Peisley v Maddrell Management Pty Limited and Ors

Local Court Act 2007 LEGISLATION CITED : Suitors Fund Act 1951 Supreme Court Act 1970 Uniform Civil Procedure Rules 2005

Baltic Shipping Company v Dillon (The Mikhail Lermontov) [1993] HCA 4; 176 CLR 344 Cameron v Cole [1944] HCA 5; 68 CLR 571 David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; 175 CLR 353 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32; [1942] 2 All ER 122 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 81 ALJR 1107 Fortune Food Manufacturer Pty Ltd v K Young Trading Pty Ltd [2010] NSWSC 407 Haxton v Equuscorp (formerly Equus Financial Services) [2010] VSCA 1; 265 ALR 336 CASES CITED : Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) BPR 11,987 Leduva Pty Ltd v NM Structural Engineering Pty Ltd [2010] NSWSC 1164 Nichols v Lee [2008] NSWSC 1243 Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6 Pavey and Matthews Pty Ltd v Paul [1987] HCA 5; 162 CLR 221 Ross T. Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 Rowland v Divall [1923] 2 KB 500 Roxborough and Others v Rothmans of Paul Mall Australia Ltd [2001] HCA 68; 208 CLR 516

Davenport P and Harris C, Unjust Enrichment TEXTS CITED : Jackman IM, The Varieties of Restitution Mason K, Carter JW and Tolhurst GJ, Restitution Law in Australia, 2nd ed

Troy Peisley (Plaintiff) PARTIES : Maddrell Management Pty Limited (First Defendant) The Owners of Strata Plan No. 62893 (Second Defendant)

COUNSEL : Mr S Jacobs; Ms T Catanzaniti (Plaintiff) Mr J Sleight (First and Second Defendants)

SOLICITORS : Mr T Peisley (Plaintiff - in person) Doyle Edwards Anderson Lawyers Pty Limited (First and Second Defendants)

LOWER COURT JUDICIAL OFFICER : Magistrate David Heilpern

LOWER COURT DATE OF DECISION : 3 December 2009

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

2009/332071 Troy Peisley v Maddrell Management Pty Limited and Anor

1 JOHNSON J: By Summons Commencing an Appeal dated 31 December 2009, the Plaintiff appeals a decision of Magistrate Heilpern in the Downing Centre Local Court on 3 December 2009. The Plaintiff appeals from the whole of the Magistrate's decision.

2 The Plaintiff in these proceedings is Mr Troy Peisley, a chartered accountant and qualified solicitor. The First and Second Defendants are, respectively, Maddrell Management Pty Limited ("Maddrell") and The Owners of Strata Plan No. 62893 ("Owners Corporation"). For convenience, I will refer to the parties by name.

3 Maddrell was caretaker to the Strata Plan pursuant to an agreement dated 30 June 2000 ("Caretaker Agreement"). The Caretaker Agreement was for an initial term of 10 years, with an option to renew. It specified the duties Maddrell was to perform, and set the amount of remuneration for the first five years by reference to increases in the consumer price index from time to time. Thereafter, the remuneration was to be any amount mutually agreed upon by the parties.

4 In the event that the parties could not agree, the Caretaker Agreement provided that the President of the Law Society could appoint an expert to "determine the fair market remuneration". Mr Peisley was appointed for this purpose on 27 August 2007. He wrote to the parties on 10 August 2007 confirming his appointment, and again on 15 November 2007 outlining the terms of his engagement.

5 Maddrell and the Owners Corporation commenced proceedings in the Local Court in June 2009 seeking orders that Mr Peisley refund the amount of approximately $30,000 in professional fees allegedly paid to him for a determination which he never completed. Mr Peisley defended the proceedings and appeared in person.

6 On 3 December 2009, the Magistrate gave judgment in favour of Maddrell and the Owners Corporation. Mr Peisley was ordered to pay each party the sums sought in the Amended Statement of Claim, totalling $34,116.87, plus interest. An order was also made that Mr Peisley pay costs on the ordinary basis. Hearing of the Appeal

7 Mr S Jacobs, of counsel, appeared for Mr Peisley in this Court with Ms T Catanzariti, of counsel. Mr J Sleight of counsel appeared for both Maddrell and the Owners Corporation.

8 An affidavit sworn by Mr Peisley on 31 December 2009 ("Peisley Affidavit") was read, without objection, in support of the appeal. A bundle of documents exhibited to the Peisley Affidavit and filed on 30 May 2010 was also tendered (Exhibit A). The bundle contained the following documents from the Local Court proceedings in accordance with Rule 50.14 Uniform Civil Procedure Rules 2005 ("UCPR"): (a) the Amended Statement of Claim filed for Maddrell and the Owners Corporation on or about 24 June 2009;

(b) Mr Peisley's Amended Defence filed 13 July 2009; (c) affidavits of Simon Maddrell sworn 14 July 2009, 11 August 2009 and 24 August 2009 filed for Maddrell;

(d) an affidavit of Mr Peisley sworn 13 August 2009;

(e) Mr Peisley's written submissions dated 4 September 2009;

(f) the transcript of the Local Court proceedings on 4 September 2009; and

(g) the learned Magistrate's Reasons for Decision dated 3 December 2009 ("Magistrate's Reasons"). 9 This Court was informed that neither Maddrell nor the Owners Corporation relied on written submissions in the Local Court proceedings (T16.50-17.3).

