McConvill, James; Bagaric, Mirko --- "The Yoking Of Unconscionability And Unjust Enrichment In Australia" [2002] DeakinLawRw 13; (2002) 7(2) Deakin Law Review 225
The Yoking[1] Of Unconscionability And Unjust Enrichment In Australia
James Mcconvill[*] And Mirko Bagaric[**]
ABSTRACT: This article assesses the role that restitution law should have in Australia’s legal corpus. The supposedly `unifying concept' in restitution law - unjust enrichment - remains elusive and ambiguous and, accordingly, has yet to establish a firm foothold in Australia’s jurisprudence. In the recent High Court decision of Roxborough v Rothmans, Gummow J engaged in a stinging attack of unjust enrichment, and intimated that unconscionability as a doctrine was a far more coherent and effective cause of action. At the same time, the Full Federal Court has confirmed recently in ACCC v Samton Holdings that the scope of unconscionability extends to cover ‘situational disadvantage’ - giving unconscionability greater commercial application. In this article, the authors argue that given the problems with, and judicial criticism of, unjust enrichment as a principle, it is both necessary and appropriate that unjust enrichment be subsumed by the expanding doctrine of unconscionability - creating one truly unifying concept which can be applied to achieve justice in a variety of different contexts. In the main part of this paper we analyse the doctrine of unconscionability and conclude that there are two triggers for equitable intervention to reverse or adjust the transfer of resources on the basis of unconscionability: (i) where there is neither real consent or real consideration; or (ii) where either variable is absent and it is unclear whether the other is satisfied. This approach will inject principle into unconscionability and explain and justify the need for reversing or adjusting the transfer of property or other resources in some circumstances. This is preferable to the alternative and illusory rationale that unconscientious conduct prevents a person insisting upon his legal rights to take advantage of another’s special vulnerability or misadventure.
`An approach based on unconscionable conduct or one based on unjust enrichment will inevitably bring about the same result'.
Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137, 154 (Toohey J)
`The general underlying notion ... which has long been identified as underlying much of equity’s traditional jurisdiction to grant relief against unconscientious conduct [is] that a person should not be permitted to use or insist upon his legal rights to take advantage of another’s special vulnerability or misadventure for the unjust enrichment of himself'.
Stern v McArthur (1988)165 CLR 489, 526-27 (Deane and Dawson JJ).
I INTRODUCTION
The principle of unjust enrichment in Australia has, since its acceptance as the `unifying legal concept'[2] of the law of restitution by the High Court in Pavey and Matthews v Paul,[3] been characterised by complication, doubt and uncertainty in Australia’s courts. While unjust enrichment does have its proponents,[4] of late it has received more criticism than praise.[5] It is therefore not surprising that there have been very few cases in Australia litigated successfully strictly according to restitutionary principles[6] This led Gummow J in Roxborough v Rothmans of Pall Mall Australia,[7] the most recent restitution case to come before the High Court, to comment that unjust enrichment has yet to receive `currency' in Australian law.[8]
The purpose of this article is not to build upon the catalogue of such criticisms, nor to examine the reasons for the failure of unjust enrichment to operate as a unifying concept providing support for a distinct law of restitution in Australia. Rather, the authors seek to engage in an exploration of an issue that, although discussed in passing by various academics and judges, has not been given the attention that it warrants. The central question that is addressed is whether the doctrine of unconscionability is capable of subsuming (and ought to subsume) the principle of unjust enrichment (resulting in a dismantling of the law of restitution). In our view, the answer is yes. We then suggest an overarching rationale that should govern the development of the law of unconscionability in the future.
A Overview of Purpose and Themes of Paper
There are two reasons why unconscionability should subsume unjust enrichment. The first is that the notion of unjust enrichment is superfluous - all the factual situations which to date have been decided on this basis could have been resolved by utilising the action of unconscionable conduct. Secondly, the rationale and sphere of operation of unjust enrichment is vague. So vague that the benefit the community derives from being able to possibly utilise it as a cause of action is probably outweighed by the uncertainty that it introduces into commercial life. The extinction of unjust enrichment would not leave `a gap in the field' so that the law is impotent to properly realign the rights and interests that have been distorted as a result of inappropriate transactions. The action of unconscionable conduct is an effective vehicle for this. While this action suffers from some of the shortcomings inherent with unjust enrichment- the rationale underpinning unconscionable conduct and its scope of operation are also marked by a high of degree of uncertainty- we believe that it should be preserved. Despite its shortcomings it is more salvageable than unjust enrichment. The doctrine has a richer history than unjust enrichment making it possible to draw a common thread through the cases to identify an overarching rationale. The doctrine is also of wider application than unjust enrichment, especially with the recent expansion of the doctrine to cover `situational disadvantage'. Although we suggest that the doctrine of unconscionable conduct should be preserved it is necessary to underpin the doctrine with an overarching rationale to avoid charges of arbitrariness in its application and indeterminacy. We suggest that there are two triggers for equitable intervention under the principle of unconscionability: (i) where there is neither real consent nor real consideration; or (ii) where either variable is absent and it is unclear whether the other is satisfied or is satisfied in a minimal manner. This approach will inject principle into unconscionability and explain and justify the circumstances in which the transfer of property or other resources is appropriate.
B The Need for a Re-Assessment
In addition to the above theoretical difficulties, an examination of the merits of maintaining unjust enrichment as a cause of action and its relationship with unconscionable conduct is timely in light of the following developments:
- The Federal Court’s recent decision in ACCC v Samton Holdings[9] which confirmed that unconscionability can arise as a result of ‘situational disadvantage’ (arising from particular legal or financial circumstances) and not just ‘constitutional disadvantage’ (namely emotional dependence and vulnerability). Despite the lack of commentary on Samton Holdings to date,[10] the implications of this decision are significant, as it means unconscionability can be used in a wider range of commercial situations. Accordingly a strong argument can now be made that unconscionability, by incorporating ‘situational disadvantage’, is of sufficient scope and depth to be capable of subsuming the principle of unjust enrichment.
- The treatment of the principle of unjust enrichment in particular, and the law of restitution in general, in the recent High Court decision of Roxborough v Rothmans. As will be discussed in the course of the article, not only does the case demonstrate that Australian lawyers and judges are yet to fully accept and embrace unjust enrichment as the basis for a claim to make restitution, but also Gummow J in his judgment strongly criticised unjust enrichment as a principle and in doing so implicitly endorsed the use of unconscionable conduct over unjust enrichment to achieve effective outcomes in a case.[11] Contrary to a recent commentary,[12] the authors will argue that the principle of unjust enrichment is unlikely to survive the attack of Gummow J, and that Roxborough v Rothmans highlights that rather than being clear and well-defined, unjust enrichment is the cause of uncertainty and confusion.
- The dicta of Kirby J and Callinan J in the High Court’s recent decision of Royal Botanic Gardens & Domain Trust v South Sydney City Council[13] demonstrating a reluctance to accept that a broad-ranging requirement of good faith should be implied into all commercial contracts as a coherent and unifying duty to guide the behaviour of parties to the contract.[14] As a result of this, greater attention is likely to be given to the expanding area of unconscionability to perform the role which could potentially have been performed by a duty of good faith. According to the authors, the potential of unconscionability to act as a coherent and unifying principle enabling parties to achieve justice inter se, should not be confused (and hence limited) by continuing with an unnecessary division of unconscionability and unjust enrichment.
- The recent extra-curial speech of Hayne J to the Australian National University Centre for Commercial Law,[15] in which his Honour expressed concern about the `intrusion' of equitable principles in commercial dealings, calling for clarity and precision in the way equitable principles are developed and applied. It will be argued in this article that unconscionability, as an expanding doctrine operating within clearly defined categories, is far more likely to satisfy Justice Hayne’s objectives of clarity and precision (in light of the reforms suggested in this article), than unjust enrichment - a principle that even judges of the High Court have difficulty understanding, let alone applying with precision and clarity.
- Sir Anthony Mason has noted recently that the concept of unconscionable conduct, along with the recognition of unjust enrichment which is partly a derivative of unconscionable conduct, has been the source of the recent rejuvenation of equity. Given this rejuvenation, it is time to take a step back to put principle back into the law.
C Outline of Paper
In the next part of this paper we provide an overview of the principle of unjust enrichment. This is followed by a critique of this cause of action. We examine in detail Gummow J's judgment in Roxborough v Rothmans. This is followed in section three by an examination of the development and evolution of unconscionability in Australia - particularly the extension of unconscionable conduct by the Federal Court to capture ‘situational disadvantage’, and the implications of this.[16] In section four we critique the respective doctrines and explain why unjust enrichment ought to be subsumed by the expanding doctrine of unconscionability. In section five, we discuss how the unconscionability doctrine should be remodelled to form a more coherent and workable concept. In doing so, we suggest that the current rationale for the doctrine (unfair insistence on legal rights) is incoherent.
II OVERVIEW OF UNJUST ENRICHMENT
A Overview of restitution and the principle of unjust enrichment
Before proceeding to analyse the cases dealing with unjust enrichment, it is instructive to first provide a brief overview of the cause of action. In an entry on ‘restitution’ recently written for the Oxford Companion to the High Court of Australia, Keith Mason and John Carter provided a good overview of the historical development of restitution law in Australia:
In a range of anomalous situations that did not fit neatly into the doctrinal categories of contract and tort, the common law allowed a plaintiff to be paid for benefits derived by the defendant at the plaintiff’s expense. Traditionally, these cases were referred to as `quasi-contract’, because typically (though often artificially) the success of the claim depended on the willingness of the court to find an implied contract that the defendant would restore the benefit to the plaintiff. The notion of quasi-contract was reinforced by analogy with older forms of action (predicating the development of the common law) in which a plaintiff sued simply on a debt. ... More recently, the rationale for such claims has depended on a more open recognition that the defendant should not be unjustly enriched at the plaintiff’s expense. In Australia, the breakthrough came in Pavey & Matthews v Paul (1987), when a majority of the Mason Court rejected implied contract as the basis of the common money counts and as the explanation for 'quasi-contract’. Deane explained that unjust enrichment was a ‘unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff.[17]
By way of further clarification, we note that restitution and unjust enrichment are often treated as synonymous. Mason and Carter in their seminal work, Restitution Law in Australia have sought to distinguish between the two on the basis that `restitution is the claim, whereas unjust enrichment is the basis of the claim'.[18] We maintain this distinction throughout this article.
