In his Honour's discussion of the cases his Honour described Lexane Pty Ltd v Highfern Pty Ltd and Sandeman v Wilson as cases in which restitution was allowed "as part of the equitable adjustments between the parties when an instalment contract failed because of the default of the purchaser" (at 226). He said that the justification for restitution flowed from the vendor's knowledge of the right of the purchaser to effect improvements, though not necessarily of the acts in exercise of that right, and that in effecting the improvements the purchaser must do so at least under the belief of a right to do so (at 226-7). He continued -
"In the present case, the plaintiff is not shown to have acted under more than an expectation of having the benefit of the improvement upon the completion of the transaction. Its having done the work does not imply belief in a contractual right to do so and may be compared with the misprediction referred to by Professor Birks and mentioned above.
But even if it existed such a belief on the purchaser's part would not have been enough. The operation of the doctrine of restitution under analogous heads requires a participation by the vendor in such a way as to render his subsequent enrichment unjust, for enrichment alone is not ipso facto unjust at law. This factor as it is manifested in the instalment contract cases can only be in the form of the implied approval by the vendor to the improvements by reason of the nature of the contract itself which allows the purchaser to have possession for a sufficient period in circumstances where the possibility of his effecting improvements is to be expected. That will also be logical in cases other than instalment contracts where the same considerations apply.
That is not the position in the present case for when the plaintiff entered into possession, it was only to be a temporary state of affairs pending completion, and no implication of any suitable approval could be drawn from those circumstances."
238 It is apparent that his Honour did not accept an automatic entitlement in the purchaser to compensation in respect of the improvements, even when the vendor was the defaulting party. There had to be circumstances of unjust enrichment. The relationship between the emerging law of restitution and equitable intervention on grounds of unconscionability is not settled (see for example Toohey J in Baumgartner v Baumgartner at 152-4; Mason, "Restitution in Australian Law" in Finn (ed) Essays on Restitution, 1990; Jones, "The Law of Restitution: The Past and the Future" in Burrows (ed), Essays on the Law of Restitution, 1991; Byrne, "Restitution and Equity" (1995) 11 QUTLJ 169; Mason and Carter, Restitution Law in Australia, para 235), but they have much in common.
239 Instalments of the purchase price paid by the purchaser, other than a deposit paid as security for the completion of the contract, are repayable by the vendor if the contract is terminated, even if it is terminated for the purchaser's default: see for example McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 469-70 per Starke J and 477-8 per Dixon J. It is said that the vendor cannot have the land and its value too (a phrase stemming from Laird v Pim (1841) 7 M & W 474 at 478 per Parke B; 151 ER 852 at 854), and that the vendor's title to the money is not absolute but conditional on the subsequent completion of the contract (ibid; see also Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 464-5 per Dixon J; Baltic Shipping Co v Dillon (1992) 176 CLR 344 at 352, 385). The instalments are recoverable at law, as on a failure of consideration (McDonald v Dennys Lascelles Pty Ltd at 470 per Starke J and 479 per Dixon J), and unless there is a provision of the contract by which the vendor is entitled to retain the instalments it is not necessary to seek equitable relief. If there is such a provision, although it has been referred to as relief against forfeiture (eg Pitt v Curotta (1931) 31 SR (NSW) 477 at 480) the equitable relief is properly not relief against forfeiture but on the footing that the provision is in the nature of a penalty (Legione v Hateley (1983) 152 CLR 406 at 445 per Mason and Deane JJ, cf at 458 per Brennan J referring to relief against forfeiture of the purchase price; Stern v McArthur at 524 per Deane and Dawson JJ).
240 Recovery of instalments does not provide a satisfactory analogy for recovery of the value of improvements in a case such as the present. The appellants were not obliged to spend money on improvements (other than the initial $200,000), the money spent on improvements was not paid to Salienta as part of the purchase price or in consideration of conveyance of Yarrawah, and the benefit of the expenditure did not accrue to Salienta conditionally on the subsequent completion of the sale of Yarrawah. There is relevantly no failure of consideration, and the remedy on termination of the contract is for breach of contract not restitution of a benefit (see for example Baltic Shipping Co v Dillon at 390 per McHugh J). Nor does the statement that the vendor can not have the land and its value too apply in the same way - that Salienta obtains the benefit of the money spent on improvements is a necessary consequences of it having the land following the appellants' default, and the benefit of course is not necessarily commensurate with the amount expended.