10 Written submissions were furnished by the parties to the appeal, and additional submissions prepared personally by Mr Peisley were also provided (MFI 1). The Local Court proceedings

11 The proceedings were heard in the Local Court on 4 September 2009.

12 Mr Sleight of counsel appeared for Maddrell, as he does in this Court on the appeal. Mr Simon Maddrell appeared as a non-legally qualified person for the Owners Corporation. As previously mentioned, Mr Peisley, who is a qualified solicitor, appeared in person.

13 The case advanced orally by Mr Sleight was that there had been a total failure of consideration by Mr Peisley in not completing his determination. It was contended that not only did Mr Peisley fail to deliver the determination, but he also exceeded the scope of his retainer by repeatedly requesting the parties to agree on an additional set of duties said to be either separate from or contrary to those already contained in the documentation comprising the Caretaker Agreement, and which had been provided to Mr Peisley.

14 Mr Maddrell gave a brief opening to the Magistrate, but otherwise did not make oral or written submissions.

15 Mr Peisley addressed the Magistrate. He also gave oral evidence and was cross-examined by both Mr Sleight and Mr Maddrell.

16 Mr Peisley did not dispute the existence of his retainer, nor the fact that about $30,000 in professional fees had been paid to him and that he had not provided a determination. Rather, it was his case that he was unable to complete the determination because he did not receive certain information from Maddrell and the Owners Corporation. Mr Peisley also claimed to have not been fully paid, and that his instructions had been suspended or withdrawn at various times by one or both of the parties. He contended that the scope of his appointment included resolving what he understood to be a dispute between Maddrell and the Owners Corporation as to each party's duties and entitlements under the Caretaker Agreement.

17 Mr Peisley relied upon written submissions at the hearing, which included a section entitled "Restitution". The written submissions contended that the remedy sought by Maddrell and the Owners Corporation was one of restitution. It was submitted that, although not expressly pleaded, Maddrell and the Owners Corporation had sought to recover from him a benefit "on the ground of unjust enrichment" (Exhibit A, TP-3, p. 20). On this basis, Mr Peisley sought to raise the restitutionary defence of detrimental change of position in answer to the claim. This issue was not dealt with in oral submissions at the hearing, other than when the Magistrate briefly sought to clarify with Mr Peisley the relevance to the claim of those parts of his written submissions concerning restitution. I will return to this in due course (see [47] below). The Magistrate's Decision

18 The Magistrate delivered judgment on 3 December 2009.

19 In the opening paragraph of his reasons, the Magistrate stated that "Maddrell and the Strata Plan … now sue for the $30,000 on the basis of breach of contract".

20 At [2], the Magistrate identified that "[t]he issue is whether the contract has been breached". His Honour also noted from the outset that the pleadings had only been referred to in passing during the proceedings and submissions, and that it was "clear that the parties understand precisely what the issues in contention are" (at [4]).

21 The Magistrate recited, at [7]-[11], key factual matters giving rise to the contract between Mr Peisley, Maddrell and the Owners Corporation. His Honour referred to the relevant provision of the Caretaker Agreement providing for the appointment of an expert to determine the fair market remuneration, the letter from the President of the Law Society dated 27 July 2007 appointing Mr Peisley as that expert, and Mr Peisley's letter to Maddrell and the Owners Corporation dated 10 August 2007 confirming his appointment. His Honour made no reference to Mr Peisley's terms of engagement dated 15 November 2007.

22 At [16], the Magistrate identified the terms of Mr Peisley's retainer as follows: "…the letter from the defendant to the plaintiffs was for a limited contract. The obvious terms of the contract were that the plaintiff would pay the defendant in exchange for the defendant giving a determination. The payment was to be on an hourly basis, and at first the estimate was $12,000, which then increased to $30,000 all of which was eventually paid. There was an implied term of the contract that the plaintiffs would provide the defendant with sufficient information to undertake the determination. There was an implied term of the contract that the parties would act reasonably in the undertaking of their responsibilities under the contract. Another way of putting this is that there was a 'duty to cooperate'…"

23 His Honour then addressed the question of breach and held, at [17]: "In my view the defendant breached the terms of the contract, and remains in breach by not determining the matter on the information before him. He ought repay the money in full, as he has breached the contract. He had not fulfilled and essential term - namely the provision of his expert's determination. This represents a total failure of consideration. His reasons for not doing so do not stand up to detailed analysis."

24 The Magistrate was highly critical of Mr Peisley's evidence. His Honour set out, at length, extracts of cross-examination to support his finding that Mr Peisley misunderstood the nature of his task and exceeded the scope of his authority (see Magistrate's Reasons [18]-[23]). His Honour rejected the contention that Maddrell and the Owners Corporation had obstructed Mr Peisley from completing his task (at [31]).

