Federal Court of Australia|1991-04-26|Before: Gummow J

The applicant pay the costs of the first respondent of the proceedings on 4 and 12 April 1991.

The matter be adjourned for further directions before Gummow J. at 9.30 a.m. on 17 May 1991.

NOTE: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

2. Hambros moves pursuant to Order 11 rule 16 and Order 20 rule 2 of the Federal Court Rules. It contends that no reasonable cause of action against it is disclosed and that, even if such an action is disclosed, the pleading is embarrassing. In response to questions from the bench, counsel indicated that it was not practicable to isolate particular questions for separate decision on a final basis. The result is that it is for Hambros to show no reasonable cause of action is disclosed, in accordance with the well known principles to be found in General Steel Industries Inc. v Commissioner for Railways (N.S.W.) [1964] HCA 69; (1964) 112 CLR 125 at 129-130, per Barwick C.J.

3. Pan is the owner of premises at 153-157 Victoria Avenue, Chatswood, a suburb of Sydney ("the Property"). Hambros is a financier and Winterton a builder.

4. On 3 February 1989, Pan and Hambros (together with two other parties as guarantors of the obligations of Pan) entered into a written agreement of some 50 pages which is described in the Statement of Claim as "the Financial Agreement". The Financial Agreement was amended by supplemental deeds dated 5 October 1989 and 1 August 1990. The Financial Agreement provided for a loan facility for use by Pan for the purpose of the acquisition of the Property and the construction thereon of an office block. The obligations of Pan to Hambros were to be secured by first registered mortgage over the Property. Winterton is not a party to this agreement. Sub-clause 22.1 stated that the Financial Agreement shall be governed by and construed in accordance with "the laws of New South Wales".

5. In August 1989 (the precise date does not appear) Pan and Winterton entered into a written agreement for the construction of the office block on the Property for a lump sum of $1,650,372.00 ("the Building Contract"). This was in a standard form (of over 40 pages) approved by The Royal Australian Institute of Architects, The Master Builders' Federation of Australia Inc. and The Building Owners and Managers Association of Australia Limited. The Building Contract obliged Pan to make the site available to Winterton on or before 28 August 1989 and specified as the date for practical completion 39 working weeks thereafter. Provision also was made in the Building Contract for the appointment by Pan of an architect to administer it, and, in particular, to issue Progress Certificates against presentation of which payments would be made by Pan to Winterton (cl. 10.07). The governing law was that of New South Wales (cl. 1.05).

6. Order 20 sub-rule 2 (2) provides that the Court may receive evidence on the hearing of an application for an order under sub-rule (1). Both the Financial Agreement and the Building Contract were in evidence on the hearing of the motion.

7. It is alleged in paras. 10, 11 and 12 of the Statement of Claim that Winterton has carried out and completed the building work in accordance with the Building Contract, and that Pan has paid Winterton thereunder sums totalling $1,314,785.15, but that there remains owing to Winterton under the Building Contract two progress claims, one for $258,569.48 which became payable on 29 October 1990, and the other for $112,858.04 which became payable on 7 November 1990. The total of these unpaid progress claims, $371,427.52, is equal to the amount which, in the Application, Winterton seeks to recover as damages, not only as against Pan, but also against Hambros.

8. The claim of Winterton against Hambros is put on four bases, the legal adequacy of each of which is disputed by Hambros. The third and fourth bases are founded in contravention of s. 52 of the Trade Practices Act 1974 ("the Act") and "unjust enrichment". I will return to these later in these reasons. The first and second bases involve the proposition that Pan held certain of its rights against Hambros under the Financial Agreement in trust for Winterton and, alternatively, that in that agreement Hambros promised Pan that it, Hambros, would pay moneys to a third party, Winterton, such that this promise might be enforced directly by Winterton against Hambros despite the lack of contractual privity. In aid of both propositions, counsel for Winterton claimed support from what was said and decided by the judgments in Trident General Insurance Co. Limited v McNiece Bros Proprietary Limited [1988] HCA 44; (1988) 165 CLR 107.

9. The applicable state law is that of New South Wales, as the Court is exercising federal jurisdiction in that State: Judiciary Act 1903, s. 79.