B The Foundation Case- Pavey and Matthews v Paul
Restitution emerged as a distinct area of the law of wrongs in the case of Pavey & Matthews v Paul.[19] In this case, the appellant, a licensed builder, performed building work for the respondent following conversations over a six month period that the appellant builder would perform the building work and the respondent owner would pay a reasonable remuneration (based on industry rates) for that work. Hence, there was no written contract. The appellant performed the building work as requested, and the respondent accepted but disputed the reasonableness of what the appellant charged for the work. The appellant could not enforce the contract with the respondent as s 45 of Builders Licensing Act 1971 (NSW), which applied to the contract, stated that a building contract was not enforceable unless the contract was in writing and signed by the parties. Ultimately, therefore, the appellant sought to claim the moneys owed on a quantum meruit (ie for a reasonable sum) basis.
The respondent challenged the appellant’s quantum meruit claim, arguing that as such a claim rested on an implied contract that the sum would be paid by the respondent, it was prohibited by the requirement in s 45 of the Builders Licensing Act that only written building contracts could be enforced. The High Court found for the appellant. The Court held that an action to claim restitution or a quantum meruit rests not on implied contract but on a claim based on the principle of unjust enrichment, arising from the acceptance by the respondent of the appellant’s performance of the unenforceable oral contract. According to the Court, the process of establishing the nature of the oral contract was not to enforce it, but rather to make out that under the circumstances the respondent was unjustly enriched. In this regard Deane J stated:
To identify the basis of such actions as restitution and not genuine agreement is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate. The circumstances in which the common law imposes an enforceable obligation to pay compensation for a benefit accepted under an unenforceable agreement have been explored in the reported cases and in learned writings and are unlikely to be greatly affected by the perception that the basis of such an obligation, when the common law imposes it, is preferably seen as lying in restitution rather than in the implication of a genuine agreement where in fact the unenforceable agreement left no room for one. That is not to deny the importance of the concept of unjust enrichment in the law of this country. It constitutes a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case (see Muschinski v. Dodds [1985] HCA 78; (1985) 60 ALJR 52, at p 67; [1985] HCA 78; 62 ALR 429, at p 455; Goff & Jones, op. cit., at pp 11ff.)[20]
Mason and Wilson JJ agreed with Deane J's reasoning and analysis in rejecting implied contract as the basis for adjusting the rights of the parties. They stated:
Deane J., whose reasons for judgment we have had the advantage of reading, has concluded that an action on a quantum meruit, such as that brought by the appellant, rests, not on implied contract, but on a claim to restitution or one based on unjust enrichment, arising from the respondent's acceptance of the benefits accruing to the respondent from the appellant's performance of the unenforceable oral contract. This conclusion does not accord with the acceptance by Williams, Fullagar and Kitto JJ. in Turner v. Bladin (at p 474) of the views expressed by Lord Denning in his articles in (1925) 41 Law Quarterly Review p 79, and (1939) 55 Law Quarterly Review p 54, basing such a claim in implied contract. These views were a natural reflection of prevailing legal thinking as it had developed to that time. The members of this Court were then unaware that his Lordship had, in his judgment in James v. Thomas H. Kent & Co. Ld. (1951) 1 KB 551, as reported in the authorized reports, discarded his earlier views in favour of the restitution or unjust enrichment theory. Since then the shortcomings of the implied contract theory have been rigorously exposed (see Goff and Jones, The Law of Restitution 2nd ed. (1978) pp.5-11) and the virtues of an approach based on restitution and unjust enrichment, initially advocated by Lord Mansfield and later by Fuller and Perdue (see "The Reliance Interest in Contract Damages" (1936-37) 46 Yale Law Journal 52, 373, esp. at p.387), widely appreciated (Goff and Jones, op cit. at p.15 et seq.; and see Deglman v. Guaranty Trust (1954) 3 DLR 785, at pp 794-795). We are therefore now justified in recognizing, as Deane J. has done, that the true foundation of the right to recover on a quantum meruit does not depend on the existence of an implied contract.[21]
An important omission from the reasoning the Pavey and Matthews is the failure of the court to clearly demarcate the criteria or elements that need to be satisfied in order to ground an action in unjust enrichment.
Although not made entirely clear in the cases to date, in Australia the content of unjust enrichment seems to comprise three elements. These elements are:
(1) benefit
(2) at the plaintiff’s expense; and
(3) injustice.[22]
One other important aspect of unjust enrichment is that it is subordinate to other areas of law, namely contract, torts and property. As has been noted by Beatson and Virgo:
A fundamental principle relating to ... unjust enrichment generally, is that the law of restitution is subordinate to the law of contract. It follows that restitutionary remedies are generally only available in a contractual context once the contract has been set aside, for example for breach, frustration or because it is unenforceable'.[23]
There are several reasons for this:
Restitution will almost never be appropriate before a valid contract has been discharged. There are a number of reasons for this. First, where P has an accrued claim in debt in respect of the performance rendered the claim in debt will give him all the protection a restitutionary claim would give him. Secondly, allowing a restitutionary claim will often involve subverting the contractual allocation of risks and the contractual valuation of performance. Thirdly, holding a party (P) contractually liable to confer a benefit upon the other (D) which the law of restitution requires D to return to P or to make recompense to P is circular.[24]
The `subsidiary' nature of unjust enrichment, meaning that it is essentially a `gap filler' that only comes into operation when more traditional areas like contract and property are not available, or to supplement these traditional legal areas, was recently discussed in an article by Grantham and Rickett. They state that:
Restorable or unjust enrichment ... is subsidiary in the sense that the scope and operation of the principle of unjust enrichment are necessarily constrained by the scope and operation of the other core doctrines of the private law, being consent-based obligations (dominantly but not solely the law of contract), the law of property, and the law of wrongs (dominantly but not solely the common law of torts).” (citations omitted).... The subsidiarity of unjust enrichment ... finds support in the very ordering of the private law of the common law system. The Anglo-American liberal democratic political tradition accords primacy to individual autonomy and choice. The fundamental consequence of that tradition, for the legal system, is that various interests are positively protected (in particular, expectations generated by consent, property rights, and rights of personal integrity); while unjust enrichment is shown to be operative only in a negative sense, preventing the loss of wealth where there exists a lack of voluntariness. That distinction makes unjust enrichment necessarily a subsidiary legal standard.[25]
C High Court Analysis in Roxborough v Rothmans
1 Overview and Facts
The need for a reassessment of the suitability of retaining unjust enrichment as a distinct principle of law is best demonstrated by an examination of Roxborough v Rothmans. Although unjust enrichment has been proclaimed as a unifying concept supporting the continued operation of a distinct law of restitution, the restitution claim by the appellants in Roxborough v Rothmans relied on the old common law action for money had and received, rather than using unjust enrichment, and was decided by the Court accordingly. While arguing the case on the basis of the common law action of money had and received rather than according to the elements of unjust enrichment may have resulted in the same practical outcome, Roxborough v Rothmans shows just how under-utilised unjust enrichment remains, and some of the dicta casts strong doubts about the need for maintaining a `unifying concept'.
In Roxborough v Rothmans,[26] the respondent, who was a tobacco wholesaler, paid a tobacco licence fee to the New South Wales government which it recouped from the appellant tobacco retailers by charging them an identified amount in respect of the licence fee. In an earlier High Court decision, Ha v New South Wales,[27] the tobacco licence fee legislation was found to be invalid under s 90 of the Australian Constitution as the licence fee imposed under the legislation was characterised as an excise duty (which only the Commonwealth government can impose) and the respondent was entitled to be reimbursed for licence fees it had paid to the licensing authority just before the High Court’s Ha decision.[28] The appellants brought an action for restitution against the respondent for that part of the purchase price for tobacco which had been allocated to the unconstitutional licence fee. It was argued on behalf of the appellants that the licence fee component could be separated from the total purchase price, and as the licence fee was constitutionally invalid, that separate part of the contract was ineffective- enabling a claim in restitution for the licence fee component on the basis of a total failure of consideration.
The High Court held (Kirby J dissenting) that the appellants were entitled to restitution for the licence fees received by the respondents for their use, due to a total failure of consideration. The fact that the appellants had recouped their payment of the unconstitutional license from their customers did not prevent them from recovering upon the claim for money had and received, as a majority of the Court reaffirmed the position established in Royal Insurance v Commissioner of State Revenue (Vic)[29] that the defence of passing on has no place in Australian law.[30]
2 Analysis of judgments in Roxborough v Rothmans
In the present state of affairs in England (and, I assume, Australia), where the law of restitution is still very much in a state of development, even of fluidity, and where most judges have little experience of the subject as a whole, their judgments are unlikely to reflect any deep analysis of the more profound principles underlying the subject - indeed judges tend in any event, very wisely, to shy off any such activity, unless it is absolutely necessary to the decision of the case before them.[31]
Apart from the separate judgment of Gummow J which delivered a very powerful critique of unjust enrichment on several levels, the observation above by Lord Goff as to judicial treatment of the law of restitution was (unfortunately) highlighted in the judgments in Roxborough v Rothmans. In this part, the authors examine some key points from the Gummow J’s separate majority judgment, and the leading judgment of Gleeson CJ, Gaudron and Hayne JJ. It must be noted at this point that the High Court judges cannot be criticised for their treatment - or rather lack of it - of unjust enrichment (and restitution law generally) in Roxborough v Rothmans, as this was to a large extent influenced by the way in which the case was argued before the court by the appellant tobacco retailer.
Justice Gummow’s Judgment
In Roxborough v Rothmans, the concept of unjust enrichment was subjected to a considered attack by Gummow J. His Honour found that the appellants claim failed on both unjust enrichment and contract grounds, stating that: ‘in the present case, there has been no failure in the performance by Rothmans of any promise it made. No question of repudiation by it of its contractual obligations arises.’[32] Rather, his Honour found that the case could be decided through the application of unconscionability principles:
The question is that stated by Deane J in Muschinski.... Is it unconscionable for Rothmans to enjoy the payments in respect of the tobacco licence fee, in circumstances in which it was not specifically intended or specially provided that Rothmans should so enjoy them?”[33]
On this point, Gummow J found for the appellants, as according to his Honour it would be unconscionable on the part of the respondent not to return the benefit paid by appellants.