25 At [32], the Magistrate said: "At point 12 to 14 [of Mr Peisley's written submissions] , the defendant raises the issue of quantum. Clearly, the defendant undertook some relevant work, and the contention is that the defendant ought be paid for that work. However, this is not like a building contract, where the homeowner can at least arrange the finishing of a house where work has ceased for whatever reason. The parties in this case required one thing - a number - and that has not been provided. In such circumstances the building cases, unjust enrichment cases, and part performance issues raised are not relevant. The plaintiffs have not been unjustly enriched - they have not got what they bargained for."

26 The Magistrate concluded by stating that Maddrell and the Owners Corporation had "proved their case on the balance of probabilities". An order was made in the following terms: "1. The defendant is to pay to the plaintiffs the sum sought in the statements of claim, plus interest from the date of the filing of the statements of claim. Such payments are to be made within 28 days."

27 I turn now to the nature of an appeal from the Local Court to this Court. Nature of the Appeal and Applicable Principles

28 There is no general right of appeal from the Local Court to the Supreme Court. Division 4 of the Local Court Act 2007 ("LCA") provides that a party who is dissatisfied with a judgment or order of the Local Court may only appeal to this Court in the following limited circumstances: "39 Appeals as of right (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. … 40 Appeals requiring leave (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court. (2) A party to proceedings before the Court sitting in its General Division who is dissatisfied with any of the following judgments or orders of the Court may appeal to the Supreme Court, but only by leave of the Supreme Court: (a) an interlocutory judgment or order, (b) a judgment or order made with the consent of the parties, (c) an order as to costs. 29 An appeal from the Local Court may therefore only be brought as of right on a question of law: s. 39(1) LCA. If a ground of appeal involves a question of mixed law and fact, then leave of this Court is necessary: s. 40(1) LCA. I note that s. 40(2) has no application in this case.

30 Many cases have considered what is a question of law as opposed to a question of fact, particularly in relation to the vexed issue of what is a question of mixed law and fact. These were helpfully summarised recently by Davies J in Fortune Food Manufacturer Pty Ltd v K Young Trading Pty Ltd [2010] NSWSC 407 at [26]-[31], in the context of considering s. 39 LCA.

31 An appeal to this Court from a decision that has been given after a hearing is to be conducted by way of rehearing: s. 75A(5) Supreme Court Act 1970; Part 50 Rule 50.16(1) UCPR; see also Leduva Pty Ltd v NM Structural Engineering Pty Ltd [2010] NSWSC 1164 at [14]. In such circumstances, the Court can only receive further evidence on special grounds: s. 75A Supreme Court Act 1970. No application was made to the Court to receive further evidence here.

32 Section 41(1) LCA provides that this Court may determine an appeal from the Local Court: "(a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal."

33 In the Summons filed on 31 December 2009, Mr Peisley relies on the following grounds of appeal: "1.1 The [Magistrate] held … that on a true construction of [Mr Peisley's] retainer he was obliged to determine 'fair market remuneration' on the information before him and without recourse to further information.

1.2 In so holding, the [Magistrate] erred in law as there was no such term in the said retainer. 2 In his Reasons for Judgment, the [Magistrate] further erred in law in that he failed to make critical findings of fact to support the ultimate conclusion that [Mr Peisley] was either in breach or threatened breach of his retainer. 3 Further, the [Magistrate] erred in law and misdirected himself in paragraph [21] of his Reasons, when holding by reference to the fact that the Appellant exceeded the scope of his task constituted repudiatory conduct entitling [Maddrell and the Owners Corporation] to terminate the retainer and claim restitution. 4 In his Reasons for Judgment, the [Magistrate] further erred in law in that he failed to provide any or adequate reasons for concluding that [Mr Peisley] was in breach or threatened breach of the terms of his retainer. 5 The [Magistrate] erred in law in holding that the conduct of [Mr Peisley] was in its nature repudiatory, justifying a termination of his retainer. 6 There was no finding by the [Magistrate] of any critical facts to the effect that [Maddrell and the Owners Corporation] had made time of the essence of the retainer. 7 Further and in any event, even assuming the correctness of the findings of fact by the [Magistrate] in his Reasons for his decision, but not conceding the correctness of such findings, the [Magistrate] erred in law in holding that such conduct was repudiatory justifying termination. 8 In the premises, and having regard to the [sic] one or more of the grounds above, the [Magistrate] erred in law in concluding that there was any conduct on the part of [Mr Peisley] justifying [Maddrell and the Owners Corporations'] purported termination of his retainer. 9 Further, the [Magistrate] erred in law and misdirected himself in categorising the facts of the matter as constituting a total failure of consideration, as he did in paragraph [33] of his Reasons. 10 Further, the [Magistrate] erred in law and misdirected himself in applying a remedy not cognisable at law when he ordered a restitutionary remedy (i.e. return of all monies paid to [Mr Peisley] in fees) by way of damages for alleged breach of contract. 11 Further, the [Magistrate] erred in law and misdirected himself in determining the issues between the parties otherwise than those pleaded or raised [in] clear terms at the hearing, in particular in impliedly holding that [Mr Peisley's] conduct constituted repudiatory conduct entitling [Maddrell and the Owners Corporation] to terminate the retainer. [12] Without that issue having been pleaded, or having given the Appellant notice that he intended to consider making a finding of repudiation and giving [Mr Peisley] an opportunity of considering that matter and dealing with it, this effected a denial of natural justice to [Mr Peisley] , and for which the judgment ought be called up and quashed."

