UNJUST ENRICHMENT IN AUSTRALIA: WHAT IS(N'T) IT? IMPLICATIONS FOR LEGAL REASONING AND PRACTICE.

• Date: 01 April 2020
• Author: Barker, Kit

Contents I Introduction II Unjust Enrichment: What Role Does It Play? A Role 1: A Purely Moral Principle? B Role 2: A 'Unifying' Legal Principle C Role 3: A Legal Category D Role 4: An Analytical Framework E Role 5: A Cause of Action? III Implications for the Pleading of Claims IV Conclusion I INTRODUCTION

Much confusion currently exists in Australian law about the precise status of the concept of unjust enrichment. There is an unfortunate historical irony in this. Pipped at the post only by radicals in Canada, (1) Australia was, after all, amongst the first Commonwealth common law jurisdictions to vent the idea, and indeed did so at the highest appellate level (2) some four years before this occurred in England and Wales. (3) Ordinarily, this advanced position on the field of intellectual play would be a ground for celebration, not to say some lighthearted mockery of the Old Country's historic conservatism and particularised, insular ways of thinking. But something then happened, in the wake of the retirement of Justice Deane and Chief Justice Mason from the High Court Bench, that abruptly silenced the cheering crowd. (4) At some stage in the mid-to-late 1990s, the Court abruptly lost its enthusiasm for the ball, just as English courts really started to run with it. Influential members of the new Court reverted to older, more familiar training patterns, preferring to analyse restitutionary problems through the lens and language of the ancient forms of action and traditional equitable concepts, rather than to accord the idea of unjust enrichment any very meaningful role in the law. Some members of the Bench went so far as to excoriate the idea as 'top-down reasoning' or 'dogma', (5) and as an unwelcome, academic import. Lower appellate courts that dared to use the idea creatively to change existing legal or (especially) equitable rules were publicly rebuked and instructed bluntly to desist. (6) Unjust enrichment was cast, for a time, as an invasive outsider, set on disrupting a house that was already very much in order and that could happily live without its interfering tendencies.

It is only in recent times, with further changes in the composition of the High Court, that there are signs of a new, cautious acceptance. The development in Australian law of a defence of change of position in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd ('Hills') (7) has now made this re-engagement with unjust enrichment thinking inevitable. Indeed, despite an unfortunate and often misunderstood paragraph in the plurality judgment in Hills (to which we shall return), this case will almost certainly prove to be Australia's Lipkin Gorman v Karpnale Ltd ('Lipkin Gorman') (8)--a little late in coming, perhaps, but here at last. In the meantime, the American Law Institute has completed its third restatement of the law, in the process elevating the concept of unjust enrichment to the title page of the work, (9) and the High Court has referenced that work several times (albeit in a different context) in the recent decision of Thorne v Kennedy. (10) One (new) member of the current High Court Bench, Justice Edelman, is co-author of an important text, now in its second edition, that also bears the concept boldly upon its cover, (11) and his Honours influence can already be seen, I suggest, in the plurality judgment of the High Court in the most recent case of Mann v Paterson Constructions Pty Ltd ('Mann'). (12) Whilst the next 10 years will be critical in determining Australia's attitude to the unjust enrichment game, there are therefore good reasons to think that the ball that was dropped by the High Court in the early years of the new millennium may yet be retrieved from the mud.

Australia is not the only country to have suffered crises of confidence over the idea of unjust enrichment. There are scholars elsewhere who continue to harbour old doubts and even to express new ones. (13) The purpose of this piece is to identify the role that the idea currently plays in Australian law in the post-Hills era, and to suggest how it can fruitfully be understood and accommodated within the developing jurisprudence of this country. Many of the reservations about the idea that have troubled the High Court in recent times, I shall argue, stem from a failure to distinguish clearly between five distinct roles that the idea might play in legal reasoning, as well as from the Courts justified anxiety about two of these roles in particular. A clearer view of what unjust enrichment is and, equally importantly, what it is not can lead, I suggest, to its more confident acceptance and coherent use by Australian courts. It will also assist practitioners in determining how properly to plead modern restitutionary claims.

