now clear that what he told Ms Vescovi was false. But, on the basis of what she was told, Ms Vescovi consented to being nominated [on 5 February 2010] as substitute purchaser to take a transfer of the title at settlement.
“Before that nomination took place, on 20 January 2010, Southage, a money lender, advanced $285,000 [by paying $219,518 to the vendor and the balance to Mr Kalivoda] pursuant to a letter of offer of the same date, apparently signed by Ms Vescovi. It was a forgery. Ms Vescovi had no knowledge of Southage or the letter of offer.
“According to the letter of offer, the loan was required to fund the deposit on an “investment property” (which turned out to be the Kew property). The loan was to be repayable in three months from drawdown and was to be secured by a second mortgage over a different property – a property [in] Williamstown.
“Ms Vescovi was the registered proprietor of the Williamstown property. A mortgage over that property, again apparently signed by Ms Vescovi on 20 January 2010, was provided to Southage at the time of the advance. It was also a forgery . . .
“[Later,] the Kew property [was] sold. Ms Vescovi did not receive any proceeds from its resale. Southage has not been repaid its loan. Mr Kalivoda is a bankrupt and the company that operated his business is in liquidation.”
Further,5 the balance of the purchase price was funded by a loan from the National Australia Bank pursuant to a contract with Ms Vescovi, about which there was no issue. Following her separation from Mr Kalivoda, mortgage repayments to the bank ceased, and Ms Vescovi sold the property ahead of the bank doing so. After payment to the bank from the proceeds of sale available, there was no surplus left for Ms Vescovi. Ms Vescovi had, until some considerable time after settlement of the acquisition of the Kew property, no knowledge of the involvement of Southage or that it had provided a loan that was used largely for the deposit on the purchase of the Kew property.
His Honour expressly made no finding as to who the perpetrator of the fraud was.6
Unjust enrichment: the unifying misconception
Many textbooks explain restitution or unjust enrichment as:
Subject to defences, a defendant is liable to a plaintiff if:
- the defendant is enriched;
- at the expense of the plaintiff; and
- the enrichment is unjust.
Chapters will then be dedicated to each of those concepts.
The above framework looks strikingly like a cause of action. Compare it, for example, with negligence.
Subject to defences, a defendant is liable to a plaintiff if:
- the defendant owed the plaintiff a duty of care;
- the defendant breached that duty of care; and
- as a result of the breach, the plaintiff suffered loss and damage.
However, unjust enrichment is not a cause of action. It merely provides a “unifying legal concept”, as Deane J described it in Pavey. The causes of action that respond with a restitutionary remedy include:
- money had and received, being money paid (to the defendant):
- under a mistake;
- under duress;
- pursuant to a contract where the consideration has totally failed;
- money paid for and at the request of the defendant;
- work and labour done for and at the request of the defendant.
The work of Professor Peter Birks7 was an endeavour to explain at a theoretical level the concepts that unified, in a taxonomical sense, these seemingly miscellaneous causes of action. Those unifying concepts constitute the typical explanation of unjust enrichment set out above.
The High Court has drawn away from the Birksian framework in recent decisions, including Farah Constructions Pty Ltd v Say-Dee Pty Ltd,8 Lumbers v W Cook Builders Pty Ltd (in liq) (Lumbers),9 Friend v Brooker (Friend),10 Bofinger v Kingsway Group Ltd (Bofinger),11 Equuscorp Pty Ltd v Haxton (Equuscorp),12 and AFSL.
Significantly, in Friend, the High Court said:13
“The joint reasons in Lumbers contain two relevant propositions. The first is that, in general, 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. The second proposition is that while the concept of unjust enrichment may provide a link between what otherwise appears to be a variety of distinct categories of liability, and it may assist, by the ordinary processes of legal reasoning, in the development of legal principle, the concept of unjust enrichment itself is not a principle which can be taken as a sufficient premise for direct application in a particular case.”
In Bofinger, the High Court said further:14
“In a passage in their reasons in David Securities Pty Ltd v Commonwealth Bank of Australia, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ rejected the submissions that in Australian law unjust enrichment was more than ‘just a concept’ and that it was ‘a definitive legal principle according to its own terms’. The use of the phrase ‘unifying legal concept’ earlier in the joint reasons must be understood with what was said in that later passage. In the years which have followed the Court has reaffirmed this position and all other Australian courts are bound accordingly.
