Pavey & Matthews Pty Ltd v Paul

High Court of Australia Mason Wilson Brennan Deane and Dawson JJ Pavey & Matthews Pty Ltd v Paul (F C 87/004) [1987] HCA 5

6. As a matter of ordinary legal usage the words "enforceable" and "unenforceable" may refer either to the judicial and curial remedies available for the enforcement of a contract or to all the remedies available for the enforcement of a contract, including such remedies as the contract itself may provide. Section 4 of the Statute of Frauds 1677 UK (Statute of Frauds) and its successor s 128 of the Instruments Act 1928 Vic, which was considered in Turner v Bladin [1951] HCA 13;; (1951) 82 CLR 463, provided for unenforceability of the first kind, whereas s 9 of the Money Lenders Act 1912 WA, which was considered in Mayfair Trading Co. Pty Ltd v Dreyer [1958] HCA 55; (1958) 101 CLR 428, esp. at pp 448-449, provided for unenforceability of the second kind.

We accept with respect the views expressed by A.T. Denning (now Denning L.J.) in the articles in 41 Law Quarterly Review, p.79 and 55 Law Quarterly Review, p.63. His Lordship has now expressed his adherence to these views as a member of the Court of Appeal in James v Thomas H. Kent & Co.Ltd In our opinion Koellner v Breese ((1909) 9 SR (NSW) 457; 26 WN (N.S.W.) 92) was rightly decided. Cocking v Ward [1845] EngR 970; ( (1845) 1 CB 858 (135 ER 781)); Kelly v Webster ((1852) 12 C.B.283 (138 E.R.912)); Sanderson v Graves ((1875) LR 10 Ex 234) are cases where the action was brought on the agreement and are therefore distinguishable. Phillips v Ellinson Bros.PtyLtd [1941] HCA 35 [1941] HCA 35;; ( (1941) 65 CLR 221) was also a case where the action was brought on the agreement. Accordingly, if an indebitatus count had been added to the statement of claim, the learned Chief Justice could have given judgment at common law.

34. There is a difference in language and in purpose between s 4 of the Statute of Frauds and s 45 of the Builders Licensing Act. Section 4 of the Statute of Frauds prescribes that "no action shall be brought whereby to charge any (person) upon" an agreement not in writing being an agreement of a kind therein specified. Section 45 of the Builders Licensing Act provides that a "building contract" as therein prescribed which is not in writing "is not enforceable" by the holder of a licence "against the other party to the contract". A general denial of enforceability against one party is a more extensive sterilization of a contract than a denial of a right to enforce it by an action on the contract brought against that party. To make a contract unenforceable against a party is to give him a wider immunity than is given by preventing an action against him on the contract. A contract which is unenforceable cannot give rise to any legal remedy, whether curial or extra-curial: Mayfair Trading Co.PtyLtd v Dreyer [1958] HCA 55; (1958) 101 CLR 428, at pp 448-449.

44. As this Court (Griffith C.J., Barton and O'Connor JJ.) pointed out in Bagnall v White [1906] HCA 52; (1906) 4 CLR 89, at p 96, the ex tempore dictum of Tindal C.J. in Souch v Strawbridge [1846] EngR 565 (1846) 2 CB 808, at p 814 [1846] EngR 565; (135 ER 1161, at p 1164) to the effect that the Statute of Frauds does not apply to "an action in the present form, founded upon an executed consideration" cannot properly be converted into a general proposition to the effect that the Statute does not apply at all to executed contracts (in the sense of executed on one side). So much was made clear by Bramwell B. and Amphlett B. in separate judgments in Sanderson v Graves (1875) LR 10 Ex 234. Amphlett B. (at pp 241-242) acknowledged that there were some "old" authorities which supported such a general proposition but concluded that "more modern decisions" must be seen as having overruled them. Among those "more modern decisions" was the considered judgment in Cocking v Ward [1845] EngR 970 (1845) 1 CB 858 (135 ER 781) which had been delivered by Tindal C.J. on behalf of a Court of Common Pleas constituted by himself and Maule, Cresswell and Erle JJ. In rejecting any general proposition that the Statute of Frauds does not apply to an executed contract, Bramwell B. (in Sanderson v Graves ) demonstrated the need to identify some other rational explanation of those cases where recovery of recompense for an executed consideration was permissible in a common law action notwithstanding that the provisions of s 4 of the Statute of Frauds applied to the contract under which the consideration had been given. His Lordship said (at p.238):