10. Paragraphs 6 - 9 of the Statement of Claim are in the following terms:

"6. (Hambros) and (Pan) made the (Financial Agreement) and (Pan)

granted a mortgage over the (Property) in favour of

(Hambros) pursuant to that agreement with the purpose,

object and intention of inducing (Winterton) to enter into

the (Building Contract) and performing (sic) the building

work so as to improve the (Property) for the benefit of each

of them, (Hambros) and (Pan).

7. (Winterton) entered into the (Building Contract) in reliance

on the fact that (Pan) had, by the (Financial Agreement),

secured (Hambros') promise to lend to it sums sufficient to

enable (Pan) to pay to (Winterton) all amounts due to it

under the (Building Contract).

8. In the circumstances (Pan) holds the benefit of (Hambros')

promise under the (Financial Agreement) in trust for

(Winterton) entitling it to compel (Hambros and Pan) to have

that promise carried into effect for its benefit.

9. Alternatively, (Hambros') promise under the (Financial

Agreement) is a promise made by it to pay money to a third

party, namely (Winterton), which may be enforced directly by

the latter."

It is then alleged in para. 22, that by reason of the matters set out in paras. 8 and 9, Winterton is entitled to recover the amount of the unpaid progress claims from Hambros.

11. I turn to deal with the four causes of action propounded by Winterton, commencing with that concerning privity of contract.

12. Questions of privity of contract usually arise in cases where, by way of example, in return for consideration provided to A by B, A promises B that A will pay C $1,000. In such a case, C is a stranger to the contract and, in addition, no consideration has moved from C. But concepts of privity and consideration are distinct: Trident, supra at 115-116, 127, 164. An action for damages lies against A at the suit of B, not C. There is debate in the authorities as to whether, if there was no trust binding B in favour of C, B may recover any more than nominal damages from A: Trident, supra at 118-119, 139, 158, 173. There is no applicable statutory modification to the law as to privity of contract in New South Wales; cf. Property Law Act 1974 (Qld), s. 55; Property Law Act 1969 (W.A.), s. 11; Contracts (Privity) Act 1982 (N.Z.); Karangahape Road International Village Ltd v Holloway [1988] NZHC 159; (1989) 1 NZLR 83 at 100-105.

13. An objection for lack of privity arises also where A promises B to pay B $1,000 on terms that B then pay $1,000 to C. In such a case, A can get a good receipt only from B, and it would be a breach of contract for A to pay C directly. The distinction between the two classes of case is discussed in Weld-Blundell v Stapleton-Bretherton (1941) 1 Ch 482 and Cathels v Commissioner of Stamp Duties (1959) 62 SR (N.S.W.) 455. In the second category of case, A is liable for the $1,000 at the suit of B. But C still remains a stranger to the contract, and no consideration has moved from C.

14. As I understood the submissions for Winterton, it submitted that the Financial Agreement fell into the first category and that it contained a promise by Hambros to Pan that Hambros would pay money to a third party, Winterton. That submission reflected the terms in which para. 9 of the Statement of Claim are expressed.

15. Winterton contends that despite the lack of privity, it might, consistently with Trident, recover by action against Hambros. But there was no "third party" contract here, of the nature discussed in Trident. There was no promise of Hambros to Pan to pay Winterton.

16. The Financial Agreement ante-dated the Building Contract and did not specify any particular builder for construction of the office block, beyond stating that the builder was to be nominated by Pan and approved by Hambros. Clause 2 of the Financial Agreement provided for Pan to utilise the facility extended thereunder by Hambros, by giving draw-down notices specifying, inter alia, "payment instructions" (cl. 3.2). For draw-downs after the initial draw-down, Pan was obliged (cl. 4.2) to furnish with each draw-down notice a certificate from an architect nominated by Pan and approved by Hambros, which stated, inter alia, the amount of money required at the date of the certificate; the proceeds of the draw-down were to be paid in payment of completed works as so certified (cl. 4.2 (d) (e)). Counsel for Hambros gave various practical examples of payment instructions which might properly stipulate payment by Hambros to third parties other than the builder.