Hence, the judgment of Gummow J is significant both in terms of his Honour’s disapproval of unjust enrichment as an avenue for the enforcement of legal rights, and for his Honour’s clear preference for the doctrine of unconscionability over the principle of unjust enrichment. In discussing his preference for unconscionability over unjust enrichment, his Honour advocated the so-called `concealment' argument which is often raised[34] against the operation of unjust enrichment due to its focus on outcome rather than conduct: His Honour noted:
[To] the extent that [unjust enrichment] directs attention to outcomes and to the character to be attributed to them, it is capable of concealing rather than revealing why the law would want to attribute a responsibility to one party to provide satisfaction to the other. This is particularly so where, as is so often the case, it is conduct in a relationship or dealing - an expectation created and relied upon; a mistake not corrected; etc - which provides the focus of legal attention and which generates the issue of legal policy for which resolution is required. This, I suspect, provides the reason why `unconscionable conduct' and not `unjust enrichment' (a possible effect of that conduct) has achieved the currency it has in Australian law.[35]
Moreover, Gummow J characterised the focus of restitution law on the principle of unjust enrichment as fitting the definition of Judge Posner’s `top down reasoning', by which `a theory about an area of law is invented or adopted and then applied to existing decisions to make them conform to theory and to dictate the outcome in new cases'.'[36] According to his Honour, unless unjust enrichment is seen in such a light, rather than been used as a unifying principle to make sense of the raft of different cases where a claim for restitution is sought, there is the potential for an unnecessary and damaging competition to develop between unjust enrichment and other areas of law (namely, unconscionability). His Honour stated:
Unless as this court indicated in David Securities Pty Ltd v Commonwealth Bank of Australia, unjust enrichment is seen as a concept rather than a definitive legal principle, substance and dynamism may be restricted by dogma. In turn, the dogma will tend to generate new fictions in order to retain support for its thesis. It also may distort well-settled principles in other fields, including those respecting equitable doctrines and remedies, so that they answer the newly mandated order of things. Then various theories will compete, each to deny the others.[37]
Judgment of Gleeson CJ, Gaudron and Hayne JJ
The judgment of Gleeson CJ, Gaudron and Hayne JJ found in favour of the appellant’s restitution claim arising from a total failure of consideration. The majority justices agreed with the argument of the appellants that the licence fee component of the contract was divisible, and that failure of the respondent to pay back the proceeds of an unconstitutional tax would be unjust. In upholding the restitution claim, the justices reinforced the position established in Royal Insurance that the defence of passing on is not part of Australian restitution law. According to Gleeson CJ, Gaudron and Hayne JJ:
Why does it make a difference to the conscientiousness of the respondent’s retention of the moneys that the products were sold by the appellants at prices that have the effect of recouping the expense they bore in paying the `tobacco licence fees'?[38]
The basis of the claim for money had and received was explained by Gleeson CJ, Gaudron and Hayne JJ in the following terms: ‘the appellants base their claim, in part, upon the principles underlying the common indebitatus count for money had and received by the defendant to the use of the plaintiff’.[39] The justices then proceeded to quote from the 1868 edition of Bullen and Leake’s Precedents on Pleadings to explain that a claim for money had and received can be based on a total failure of consideration. Due to the appellants basing their restitution claim according to the common law count for money had and received, rather than the three elements of the principle of unjust enrichment, unjust enrichment as a principle was really only discussed in passing[40] by Gleeson CJ, Gaudron and Hayne JJ, rather than forming the hub of the decision.
There is no reason in principle that the appellant could not have succeeded on the basis of unjust enrichment as it was spelt in Pavey and Matthews v Paul. The respondents derived a clear benefit (the money) from the appellant in a manner that was seemingly unjust - ie, as a result of the appellants labouring under the mistaken belief that Rothmans were permitted (and in fact required) to collect the money.
When one looks at the three majority judgments (the leading judgment, along with the separate judgments of Callinan and Gummow JJ) together, the future of unjust enrichment as the basis of a restitution claim looks decidedly vulnerable. The leading judgment really only referred to unjust enrichment methodology once, instead deciding the case under the banner of a money had and received claim. Gummow J, after going to great lengths to undermine unjust enrichment as a legitimate principle of law, found in favour of the appellants on the basis that failing to pay back the proceeds of an unconstitutional tax would be unconscionable. The other judge in the majority, Callinan J, seemed to find for the appellants not only arising from a claim for money had and received,[41] but was also prepared to find an implied contractual term that the respondent pay back the amount of the licence fee.[42]
At this point it is worth noting that these remarks about the impending demise of unjust enrichment are not shared by all. Some commentators have taken the view that the uncertainty emerging from Roxborough v Rothmans is a reason for preserving unjust enrichment. For example, Beatson and Virgo have argued:
Although the unjust enrichment principle has been subject to rigorous criticism over the years, it retains a vital function in explaining disparate areas of the law in a principled and logically coherent way. The antipathy in certain Australian quarters to the principle is well known. An important attack on the validity of the principle is to be found in the decision of the High Court of Australia in Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2002) 76 ALJR 203, especially in the judgment of Gummow J. We suggest that the principle has survived that attack, and, in fact, the lack of clarity in the majority judgments as to the nature of the claim and what must be established emphasises the need for clear, well-defined principles, such as the unjust enrichment principle, to underpin the law of restitution.[43]
Prior to examining unjust enrichment in greater detail we provide an overview of unconscionability - which for the reasons advanced in sections 4 and 5 should subsume unjust enrichment.
III OVERVIEW OF UNCONSCIONABILITY AND THE DEVELOPMENT OF SITUATIONAL DISADVANTAGE
A Overview of Notion of Unconscionability
There is no question that unconscionability is becoming an increasingly important concept in equity. As has been noted by Fiona Burns, the High Court `has retained unconscionability as the touchstone of equity jurisprudence'.[44] As with the concept of unjust enrichment, the notion of unconscionability is, at least ostensibly, vague. However, according to Finn it is not indeterminate. The notion of unconscionability gains legal expression in a several different ways. Most importantly, it underpins several discrete causes of action, namely, estoppel, unilateral mistake, relief against forfeiture; and undue influence. There is also the broader action of unconscionable dealing.[45] More globally, Finn contends that there are instances where the courts have given direct legal effect to a finding that a person has acted unconscionably. `What differentiates this usage from the previous [ones] is that, of itself, unconscionable conduct can found a cause of action. It is not mediated by a discrete doctrine which channels the cause of action and the available relief.'
The multi-faced nature of unconscionability is also noted by Sir Anthony Mason. However, he claims that the doctrine is more circumscribed:
[The] use of unconscionable conduct has been criticised because it does not lend itself to precise definition and offers no precise test to be applied. The problem is that unconscionability is “better described than defined”. It is then argued that the concepts and principles based on unconscionability, such as the constructive trust and estoppel, are also afflicted with uncertainty. The force of this criticism is exaggerated. In other, sometimes related, fields, we have become accustomed to dealing with concepts that do not lend themselves to precise definition- fraud, undue influence, the duty of care in negligence. Like these concepts, unconscionability involves matters of fact, degree and value judgment so that, to the extent necessary, greater guidance will come from an array of decisions in particular situations (references omitted).[46]
Mason in providing a description of ‘unconscionable bargains’ in Australia as a flexible doctrine states that:
Here relief is granted when a transaction, considered in the light of the circumstances in which it was entered into, is so unconscionable that it cannot be allowed to stand. Historically, relief on this ground was largely confined to cases in which the party seeking relief was a person suffering from special disability or disadvantage, eg the expectant heir, the inebriated plaintiff in Blomley v Ryan, [fn [1956] HCA 81; (1956) 99 CLR 362] who was incapable of forming a rational judgment. But the principle according to which relief is granted cannot be limited to these particular situations. What is required is that there be an unconscientious taking advantage of the serious disability or disadvantage of the person in the inferior bargaining position by procuring or retaining the benefit in question in a way that is both unreasonable and oppressive. Implicit in this statement is the requirement that the defendant knew or ought to have known of the acceptance of the disadvantage or disability.[47]
B Extension to Situational Disadvantage
The notion of unconscionability has been expanded significantly in recent times as a result of a number of court rulings that have found that it operates in a commercial sphere.[48] In the case of ACCC v Berbatis,[49] French J extended the operation of unconscionability to the case where one party has a `situational' disadvantage, thus enabling the action to have a broader, commercial application. This was subsequently affirmed in Samton Holdings.[50]
The facts in Samton Holdings are as follows. The case involved the sale by New York Fries of a ‘lunch bar’ under a lease to a company called Executive Bloodstocks Pty Ltd. The price paid was $205,000, which comprised the following: $145,000 for goodwill, $50,000 for plant and equipment and $10,000 for stock in trade. Settlement of the purchase occurred on 28 February 1997, with the current lease that was in place expiring on 2 June 1997. There was an option to renew the lease for a period of a further 7 years, with the lessee being required to give notice at least 3 months before, but not more than 6 months prior to the expiration of the current lease (meaning that the tenant had to exercise the right to renew before 2 March 1997). According to the judgment, Executive Bloodstock was apparently aware of this, but due to a variety of circumstances overlooked the option to renew until 18 March 1997. The landlord informed Executive Bloodstock that this was not a valid option to renew and that they were going to take over the business themselves. However, instead of doing this the lessors required Executive Bloodstock to pay $70,000 to obtain a further 7 year term. This extension would have cost Executive Bloodstock nothing if it had been exercised prior to 2 March 1997. Importantly, the lessee had taken first and second mortgages over the home as well as a chattel mortgage over the family car to fund the purchase of the business. The Australian Competition and Consumer Commission argued that the respondents knew that Executive Bloodstock were in a position of special disadvantage and that imposing a requirement that $70,000 be paid was unconscionable. The Full Federal Court held that the trial judge was correct in stating that while the respondent’s conduct may have been opportunistic and an example of driving a hard bargain - it was not unconscionable.[51]
In Samton Holdings, the Full Court found that:
Under the rubric of unconscionable conduct, equity will...[s]et aside a contract or disposition resulting from the knowing exploitation by one party of the special disadvantage of another. The special disadvantage may be constitutional, deriving from age, illness, poverty, inexperience or lack of education - Commercial Bank of Australia Ltd v Amadio. Or it may be situational, deriving from particular features of a relationship between actors in the transaction such as the emotional dependence of one on the other - Louth v Diprose; Bridgewater v Leahy (1998) 194 CLR 457.[52]
The court not only endorsed, but also went some way toward describing, situational disadvantage, saying that:
Characterisation of disadvantage as “special” involves the recognition that it would be unconscionable knowingly to deal with the person so affected without regard to his or disability, be it constitutional, in the sense of inherent, or situational, in the sense of arising from a particular set of circumstances.[53]
Ultimately, however, the court found that special disadvantage did not exist in this case - apparent financial exposure and potentially severe losses did not suffice. According to the court, at least in the case of an experienced businessman, there must be something more than commercial vulnerability (however extreme) to elevate disadvantage into special disadvantage. Thus unconscionability can now be used in a wider class of commercial situations, with situational disadvantage encompassing a wide range of legal and financial circumstances. As is noted by Horrigan:
The sense of unconscionability under the general law and section 51AA of the Trade Practices Act which curbs unconscientious use of superior bargaining power to take of someone suffering from a special disability or special disadvantage now includes a wider class of commercial conduct, in light of the expansion of the notion of ‘special disadvantage’ to cover “situational” disadvantage arising from the matrix of legal and commercial circumstances rather than from any inherent infirmity or inadequacy.[54]
C Situational Disadvantage Extension Enabling Unconscionability to Subsume Unjust Enrichment
When restitution emerged as a distinct area of the law of wrongs in the case of Pavey and Matthews v Paul, unconscionability had not yet achieved extensive commercial application. At that stage, unconscionability was limited to a relationship where one party had a special `constitutional' disadvantage.[55]
However, if the foundation case of Pavey and Matthews v Paul was decided today, the same outcome could have been achieved by arguing the case of the basis that there was unconscionable conduct in a commercial context arising due to the builder’s ‘situational disadvantage’ that there was no enforceable contract to support the valuable services that had been provided. We would argue that if this occurred, unconscionability would be allowed to develop and be applied in a variety of commercial situations in which contract and tort are not applicable, subsuming the principle of unjust enrichment in the process. Accordingly, if such a favourable scenario had indeed occurred, we would not need a separate law of restitution: the desired potential of the law of restitution would instead be achieved by an expanding doctrine of unconscionability, without needing to turn to a so-called `unifying concept' such as unjust enrichment.