34 The grounds of appeal are, to say the least, unclear insofar as they attempt to identify with precision the nature of the errors of law complained of. The grounds involve overlapping areas of complaint and, in some instances, are repetitious and redundant. It is also apparent from the written submissions filed in support of the appeal that Mr Peisley presses a number of grounds on alternative, but not pleaded, bases.

35 In my view, this state of affairs is unsatisfactory given the obligations imposed upon parties to litigation by Rule 50.4(2) UCPR to specify the grounds upon which it is contended there is an error of law in the decision below. I agree that this equates to an obligation to identify such grounds with precision: see Nichols v Lee [2008] NSWSC 1243 at [30]. It is inappropriate for a party to attempt to rely upon grounds that are not pleaded, without having sought the leave of this Court, and then to do so in a "rolled up" fashion.

36 To the extent that questions of fact arise in relation to a number of the grounds, Mr Jacobs sought leave to advance those which involved questions of mixed law and fact (T15.17). Mr Sleight made various submissions concerning whether each ground required leave of the Court, or whether they may be advanced at all (T34.20-T36.27).

37 I do not consider it necessary to set out the arguments as to whether each ground involves a question of mixed law and fact for the purposes of ss. 39 and 40 LCA. The high point of the appeal and its resolution appears to lie in the contention (as it crystallised in this Court) that the Magistrate misdirected himself by essentially confusing the concepts of restitution and breach of contract (T16.18), not understanding that he was dealing with a claim for restitution (T17.15, 20.6) and thereby applying an incorrect legal criterion in determining the claim (T15.45, 16.44). It was submitted that this had the practical effect of denying Mr Peisley procedural fairness by not affording him the opportunity to have his arguments concerning restitution (in particular, unjust enrichment) understood and considered (T17.17, 20.6, 25.42). I am satisfied that matters of this type necessarily involve questions of law only, and may therefore be brought as of right for the purposes s. 39 LCA.

38 For the reasons set out below, I have formed the clear view that the Magistrate did misdirect himself in law, and effectively denied Mr Peisley procedural fairness. In those circumstances, it is not necessary to consider and determine the remaining grounds of appeal. Legal Framework of the Claim

39 The pleadings, Mr Peisley's written submissions and the transcript of the Local Court proceedings together reveal a degree of confusion as to the precise legal basis for Maddrell and the Owners Corporation's claim.

40 The Amended Statement of Claim sought orders that Mr Peisley refund to Maddrell and the Owners Corporation the professional fees paid to him, plus interest, "for a service never provided". It pleaded the existence of Mr Peisley's retainer entered into on 15 November 2007, a series of payments made to Mr Peisley by the parties pursuant to that retainer, and the fact that as at the date proceedings were commenced (24 June 2009), no determination had been forthcoming.

41 The Amended Statement of Claim contained no expressly pleaded cause of action, for example, that Mr Peisley was in breach of contract. The relief claimed in the Amended Statement of Claim did not include damages.

42 During the course of the Local Court proceedings, Mr Sleight repeatedly framed the case for Maddrell as being a total failure of consideration, which entitled his client to return of the professional fees paid (see, for example, Local Court 6.12). At the end of his opening, Mr Sleight said (Local Court 9.33) (emphasis added): "So, your Honour, the plaintiff's case is simply this - there was an agreement. All $30,000 has been paid pursuant to the agreement. There's been a total failure of consideration because no determination has been forthcoming . You've heard from Mr Maddrell that they've had to go off and appoint a further expert. That is the basis for which the plaintiffs seek the repayment of the fees ."

43 In closing submissions, Mr Maddrell concluded (Local Court 57.29) (emphasis added): "…As a matter of law, your Honour, there's been a total failure of consideration in my submission and that entitles the plaintiff to claim the return of the price or the return of the fee paid, also got a claim for damages, but that's not advanced today, we just seek return of the professional fees paid plus interest and costs . Those are the plaintiff's submissions, your Honour."

44 I infer that the claim for damages referred to, but not advanced, by Mr Sleight was one for breach of contract. It is therefore plain from both the Amended Statement of Claim and the transcript that Maddrell and the Owners Corporation's claim for relief was founded on a cause of action for a total failure of consideration, not merely a breach of contract entitling them to damages or some other contractual remedy. As Mr Sleight repeated, the relief sought was simply the return of money paid to Mr Peisley.

