para 2 and para 3 of the plaintiff/cross-respondents' interlocutory application
7 By paras 2 and 3 of their interlocutory application, the plaintiff/cross-respondents seek orders in the alternative that:
2. The cross-claim be and hereby is struck out; or
3. Judgment on the cross-claim be entered in favour of the cross-respondents, pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth).
8 In light of the advice of the parties, the order sought relates only to the cross-claim against the second cross-respondent. The question is whether the relevant cross-claim has reasonable prospects of success at trial: Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118.
9 The following submissions are made on behalf of Mr Vinciguerra:
At paras 3(e) and 3(j) of the amended defence (filed as a result of the consent orders referred to above), the first defendant (Mr Gilmour) and the second defendant (now Magil Nominees Pty Ltd but at material times called Sola-Kleen Pty Ltd and referred to here as Sola-Kleen) plead that the expenses paid by Mr Gilmour (respectively being motor vehicle expenses including stamp duty on Mr Vinciguerra's BMW and travel expenses for Mr Vinciguerra) were not for the benefit of the plaintiff and should be reimbursed to the plaintiff by Mr Vinciguerra.
At paras 12 and 16 of the amended cross-claim (filed as a result of the consent orders referred to above), Mr Gilmour (as first cross-claimant) and Sola-Kleen (as second cross-claimant) plead that in the event that that defence fails, Mr Vinciguerra should either indemnify Mr Gilmour and Sola-Kleen or disgorge that money to them on the basis that they received no consideration for that or those payments.
This restitutionary claim is untenable for two reasons:
(1) The mere conferral of a benefit without more is insufficient to ground a claim for restitution: see Lumbers v W Cook Builders Pty Ltd (in Liquidation) [2008] HCA 27; (2008) 232 CLR 635 (Lumbers) at [82]-[86].
(2) Failure of consideration cannot be the basis of the claim because only a management agreement existed between Sola-Kleen and the plaintiff under which Sola-Kleen provided management for the plaintiff and Mr Vinciguerra was employed by and could only have provided consideration to the plaintiff.
(3) Accordingly, the cross-claim against Mr Vinciguerra should be struck out as having no reasonable prospect of success.
10 The cross-claimants reject these submissions.
11 The essence of this cross-claim in each case is that Mr Vinciguerra received a benefit which did not benefit the plaintiff and should be refunded to the cross-claimants as they paid it on behalf of the plaintiff.
12 I find it very difficult to see how the cross-claimants in the circumstances pleaded can maintain such a restitutionary or unjust enrichment claim against Mr Vinciguerra. As is submitted on behalf of Mr Vinciguerra, to the extent that the pleaded cause of action alleges a failure of consideration, it cannot be the basis of a failed contract with Mr Vinciguerra, because there was only ever a management agreement between Sola-Kleen and the plaintiff under which Sola-Kleen provided management for the plaintiff, and Mr Vinciguerra was employed by and could only have provided consideration to the plaintiff. There is no privity of contract between Sola-Kleen and Mr Vinciguerra in respect of these payments. To the extent that Sola-Kleen may have been an agent of the plaintiff, it is not in a position to sue as if it were the company in relation to the claimed failure of consideration. Only the company can do that. Any such claim would not entitle the defendants to a set-off in this proceeding or provide any basis for a cross-claim by these cross-claimants.
13 To the extent that the counter-claim made in respect of these expenses is put on a broader unjust enrichment basis, this is an area of law which often seems in a state of constant refinement, owing to the seemingly infinite variety of circumstances in which a party may feel aggrieved by the unwillingness of another party to recognise and pay for a benefit it believes the other party has unjustly gained. In this regard, Mr Vinciguerra refers to the relatively recent decision of the High Court of Australia in Lumbers, a case where (as the headnote states) the owner and a lessee for life (the owners) of an allotment of land entered into a contract with a building contracting company for the construction of a house on the land. During the course of construction, unbeknown to the owners, the contractor entered into an arrangement with an associated company for that company to perform much of the work required by the building contract, which included the engagement of sub-contractors and the supervision of their work. There was no assignment or novation of the building contract. The associated company did what was required of it under the arrangement with the building contractor. The owners paid all amounts claimed by the building contractor but the contractor paid the associated company less than the amount incurred in construction and in the supervision and payment of its sub-contractors. The house was completed to the satisfaction of the owners. The associated company claimed from the owners an amount for payments made to sub-contractors, allowances for defects and a fee for supervision and management, less the amount received from the contractor. The High Court held (as the headnote also states) that the associated company had no claim against the owners for the price of any work and labour performed or for any money it might have paid in relation to the construction. It had no claim because it had no contract with the owners and it had not performed the work or made the payments to the sub-contractors at their request.