17. The effect of such instructions, which might be expected to vary between draw-downs, would be a mandate by Pan to Hambros, or perhaps an assignment by Pan, as to the disbursement of moneys otherwise payable by Hambros to Pan as the borrower under the loan facility; cf. Coulls v Bagot's Executor and Trustee Company Limited [1967] HCA 3; (1967) 119 CLR 460. But, until particular payment instructions were given to Hambros by Pan, there would be no requirement under or pursuant to the Financial Agreement that Hambros pay any moneys to Winterton as the builder.

18. It is pleaded in para. 9 that the promise of Hambros under the Financial Agreement is a promise by it to pay money to Winterton, and it is alleged that this promise may be enforced directly by Winterton. That is not what Hambros promised. It was not pleaded that, in relation to the two unpaid progress claims, Hambros has refused to pay Winterton despite payment instructions to that effect given by Pan to Hambros under the Financial Agreement. (Nor is it apparent whether Hambros claims to be entitled to refuse to make these payments, for example, by reason of breach by Pan of the Financial Agreement.) The allegations in this regard, in paras. 12 and 16, are of a failure by Pan to pay Winterton unpaid progress claims under the Building Contract, to which, of course, Pan and Winterton are parties.

19. My conclusion is that the first cause of action pleaded by Winterton is so clearly untenable that it cannot possibly succeed, and that conclusion may be reached without deciding what flows from Trident to change the common law rules concerning privity of contract.

20. In any event, even if the pleading did reflect the terms and the effect of the Financial Agreement, Trident would not provide authority for the proposition that the promise to Winterton might be enforced directly against Hambros by Winterton.

21. Trident is a decision of all members of the High Court. At best from the view point of Winterton, there is support by three only of their Honours (Mason C.J. and Wilson J. supra at 123-124, Toohey J. at 172) for the proposition that in addition to the qualifications and exceptions already established to the doctrine of privity of contract, the old rules do not apply in their full rigour. And their Honours confined their decision to the position of third parties claiming under some policies of insurance. Gaudron J. (at 173) expressly differed from Mason C.J. and Wilson J., and founded liability in restitutionary principles which operated dehors the contract in question.

22. I turn now to consider the second cause of action, that relying upon a trust binding Pan and entitling Winterton to compel Pan to have certain obligations of Hambros under the Financial Agreement carried into effect for the direct benefit of Winterton.

23. Particulars were sought and supplied. In these, Winterton stated that the trust pleaded in para. 8 arose "as a matter of law"; however, as the matter was developed before me in submissions of counsel, it became apparent that what was relied upon was an express trust.

24. In response to the request for particulars of the allegations in para. 8 of the Statement of Claim, which sought the matters, facts and circumstances on which Winterton relied in support of the allegation that Pan held the benefit of Hambros' promise under the Financial Agreement to lend money to Pan, in trust for Winterton, the solicitors for Winterton responded:

"The financial agreement was entered into to

meet the liabilities of (Pan) to the contractor

under a building contract for the construction

of a commercial development property and

(Winterton) is the contractor. Further,

(Winterton) was by its construction of the

building the beneficiary of the funds provided

under the financial agreement."

The reference in para. 8 to the entitlement of Winterton to compel Hambros and Pan "to have that promise carried into effect for its benefit" was said to be to the promise to provide the funds to meet the cost of construction of the commercial development on the property. This appears to be a reference to what is alleged in para. 7 of the Statement of Claim. It is there alleged that Winterton entered into the Building Contract in reliance on the fact that Pan had secured, by the Financial Agreement, the promise of Hambros to lend to Pan sufficient sums to enable Pan to pay Winterton all amounts due to it under the Building Contract.

25. Reliance also is placed in the particulars upon a conversation in or about June or July 1989, which was after the entry of Pan and Hambros into the Financial Agreement, but before the entry of Pan and Winterton into the Building Contract. The conversation is said to have been between an officer of Pan, Mr Phillip Drummond, and an officer of the applicant, Mr William Winterton. Mr Drummond is alleged to have stated that Hambros would be providing all the funds for construction costs, that prior to accepting Winterton's tender, he would advise Hambros that Winterton was the proposed successful tenderer, that Hambros would "check out" Winterton, and that subject to Hambros' approval, Pan would enter into the building contract with Winterton. It is alleged that Hambros knew or ought to have known and so intended that Mr Drummond would make those statements, and that in fact Hambros did "check out" Winterton and gave its approval of Winterton prior to Pan entering into the Building Contract. The truth of these allegations is to be assumed on this application.