241 Nor is there any question of equitable relief in relation to a contractual provision on the footing that it is in the nature of a penalty. No contractual provision in this case prescribes that Salienta shall have the benefit of the improvements made by the appellants or of the consequent increased value of Yarrawah.
242 Equitable relief against forfeiture of the appellants' interest in the land, by "denying validity to the vendor's act of rescission" (Stern v McArthur at 510 per Brennan J) and thereby reinstating the purchaser's right to purchase and decreeing specific performance (as in Stern v McArthur), does not arise, because the appellants are not willing to pay the last agreed purchase price. Adapting the words of Lord Diplock in Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (1983) 2 AC 694 at 701 in a related context, relief against forfeiture of an interest in land is pregnant with an affirmative order that the vendor perform the contract.
243 In P C Developments Pty Ltd v Revell the purchaser was initially successful in obtaining what was described as relief against forfeiture although not able to complete the contract, but that was because it was agreed that, if entitled to relief against forfeiture of his interest, he "should in effect be placed in the same position as if he had completed the contract" (at 632) or should have compensation for damages in lieu of a decree for specific performance (at 641). This case does not stand as authority for relief against forfeiture by payment of compensation as distinct from reinstating the purchaser's right to purchase and decreeing specific performance. Nor does the description of the conceded entitlement in Stern v McArthur at first instance (Waddell J, 2 November 1984, unreported) as "relief against forfeiture of the value added to the land by the house …".
244 Why, then, may a purchaser in some circumstances have an entitlement to be compensated in respect of permanent improvements to the land?
245 The entitlement is described as an entitlement as a condition or term of equitable relief in Rossiter, Penalties and Forfeiture, pp 184-5, with the observation that the common thread running through the cases is that the purchaser has sought equitable relief. The description probably comes from Rawson v Hobbs, where the purchaser did not seek equitable relief but seems to have been given it as if there should have been rescission ab initio; from the other cases, the postulated common thread is incorrect. In any event, the question remains: why may the purchaser get a condition or term of equitable relief in the shape of an order that the vendor pay compensation for improvements?
246 The entitlement is described as "a matter to be dealt with by way of adjustment on discharge" in Mason and Carter, Restitution Law in Australia, para 1170 (referred to also as restitutionary relief and a substantial restitution requirement at paras 1438 and 1439). The language of equitable adjustment was also used in Sunstar Fruit Pty Ltd v Cosmo to describe Lexane Pty Ltd v Highfern Pty Ltd and Sandeman v Wilson. Still the question remains: why may there be adjustment on discharge, or restitution?
247 It seems to me that, if Salienta is to pay to Rosefarms the increased value of Yarrawah attributable to the improvements, it must be either on the basis of what was described by Deane and Dawson JJ in Stern v McArthur (at 526-7) as the notion underlying much of equity's traditional jurisdiction to grant relief against unconscientious conduct, namely that a person should not be permitted to use or insist upon his legal rights to take advantage of another's special vulnerability or misadventure for the unjust enrichment of himself, or by adoption of principles of unjust enrichment. The former notion was described by Mason and Deane JJ in Legione v Hateley (at 444) as "the fundamental principle according to which equity acts, namely that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct". In terms of unconscionability, the basis must be that there may be relief if it would be unconscionable in all the circumstances for Salienta to retain the benefit of the improvements without compensating Rosefarms for its expenditure. If principles of unjust enrichment be applied, it must be found that Salienta's enrichment by having the benefit of the improvements is in the circumstances at the expense of Rosefarms and unjust. Rejecting the appellants' stance, in cases such as the present the purchaser does not have an automatic entitlement to recover from the vendor the amount expended or the increase in the value of the land, and may receive only such relief as equity may afford in order to prevent unconscionability or as may be necessary to avoid unjust enrichment.