A practical example of the capacity of unconscionability to subsume unjust enrichment (and the similarity of the concepts) is the case of Nepean District Tennis Association Inc v Council of the City of Penrith.[56] In that case Hodgson J, while ostensibly invoking the concept of unjust enrichment, effectively decided the case by applying the doctrine of unconscionability.
The relevant facts of the case were as follows. Money was expended by a not-for-profit association on tennis courts owned by the City of Penrith Council, in reasonable expectation (as the law said the courts had to be leased to a not-for-profit association), encouraged by Council officers during a series of meetings and negotiations, that there would be a regranting of the lease to the association. A change of the Local Government Act (s 519A) in New South Wales meant that the Council could lease the courts to an organisation for the purpose of private profit (as the courts instead then came under s519C of the Act), and this meant for a potentially much greater fee ($35,000 per annum compared to $200 per annum). As a result, a long term lease was not granted to the association, but the Council alternatively decided to advertise to lease the courts to a profit-making organisation, with the intention of using the extra lease money to improve other courts and facilities in the city of Penrith area.
In his judgment, Hodgson J noted the emerging concept of unjust enrichment as a cause of action in the following way:
There are a number of cases in recent years where relief has been given against a party who would have been unjustly enriched by contributions made, or improvements made, to his land by the plaintiff having regard to the expectation of the parties at the time the contributions or improvements were made; for example, Morris v Morris [1982] 1 NSWLR 61, Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 and Baumgartner v Baumgarther [1987] HCA 59; (1987) 164 CLR 137. Furthermore the action for quantum meruit based upon the building work performed by a builder under an unenforceable contract has now been placed firmly on the basis of unjust enrichment, see Pavey-Matthews v Paul [1987] HCA 5; (1987) 162 CLR 221, See also Goff and Jones, The Law of Restitution, 2nd Ed, pp15-16, 110, and 396.[57]
However, whilst propounding that such a situation falls firmly within the realm of unjust enrichment, Hodgson J’s ratio seems to be placed on other grounds; namely, that it would be unconscionable for the Council to accept the benefit of expenditure without giving appropriate compensation or notice to the association. In other words, Hodgson J used unconscionability to reverse what would be an unjust enrichment derived from a contract which failed to materialise. According to his Honour:
The general principle is that if A expends money on the land of B, leading to some increase in the value of that land, A cannot recover from B either A’s expenditure or even the extent of the increased value. However the above cases show there are exceptions to this where the circumstances of the expenditure are such that it would be unconscionable for B to retain the increased value without some compensation to A. The question is whether there are such circumstances in this case. In my view there are such circumstances.[58]
His Honour concluded that `I think it would be unconscionable for the council to accept the full benefit of the expenditure without some compensation or notice'.[59] Now that unconscionability extends to cover ‘situational’ disadvantage, in the future when similar facts are presented, judges can directly invoke the concept of unconscionability without needing to cloak the concept in the language of an alternative cause of action - such as unjust enrichment.
Thus, while there is little question that the new expanded notion of unconscionability is capable of subsuming unjust enrichment, the more important issue is whether the law should be developed in such a way. In order to answer this question, we critically evaluate each of the causes of action.
IV COMPARISON OF UNJUST ENRICHMENT AND UNCONSCIONABILITY
A The Importance of Predictability
The central criticism of unjust enrichment as a unifying concept is that it is too vague to operate as a legal standard. However, as is discussed below the same charge can be made against unconscionability. Before considering this in relation to these specific claims it is important to emphasise that vagueness or indeterminacy of law is not a minor criticism. It strikes at one of the central tenets of the rule of law. In a speech delivered in November 2002, ‘Dispute Resolution and the Rule of Law’, Hayne J provided a useful description of the rule of law:
... [T]he rule of law will be seen to be concerned primarily with whether norms of behaviour and the rights and duties of participants in society, and the consequences that will follow from a failure to observe them, are both ascertainable and predictable.[60]
If laws are to guide and govern human conduct there are numerous minimum requirements that laws must observe. This includes that laws must not impose impossible demands; they should not be retroactive; and, of most relevance to the present discussion, laws must be promulgated in a manner that is clear, so that it is apparent from reading the laws what one must do.[61] One of the central tenets of the rule of law is that the law should be known by citizens. As Lon Fuller wrote in his classic work The Morality of Law, in the context of discussing the tale of King Rex, `How can anybody follow a rule that nobody can understand?'[62] `The desideratum of clarity represents one of the most essential ingredients of legality'.[63]
In light of this, it can be charged that maintaining restitution as a separate branch of the law of wrongs when the principle of unjust enrichment could easily be subsumed by the principle of unconscionability only achieves multiplicity. As noted above, Gummow J in Roxborough v Rothmans recognised this[64] when he wrote in his judgment that the continued operation of unjust enrichment in Australia could distort more settled principles of law (like unconscionability), and produce a competition between legal principles which causes conflict and unnecessary complexity.
B Unjust Enrichment
A good overview of the vagueness argument is provided by Mason and Carter in Restitution Law in Australia in discussing the High Court's treatment of unjust enrichment.
It cannot be said that the High Court has been content to treat unjust enrichment as the explanation for all restitutionary claims, and there are, perhaps, three criticisms of the way in which unjust enrichment has been dealt with by the High Court. The first is that it is difficult to find any clear statement in the decisions of the High Court of the components of the unjust enrichment concept, at least when applied to claims for reasonable remuneration. The second is that there is ambiguity as to the basis on which unjust enrichment may be used. Thus, as well as being described as a ‘concept’, there are in the High Court references to the ‘restitution or unjust enrichment theory’ [see Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 227 per Mason and Wilson JJ] as well as to the ‘doctrine of restitution or unjust enrichment’ [see Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 117 per Deane J], and the ‘law of unjust enrichment’. [see Baltic Shipping Co v Dillon (The Mikhail Lermontov) [1993] HCA 4; (1993) 176 CLR 344, 376 per Deane and Dawson JJ]. This is not merely a terminological quibble. Thus, our third point is that there is some uncertainty, both as to the scope of the law of restitution and the nature of the concept which has been adopted. An element of uncertainty in the law is inevitable.[65]
This has been contrasted to the situation with unconscionability.
...[P]roponents of unjust enrichment often refer to the generality of other principles to rebut the traditional criticism of the uncertainty of unjust enrichment. Unjust enrichment has been equated, for example, with concepts such as “unconscionability”. Perhaps one of the difficulties with such arguments is that, whereas concepts such as “unconscionability’ operate for the most part within the confines of very specific doctrines, this may not be the case with “unjust”. For if “unjust” is perceived as one element of a cause of action, then the only restriction on “unjust” is the need to show an enrichment at the plaintiff’s expense.” citations omitted.[66]
As is noted above, Gummow J has stated that a central reason for the supposed vagueness of unjust enrichment lies in the fact that it focuses on outcomes.
C Unconscionability
While unjust enrichment is vague the same charge can no doubt be made in relation to unconscionability. As noted by Beatson and Virgo:
The question is whether unconscionability, which he [referring to Gummow J in Roxborough v Rothmans] prefers, is any more principled or satisfactory a tool than unjust enrichment. While the term “unconscionability” is historically rooted in the equitable jurisdiction, modern Australian law has, it is suggested, shown its inherent uncertainty when it is generalised and used as a “basal principle” as it has been since the decision of the High Court in Commercial Bank of Australia v Amadio (1983) 151 CLR 447.[67]
However, some commentators have attempted to demarcate the boundaries of unconscionability in a bid to establish that it does not exist at large. For example, according to Parkinson, there are four categories of doctrine identified with the application of the concept of unconscionability:
(i) Exploitation of vulnerability or weakness. (ii) Abuse of position of trust or confidence.
(iii) Insistence upon rights in circumstances which make that harsh or oppressive.
(iv) Inequitable denial of legal obligations.
Furthermore, there are, it is suggested by Parkinson, three broad standards underlying the doctrines:
(i) That those in positions of strength or influence should not take advantage of another’s relative weakness.
(ii) That people should not by appeal to strict legal rights cause hardship of others by violating their reasonable expectations.