26. It should be borne in mind that the definition of "Builder" in cl. 1.1 of the Financial Agreement was to a builder nominated by Pan and approved by Hambros. Thus, the allegation as to the giving of approval by Hambros of Winterton prior to Pan entering into the Building Contract is entirely consistent with the performance of the provisions of the Financial Agreement.

27. It is also alleged in the particulars that, the existence of the Financial Agreement having been disclosed by Pan to Winterton, Winterton was satisfied that Pan was able to fulfil its contractual obligations to Winterton. However, the particulars also disclose that Winterton does not make a case that, prior to entering into the Building Contract, it obtained a copy of the Financial Agreement, nor that any officer of Winterton had read the Financial Agreement before Winterton entered into the Building Contract.

28. These then are the materials from which Winterton would invite the conclusion that Pan was a trustee for it as alleged in para. 9.

29. A critical question is the identification of the subject matter of the trust. This appears to be the benefit of so much of the promises of Hambros to Pan in the Financial Agreement as obliged Hambros to lend Pan sufficient funds to enable Pan to pay "the Builder" (being a builder of the works on the Property who was nominated by Pan and approved by Hambros pursuant to cl. 1.1) amounts due from Pan to the builder under the Building Contract.

30. It also is essential for Winterton to establish the existence of the necessary intention to create an express trust containing those terms. The trust alleged is not apparent on the face of the Financial Agreement. It is not the result of private family dealings where some imprecision of thought and expression might be expected. Nor is the alleged trust part of a pattern of business dealings each in a legal form intended to follow those before it, with a resulting abbreviation in detail; cf. Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 277.

31. The relevant intention to create the trust is that of Pan, although it may be necessary for there to have been a joint intention of Hambros and Pan. The latter view is consistent with that expressed by Deane J. in Trident, supra at 149, although Mason C.J. and Wilson J. (at 121) looked only to the promisee, which here was Pan. In some cases it may be sufficient (as Deane J. pointed out at 148) to construe the terms of the contract in question, and the necessary intention may more readily be found in some classes of contract as others. Certainly, in seeking to divine an intention from language employed by the parties, the Court may look to the nature of the transaction, and the relevant circumstances attending the relationship between the parties: Walker v Corboy (1990) 19 NSWLR 382.

32. Here, the Financial Agreement plainly contemplated the engagement of a builder by Pan with the approval of Hambros, and the use of the facility provided by Hambros for the acquisition of the Property and the construction of an office block upon it. It was a condition precedent to draw-downs subsequent to the first draw-down that Hambros should have received a certified copy of the building contract, which contract was to be capable of assignment by Pan (cl. 4.2 (c) (v)). The proceeds of such draw-downs were to be applied in payment of work completed and certified by an architect's certificate (cl. 4.2 (e)). The Financial Agreement included covenants by the two guarantors. They were joined in the two supplemental deeds dated 5 October 1989 and 1 August 1990. The obligation of repayment and the right of prepayment of the indebtedness under the Financial Agreement were expressed in cl. 5 in terms of rights and obligations flowing simply between Hambros and Pan. Pan might not assign its rights under the Financial Agreement without the prior written consent of Hambros (cl. 17.2). That is an important provision.

33. The consistent tenor of the Financial Agreement is that Hambros was dealing directly only with Pan. There may, in some settings, be ground for debate as to whether a declaration of trust of rights is an outright assignment of those rights; cf. Helstan Securities Ltd v Hertfordshire County Council (1978) 3 All ER 262 at 264. But the significance of cl. 17.2 for present purposes is as an indication of the intention of Hambros not to place itself in a position whereby, without its approval, rights against it under the Financial Agreement would be vested in a party other than Pan. The intention of Pan has to be gauged in the light of its responsibilities to Hambros, and in this sense the present case illustrates the point made by Deane J. in Trident, supra at 149 as to the significance of the intentions both of promisor and promisee.