45 In his brief opening on behalf of the Owners Corporation, Mr Maddrell stated the case to be "a simple contract dispute" (Local Court 18.9). I have already mentioned that Mr Maddrell is not legally qualified and he made no submissions. In those circumstances, the Magistrate could have derived little use from these remarks in identifying the legal basis of the claim before him, and in fact these comments may have served to confuse matters.

46 As stated at [17] above, Mr Peisley's written submissions contended that the relief sought by Maddrell and the Owners Corporation was a type of restitution, based on principles of unjust enrichment, and thus entitled him to raise a restitutionary defence, namely detrimental change of position.

47 This point was raised by the Magistrate at the commencement of Mr Peisley's oral submissions (Local Court 58.7): "HIS HONOUR: …See, I'm not sure why the defendant's submission contains material about restitution to start with. Is that pleaded? DEFENDANT: Because it was a point of total failure of consideration that contracts of service never provided that - given that unjust enrichment is a part of the - the - it's part of the claim of failure of consideration as an equitable notion that unjust enrichment is a claim in restitution." HIS HONOUR: Okay. Well, what I propose to do is order a transcript, it will be necessary, and reserve…"

48 The issue of restitution was not dealt with further by the Magistrate at the hearing. Mr Peisley continued to make a range of submissions as to factual matters, but nothing more on the restitution point. Maddrell and the Owners Corporation's Claim was For Restitution on the Basis of a Total Failure of Consideraton

49 Mr Jacobs referred this Court (T19.34) to Jackman IM, The Varieties of Restitution, where it is said (p. 44): "Few concepts in the common law are both as resilient and as controversial as 'total failure of consideration'. For at least three centuries, it has provided one of the principal grounds for the recovery of money paid to another, but it remains easier to illustrate than to define."

50 Notwithstanding historical controversy or legal debate, in my view there is no doubt that the return of money paid for a consideration which has totally failed is a type of restitution. Restitution, of course, does not itself constitute a cause of action, but rather "explain[s] the availability of relief in a number of different circumstances": Haxton v Equuscorp (formerly Equus Financial Services) [2010] VSCA 1; 265 ALR 336 at 358 per Dodds-Streeton JA.

51 Mason K, Carter JW and Tolhurst GJ state, in Restitution Law in Australia, 2nd ed, that (p. 414) (footnotes omitted) (emphasis added):

"… the common count for money had and received by the defendant to the use of the plaintiff, on a consideration that totally failed, was used to recover (or justify) restitution of payments made under discharged contracts. Total failure of consideration, that is total failure of the agreed return, still represents the principal basis for the recovery of a payment as restitution .

52 The origins of such a claim were considered by the High Court in Roxborough and Others v Rothmans of Paul Mall Australia Ltd [2001] HCA 68; 208 CLR 516. Gleeson CJ, Gaudron and Hayne JJ said at 524-525 (footnotes omitted) (emphasis added): "[14] The appellants based their case, in part, upon the principles underlying the common indebitatus count for money had and received by the defendant to the use of the plaintiff… [15] Mason and Carter, in Restitution Law in Australia, point out that cases decided in relation to the common indebitatus counts , although they involved an implied contract analysis which is now out of date, ' form the precedents which make up the legal matrix of restitution law' . Lord Mansfield, in Moses v Macferlan , referred to money paid 'upon a consideration which happens to fail' as an example of money which, ex aequo et bono, a defendant ought to refund and, therefore, money for the recovery of which the count for money had and received lies."

53 Given the above principles and the manner in which the case was put by Mr Sleight in the Local Court, I accept Mr Jacobs' submission to the effect that restitution is the only class of legal remedy within which the relief sought in the Amended Statement of Claim could have fallen, and indeed was the remedy awarded by the Magistrate (T19.28). Despite suggesting in his written submissions that "No restitutionary remedy was granted" by the Magistrate (p. 5), Mr Sleight effectively conceded in this Court that such a statement was wrong or misleading (T32.1).

54 It is necessary to briefly consider the nature of a claim for restitution based on a total failure of consideration, and the relevance of principles of unjust enrichment, in order to identify the manner in which the Magistrate fell into error. The following is intended only to be a summary of those key aspects I consider are relevant to this appeal. Nature of Claims for Restitution Based on a Total Failure of Consideration

55 In Haxton v Equuscorp, the Victorian Court of Appeal recently considered, in some detail, the evolution and nature of claims for restitution based on the well-established category of total failure of consideration.

56 Dodds-Streeton JA (Ashley and Neave JJA concurring) traced lines of Australian and English authority dealing with the doctrine, commencing with the well-known case of Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32; [1942] 2 All ER 122, and including more recent decisions of the High Court of Australia in David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; 175 CLR 353 and Roxborough and Others v Rothmans of Paul Mall Australia Ltd; as well as the Victorian Court of Appeal's decision in Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6. Her Honour then said, at 372: "[177] The decided cases do not establish the precise ambit and prerequisites of total failure of consideration as a vitiating factor justifying restitution, or clearly indicate its relationship to, and potential overlap with, other recognised categories, such as mistake. Nor is there yet a settled and coherent judicial analysis of the impact, in the restitutionary context, of the termination of a contract by a party against whom it is unenforceable. As Lord Woolf stated in Westdeutsche , "[r]estitution is an area of the law which is still in the process of being evolved by the courts. In relation to restitution there are still questions remaining to be authoritatively decided".