(iii) That those in fiduciary positions should act only in the interests of those to whom those fiduciary duties are owed.[68]
However, this analysis introduces more uncertainty than it dispels. Concepts such as `strength' and `weakness'; `fiduciary positions'; `hardship' and `reasonable expectations' are inherently vague. Further, as is discussed below the `standards' propounded as underpinning unconscionability do not touch on the fundamental rationale for unconscionability.
C Overlap Between Unjust Enrichment and Unconscionability
It follows that unjust enrichment and unconscionability, especially the former, have been criticised for being too vague and indeterminate. However, fundamentally there are at least two common indispensable features which they both share.
1 Transfer of Resources
The first is that there must be a transfer of resources, whether it is money, property, or labour. The transfer can be either formal, where it is typically pursuant to an otherwise valid contract, or informal where, for example, possession of a resource is transferred - as in the situation of Pavey and Matthews v Paul.
2 Conduct / Behaviour Distinction Illusory
It should be noted that this apparently trite observation exposes a basic misconception concerning a supposed difference between the two doctrines. It is artificial to suggest that unjust enrichment focuses on outcome whereas unconscionability focuses on conduct. An indispensable feature of both actions is that a resource has passed from one party to another. Absent such an occurrence unconscionability does not spring to life - irrespective of how bold the lie or deceitful the trick may have been. This is simply a manifestation of the broader legal principle that lies and deceptions, no matter how reprehensible, are not actionable per se.
The claim that only unjust enrichment focuses on outcome is thus illusory. It probably stems from a pre-occupation with the linguistic manner in which the respective claims are normally put. Unjust `enrichment' logically entails that a person has had his or her resource base enhanced. Unconscionable `conduct' entails that a person has behaved in a manner that is contrary to good conscience.[69] The actions could just as readily be described as `unjust conduct' or `unconscionable enrichment'. The point being that accidents in terminology should not distract commentators from the substantive nature of the respective actions. To this end, they are both concerned with remedying transactions that have resulted in a party unfairly increasing his or her resource base at the expense of another party who has suffered a corresponding diminution in his or her resource base.
3 Inappropriate Transfer
The second requirement shared by both doctrines is that the transfer of property, money or labour must have occurred in a manner which makes it inappropriate that the acquirer should keep the resources. The key issue then becomes whether any of the respective concepts are capable of providing for `fairer' and more definitive results than the other.
Viewed in abstract the answer is no.
Literally, unjust means contrary to justice; unconscionable, means contrary to good conscience. Both are vague terms - probably equally vague. It has been suggested that unconscionability is a more discrete concept than unjust enrichment - which supposedly roams at large. As is noted above, the weight of judicial and academic opinion supports the view that unconscionability is far more circumscribed than unjust enrichment. But practical realities suggest otherwise.
4 Unconscionability Just as Vague - Practical Example: the Fallout from Amadio
The landmark High Court decision of Commercial Bank of Australia v Amadio[70] represents perhaps the high water mark so far as the concept of unconscionability is concerned in Australian law. It was held that the court will set aside a transaction `whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-a-vis another and unfair and unconscientious advantage is then taken of the opportunity thereby created'.[71]
The facts in the case were quite extreme. The respondent (guarantors) were aged and had a poor knowledge of English. As a result of this it was held that it would be unconscionable for the bank to enforce a guarantee and sell the respondents' home after the respondents' son failed to repay the loan owed to the bank.
The measured response to the decision in Amadio would have been to assume that the case was confined to its facts: big bank versus financially naive aged couple with poor English skills. The fallout from the case has been anything but that. Amadio has seen a wholesale change in banking practice concerning the provision of guarantees. It is now standard practice across Australia that virtually every person who signs a guarantee where a bank is a party must first obtain independent legal advice. This is so irrespective of the level of financial and business acumen possessed by the prospective guarantor.
Thus, the upshot of Amadio is that the parents got to keep the house; lawyers got a new income stream (in the form of providing independent legal advice for virtually every guarantee that has been entered into in Australia since the decision was handed down); and the community has paid tens of millions of dollars to lawyers for independent legal advice. The reason the banks insist on independent advice, and have not confined Amadio to its facts, is simple: they have no confidence that the notion of unconscionability will be confined to facts similar to those in the case. There is a risk that the doctrine could be used to invalidate many other guarantees.
Importantly it is not `just' the banks that have little idea about just how wide the tentacles of unconscionability may reach. On such matters banks always act on legal advice - indeed they more than any other institution in the country (with the possible exception of oil companies) have the means to afford the supposed best legal advice available. The culmination of this legal advice is to compel virtually every prospective guarantor in the country to get independent legal advice as a pre-requisite to signing a mortgage. This is so, irrespective of the level of legal and financial acumen of the would-be guarantor.
The situation is so prescriptive that even lawyers (who, remember, are the people who provide advice to clients on the meaning and effect of guarantees) must get independent legal advice before entering into a mortgage. When one remembers that the scope of independent legal advice does not touch on the financial merit of the transaction but purely concerns explaining the legal effect of a guarantee, the prescriptive character of the rule is obviously a nonsense. Moreover it is inefficient. Obtaining independent legal advice takes time and costs money.
The obvious question is why would any institution insist on implementing such an inefficient and on the whole wasteful transaction - it is only a small minority of people who fit into the Amadio mould - as a pre-requisite to a financial dealing? The answer is that the lawyers for the banks are not confident in predicting the scope of the unconscionability principle. Thus, judges and legal commentators can theorize all they wish concerning the principled and structured nature of unconscionability, but commercial reality suggests either one of two things: (i) they are wrong; or (ii) they have not done an inadequate job of informing banking lawyers of the limits and scope of the doctrine. Given that the absence of elucidatory material on the topic we think that the more likely explanation is the first. Either way, the doctrine is in need of an over-haul.
Thus we do not believe that there is any basis for suggesting that unconscionability is a more concrete notion than unjust enrichment. However, assuming that a doctrine which can reverse the effect of unfair resource distributions is necessary and that certainty and predictable in the law are highly commendable virtues it follows that there is room for only one of them. As is note by Mason, `there is, in my view, little to be said for the preservation of separate and different sets of principles if they ultimately depend on nuances to be derived from words such as “unjust” and “unconscionable”'.[72]
V THE PATH FORWARD: ADVANTAGES OF UNCONSCIONABILITY AND PUTTING STRUCTURE INTO UNCONSCIONABILITY
A Preference for Unconscionability
The question at this point becomes which of the two concepts should be retained. In our view, unconscionability wins for two reasons. First, unlike unjust enrichment, it is not constrained by the limitation that it applies only in situations where a contract is not on foot. This constraint might be seen by some as an advantage of the doctrine, in that it provides a limit to its sphere of operation and hence necessarily makes the law more predictable. However, as is discussed below the principle behind the concept of reversing unfair resource allocations looks beyond technicalities and it would cut too deeply across this principle to make it subservient to such a fickle notion as whether a contract existed at the time. Secondly, unconscionability should be preferred for the simple reason that it has a richer legal history in Australian jurisprudence. This too can be a disadvantage when one is postulating a fundamental legal change - the mistakes of the past often provide a fetter to substantive reform given the innately conservative manner in which the law develops. However, this is not a barrier in the case of unconscionability. As is noted above, the concept is so broad that there is ample scope to re-fashion it in a more coherent manner.
B Injecting Principle into Unconscionability
Given that unconscionability should be the sole touchstone for remedying unfairness the key issue is how the doctrine should be remodelled to operate in a more predictable and principled manner.
To make headway, it is necessary to go back to fundamentals. In this regard the broadest question is why do we need any doctrine to remedy the effects of otherwise lawful transfers of resources? This takes us back to the root justification for equity. The notion of unconscionability is a concession to two matters. First, the limits of human foresight. The operation of any narrow legal standard will invariably lead to unfair consequences in some cases. The requirements of offer, acceptance, consideration and the (informed) intention to create legal relations, and the absence of vitiating factors, normally operate to ensure a fair bargain but this will not always be the case. Secondly, certainty (especially in relation to financial matters) is a desirable virtue, but it is ultimately subservient to fairness.
Against this background it is possible to derive some broad standards concerning the circumstances in which otherwise lawful transfers of property should be reversed or otherwise adjusted. First, it is necessary to provide an overview regarding the circumstances in which property transfers are not unfair. There are several basic principles in this regard.
1 Fundamentals Concerning Appropriate Transfers of Property
(1) People have the right to own property (and other resources).[73]
(2) An inherent part of this right is that people can transfer property.[74]
(3) People generally value property ownership.
(4) Because people value property there should be formal rules established by which property transfer can occur.
This fourth principle is reflected by the fact that the law lays down relatively prescriptive standards concerning the manner in which property can be transferred. The minimum requirements that are normally necessary for property to pass are:
(1) consent. This underpins the notions of offer, acceptance and intention to create legal relations; and(2) consideration. apart from the (relatively) rare circumstances in which gifts are enforceable. Underpinning the notion of consideration is the belief that because property is so highly valued, no person would part with it without getting something in return.
(5) The rules that regulate the transfer of property need to be clear and operate to provide a high degree of certainty so that it possible to make a confident assessment about the ownership of a resource at any point in time.
As noted above, people value property. They often desire to own more property and expend countless hours of labour deriving money to put themselves in a position where they can acquire new property. The desire to acquire new property will be frustrated and ultimately diminished if people do not have confidence in the process by which property is transferred. This will thwart the market economy. Rational power will not swap labour or money for property unless there is (near) certainty that the transfer will not reversed. People will stop buying houses, cars, shares, concert tickets or entering into any contracts unless they believe that the transaction will be recognised.
(6) The circumstances in which certainty can be trumped should be determined by reference to the core requirements by which property can pass. This takes us back to premise four.
Consent and consideration have both been interpreted very broadly by the courts. The reason for this is to facilitate the ease with which property can pass so that the market system can operate as efficiently as possible and to increase confidence that property transfers will not be impugned. Thus, an objective standard is generally used to ascertain if the elements of offer, acceptance and intention to create legal relations are satisfied and a `peppercorn' constitutes good consideration.[75]
2 Legal Notions of Consent and Consideration are Illusory - hence the need for overriding principles
In reality, such standards, of course, are illusory and can lead to gross unfairness - whether a person actually consents is a matter peculiarly know to them; it does not depend on what an objective person observing the transaction would conclude. Also, what right thinking person really believes that a peppercorn is a fair swap for a new model car or an original oil painting? The niggling discomfort which judges have regarding the operation of such rules lies at the heart of the desire to ameliorate their discomfort by introducing notions such as unconscionability.