34. This is a case where both borrower and lender intended to keep alive their rights to vary consensually between them the terms of their obligations, subject to the need to bind the guarantors to any such variation. In my view, it is quite plain from looking to the terms and nature of the Financial Agreement that Pan did not intend to displace its own interests, in favour of those of whoever was selected as the builder, by assuming an obligation to exercise its rights against Hambros under the Financial Agreement, as regards draw-downs, for the benefit of the selected builder. The inference is not to be drawn that Pan intended to create in a third party an interest in its rights; cf. Bahr v Nicolay (No. 2) [1988] HCA 16; (1988) 164 CLR 604 at 618-619. Nor, in order to give efficacy to the Financial Agreement was it a matter of necessity that there be such a trust; cf. the reference to "commercial necessity" by Samuels J.A. in Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 at 189-190.

35. I have referred to the surrounding circumstances as relied on in the particulars provided by Winterton. The circumstances that the Financial Agreement was entered into to enable Pan to purchase and provide for the erection of an office block upon the property; that Winterton is the contractor engaged for that purpose by Pan with the approval of Hambros; and that in June or July 1989 an officer of Pan stated to an officer of Winterton that (i) Hambros would be providing all the funds for construction costs, (ii) prior to Pan accepting the tender of Winterton, Hambros would "check out" Winterton, and (iii) subject to Hambros' approval, Pan would enter into the Building Contract with Winterton; are surrounding circumstances which may be taken into account in deciding whether Pan had the necessary intention to constitute itself a trustee in favour of Winterton. But, in my opinion, those circumstances tend to point away rather than towards a declaration of trust by Pan.

36. The circumstance, as pleaded in para. 7, that Winterton entered into the Building Contract in reliance on the terms of the Financial Agreement as securing to Pan the promise of Hambros to lend Pan sums sufficient to enable Pan to pay Winterton all amounts due to it under the Building Contract, is likewise not conducive of a conclusion that Pan was a trustee for Winterton. Nor is the allegation in para. 6 that Hambros and Pan made the Financial Agreement with the purpose, object and intention of inducing Winterton to enter into the Building Contract, conducive of a conclusion that Pan was a trustee for Winterton.

37. The reality is that detailed, but not unusual, commercial arrangements were arrived at between the parties which produced the result that first, in February 1989, Pan, Hambros and the guarantors entered into the Financial Agreement and then, in August 1989, Pan and Winterton entered into the Building Contract. Each contract operates in aid of the other, in the sense that the Financial Agreement provided Pan with the finance to develop the Property and to engage Winterton as the builder. But all of the matters relied on by Winterton leave it a great distance from making good any case of a trust in its favour of any rights of Pan against Hambros under the Financial Agreement.

38. Accordingly, the Statement of Claim, insofar as it pleads the second cause of action, should also be struck out.

39. The third basis on which the claim is made is that Winterton has suffered loss or damage by reason of the non-payment of the unpaid progress claims, and that this is in consequence of misleading or deceptive conduct by Hambros, within the meaning of s. 52 of the Act. This cause of action is pleaded in paras. 15-21 of the Statement of Claim.

40. Winterton alleges (para. 15) that prior to its execution of the final work, Hambros had decided that it would not advance any more money to Pan under the Financial Agreement, and that (para. 16) as a result of that decision by Hambros, Pan has failed to pay to Winterton the unpaid progress claims "and is unable so to do". Winterton then alleges (para. 17) that had it known of Hambros' decision referred to in para. 15, it would have been entitled to and would have refused to carry out and complete the final work. It is then alleged (para. 18) that in the circumstances, Hambros had a duty to inform Winterton of its decision referred to in para. 15, and that it failed to do so, in breach of that duty. That failure is then alleged (para. 19) by Winterton to have amounted to conduct on the part of Hambros, in trade or commerce, which contravened s. 52 of the Act. The ground is then laid for a claim, presumably under s. 82 of the Act, to recover loss or damage, by the allegation that the misleading or deceptive conduct complained of induced Winterton to act to its detriment by carrying out and completing the final work "without being paid for it".