The old common lawyers were a robust people, and if a fiction was convenient under the old rigid forms of pleading they did not worry about its correspondence to reality or to juristic concepts. But it does not follow that they did not realize the true nature of the concept. The third criticism of the explanation advanced by Lord Denning in his Law Quarterly Review articles is a more fundamental one and is made with the benefit of the hindsight flowing from subsequent elucidation of the law for which Lord Denning is entitled to no small part of the credit. It is that adverted to by Sir Robert (now Lord) Goff and Professor Jones in their landmark work The Law of Restitution, 2nd ed. (1978), at pp.320-321 , namely, that the basis of the obligation to make payment for an executed consideration given and received under an unenforceable contract should now be accepted as lying in restitution or unjust enrichment. Indeed, so much was recognized by Professor Ames himself (see Ames, op. cit., at pp.162-166 and, per Viscount Haldane L.C., Sinclair v Brougham (1914) AC 398, at p 417). In such a case, the underlying obligation or debt for the work done, goods supplied, or services rendered does not arise from a genuine agreement at all. It is an obligation or debt imposed by operation of law which "arises from the defendant having taken the benefit of the work done, goods supplied, or services rendered " (per Starke J., Phillips v Ellinson Brothers Pty Ltd , at p 235) and which can be enforced "as if it had a contractual origin" (per Lindley L.J. (emphasis added), In re Rhodes (1890) 44 ChD 94, at p 107 and see, among many other relevant works and cases, Lord Wright, op. cit., at pp 317ff.; R.M. Jackson, The History of Quasi-Contract in English Law (1936); Pulbrook v Lawes , at p 290 (per Blackburn J.) and pp 290-291 (per Lush J.); Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour, Ltd [1942] UKHL 4 (1943) AC 32, at pp 61-62; Deglman v Guaranty Trust (1954) 3 DLR 785, at pp 788, 794-795; the judgment of Lord Denning himself (then Denning L.J.) in James v Thomas H. Kent & Co. Ltd (1951) 1 KB 551, at p 556; and the judgment of the Privy Council, delivered by Lord Denning, in Kiriri Cotton Co. Ltd v Dewani (1960) AC 192, at pp 204-205).

53. 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. The circumstances in which the common law imposes an enforceable obligation to pay compensation for a benefit accepted under an unenforceable agreement have been explored in the reported cases and in learned writings and are unlikely to be greatly affected by the perception that the basis of such an obligation, when the common law imposes it, is preferably seen as lying in restitution rather than in the implication of a genuine agreement where in fact the unenforceable agreement left no room for one. 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 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 (see Muschinski v Dodds [1985] HCA 77; (1985) 60 ALJR 52, at p 67[1985] HCA 77; 62 ALR 429, at p 455; Goff & Jones, op. cit., at pp 11ff.). In a category of case where the law recognizes an obligation to pay a reasonable remuneration or compensation for a benefit actually or constructively accepted, the general concept of restitution or unjust enrichment is, as is pointed out subsequently in this judgment, also relevant, in a more direct sense, to the identification of the proper basis upon which the quantum of remuneration or compensation should be ascertained in that particular category of case.