3 Real Consent and Real Consideration
The upshot of this is clear. The further away that a purported transfer of property is from incorporating real consent and real consideration the more likely that it should be reversed or adjusted. In this sense real consent simply means informed consent: the party has an actual (as opposed to apparent) knowledge of the relevant facts. Real consideration is equally straightforward: the market value of the items is similar in value.
These variables operate in an independent fashion. When either one is completely satisfied then the transfer is generally fair. Thus, where we have real consent but no consideration or real consideration but not consent, conscience does not require a reversal or adjustment of the transaction. The first paradigm is reflected in the notion of the legitimacy of gifts. Where we are certain a party wanted to depart with their property without receiving anything in return we accept this as a legitimate exercise of one's autonomy. Certainty in this regard is attained by the symbolism of a deed or seal[76] - the paradigm situation in which a gift is legally enforceable. Similarly, where a party does not subjectively consent to a transfer, courts do not strive too hard to find a means to alter the transfer so long as they have been reimbursed.[77] Hence, the reluctance of equity to step in where real consideration has passed.
4 Proposed New Test for Principle of Unconscionability
Thus, the triggers for equitable intervention under the principle of unconscionability should be where:
(1) There is neither real consent or real consideration; or(2) Either variable is absent and it is unclear whether the other is satisfied or is satisfied only to a minor extent.
The first situation is clear. A practical example of this is Amadio - the parents received nothing (although in law the consideration was the loan to the son) in return for guaranteeing their son's loan and had no concept about what they were signing.
The second turns on matters of degree and hence requires further elaboration. Like most concepts, consent and consideration come in degrees. Real consent in the fullest sense requires the agent to be aware of all the relevant facts. Lack of awareness of each relevant fact diminishes the quality of the consent. At some point the number of facts becomes so significant to impugn the notion of real consent and at best we are left only with ostensible consent - the type which normally suffices for the purpose of contract law. There is, of course, no shortage of ways in which real consent can be vitiated. Common vitiating features include deception and mistake. Real consideration is, likewise, not an absolute concept - it too turns on questions of degree. Paying $1,000 for a commodity with a market value of $1,000 is the paradigm case of real consideration. Paying $2,000 for the same commodity is still in acceptable, $5,000 is still in the ballpark, but $100,000 is consideration only in fiction - once again of the type recognised by contract law. We now see that a practical example of this is the Pavey and Matthews v Paul situation. There was a total absence of consideration (the builder received nothing for his improvements) and total real consent was lacking, given that he was unaware that an enforceable contract was not (or would not be) on foot.
Thus, we suggest the concept of unconscionability should step in to reverse or adjust a transfer of resources where principles (1) or (2) are satisfied. Approached in this way, unconscionability would operate in a fairer and more defined manner. We accept that the second principle involves an element of degree. However, it is still a vast improvement on the present state affairs given that the principle variables, real consent and real consideration, have been demarcated and defined.
The real splendour of the above approach is that it is flexible enough to explain and justify the leading cases on unconscionability. In this way the new jurisprudence of unconscionability can clarify and build on the rich history of the past.
C Out with the Old: Unfair Insistence of Strict Legal Rights - Legal Fallacy
1 Immoral Dealing as the Justification?
As we have already adverted to, ostensibly the concept of immoral dealing underpins unconscionable conduct. In Amadio, Deane J stated:
Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so.[78]
In this regard it has been noted that unreasonableness is not enough, there must be `morally reprehensible' conduct.[79]
Enough has been said already to impugn this as a justificatory legal principle. Importing empty moral notions into the law risks making the law so uncertain as to be unknowable. This is not to deny that morality should not be at the core of legal standards. However, in order to directly import moral concepts into the law, one of two things must occur. First, the courts could expressly state which of the vast number of moral theories that have advanced over the ages is being invoked. For example, are they adopting a consequentialist or rights based theory? Judges are not moral philosophers and hence are not likely to go down this path.[80] There are, however, numerous moral principles which are common to most normative theories, such as don't tell a lie or directly cause harm to others.
Thus, the second tack that the courts could take in order to legitimately import moral notions into the law is state which precise moral principles are been invoked and how they are to be balanced against other competing moral virtues. Unfortunately, the courts have not taken this path so far as unconscionable conduct is concerned and, accordingly, we are left with indeterminacy. To this end, we suggest that the principles we have advanced to guide the development of unconscionable conduct balance the competing moral goods of the right to property and consent - which is a manifestation of the broader notion of personal liberty.
2 Unfair Insistence on Strict Legal Rights
What then of the alternative rationale for unconscionability - unfair insistence of strict legal rights? This rationale should be discarded for two reasons. First, as has been discussed above it is too vague. It fails to consider the rationale behind the principle of unconscionability, and offers no guidance regarding the manner in which future cases will be decided. Secondly, the concept that one can unfairly exercise his or her rights (legal or otherwise) is nonsense. Such a claim reveals a serious misunderstanding of what it means to have and to exercise a right. It is contradictory to claim both that one has a right and that disadvantages can flow from its exercise (for example he or she is not entitled to the benefit of an otherwise lawful transfer of resources).[81] This follows from fundamental aspects of the nature of rights.
Rights have been defined in a variety of ways - following the seminal work of Wesley Hohfeld,[82] there has been much useful discussion in this area. McCloskey believes rights to be simply entitlements,[83] while in Sprigge’s view `the best way of understanding ... that someone has a right to something seems to be to take it as the claim that there are grounds for complaint on their behalf if they do not have it'.[84] Still further, rights have been defined as: claims and entitlements to benefit from the performance of obligations;[85] `those minimum conditions under which human beings can flourish [as moral agents] and which ought to be secured for them, if necessary by force';[86] and the `liberties each man hath, to use his own power, as he will himself, for the preservation of his own nature'.[87] Finally, Galligan defines a right as a `justified claim that an interest should be protected by the imposition of correlative duties'.[88]
Although, as we shall shortly see, it is not necessary for the purpose of this discussion to explore which definition is the most plausible, though for the sake of completeness, and hence without being too concerned to argue the point, we believe the following to be the correct definition of a right. A right is a presumptive benefit or protection one can assert against another individual or the community in general. Presumptive, because it is never indefeasible or absolute. By benefit, we mean a positive entitlement such as the right to welfare. A protection is a negative entitlement, such as the right to be free from a particular violation. We do not agree with Hart’s view that a right necessarily requires that the holder must be in a position to elect whether or not to exercise it.[89] It does not seem to be overly straining the language to assert that children, the mentally handicapped or even animals have rights. For example, it is appropriate to speak of the mentally disabled as having the right to have children, or children as having the right not to be physically abused, and such issues are normally discussed in terms of rights without even the hint of incoherency.[90]
The reason we need not to deeply concern ourselves here with which definition is correct is because whichever definition is selected it is apparent that a right is at the bare minimum a positive quality or a `plus’. Having a plus is obviously not sufficient to have a right, but it is the one pervasive feature to emerge from the differing views as to what constitutes a right, and hence we may conclude that it is a necessary feature of a right. None of the definitions state or even imply that a right could involve a minus or a disadvantage. Nor could any tenable definition maintain any such thing. For to directly negate the necessary element of the term would constitute a clear internal incoherency. The High Court has in other contexts accepted exactly this point. In the case of Petty and Maiden v The Queen (which concerned the scope of the pre-trial right of silence), in the context of discussing the importance of the right of pre-trial silence the Court stated:
an incident of that right of silence is that no adverse inference can be drawn against an accused person by reason of his or her failure to answer questions or provide information. To draw such an adverse inference would be to erode the right of silence or to render it valueless.[91]
Given the beneficial nature of rights it is illogical to assert that one can suffer a detriment when exercising a right. The fact that the law resorts to fictions such as that based on the unfair insistence of strict legal rights reveals the extent of the confusion that prevails in this area of law.
It could be countered that the doctrine of unfair exercise of legal rights is sound in the context of the demarcation of law and equity. Once again at the substantive level this is merely to advert to other fictions. In all meaningful respects law and equity are the same. They are rules which guide human conduct and which are backed by the authority of the State and hence are prescriptive in nature.[92] This is unlike all other rules, such as those of morality, etiquette and sport. Law and equity may have different ultimate goals and features, notably the law’s desire for certainty in contrast to equity’s desire for fairness.[93] However, this does not change the fact that both come within the rubric of the social institution of the law.
In this regard it is nonsense to assert that one can exercise his or her legal rights unfairly and suffer a detriment as a result. It is unquestionable that many legal standards operate in an unfair manner. But to assert that such unfairness should result in legal rights not being enforced is to place morality above law, which violates the most fundamental tenet of the rule of law: we should be governed by law, not men.
The only way to make some sense of the claim that transactions should not be enforced which involve unfair insistence on strict legal rights is to assume that in such cases the law, prescribing the transaction, has not been fully stated. Thus, for example, the claim is that one cannot exercise his or her contractual rights because an exception applies on the facts of the case. We suggest that the only recognised exception that should apply is where exercise of one's contractual rights would be unconscionable. As noted above, two paradigms exhaust this.
VI CONCLUSION
The actions of unjust enrichment and unconscionability cover similar factual scenarios. Both have been criticised because of their vagueness and indeterminacy. As the law currently stands this criticism is sound. In light of this, and the fact that unconscionability has a broader scope of operation (especially now that it applies to ‘situational’ disadvantage) it should subsume unjust enrichment, which should be abandoned as a cause of action.
This still leaves the notion of unconscionable conduct at large. The need for certainty in the law requires principle to be injected into this notion. We have suggested that the triggers for equitable intervention under the principle of unconscionability should be where:
(1) There is neither real consent or real consideration; or(2) Either variable is absent and it is unclear whether the other is satisfied or is satisfied only to a minor extent.
In Justice Hayne’s recent extra-curial speech, ‘Commercial Law- Private Business/Public Concern’[94] in which he talks about the “intrusion” of equitable principles into commercial dealings, his Honour observed that:
it is, I think, the common experience of judges sitting in commercial lists that expressions like “fiduciary” and “unconscionable” are sprinkled through pleadings or submissions much as caster sugar is sprinkled upon a bowl of strawberries in the hope that the consumer may find the dish more palatable.