41. Winterton relies upon an obligation of Hambros to disclose its decision to Winterton, and in that regard relies on what was said in the Full Court in Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 488-490, 504-505, 507-508.

42. In para. 18, the duty to Winterton is said to have arisen "In the circumstances . . .". In response to requests for particulars seeking identification of those circumstances, some reliance was place upon paras. 8 and 9 of the Statement of Claim which, it will be recalled, state the causes of action founded in trust and in contract by way of exception to the principle of privity. Counsel for Hambros submitted that if those causes of action were struck out, the result would be that they took with them the trade practices claim.

43. However, it is also apparent from the particulars that reliance is placed for the existence of the duty upon what was said in the alleged conversation in June - July 1989 between Mr Drummond and Mr Winterton, together with an allegation that Hambros knew or ought to have known that Mr Drummond would make those statements. I have indicated earlier in this judgment what is said to be the contents of the conversation in question.

44. I would not strike out the claim based on contravention of s. 52. However, the use of the expression in para. 18 "in the circumstances" is embarrassing. The paragraph should be struck out with leave to amend, consequent upon the other orders made in relation to the Statement of Claim.

45. The remaining cause of action was said by counsel for Winterton to be "based upon unjust enrichment". In paras. 13 and 14 of the Statement of Claim, Winterton alleges that prior to the execution of the final work (the subject of the unpaid progress claims) the building was in an incomplete state, and that by carrying out and completing the final work, Winterton effected an improvement in the value of the Property "at least equal to the sum of the unpaid progress claims" (para. 14). Paragraph 23 should be set out in full:

"23. Further, or alternatively, (Winterton's) execution of the

final work at the request of (Hambros and Pan),

notwithstanding the decision referred to in paragraph 15,

has by its improvement in the value of the (Property) (as

set out in paragraph 14) enriched (Hambros) as its mortgagee

such that it is and would be unconscionable for it to retain

the benefit of that enrichment without paying to (Winterton)

the unpaid progress claim (sic)."

46. The term "unconscionable" has crept in here, whereas what apparently is asserted is a legal right to remedy injustice; the meaning of the term "unconscionable" is, as Deane J. has reminded us in The Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 444, more accurately conveyed by the term "unconscientious" which indicates its root in equitable doctrines.

47. It will be observed that the final work is alleged to have been executed by Winterton "at the request" of both Hambros and Pan. No particulars were sought of that allegation. However, I was told from the bar table that the allegation should be understood as one to the effect that "the circumstances of the case as pleaded" gave rise to the request. The circumstances of the case as pleaded allege in terms no such request. It would appear that what may be intended to be put for Winterton is that it carried out the final work at the implied request of Hambros and Pan, and that an implied request is sufficient for the cause of action relied upon in the same way as it may be sufficient for an action to recover money paid by the plaintiff to a third person at the implied request of the defendant, with an implied undertaking on the defendant's part to repay it.

48. But as regards Pan, there is a difficulty with divining any implied request by it because, on the pleading, Winterton was already obliged to it to perform the work by the terms of the Building Contract with Pan. Further, as earlier portions of the Statement of Claim are to be struck out, it remains uncertain as to whether they take with them vital circumstances relied upon for para. 23.

49. The paragraph should be struck out, but with leave to replead.

50. However, counsel for Hambros invited the Court to go further. He submitted that para. 23 was beyond repair and should be struck out as disclosing no reasonable cause of action known to the law. His opponent did not submit that in para. 23 his client relied upon a concept of unjust enrichment merely to explain an existing cause of action known to the law. Accordingly, the applicant seeks to put the present case in a different rank to Mason v The State of New South Wales [1959] HCA 5; (1959) 102 CLR 108; Pavey and Matthews Proprietary Limited v Paul [1987] HCA 5; (1987) 162 CLR 221 and Australia and New Zealand Banking Group Limited v Westpac Banking Corporation (1988) 164 CLR 662. In the first of those cases, the claim was to recover moneys paid under "compulsion", and it was in that context that Windeyer J. (at 142-143) referred to the writings of Professor Dawson on unjust enrichment. In the second, a quantum-meruit claim for work done under an unenforceable building contract was allowed, so it was held, in order to prevent an unjust enrichment, and there was express acknowledgment that a quantum-meruit claim - an action well known to the law - gives expression to a principle of unjust enrichment. In the third case, it was held that the foundation of the action of money had and received for recovery of an amount paid under a fundamental mistake of fact lies in restitution or unjust enrichment. The effect of the submissions for Winterton is to deny the applicability in Australia of Lord Diplock's statement that ". . . there is no general doctrine of unjust enrichment recognised in English law", and that what that law ". . . does is to provide specific remedies in particular cases of what might be classified as unjust enrichment . . ." in a civil law system: Orakpo v Manson Investments Ltd (1978) AC 95 at 104.

