Common law divergences.

• Jurisdiction: Australia
• Author: Finn, Paul
• Date: 01 August 2013

When Sir Owen Dixon commented in 1942 that no good could come of 'divergences' between the common law administered in English and Australian courts, the then orthodoxy was that the common law of England was the common law to be applied in Australia. Over 40 years later and in a much changed constitutional and legal environment, Sir Anthony Mason highlighted the need to fashion a common law for Australia that was best suited to our conditions and circumstances. The common law of England, like the law of other jurisdictions, was simply a possible source of law in Australia. The assistance properly to be derived from that source is a recurrent issue for our courts. The recent decision of the Full Court of the Federal Court in Grimaldi v Chameleon Mining NL [No 2] provides an extended illustration. This lecture focuses primarily upon equitable doctrine and remedy in Australia and England both to illustrate significant differences between the two legal systems and to explain at least some of the causes. Reference necessarily will be made to how divergence is reflected in the differing extents to which commercial dealings are regulated in the two jurisdictions; to the debates about unjust enrichment and its province; and to the significance statutes have in contriving the context in which Australia's common law is evolving.

CONTENTS I Introduction II The Unconscionable Dealings Doctrine III Undue Influence IV Australian Fiduciary Law V Estoppel in Equity VI The Constructive Trust VII The Statutory Context VIII Conclusion I INTRODUCTION

Let me begin by setting the scene for what follows. The story of the changes in the formal character of the common law in Australia is well-known and requires little elaboration. Seventy years ago, ours was the common law of England. So much was this felt to be so that Sir Owen Dixon could state uncontroversially:

We are studious to avoid establishing doctrine which English courts would disavow. For we believe that no good can come of divergences between the common law as administered in one jurisdiction of the British Commonwealth and as administered in another. (1) Thus, it was that the rules of contract law were the rules of English contract law. This was their justification. That was sufficient. (2)

Forty-five years later, but in a changed Australia, Sir Anthony Mason gave his imprimatur to a process which was then well in train:

There is ... every reason why we should fashion a common law for Australia that is best suited to our conditions and circumstances.... The value of English judgments, like Canadian, New Zealand and for that matter United States judgments, depends on the persuasive force of their reasoning. (3) A year later the transition from the common law of England to the common law of Australia was belatedly formalised for all practical purposes in the amendment made to s 80 of the Judiciary Act 1903 (Cth). (4) As Justice James Allsop neatly put it extra-curially: 'The common law of England had ceased, literally overnight, to be law, but had become a source of law for legal development'. (5)

Today, it is abundantly clear that there are separate bodies of English and Australian common law. (6) And there are clear divergences' reflected, not merely in isolated and specific court rulings, but also in differing casts of mind, distinctive methodologies and markedly different contexts (particularly legislative ones) in which the respective bodies of common law do their work. My purpose in this lecture is to illustrate these matters.

If I have a message it is this. We have in the past borrowed, and will continue to borrow, from abroad in the endeavour of making our own law. But to adapt the language of a great Californian Chief Justice and jurist, Roger Traynor, we must, of necessity, 'subject [foreign decisions] to inspection at the border to determine their adaptability to native soil'. (7)

This challenge for judge and counsel alike was demonstrated starkly in the very recent decision of the Full Court of the Federal Court in Grimaldi v Chameleon Mining NL [No 2] ('Grimaldi') (8) (a decision in which I participated). It did so in two respects. First, despite the importuning of the appellants' counsel, the Court declined to engage in detailed consideration of apparently relevant English authority on de facto directors. (9) This was because, when examined by the Court, 'the legislative context of the English decisions ... so differs from Australia's', as to warrant their being treated with considerable reserve. (10) In any event, the present state of Australian jurisprudence on de facto directors made it unnecessary to seek guidance from abroad. (11)