[178] Mindful of the uncertainties necessarily attending the case-by-case development of this area of the law of restitution, in my view, neither Australian nor English authorities have expressly, or as a matter of inference, wholly discarded the requirement that the failure of consideration be total. Rather, particularly in cases where there is no enforceable contract or alternative source of remedy, courts have mitigated its severity by a liberal approach to severance from the consideration bargained for. David Securities and Roxborough do not establish that a lender which has received some benefits or repayment under an unenforceable loan contract is, without more, prima facie entitled to restitution on the ground that the consideration it bargained for was a legally enforceable right to repayment which has wholly failed. 57 Jackman IM, in Chapter 4 dealing with "Payments Made on a Total Failure of Consideration", identifies specifically the circumstances in which the claim may arise (at pp. 44-45): "…the three doctrines of the common law which use 'total failure of consideration' as a yardstick for the discharge or avoidance of a contract, and thus for the recovery of money paid pursuant to the contract, namely frustration, mistake and termination for fundamental breach. The recovery of money in these cases is restitutionary, for there is no contractual term for the return of money in these circumstances. There is, however, a category of case in which the contract itself provides (expressly or impliedly) for the repayment of money, even in favour of the party in breach; these cases will be analysed to demonstrate that they involve contractual rather than restitutionary obligations and do not involve the application of the doctrine of total failure of consideration."

58 Mr Jacobs submitted that the present case fell within the third category referred to above, namely termination for a fundamental breach of contract (T19.39) or repudiation. I accept that submission in light of both the factual circumstances of the case, and the manner in which the claim was put to the Magistrate.

59 Thus, in the circumstances, a claim based on a total failure of consideration can only be available once the contract has been discharged, either for breach or frustration: Baltic Shipping Company v Dillon (The Mikhail Lermontov) [1993] HCA 4; 176 CLR 344 at 355 per Mason CJ; see also Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) BPR 11,987 per Young J at 11,989-11,990. That position is reflected in the passage at [51] above from Mason K, Carter JW and Tolhurst GJ, and also where the authors state (at p. 416): "…There are six basic rules … applicable to failure of the agreed return. First, the relevant time for determining whether a failure of the agreed return has occurred is the time at which the contract is discharged for breach or repudiation. … [118] Total failure of consideration as the effect of discharge. While a contract remains to some extent executory, there can be no talk of total failure of the agreed return, for the simple reason that at least one party is subject to an unperformed primary obligation. However, once a contract has been discharged for breach or repudiation, the primary obligations are no longer enforceable and the question of total failure may be raised."

60 The notion of a total failure of consideration is concerned with performance of the defendant's promise, not the promise itself, as being the relevant consideration: Baltic Shipping Company v Dillon (The Mikhail Lermontov) at 350-351 per Mason CJ; 378 per Deane and Dawson JJ. It looks to the benefit bargained for under the contract by the plaintiff rather than any bargain that may have been received in fact: David Securities Pty Ltd v Commonwealth Bank of Australia at 382 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ. Hence, the terminology commonly used now is a "total failure of the agreed return": see, for example, Macon K, Carter JW and Tolhurst GJ at [59] above.

61 Finally, the failure of consideration must, generally speaking, be total: see, for example, Rowland v Divall [1923] 2 KB 500. Recovery will usually be precluded where the plaintiff has received at least part of the agreed return: see Baltic Shipping Company v Dillon (The Mikhail Lermontov). Relevance of Unjust Enrichment

62 Mr Sleight submitted to this Court that although Maddrell and the Owners Corporation's claim for relief may have been restitutionary in nature, it is a misunderstanding to suggest this also involves the concept of unjust enrichment (T32.15). Mr Sleight referred the Court to Davenport P and Harris C, Unjust Enrichment, which states (p. 8) (footnotes omitted),: "Some commentators treat the terms 'restitution' and 'unjust enrichment' as being synonymous, but there is a distinction between the meaning and use of these two terms. A claim based on unjust enrichment is known as a claim for restitution."

63 In this case, Mr Sleight submitted that Maddrell and the Owners Corporation did not have a claim for restitution based on unjust enrichment; what they had was an old claim for restitution based on a total failure of consideration (T32.23-33.9; Defendants' Further Written Submissions at [8]). He submitted that the two are distinct and thus, in the circumstances, the principles of unjust enrichment were simply not relevant to his client's claim. Mr Sleight submitted that the Magistrate's reasoning was correct, and that his Honour would have fallen into error by having regard to the issue of (detrimental) change of position (T33.8).

64 In Pavey and Matthews Pty Ltd v Paul [1987] HCA 5; 162 CLR 221; the High Court recognised (at 256-257) that unjust enrichment (citations omitted): "…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."