248 The postulated basis of equitable relief on the ground of unconscionability goes beyond relief against forfeiture of an interest in the land, in that the purchaser obtains relief although unable or unwilling to complete the purchase. It takes up the basis of relief by way of proprietary estoppel recognised in Waltons Stores (Interstate) Pty Ltd v Maher, the element of unconscionability both attracting the jurisdiction of a court of equity and shaping the remedy to which Brennan J referred (at 419), but with a sufficient remedy an order for payment of equitable compensation. This is effectively what was done in T M Burke Estates Pty Ltd v P J Constructions (Vic) Pty Ltd (in Liq), and Nepean District Tennis Association Inc v Penrith City Council (1988) 66 LGRA 440. In the latter case the club resurfaced tennis courts held under licence from the council in anticipation, encouraged by the council, of a long term lease. It was held that, in the absence of an assurance that a lease would be granted, the proprietary relief of a lease would not be granted. But it was said that relief could be given against a party who would have been unjustly enriched by contributions made, or improvements made to his land, having regard to the expectations of the parties at the time, citing Morris v Morris (1982) 1 NSWLR 61, Muschinski v Dodds and Baumgartner v Baumgartner, and that because it would be unconscionable for the council "to accept the full benefit of the expenditure without some compensation or notice" (at 448) it should pay to the club a depreciated value of the resurfacing work less an allowance for a market rental to the date the council obtained possession.
249 In England a general principle that equity will restrain the enforcement of legal rights when it would be unconscionable to insist on them has been thought unacceptable, see Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana at 700; Union Eagle Ltd v Golden Achievement Ltd (1997) AC 514 at 519. In Australia the High Court has given unconscionability in this respect a more significant role in the grant of equitable relief, while still cautioning that a strong case must be made out to warrant departure from holding parties to their bargain and that unconscionability should not bring judicially idiosyncratic notions of fairness. But there is no need in principle, once unconscionability warranting equitable relief has been found, for the remedy to be proprietary, even by creation of a lien. In circumstances such as the present the principles invoked for proprietary estoppel can readily enough be applied, but with the remedy not being proprietary, and it may be noted that in Ramsden v Dyson Lord Kingsdown contemplated relief "either in the form of a specific interest in the land, or in the shape of compensation for the expenditure …".
250 In Nepean District Tennis Association Inc v Penrith City Council there was also reference to unjust enrichment, and the claim in Sunstar Fruit Pty Ltd v Cosmo was put forward as an unjust enrichment claim. In Union Eagle Ltd v Golden Achievement Ltd a possible greater role of "the law of restitution and estoppel" was foreshadowed (at 520), but the principles of unjust enrichment, although recognised, are not yet embedded in Australia as themselves grounds for relief. They were not the subject of submissions in the appeal.
251 In deciding whether, assuming that there may be an entitlement on one of these bases, on the facts in this case Salienta is to pay to Rosefarms the increased value of Yarrawah attributable to the improvements, the relevant considerations are not necessarily the same as those arising in relation to equitable relief pursuant to proprietary estoppel. At least in relation to unconscionability there is substantial common ground, although arguably the fact of a contract between the parties has different significance where the purchaser's claim is founded on the failure of the contract. It must not be forgotten that the appellants claimed the increased value of Yarrawah attributable to the improvements over the whole period of the relationship, from 1992 onwards, and did not limit their claim to the improvements during the currency of the March 1995 contract. For the first two years or so there was no contract of sale, but an option to purchase. For about three months there was the 1994 contract for sale: although it seems that its enforceability was in dispute at the trial, I see no reason to regard it as any less binding and enforceable than the March 1995 contract. The option to purchase was not exercised, and the 1994 contract for sale should be taken to have been consensually rescinded. The appellants can not be in any better position in relation to the improvements prior to March 1995 than in relation to the improvements made during the currency of the March 1995 contract.
252 I do not think repetition of the earlier material in these reasons is necessary. There is no doubt that Mr Forsyth, and through him Salienta, knew of the improvements, and acquiesced in and encouraged the making of the improvements in the manner earlier referred to. But in the circumstances I have described I do not think there would be unconscionability in Salienta having the benefits of the improvements without compensatory payment for the increased value of Yarrawah attributable to the improvements. Nor in my view would there be unjust enrichment.