“A not dissimilar fate met the attempt to adopt ‘proximity’ as the ‘unifying theme’ of the categories of case recognising a duty to take reasonable care to avoid a reasonably foreseeable risk of injury to another.”
In Equuscorp, the High Court said:15
“[Unjust enrichment] is not a ‘definitive legal principle according to its own terms’. Nor was it such when first propounded in legal scholarship. It was:
‘an ex post facto explanation of decisions that had already been reached, an organisational category separate from contract. The substance of the law still had to be found in its concrete emanations’.
“Unjust enrichment therefore has a taxonomical function referring to categories of cases in which the law allows recovery by one person of a benefit retained by another. In that aspect, it does not found or reflect any ‘all-embracing theory of restitutionary rights and remedies’.”
Southage: application of principles
The view of unjust enrichment as a cause of action is the approach that Macaulay J appears to have taken in Southage. His Honour conducts his analysis under the following headings:
- Did Ms Vescovi receive a benefit from the Southage loan by which she was enriched?16
- Was the enrichment unjust?17
- Did Ms Vescovi change her position on the faith of the receipt of the benefit?18
His Honour’s analysis of enrichment, in particular, is lengthy and comprehensive. It is submitted that it need not have been, and it ought to have followed an altogether different analysis. His Honour’s analysis raises for consideration a number of matters that are, with respect, a distraction.
In an unjust enrichment claim (as with any claim), it is necessary first to identify the cause of action. In Southage, it was a claim for money had and received being money paid under a mistake. The breakdown of the elements of the cause of action can be compared with the Birksian model in the following way:
|Cause of Action elements||Birksian model|
|Paid (by the plaintiff)||At the expense of the plaintiff|
|Under a mistake||Unjust factor|
|(Paid) to the defendant||Enrichment of the defendant|
Although comparable with the elements of the cause of action, the Birksian model is apt to raise issues that are irrelevant to the cause of action.
The plaintiff, Southage, paid money. This was not contested, but its effect was.
The question that was considered was whether Ms Vescovi remained “enriched” by some “benefit” of which it would be “just” to order her to make restitution. This was, it is respectfully submitted, an erroneous question to ask. The cause of action of money had and received is a personal action sounding only in a money judgment. Successful proof does not depend on identifying property in specie in the hands of the defendant. Proprietary claims for the delivery-up of property in specie are the subject of other causes of action and equitable remedies.19 The use of principles of tracing by Macaulay J is therefore, with respect, questionable,20 but beyond the scope of this article. The remedy of restitution, in these causes of action, does not require the return of something presently in the hands of the defendant; it is merely a term used to describe the remedy of a monetary payment that is not damages. It is a claim for relief very similar to repayment of a debt.21
It follows from (i) the stated elements of the causes of action, (ii) the irrelevance of identifying property in specie, and (iii) the nature of the remedy, that Macaulay J’s separate consideration of the “justice” in the abstract of ordering restitution22 had no place in the analysis.23
The money that Southage paid on 20 January 2010 was paid on account of a liability Mr Kalivoda had under the contract of sale with the vendor.24 There is no difference in substance between paying the money (directly) to Mr Kalivoda as a matter of fact and paying the money at his direction to settle his liability.25 It was only on 5 February 2010 that Ms Vescovi accepted the nomination as purchaser under the contract, but even then she did not acquire any liabilities under the contract.26 Accordingly, Mr Kalivoda was the only person who was relevantly “enriched” by the payment.27
The above analysis follows from what was said in Lumbers. In that case, concerning a claim by a subcontractor-builder against a homeowner for work and labour done, the High Court largely dispensed with the Birksian unjust enrichment model and referred to the basic elements of the cause of action: a request28 (by the defendant) for work done (by the plaintiff). However, the High Court held in Lumbers that the contractual allocation of rights, liabilities and risk governed the outcome. In Southage, Ms Vescovi had no contract with Southage or the vendor. Southage paid the money in discharge of Mr Kalivoda’s, not Ms Vescovi’s, liabilities to the vendor (although it did so operating under the mistaken belief that a contract subsisted between it and Ms Vescovi). This ought to have been the end of the analysis, and the claim ought to have failed at that point. However, Macaulay J, without any reference to Lumbers, held that the fact of payment and enrichment can happen at separate times and that, consequently, Ms Vescovi was enriched. It is submitted, respectfully, that this is wrong in law. In AFSL, Gageler J noted that in Baker v Courage & Co:29 “The cause of action to recover money paid under a mistake of fact was there held to accrue at the date of payment.”30
(This article does not deal with the analysis of the change of position defence, which was discussed in detail in AFSL.)