The second illustration from Grimaldi is the more revealing. In the late 19th century, the English Court of Appeal held in Lister & Co v Stubbs (12) that, while an agent was accountable to its principal for a bribe or secret commission received, the agent did not hold the bribe as a constructive trustee nor could the bribe be traced by the principal. That proposition was recently reaffirmed by the English Court of Appeal in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd ('Sinclair Investments), (13) notwithstanding the contrary conclusion reached by the Privy Council in 1994. (14) The Full Court in Grimaldi refused to follow Sinclair Investments. It applied what it considered to be orthodox Australian fiduciary law; it endorsed the policy reasons informing the grant of proprietary relief to sanction the corruption of fiduciaries, (15) and in so doing it aligned Australian law on bribes and secret commissions with that of the United States, (16) Canada, (17) Singapore (18) and New Zealand. (19) To revert to my opening comments, this is the legal universe of Sir Anthony Mason, not Sir Owen Dixon.

The subject of divergence has attracted recent scholarly attention in this country. (20) However, it has been the ongoing, sometimes strident, debate between the predominantly English advocates of an encompassing law of restitution and the predominantly Australian defenders of equity against the extravagant claims of unjust enrichment which has given the subject its sharper edge. (21)

My own interest is longstanding. Over 40 years ago, as a student in Cambridge, I began to write an equity related textbook. Save for the slight marring caused by the need to refer to differing local statutory regimes in the two countries, the equity I wrote about appeared to be able to be described properly as Anglo-Australian law. One matter was apparent to me at the time. A very large part of the English case law to which I referred was from the 19th century. The 20th century decisions--and they were not voluminous--were primarily those of first instance judges. Save for the first decade or so of that century, House of Lords decisions were few and far between and, as the century progressed, their reasoning appeared more problematic to Australian eyes. I would instance the two fiduciary decisions, Regal (Hastings) Ltd v Gulliver (22) and Boardman v Phipps (23) to illustrate the latter comment. By way of contrast, while late 19th century Australian cases were reasonably represented in what I wrote, there was a considerable number of 20th century cases, many of which were important High Court contributions to Australia's equity jurisprudence. The significance of this will later become apparent.

Now let me move forward 40 years. I was again in England teaching in a course on equitable intervention in commercial dealings. It was presented on a comparative basis using a number of other common law countries as comparators. I was well aware that outside of the law of trusts (24) and the remedies of specific performance and the injunction, the equity jurisprudence of England and Australia had long since parted company in significant respects. What surprised me though, was that in relation to quite a number of equitable doctrines, English law stood apart (though not invariably) from most or all of the other countries with which I was concerned. It had its own concerns which were not shared elsewhere (either to the same extent or else at all). I will mention four of these.

The first is the privileging of contract law as the all but exclusive source of voluntarily assumed rights and obligations--hence, for example, the observation in the Court of Appeal denying relief to a person who was excluded from the commercial exploitation of a confidential business plan to which he was a contributor: 'Mr Murray's lack of any remedy arose from the undisputed fact that his relationship with the other five members of the original team was not regulated by contract.' (25) Associated with privileging contract is a corresponding reluctance to enlarge the scope of equitable intervention in contracts. Relatedly, there is a marked antipathy to making relied upon voluntary promises and representations actionable. The second concern is with property and with maintaining the integrity of property law as such. Emblematic of this is Lord Neuberger's observation in Sinclair Investments:

Whether a proprietary interest exists or not is a matter of property law, and is not a matter of discretion ... It follows that the courts of England and Wales do not recognise a remedial constructive trust as opposed to an institutional constructive trust. (26) The third concern, which infuses Lord Neuberger's observation, is a marked reticence in allowing judicial discretion to determine the appropriate type of equitable relief to be awarded. If there is to be a choice of remedy, that is for a party to make.

Fourthly, a constant refrain in the cases is the earnest to leave commercial parties to fend for themselves--hence the sentiment: 'In a commercial context ... a degree of self-seeking and ruthless behaviour is expected and accepted to a degree.' (27) The assumption in this, seemingly, is that commercial parties could and should look after their own interests (28) and should...