65 It is therefore now well-established that unjust enrichment is a concept rather than a definitive legal principle: David Securities Pty Ltd v Commonwealth Bank of Australia at 378-389 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ; Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 81 ALJR 1107 at [151]. To that end, I note that Davenport P and Harris C (parts of which Mr Sleight relied on), write at p.27: "Unjust enrichment is now almost universally accepted as a general principle underlying restitutionary claims which can be used to explain old law and solve new problems."

66 Brennan J stated, in David Securities Pty Ltd v Commonwealth Bank of Australia (at 390), that the concept of unjust enrichment is "present in all cases in which the common law action for moneys had and received", which is the origin of a claim based on a total failure of consideration (see [51]-[52] above). That case was concerned with payments made under mistake of law. Mr Sleight essentially submitted that the use of unjust enrichment to justify a remedy in those cases could therefore not be used in cases where restitution results from a total failure of consideration following termination of a contract (T32.23).

67 The comments of Brennan J illustrate the point that unjust enrichment is a broad and umbrella-type tool for analysing and justifying the spectrum of circumstances in which restitution may be claimed. To confine its consideration to a finite species of cases would, in my view, render it more like a definitive legal concept, quite contrary to the High Court's intentions in Pavey and Matthews Pty Ltd v Paul. There seems to be no basis for precluding its application or relevance to a claim based on a total failure of consideration in circumstances where a contract has been discharged by termination for breach or repudiation.

68 I reject the submission that principles of unjust enrichment are wholly irrelevant to a claim for restitution based on a total failure of consideration. The Magistrate Misdirected Himself

69 Having established that Maddrell and the Owners Corporation's claim, as pleaded and advanced by Mr Sleight in the Local Court, was for restitution based on a total failure of consideration, I have formed the view that the Magistrate determined the claim upon an incorrect legal criterion and thus misdirected himself in law.

70 As I have explained, the Magistrate commenced his reasons by erroneously stating that Maddrell and the Owners Corporation sue on the basis of breach of contract. He then identified that "the issue is whether the contract has been breached" (at [2]). It is again useful to also set out his Honour's findings at [17] (emphasis added): "In my view the defendant breached the terms of the contract, and remains in breach by not determining the matter on the information before him. He ought repay the money in full, as he has breached the contract. He had not fulfilled and essential term - namely the provision of his expert's determination. This represents a total failure of consideration . His reasons for not doing so do not stand up to detailed analysis."

71 A fair reading of the above and the whole of the Magistrate's reasons indicate to me a belief by his Honour that breach was the only issue in the case. But, as is apparent from the principles set out at [55]-[61] above, a breach of contract of itself is insufficient to found a claim for restitution based on a total failure of consideration. At the very least, in the circumstances of this case, his Honour was required to separately consider the issue of whether Mr Peisley's retainer had been terminated, being the date at which any failure of consideration, and thus a cause of action, could arise.

72 Contrary to his written submissions, Mr Sleight submitted orally that a finding of termination by repudiation was implicit in his Honour's reasons (T32.44). He submitted that by not completing his determination within a reasonable time, there came a point when Mr Peisley's conduct amounted to that which Maddrell and the Owners Corporation "could accept as terminating the contract" (T32.50), and that they "brought the contract to an end and at that date there had been a total failure of consideration and they are entitled to their money back" (T33.1). Because of the manner in which certain grounds of appeal were pleaded, Mr Jacobs also contended that a finding of repudiation was made, but that the Magistrate had failed to give reasons in respect of them.

73 The only parts of the Magistrate's reasons that touch upon the termination of the retainer for repudiation is the Magistrate's reference to Mr Peisley's inability to fulfil his obligations (at [26] and [31]): "[26] I cannot, however, leave the issue of costs aside without dealing with the issue of the quantum. On any measure it is an example of gross overcharging, and had it been legal work I would have referred this matter to the appropriate authorities. Even as expert remuneration, the billing is outrageous. Without objection there was direct evidence tendered by the plaintiffs as to comparative quotations of between $5000 and $7000. The defendant seemed intent on running up costs. The original quote of $12,000 was exceeded exclusively by the defendant acting unreasonably, and taking the most tortuous route to obtain information. He sought quotes which were unnecessary and he sought submissions on matters that were not in issue. There are only two possible conclusions - either the defendant was unable to fulfil his obligations and flailed about to delay his inadequacy for the task at hand, or he was milking the matter for fees. Either way, there is no justification for not completing the task he contracted to do… … [31] …the defendant did not understand the nature of his task, was incompetent to a very high degree, or simply was seeking to milk the plaintiffs for money."

74 Repudiation of contract is a serious matter and ought not be lightly found or inferred: Ross T. Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 per Wilson J at 71; Batterham v Makeig [2010] NSWCA 86 per Young JA at [82]. Although this proposition concerns inferences of fact to be drawn by a trial judge in making his or her findings, it follows that where matters ought not be lightly found or inferred, one would expect sufficiently clear and express reasons for making them.