With the authors proposed yoking of unjust enrichment into unconscionability, the ultimate objective is not to add to the dish to make it more palatable, but rather to rationalise what is on the dish so that it is easier to digest. Continuing to serve both unjust enrichment and unconscionability as an appetiser for equitable outcomes is likely, sooner rather than later, to cause the dish to crack apart, with lawyers being left with an almighty mess to deal with and clients going hungry.
[1] A phrase used by Gareth Jones to describe the merging of the two concepts: see ‘The Law of Restitution: The Past and the Future’, in Andrew Burrows (ed), Essays on the Law of Restitution (1991) 10.
[2] See Deane J in Pavey and Matthews v Paul [1987] HCA 5; (1987) 162 CLR 221, 256.
[3] [1987] HCA 5; (1987) 162 CLR 221.
[4] See, for example, Ross Grantham and Charles Rickett, ‘On the Subsidiarity of Unjust Enrichment’ (2001) 117 Law Quarterly Review 273. See also the judgement of Callinan J in Roxborough v Rothmans [2001] HCA 68; (2002) 185 ALR 335 (‘Roxborough v Rothmans’), where His Honour favoured a broad scope for the law of restitution, stating that he would, ‘reject the respondent’s submission that it is only in cases in which contracts have been frustrated, discharged for breach, or held to be unenforceable, or otherwise avoided, that a party may obtain restitution’ (390).
[5] See, for example, Ben Kremer, ‘The Action for Money Had and Received’ (2001) 17 Journal of Contract Law 93. The argument that restitution is an unnecessary branch of law is not new. The ‘artificiality argument’- that restitution is really just part of contract based on an implied contract theory - has been discussed in restitution texts for years. See Keith Mason and John Carter, Restitution Law in Australia (1995), [105]:
The main thrust of the argument against restitution, when expressed in terms of artificiality, is that there is no point in creating a scheme when there are recognised bases for securing restitution in all the individual categories already recognised. They depend for their operation on particular rules which do not admit of a generalisation. Once a generalisation is made, so the argument runs, the effect must be to redefine existing bases for liability, in terms of an artificial concept which exists in the minds of the theorists.
[6] See, for example, Lord Goff of Chieveley P C, ‘The Future of the Law of Restitution’ [1989] SydLawRw 1; (1989) 12 Sydney Law Review 1, 3.
[7] [2001] HCA 68; (2002) 185 ALR 335.
[8] [2001] HCA 68; (2002) 185 ALR 335, 365.
[9] Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 189 ALR 276 (‘Samton Holdings’).
[10] At the time of writing, the only articles to explore in any detail the implications of Samton Holdings were Professor Bryan Horrigan in ‘Unconscionability Breaks New Ground - Avoiding and Litigating Unfair Client Conduct after the ACCC Test Cases and Financial Services Reforms’ [2002] DeakinLawRw 4; (2002) 7 Deakin Law Review 73, and Jan McDonald, ‘Australian Competition and Consumer Commission v Samton Holdings Pty Ltd’ (2002) 10 Trade Practices Law Journal 234.
[11] See Roxborough v Rothmans [2001] HCA 68; (2002) 185 ALR 335, 365. Justice Gummow’s judgment is be analysed in further detail below.
[12] See the discussion in J Beatson and G J Virgo, ‘Contract, Unjust Enrichment and Unconscionability’ (2002) 118 Law Quarterly Review 352, 352-3, which is discussed below.
[13] Royal Botanic Gardens & Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289. See also case note by Derek Cassidy QC in (2002) 9 Australian Property Law Journal 282.
[14] See Tyrone M Carlin, ‘The Rise (And Fall?) of Implied Duties of Good Faith in Contractual Performance in Australia’ [2002] UNSWLawJl 4; (2002) 25 University of New South Wales Law Journal 99, 120-21; J W Carter and Andrew Stewart, ‘Interpretation, Good Faith and the ‘True Meaning’ of Contracts: The Royal Botanic Decision’ (2002) 18 Journal of Contract Law 182, 190-5. For a general discussion of whether there exists a duty of good faith in Australia, see Sir Anthony Mason in ‘Contract, Good Faith and Equitable Standards in Fair Dealing’ (2000) 116 Law Quarterly Review 66.
[15] See ‘Commercial Law- Private Business/Public Concern’, Speech to the Australian National University Centre for Commercial Law, September 30 2002. Available at <http://www.hcourt.gov.au/speeches/haynej/haynej_CommercialLawANU.htm>
[16] See Samton Holdings (2002) 189 ALR 76, 96: `It may be accepted that the categories of special disadvantage are open and may extend to what French J, at first instance in Australian Competition and Consumer Commission v Berbatis Holdings Pty Ltd (ACN 008 799 040) [2000] FCA 1893, called `situational disadvantage' as well as the constitutional disadvantages engendered by such disabilities as illiteracy or lack of education, illness or infirmity'. This is discussed further below.
[17] From Oxford Companion to the High Court of Australia (2001), ‘Restitution’ entry by John Carter and Keith Mason, 603-604:
[18] Mason and Carter, above n 5, 3.
[19] [1987] HCA 5; (1987) 162 CLR 221.
[20] [1987] HCA 5; (1987) 162 CLR 221, 256-7 (Deane J)
[21] [1987] HCA 5; (1987) 162 CLR 221, 227 (Mason and Wilson JJ)
[22] See Mason and Carter, Restitution Law in Australia (1995) 38-9. As with all actions, defences are of course available. Some have argued that as a result there is a fourth element, being that ‘no defence is applicable or available’: Peter Birks, Restitution: The Future (1992) Ch 6.
[23] Beatson and Virgo, above n 12, 356. See also Goff and Jones, The Law of Restitution (5th edition, 1998) 52. Elaborating on this point, Jack Beatson, in ‘Restitution and Contract: Non-Cumul?’ (2000) 1 Theoretical Inquiries in Law, 3 states that
while it now clear that restitution is independent of contract and there is an overlap between the two, where money is paid or work done under a valid contract there can be no restitutionary claim until the contract is discharged. Deane J, in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 256, stated that there is “neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration” where there is a valid and enforceable agreement governing the plaintiff’s right to payment. Again, in The Evia Luck, Lord Goff stated that before any right to recover money paid under a contract could be established, the relevant contract first had to be avoidable: ‘until this was done, the money in question was paid under a binding contract and so was irrecoverable in restitution’: [1992] 2 AC 152, 165 (emphasis added). Once the contract is discharged, however, a restitutionary claim may be brought, in cases of breach of contract as an alternative to a claim for damages, and in principle a person may recover more by such a claim than would be recovered as damages for breach of contract'
[24] However, there is the possibility of restitution existing alongside contract when there is a gap in the contractual allocation of risk. `Nevertheless, it should not be assumed that restitution is inevitably barred as a matter of analysis. There may be a gap in the contractual allocation of risks and, though there is no contractual right to repayment or recompense, the contract may, as in the fact situation contemplated by two of their Lordships in Miles v Wakefield M B C, contain no impediment to restitution': Miles v Wakefield M.B.C. [1987] UKHL 15; [1987] AC 539, 553.
[25] Grantham and Rickett, above n 4, 273 (emphasis added).
[26] [2001] HCA 68; (2002) 185 ALR 335.
[27] [1997] HCA 34; (1997) 189 CLR 465.
[28] See Vickery v JJP Custodians Pty Ltd [2002] NSWSC 782 (30 August 2002), [119] (Austin J).
[29] [1994] HCA 61; (1994) 182 CLR 51.
[30] See Royal & Sun Alliance Insurance Australia Ltd v Commissioner of State Revenue [2002] VSC 345 (23 August 2002), [55]-[58] for a succinct discussion of the facts and reasoning in Roxborough v Rothmans.
[31] Lord Goff of Chieveley P.C, above n 6, 1.
[32] [2001] HCA 68; (2002) 185 ALR 335, 365.
[33] Ibid (emphasis added).
[34] See Ben Kremer, ‘The Action for Money Had and Received’ (2001) 17 Journal of Contract Law 93, 97:
Mansfield’s approach [in Moses v Macferlan], which emphasises the reason for recovery lying at the heart of each case, is superior to the view that simply says an enrichment is ‘unjust’ based purely on what ‘the law’ has historically done - that is, whether it has in the past said there ‘should be restitution’- or upon a gloss put on them relating to the plaintiff’s ‘will’ or ‘intention’. [This] approach is descriptive of some instances in which [an action for money had and received] may lie but says nothing as to why it lies.
[35] [2001] HCA 68; (2002) 185 ALR 335, 354 (emphasis added), citing Finn, `Equitable Doctrine and Discretion in Remedies' in W R Cornish et al (eds), Restitution: Past, Present and Future, 1998, 251, 252 (emphasis added).
[36] [2001] HCA 68; (2002) 185 ALR 335, 355, citing Judge Posner, ‘Legal Reasoning from the Top Down and From the Bottom Up: The Question of Unenumerated Constitutional Rights’ (1992) 59 University of Chicago Law Review 433, 433.
[37] [2001] HCA 68; (2002) 185 ALR 335, 355. Recently in Vickery v JJP Custodians Pty Ltd [2002] NSWSC 782 (30 August 2002), Austin J commented on Gummow J’s attack on unjust enrichment as follows ([121]):
Gummow J criticised the concept of unjust enrichment as a general source of restitutionary obligations, and urged “caution in judicial acceptance of any all-embracing theory of restitutionary rights and remedies founded upon the notion of ‘unjust enrichment’ (at 355). In his Honour’s view, the various obligations to make restitution arise in Australian law out of conduct in a relationship or dealing, where the focus of legal attention is on the unconscionability of conduct rather than on the enrichment and its unjust nature in any more general sense. He saw unjust enrichment as a concept (admittedly, a unifying concept) rather than a definitive legal principle.
[38] [2001] HCA 68; (2002) 185 ALR 335, 343.
[39] Roxborough v Rothmans [2001] HCA 68; (2002) 185 ALR 335, 339.
[40] [2001] HCA 68; (2002) 185 ALR 335, 341: `If there is a right to enforce repayment upon the basis of a failure of consideration, it is because, in the circumstances, the law imposes an obligation to make just restitution for a benefit derived at the plaintiff’s expense'.
