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Dear Colleagues

The High Court of Australia has handed down its decision in Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] HCA 27 (18 June 2008). All the members of the Court (5-0, Gleeson CJ in one judgment, Gummow, Hayne, Crennan and Kiefel JJ in a separate joint judgment) agreed that the decision of the majority of the Full Court of the South Australian Supreme Court to allow recovery on the basis of "unjust enrichment" should be overturned.

The facts are a bit complex but as analysed by the High Court they seem to come down to this: the Lumbers contracted with a company called W Cook & Sons ("Sons") to build a fancy house for them; Sons then engaged the (related) firm of W Cook Builders (the respondent here, "Builders") to do the work. Some time after the house was finished Builders claimed they had not been paid all they were owed for the project. The litigation ends up being about whether, when a subcontractor (B) cannot recover from a head contractor (S), they can recover the value of what they have provided in accordance with the terms of the B-S contract, from the client L.

I guess when you formulate it that way it seems uncontroversial that the claim should fail. All the members of the HC criticised the majority below for choosing to ignore the fact that there was a contract between B and S. The presence of that contract reflected the "allocation of risk" between the various parties – e.g. Gleeson CJ, at [46], a factor Lord Goff had referred to in Pan Ocean Shipping Co. There was no "benefit" conferred on L by B, they were simply carrying out a contractual obligation they owed to S. Nor was there "free acceptance" since the L's never had choice- they did not even know that B were doing the work.

I find Gleeson CJ's judgment easier to follow than the joint judgment, but they basically say similar things. There are, as no doubt would be expected, a few more comments in the joint judgment taking swipes at some discussions of unjust enrichment as being "top-down reasoning" [77] and creating "incoherence with accepted principle" [78]. The judgment makes it clear that acceptance of a benefit, in the absence of a request, does not itself give a right to a remedy - [82]ff. "Unjust enrichment" is characterised as a "legal concept" (quoting Dean J in Pavey & Matthews) but not a principle "which can be taken as a sufficient premise for direct application in particular cases" [85]. If there had been a request by L for the work to be done recovery would have been possible under "long-established principles" of quantum meruit. But there was not.

In the end the case was not very promising for a clear statement of the current law on unjust enrichment in Australia, and while there are a number of hints there are still a lot of questions remaining.

Regards
Neil F

Neil Foster
Senior Lecturer, LLB Program Convenor
Newcastle Law School
Faculty of Business & Law
MC158, McMullin Building
University of Newcastle
Callaghan NSW 2308
AUSTRALIA
ph 02 4921 7430
fax 02 4921 6931