51. From what was said by its counsel, as I understand the claim of Winterton, it may be to the effect that:

(a) where A is bound by a contract with B to effect improvements

to the land of B, in return for periodic payments by B to A

as the work progresses; and

(b) where C is and remains bound by contract with B to advance

funds to be used by B, inter alia, in paying A for A's work,

such advances by C to B being secured on the property; and

(c) where A performs such work but is not paid by B and, in

turn, further advances have not been made by C to B;

A may recover directly from C the amount of those unpaid advances. This is because C has been enriched in the sense that the value of the property, the subject of C's security, has been increased by A's unpaid work, and this enrichment is unjust, the injustice lying in (a) the failure of C, at a time before A did the work in question, to disclose to A that it would not be making further advances to B, and (b) the work having been done by A at the request of B and C, where the request by C is express or implied from such circumstances as the silence of C when faced by the completion of work by A which would enhance the value of C's security, and the "request" lies in the terms of the contract between B and A.

52. The question then arises as to whether, in Australia, "unjust enrichment" is a legal institution with normative, rather than descriptive, effect, and, if so, what are the elements in such a cause of action. The pleading will then fall for assessment against the answers to those questions.

53. Winterton's claim would not appear to be one which Professor Birks would describe as "unjust enrichment by a wrong", where the obligation of restitution is dependent on the breach of a duty in tort, contract or equitable obligation; rather, if anything, it will be a case of "unjust enrichment by subtraction from the plaintiff", something independent of other legal rights and duties: see Birks, "An Introduction to the Law of Restitution", 1985, pp 23-24, 39-44. Well established and recognised claims falling in this latter category are concerned with recovery of benefits which are conferred not voluntarily and by virtue of mistake, compulsion and total failure of consideration. The concern here is with the getting back of benefits not voluntarily conferred by the plaintiff, rather than with the fulfilment or nonfulfilment of promises; that is the province of the law of contract and, to some extent, trusts.

54. Yet on the facts as pleaded, Winterton was obliged to effect the improvements of the Property by reason of its obligations under the Building Contract. In return for those efforts, it bargained for and received a promise by Pan to pay for the work done. It did not go further and bargain for a promise to it by Hambros. Why then should it be able to look to two rather than one source of payment? Why should Hambros be subjected to a concurrent liability to two parties in respect of a breach of a contract with only one of them?

55. However, counsel for Winterton relied upon the judgment of Gaudron J. in Trident General Insurance Co. Limited v McNiece Bros Proprietary Limited [1988] HCA 44; (1988) 165 CLR 107 at 174-176 as authority for the proposition in Australia both that there was a recognised doctrine of unjust enrichment which generated curial rights and obligations, and that there might be an unjust enrichment at the expense of the plaintiff, within the meaning of that principle, even though the plaintiff had been bound by contract to confer the benefit amounting to the unjust enrichment.

"In my view it should now be recognised that a

promisor who has accepted agreed consideration

for a promise to benefit a third party is

unjustly enriched at the expense of the third

party to the extent that the promise is

unfulfilled and non-fulfilment does not attract

proportional legal consequences."

Her Honour held that in such circumstances the promisor comes under a legal obligation to the third party and the third party can personally bring an action to secure the benefit of the promise.