II UNJUST ENRICHMENT: WHAT ROLE DOES IT PLAY?

A Role 1: A Purely Moral Principle?

The first role that the idea might play, which has been clearly rejected by the High Court, the American Restatement (Third) of Restitution and Unjust Enrichment ('Third Restatement'), and all other courts to date, is as a purely moral principle, external to the law and lying recumbent in the conscience of a judge. The seeds of a moral principle are certainly ancient and can be found in Pomponiuss well-known maxim: 'It is by nature fair that no one should gain through another's loss'. (14) Even as a moral proposition, this idea needed some work, for it is by no means obvious that the mere fact of gaining by another's loss identifies anything that is 'by its nature' unfair. In any market economy, the fact that one's own profit corresponds to a loss another has suffered is surely regarded as (at worst) ethically neutral in the absence of some identifiable error, exploitation, or wrongdoing. For any moral 'unfairness' to be present in a transaction, the winners gain, correlating to the loser's loss, must hence be attended by additional circumstances making it unjust. (15) Pomponius' principle must therefore be understood as a principle against gaining unjustly through another's loss', not simply gaining from loss'. Indeed there are points in the Digest which suggest as much. (16) Even when this adjustment is made, however, it is clear that, for legal purposes, the definition of injustice in this formulation cannot lie outside of the law itself in the personal conscience of a judge, or even in his or her perception of the moral consensus of the community. Courts and commentators are unanimous on this point, emphasising that any principle against unjust enrichment existing in the modern law is a legal principle derived from decided cases and concrete legal norms. (17) It works from the legal ground up, not from the moral heavens down.

The point was made right from the outset by Deane J in Pavey & Matthews Pty Ltd V Paul ('Pavey') (18) in 1987, where his Honour emphasised that identifying a law of restitution unified by a principle of unjust enrichment is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate'. (19) The passage was cited by the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia ('David Securities') (20) in 1992, where the majority added:

[I]t is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable. Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality. (21) More recently, in the Hills case, Gageler J observed, consistently with this line of thinking, that the notion of injustice lying at the heart of the principle against unjust enrichment is 'descriptive, accumulative and incremental'. (22) His Honour cited the following passage from the first instance judgment of Campbell J in Wasada Pty Ltd v State Rail Authority of New South Wales [No 2] ('Wasada'), (23) which neatly summarises both the objection to the idea of unjust enrichment as a purely moral idea and the conclusive answer to that objection:

'Unjust' is the 'generalisation of all the factors which the law recognises as calling for restitution! Because we need to search for recognised factors, examination of which involves an analysis of case law, the reference to 'injustice' as an element of unjust enrichment, is not a reference to judicial discretion. Normal judicial processes are involved and it is only in cases where there is no recognised basis for saying that injustice has arisen that problems can arise. (24) Statements to similar effect appear in the jurisprudence of the House of Lords, (25) the United Kingdom Supreme Court, (26) and the Third Restatement. (27) They ought straightforwardly to eliminate any misconception that unjust enrichment plays a loose moral role, tends to subjectivity, or derives its meaning in isolation from existing rules of law.

B Role 2: A 'Unifying' Legal Principle

If the proscription against unjust enrichment is a principle, it is therefore a legal principle, not a moral one. Legal principles can (and hopefully do) of course have moral content and merit, but the point is that their morality is embedded in existing rules and precedents and is therefore objectively determined. It does not spring in a Panglossian rush from hope itself. Legal principles may be understood as differing from legal rules in the detail that they operate at a higher level, expressing in a more general way the reason(s) underpinning those rules and precedents. (28) They are not usually used in the law in a dispositive manner (29)--that is, to determine cases, or to dictate results by themselves, without reference to lower-order rules. This is because their generality makes them hard to apply predictably to naked sets of facts and leaves too much to a courts discretion. Both of these features make legal principles potentially problematic from a rule of law point of view. However, by referring judges to the broader values and...