75 In my view, the extract at [73] above does not amount to a finding by the Magistrate that, by his conduct, Mr Peisley repudiated his retainer and that it was consequently terminated. The passing reference to Mr Peisley's inability to fulfil his obligations arises in the context of considering the quantum of fees charged, and is framed by his Honour as a hypothetical and alternative explanation as to why Mr Peisley's original quote was exceeded. On my reading, it does not purport to be the legal foundation upon which the Magistrate ultimately found in favour of Maddrell and the Owners Corporation, nor does it assume such significance in light of his Honour's earlier focus and findings concerning the issue of breach.

76 Even when repudiation occurs, it does not necessarily follow that this operates to automatically terminate a contract. Again, the Magistrate made no reference (express or otherwise) to any kind of election to terminate the retainer made by Maddrell and/or the Owners' Corporation, whether expressly or by their conduct. Indeed, his Honour's finding at [17] that Mr Peisley (emphasis added) "breached the terms of the contract, and remains in breach…" reinforces the view that the Magistrate proceeded upon the basis that the retainer had not been terminated and continued to be effective and enforceable.

77 I accept Mr Jacobs' submission that the Magistrate appears to have determined the matter upon the basis of a breach of contract. In the Local Court, Mr Sleight expressly did not advance that cause of action. He pressed a claim for restitution based on a total failure of consideration. Accordingly, the Magistrate was required to consider each element or circumstance which at law creates an obligation in restitution to repay the amount sought. This required him to consider and make findings with respect to whether Mr Peisley's retainer had been terminated (and on what basis), which his Honour did not. At the very least, the Magistrate failed to deliver adequate reasons in respect of any such findings, but as I have said, I do not consider these were made.

78 It is apparent from the above that the Magistrate confused the concepts of restitution and breach of contract, and proceeded to determine the claim on an incorrect legal criterion. His Honour therefore misdirected himself in law, and the appeal should be allowed.

79 I wish to deal briefly with the submission that this effectively denied Mr Peisley procedural fairness, as it assists the question of whether the claim ought be remitted to the Local Court or some other order made. The Procedural Fairness Issue

80 Mr Jacobs submitted that, by the Magistrate not understanding the legal principles he was dealing with, Mr Peisley was denied procedural fairness by not being afforded the opportunity to have his argument concerning the restitutionary defence of detrimental change of position understood (T24.25). Mr Jacobs directed the Court to the High Court's decision in Cameron v Cole [1944] HCA 5; 68 CLR 571, in particular portions stating that a person against whom a claim is made "must be given a reasonable opportunity of appearing and presenting his case" (at 589). He submitted that for their to be a "real trial" (at 589), a judicial officer must first acknowledge the jurisprudential universe in which they are operating (T24.44).

81 In written submissions, Mr Sleight contended that paragraph [4] of the Magistrate's reasons demonstrate that each party was fully aware of the contentions of the opposition and in particular of the claim based on a total failure of consideration. Accordingly, it was submitted that there had been no denial of procedural fairness and none identified by Mr Peisley.

82 I do not consider Cameron v Cole to be direct authority for the proposition put by Mr Jacobs. It is a case more concerned with dealing with a claim in the absence of a party to litigation, thereby denying them, as it is said, the opportunity to appear and present their case. Here, Mr Peisley appeared for himself and had put forward arguments concerning restitution in the form of written submissions. It appears, as Mr Sleight suggested, that he was apprised of the nature of Maddrell's claim, and indeed made specific submissions concerning restitution as a result.

83 The difficulty, however, is that the Magistrate was clearly not. This is evidenced in the extract from the transcript set out at [47] above, where his Honour asked, in respect of restitution, "is that pleaded?". When the Magistrate finally delivered judgment, he dismissed Mr Peisley's submissions as "irrelevant".

84 In my view, regardless of their merit, Mr Peisley's submissions concerning restitution were, at the least, relevant. He was entitled to put them to the Magistrate as he had come to Court to meet a claim for restitution based, on his understanding, a total failure of consideration. He was entitled to have those matters considered and determined on their merits.

85 Error of law has been established, the Magistrate's decision ought be set aside and the matter remitted to the Local Court to be determined according to law. Costs

86 The Plaintiff has succeeded on his appeal to this Court and, in my view, costs should follow the event.

87 The order for costs made in the Local Court ought be set aside. The costs of the first hearing in the Local Court should abide the outcome of the hearing to proceed following remittal.

88 The First and Second Defendants are to have a certificate under the Suitors Fund Act 1951, if entitled. Orders

(a) Appeal allowed. (b) The judgment and orders 1 and 2 of the Local Court on 3 December 2009 are set aside. (c) The matter is remitted to the Local Court for determination according to law. (d) The First and Second Defendants are to pay the Plaintiff's costs of the appeal on the ordinary basis.

(e) The costs of the Local Court hearing should abide the outcome of the hearing to proceed following remittal.

(f) The First and Second Defendants are to have a certificate under the Suitors Fund Act 1951 , if so entitled. ***********

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