57. This use of a principle of unjust enrichment to overcome perceived defects in the law as to privity of contract has been criticised by various commentators; see Notes (1989) 105 LQR 4, (1989) 63 ALJ 368. In Trident, Deane J. dealt more cautiously with the role of principles of unjust enrichment in third party contracts, saying (at 145-146) that if an insurer had received a premium for a policy but then refused to indemnify a third party on the ground that it was a stranger to the contract of insurance, those circumstances "could conceivably" give rise to a cause of action by the third party against the insurer "founded upon principles of unjust enrichment".

58. Counsel for Winterton conceded that what was said by Gaudron J. in Trident did not directly support an action such as his client sought to frame in para. 23. However, he did submit that there was sufficient support in the authorities for the existence in Australia of a general normative principle as to unjust enrichment, to make it inappropriate to strike out a claim on the footing that as a matter of settled law the statement of Lord Diplock, to which I have referred, foreclosed any such claim. Further, it has been said in this Court that the law ". . . should not be slow to infer or imply an obligation to indemnify where one party places himself in a position of jeopardy at the request of and for the benefit of another": Amann Aviation Pty Limited v Commonwealth of Australia [1990] FCA 55; (1990) 22 FCR 527 at 540. Also, some tentative support for Winterton's position may perhaps be seen in the discussion of the Canadian authorities, under the heading "Benefits Conferred on Third Parties Through Performance of A Contract", in Maddaugh and McCamus "The Law of Restitution", 1990, pp 749-756.

59. Accordingly, I accept counsel's proposition, so far as it goes, but it does not go far enough. As it stands, para. 23 is embarrassing because it does not specify with anything like sufficient clarity what are the material facts upon which Winterton relies (i) to show enrichment of Hambros, (ii) at the expense of Winterton and (iii) in circumstances demonstrating the necessary element of injustice.

60. Accordingly, para. 23 should be struck out, but with leave to replead. Particulars may be stated in the pleading (Order 12 rule 1).

61. In the result, upon para. 1 of the Motion of Hambros filed 5 March 1991, I would strike out paras. 6, 7, 8, 9, 18, 22 and 23 of the Statement of Claim, but with leave to replead those portions of the Statement of Claim which have been struck out insofar as they are relied upon for the causes of action under ss. 52 and 82 of the Act and in unjust enrichment.

62. Winterton should pay the costs of Hambros of the proceedings on 4 and 12 April 1991.

63. Any amended Statement of Claim is to be filed and served on or before 15 May 1991 and the matter is stood over for further directions before me at 9.30 a.m. on 17 May 1991.

Contracts (Privity) Act 1982

Re Winterton Constructions Pty Limited v Hambros Aust Limited and Pan Properties Pty Limited [1991] FCA 171; 101 ALR 363 (26 April 1991)

General Steel Industries Inc. v Commissioner for Railways (N.S.W.) [1964] HCA 69; (1964) 112 CLR 125

Trident General Insurance Co. Limited v McNiece Bros Proprietary Limited [1988] HCA 44; (1988) 165 CLR 107

Karangahape Road International Village Ltd v Holloway [1988] NZHC 159; (1989) 1 NZLR 83 Weld-Blundell v Stapleton-Bretherton (1941) 1 Ch 482

Coulls v Bagot's Executor and Trustee Company Limited [1967] HCA 3; (1967) 119 CLR 460

Bahr v Nicolay (No. 2) [1988] HCA 16; (1988) 164 CLR 604

Mason v The State of New South Wales [1959] HCA 5; (1959) 102 CLR 108

Pavey and Matthews Proprietary Limited v Paul [1987] HCA 5; (1987) 162 CLR 221

Amann Aviation Pty Limited v Commonwealth of Australia [1990] FCA 55; (1990) 22 FCR 527

Re Winterton Constructions Pty Limited v Hambros Aust Limited and Pan Properties Pty Limited [1991] FCA 171; 101 ALR 363

At a glance

Court

Decision date

Before

Source

Judgment (75 paragraphs)

Parties

Legislation Cited (12)

Cases Cited (22)

Re Winterton Constructions Pty Limited v Hambros Aust Limited and Pan Properties Pty Limited [1991] FCA 171; 101 ALR 363 (26 April 1991)