14 In Lumbers, the plurality of Gummow, Hayne, Crennan and Kiefel JJ (Gleeson CJ delivering a separate judgment also allowing the appeal) made reference, at [83], to an earlier decision of the Court (by a majority) in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 (Pavey & Matthews) which held that the right to recover on a quantum meruit for building work did not depend on the existence of an implied contract but a claim to restitution or one based on unjust enrichment. Their Honours noted that in Pavey & Matthews, at 256-257, Deane J described the concept of unjust enrichment as constituting:
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.
15 The plurality, at [84], said it is important to recognise two points about Pavey & Matthews. First, that there was no issue in the case about whether the plaintiff, a builder, had a claim for work and labour done and materials supplied. The issue was whether that claim was defeated by a statutory provision that required that no action it to be brought unless there was a note in writing recording the agreement. Their Honours added that, in particular, the issue was whether the builder's action on a quantum meruit was a direct or indirect enforcement of an oral contract made. In Pavey & Matthews, the majority of the Court had held that because the true foundation of the right to recover on a quantum meruit does not depend on the existence of an implied contract, the contract was not one by which the plaintiff sought to enforce the oral contract. Thus, the statutory limiting provision did not apply.
16 At [85], the plurality added that the second point to be noted is that unjust enrichment was identified as a legal "concept" unifying "a variety of distinct categories of case". Their Honours said it was not identified as a principle which can be taken as a sufficient premise for direct application in particular cases. Rather, it is necessary to proceed by the ordinary processes of legal reasoning and by reference to existing categories of cases in which an obligation to pay compensation has been imposed. Their Honours thus adopted the view that, 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. On the contrary, what the recognition of the unifying concept does is to "assist" in the determination, by the ordinary processes of legal reasoning of the question whether the law should, in justice, recognise an obligation in a new or developing category of case.
17 In the factual circumstances of Lumbers, the plurality, at [86], thus found that the submission made on behalf of the respondent that acceptance of a benefit, without a request, suffices to found an action for work and labour done or money paid, finds no direct support in Pavey & Matthews, and that the issue did not arise and was not decided in that case. Their Honours added that the question to which Pavey & Matthews directs attention was whether the long-established and well-recognised category of cases constituted by claims for work and labour done or money paid at the request of another should be extended or developed in the manner in which the builders there contended. To that question it in effect said no, on the facts of that case.
18 In this proceeding, the restitutionary or unjust enrichment claim is pleaded by the cross-claimants on the basis that while Mr Vinciguerra obtained a benefit from the plaintiff, it was a benefit gained at the defendants' expense because they are out of pocket for the expense. In para 3 of their defence, the defendants deny that the plaintiff incurred any excessive expenses at their hands. They plead that the motor vehicle expenses they paid for the plaintiff included stamp duty on Mr Vinciguerra's BMW, which it is said was "not for the benefit of the Plaintiff and which should be reimbursed to the Plaintiff by Mr Vinciguerra". They also plead travel expenses they paid for the plaintiff which it is said were incurred for living away from home expenses for Mr Vinciguerra and were "excessive and should be reimbursed to the Plaintiff by Mr Vinciguerra".
19 In Lumbers, at [82], the majority of the Court rejected the submission that the acceptance of a benefit, without a request, would be sufficient, at least in that case, to found an action by the subcontractors against the owner for the building work they had done. They said, "That is not so".
20 There is a real difficulty, in my view, in this case, is that, as pleaded, if any party suffered a disadvantage as a result of the "unjust enrichment" alleged against Mr Vinciguerra, it was the plaintiff. Mr Vinciguerra did not receive any benefits under any contractual arrangements he had with the defendants. Nor is there a plea that he in any formal sense requested the defendants personally to make the payments alleged. In this, the case as pleaded is not like that of Kazar, in the matter of Frontier Architects Pty Limited (in liq) [2010] FCA 1381, where Flick J at [167]-[168] on the facts found a request was made and that an unjust enrichment had occurred. While there may be some slim argument open, in my view, on the pleaded case there are no "reasonable prospects" of such a claim succeeding.
21 In all of the circumstances it seems to me it is simply not open to the cross-claimants, in effect, to run a case on behalf of the plaintiff, but not in the plaintiff's name, of a restitutionary or unjust enrichment nature against Mr Vinciguerra by way of a separate cause of action in the cross-claim or when the real complaint, if there is one, should come from the plaintiff.
22 I am not satisfied that the claims made in the cross-claim against Mr Vinciguerra have reasonable prospects of success and would therefore strike out the amended cross-claim against the second cross-respondent.