[41] See [2001] HCA 68; (2002) 185 ALR 335, 391.
[42] See [2001] HCA 68; (2002) 185 ALR 335, 392-3:
It is not necessary for me to deal with the other arguments of the appellants, although I would be inclined to agree with the conclusion of Gyles J that it might also be appropriate to imply a term in favour of the appellants for repayment of the relevant sums. The term is that in the event that it is not necessary or possible to pay the tax, the sum represented by it would not be kept by the respondent but would be returned to the appellants. The appellants almost certainly would only have paid the sums in question upon the underlying common understanding that those sums would of legal necessity be payable by the respondent to the revenue authority. An implication of the kind that I have stated, in those circumstances, could fairly readily be made by the hypothetical officious bystander whose opinion the courts invoke in a case of this kind.
[43] Beatson and Virgo, above n 12, 353 (emphasis added).
[44] From Oxford Companion to the High Court of Australia (2001), ‘Unconscionability’ entry by Fiona Burns, 689.
[45] The exemplars of this are the High Court’s decisions in Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447 (Amadio); and Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621.
[46] Mason, above n 14, 89 (citations omitted).
[47] Mason, above n 14, 87.
[48] See also the inclusion of s 51AB and s 51AC of the Trade Practices Act 1974 , which prescribe specific rules relating to unconscionability in commercial relationships. For a useful discussion of s 51AB and s 51AC of the Act, see Dominic O’Brien, ‘The ACCC v Berbatis Litigation and Section 51AA of the Trade Practices Act 1974 (Cth)’ (2002) 10 Trade Practices Law Journal 201, 204-6. As this article is focusing on the equitable notion of unconscionability, the operation of s 51AB and s 51AC will not be discussed by the authors.
[49] ACCC v C G Berbatis Pty Ltd [2000] FCA 2; (2000) 169 ALR 324. The subsequent Full Federal Court decision, CG Berbatis Holdings Pty Ltd v ACCC [2001] FCA 757; [2001] ATPR 41-826, has since been appealed to the High Court. At the time of writing, the case had been heard by the High Court but a decision had yet to be handed down. For a discussion of the High Court appeal, see O’Brien, above n 48, 214.
[50] (2002) 189 ALR 276. The principle in Samton Holdings and Berbatis that unconscionability extends to ‘situational disadvantage’ was approved by the Federal Court recently in Arrowcrest Group Pty Ltd v Ford Motor Company of Australia Ltd [2002] FCA 1450 (25 November 2002).
[51] Facts taken from Lynden Griggs, ‘A Comment on Undue Harassment and Unconscionability- the linkage that will see the private vendor of residential real estate subject to greater obligations!’ (2002) 9 Australian Property Law Journal 228, 234-5. For a discussion of the facts in Samton Holdings, see also McDonald, above n 10, 234-5.
[52] (2002) 189 ALR 76, 92 (emphasis added).
[53] (2002) 189 ALR 76, 97.
[54] Horrigan, above n 10, 87.
[55] See the classic unconscionability case of Amadio [1983] HCA 14; (1983) 151 CLR 447.
[56] Unreported, Supreme Court of NSW- Equity Division, Hodgson J, 24 October 1988.
[57] Unreported, Supreme Court of NSW- Equity Division, Hodgson J, 24 October 1988, 14.
[58] Unreported, Supreme Court of NSW- Equity Division, Hodgson J, 24 October 1988, 14 (emphasis added)
[59] Unreported, Supreme Court of NSW- Equity Division, Hodgson J, 24 October 1988. 16.
[60] Justice Hayne, ‘Dispute Resolution and the Rule of Law’, Speech to Sino-Australian Seminar, Beijing, 20-22 November 2002. Available at: <http://www.hcourt.gov.au/speeches/haynej/haynej_DisputeResolutionBeijing.htm>
[61] Lon Fuller, The Morality of Law (1964). See also Joseph Raz, The Authority of Law (1979) ch 11, (esp 211, 214-6); John Finnis, Natural Law and Natural Rights (1980) 270-6; Jeremy Waldron, The Law (1997) ch 3.
[62] Fuller, ibid, 36.
[63] Ibid, 63.
[64] [2001] HCA 68; (2002) 185 ALR 335, 355:
Unless as this court indicated in David Securities Pty Ltd v Commonwealth Bank of Australia [see [1992] HCA 48; 1992) 175 CLR 353 at 378-9; [1992] HCA 48; 109 ALR 57 at 58], unjust enrichment is seen as a concept rather than a definitive legal principle, substance and dynamism may be restricted by dogma. In turn, the dogma will tend to generate new fictions in order to retain support for its thesis. It also may distort well-settled principles in other fields, including those respecting equitable doctrines and remedies, so that they answer the newly mandated order of things. Then various theories will compete, each to deny the others. (emphasis added)
[65] Mason and Carter, above n 5, 128 (emphasis added) [author’s interpolations].
[66] Joachim Dietrich, Restitution: A New Perspective (1998), 47-8.
[67] Beatson and Virgo, above n 12, 354.
[68] `The Notion of Unconscionability', Laws of Australia [35.5], 8.
[69] For a more formal definition of `unconscionable', see ACCC v Berbatis [2000] FCA 2; (2000) 169 ALR 324, 330: `The word “unconscionable” which describes the conduct prohibited by s 51AA has as its ordinary meaning “showing no regard for conscience; irreconcilable with what is right or reasonable - Shorter Oxford English Dictionary”’.
[70] [1983] HCA 14; (1983) 151 CLR 447.
[71] [1983] HCA 14; (1983) 151 CLR 447, 474.
[72] Sir Anthony Mason, ‘The Place of Equity and Equitable Remedies in the Contemporary Common Law World’ (1994) 110 Law Quarterly Review 238, 256.
[73] The strongest modern day argument in favour of this right is espoused by Robert Nozick, in Anarchy, State and Utopia (1974), where he advances two arguments in favour of this, the `self-ownership argument' and the `creation without wrong argument'.
[74] See discussion below concerning the nature of rights.
[75] See for example B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147; Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) NSWLR 309; Oscar Chess Ltd v Williams [1956] EWCA Civ 5; [1957] 1 WLR 370; United States Surgical Corporation v Hospital Products International Pty Ltd [1983] 2 NSWLR 157.
[76] For the relevant statutory and common law requirements, see for example, N C Seddon and MP Ellinghaus, Chesire and Fifoot's Law of Contract (8th ed, 1999) ch 4.
[77] As far as the existing law is concerned, in order for the unconscionability principle to be invoked, it is not essential the transaction is manifestly disadvantageous: Amadio [1983] HCA 14; (1983) 151 CLR 447, 475. However, it is a highly relevant consideration, see Blomely v Ryan [1956] HCA 81; (1954) 99 CLR 362; Westwill Pty Ltd v Heath [1989] SASC 2031; (1989) 52 SASR 461. However, adequate consideration does provide strong evidence that the plaintiff was not exploited: see Samantha Hepburn, Principles of Equity and Trusts (1st edition, 1997) 122-3; Anthony Duggan, `Unfair Dealing' in Patrick Parkinson (ed) The Principles of Equity (2nd ed, 2002) 127, 143-4.
[78] [1983] HCA 14; (1983) 151 CLR 447, 475; see also 461 (Mason J).
[79] Multiservice Bookbinding Ltd v Marden [1979] Ch 84, 110.
[80] For a recent argument concerning how the law should develop in this regard, see Mirko Bagaric, `A Utilitarian Argument: laying the foundation for a coherent system of law' (2002) 10 Otago Law Review (NZ) 163.
[81] The disadvantages we refer to here are obviously necessary, not incidental ones - for a discussion of the difference between necessary and incidental advantages, see Mirko Bagaric, `The Diminishing Right of Silence' (1997) 19 Sydney Law Review 266.
[82] Wesley N Hohfeld, defined four categories of rights: claim-rights, privileges, powers and immunities. He qualifies this by stating that a claim right accords with the proper meaning of the term, right: see Wesley N Hohfeld, Fundamental Legal Conceptions (1919).
[83] Henry J McCloskey, `Rights: Some Conceptual Issues' (1976) 54 Australasian Journal of Philosophy 99, 115.
[84] Timothy L S Sprigge, The Rational Foundation Of Ethics (1987) 216-217.
[85]Geoffrey Marshall, '`Rights, Options and Entitlements' in Alfred W B Simpson (ed), Oxford Essays in Jurisprudence (1973) 228, 241.
[86] John Kleinig, `Human Rights, Legal Rights and Social Change' in Eugene Kamenka and Alice Tay (eds), Human Rights (1978) 36, 44-45.
[87] Thomas Hobbes Leviathan (1651, 1946 ed) 84-85.
[88] Denis J Galligan, `The Right to Silence Reconsidered' (1988) Current Legal Problems 69, 88.
[89] Herbert L A Hart, `Are there any Natural Rights?' (1955) LXIV Philosophical Review Quarterly 175.
[90] See Marshall, above n 86, 235; Tom Regan, The Case for Animal Rights (1983). See also, Christopher Arnold, `Analyses of Right' in Eugene Kamenka and Alice E Tay (eds), Human Rights (1978) 74, 80-81, who points out that lunatics do have rights.
[91] (1991) 173 CLR 95, 99 (emphasis added). A similar point was also made by Justice T H Smith in his submission, dated 18 August 1995, to the Victorian Scrutiny of Acts and Regulations Committee review of the Evidence Act 1958 (Vic). In the context of the debate concerning the desirability of legislating for judicial comment on in-court silence, he emphasised the `conundrum of giving persons a right but penalising them if they exercise it'.
[92] As is noted by Hepburn, above n 77, 33-34: The courts in some contexts, such as estoppel, are now increasingly prepared to merge substantive legal and equitable doctrines, 'rather than perpetuate an archaic and unnecessary distinction between the two.' See also Mason, above n 72, 301. However, see the discussion concerning the fusion fallacy in Hepburn, 29-31; Patricia Loughlan, `The History and Nature of Equity' in Patrick Parkinson (ed) The Principles of Equity (2nd ed, 2002) 3, 23-24.
[93] See Hepburn, above n 77, 6-7.
[94] ‘Commercial Law- Private Business/Public Concern’, Speech to the Australian National University Centre for Commercial Law, September 30 2002. Available at <http://www.hcourt.gov.au/speeches/haynej/haynej_CommercialLawANU.htm>