The prominence of the Birksian model of unjust enrichment has waxed and waned between 1987 and recent times. It is telling that, during oral argument in Lumbers, Gummow J regarded terminology like “incontrovertible benefit” as “just slogans”.31 His Honour also referred to the third edition of the prominent pleading precedents text, Bullen and Leake, published in 1868, noting that the elements of the restitutionary cause of action of work and labour done were clear back then.
Countless decisions at first instance rely on the Birksian model for analysis. By doing so, they substitute the elements of the cause of action for a “unifying legal concept”, thereby elevating it to what resembles an action for “unjust enrichment”. Recent High Court decisions are clear: courts should focus on the elements of the cause of action, not their theoretical justification. As the High Court said in AFSL, “the concept of unjust enrichment is not the basis of restitutionary relief in Australian law”.32
1. (1987) 162 CLR 221, 256-257.
2.  HCA 14; (2014) 307 ALR 512.
3.  VSC 141.
4. Note 3 above, at -.
5. Generally, Note 3 above, at -.
6. Note 3 above, at .
7. An Introduction to the Law of Restitution (1985; revised edn, 1989); Unjust Enrichment (2nd edn, 2005).
8. (2007) 230 CLR 89.
9. (2008) 232 CLR 635.
10. (2009) 239 CLR 129.
11. (2009) 239 CLR 269.
12. (2012) 246 CLR 498.
13. (2009) 239 CLR 129,  (citations omitted, emphasis added).
14. (2009) 239 CLR 269, - (citations omitted).
15. (2012) 246 CLR 498, - (citations omitted, emphasis added).
16. Note 3 above, at -.
17. Note 3 above, at -.
18. Note 3 above, at -.
19. Cf Note 3 above, at .
20. Macaulay J makes a similar observation: Note 3 above, at .
21. See the detailed history of the money counts in Pavey, especially by Deane J: (1987) 162 CLR 221, 251-256. See also the discussion of the history of the action of money had and received in AFSL: French CJ, -; Hayne, Crennan, Kiefel, Bell and Keane JJ, -; Gageler J, -.
22. Note 3 above, at -.
23. In AFSL, the High Court’s analysis is that the question of whether retention of money mistakenly paid is “unjust” ultimately goes to the availability of a defence.
24. Note 3 above, at .
25. In AFSL, Gageler J said, “Hills accepted that payment of a debt by a third person (not jointly liable for the debt) does not discharge the debt unless the payment is made by the third person as agent for the debtor and with the debtor’s prior authority or subsequent ratification”, citing inter alia Porter v Latec Finance (Qld) Pty Ltd (1964) 111 CLR 177, 191-192. See also Sonja Meier, ‘Mistaken payments in three-party situations: A German view of English law’ (1999) 58(3) Cambridge Law Journal 567.
26. Note 3 above, at - and authorities there cited.
27. This was Ms Vescovi’s submission: Note 3 above, at .
28. The reference by Deane J in Pavey to “a benefit actually or constructively accepted” ((1987) 162 CLR 221, 257) was not directly addressed in the judgment, but it is plain from a full reading of the joint reasons that it is the request, not some notion of acceptance, that founds the cause of action; to that extent, Pavey has been overruled. Courts still frequently refer to the Pavey formulation, but practitioners should be aware of this effect of Lumbers.
29.  1 KB 56, 64-65.
30.  HCA 14, .
31. Lumbers v W Cook Builders Pty Ltd (in liq)  HCATrans 95; see also the headnote in (2008) 232 CLR 635, 638.
32.  HCA 14, .
About 3 weeks after publication of the above article, the Court of Appeal dismissed an appeal from Macaulay J’s decision: Southage Pty Ltd v Vescovi  VSCA 117 (Warren CJ, Santamaria JA and Ginnane AJA). The applicable principles of liability to make restitution were discussed at -, and the Court said at :
“Accordingly, authority binding on this Court is against liability to restitution being established either by resolution of the three issues that the parties focused on below or, for that matter, by answering the five questions identified by the judge.”