59. In any event, as Macrossan J. pointed out in his judgment at first instance in Gino D'Alessandro, "currently held concepts and the common intellectual stock of the present day" will ordinarily be more relevant in interpreting a modern statutory provision than "historical investigation of the old forms of action and the pleading niceties dependent upon them" (see, to the same effect, Lord Wright, op. cit., at p.316). When one has regard to currently held concepts, it is apparent that the common perception has long been that the claimant on a common indebitatus count seeking compensation for a consideration moving from him which has been executed and accepted is not properly to be seen as "enforcing" the contract upon which the bringing of an action is precluded by the Statute of Frauds. To the contrary, it has long been the accepted general practice to describe an agreement to which the provisions of the Statute of Frauds apply as "unenforceable" (see, e.g., per Jordan C.J., Horton v Jones (No. 2), at p 319; per Street C.J., Murdock v Kennedy (1952) 69 WN (NSW) 191, at p 192) or "unenforceable by action" (see, e.g., per Gavan Duffy C.J., Starke and McTiernan JJ., Perpetual Executors and Trustees Association of Australia Ltd v Russell [1931] HCA 7; (1931) 45 CLR 146, at pp 152, 153) and one can point to statements in the cases which spell out in terms the proposition that an indebitatus count for payment of the money owing for a fully executed consideration does not involve "enforcing the unenforceable contract" (see, e.g., per Salter J., Scott v Pattison, at pp 727-728).

62. There is no apparent reason in justice why a builder who is precluded from enforcing an agreement should also be deprived of the ordinary common law right to bring proceedings on a common indebitatus count to recover fair and reasonable remuneration for work which he has actually done and which has been accepted by the building owner (cf. Johnsons Tyne Foundry Pty Ltd v Maffra Corporation [1948] HCA 46; (1948) 77 CLR 544, at p 565). Nor, upon a consideration of the words of s 45 in their context in the Act, am I able to identify any legislative intent to deprive the builder of that ordinary common law right. The section does not make an agreement to which it applies illegal or void. Nor do its words disclose any legislative intent to penalize the builder beyond making the agreement itself unenforceable by him against the other party. It may be that the bringing of an action as on a common indebitatus count would conflict with the apparent legislative policy underlying s 45 if the claimant in such an action were entitled as of right to recover the amount which the building owner had agreed to pay under the unenforceable agreement. I am, however, unpersuaded that the bringing by a builder of an action on the common indebitatus count in which he can recover no more than what is fair and reasonable in the circumstances as compensation for the benefit of the work which he has actually done and which has been accepted by the building owner conflicts with any discernible legislative policy. Plainly enough, the survival of the ordinary common law right of the builder to recover, in an action founded on restitution or unjust enrichment, reasonable remuneration for work done and accepted under a contract which is unenforceable by him does not frustrate the purpose of the section to provide protection for a building owner. The building owner remains entitled to enforce the contract. He cannot, however, be forced either to comply with its terms or to permit the builder to carry it to completion. All that he can be required to do is to pay reasonable compensation for work done of which he has received the benefit and for which in justice he is obligated to make such a payment by way of restitution. In relation to such work, he can rely on the contract, if it has not been rescinded, as to the amount of remuneration and the terms of payment. If the agreed remuneration exceeds what is reasonable in the circumstances, he can rely on the unenforceability of the contract with the result that he is liable to pay no more than what is fair and reasonable.

69. This was consistent with the action in debt, for which assumpsit became an alternative, because debt was not an action to enforce payment pursuant to an agreement; it was more in the nature of a real action to recover a thing. Thus in Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560, at p 567, this Court observed:

(1985) 3 NSWLR 134

(1951) 82 CLR 463

(1958) 101 CLR 428

(1982) 2 NSWLR 894

(1956) 99 CLR 560

(1941) 65 CLR 221

(1983) 1 QdR 107

(1983) 1 NSWLR 259

(1983) 1 NSWLR 252

(1906) 4 CLR 89

(1985) 60 ALJR 52

(1931) 45 CLR 146

(1948) 77 CLR 544