Lumbers & Anor v W Cook Builders Pty Ltd (In Liquidation) [2008] HCATrans 95 (26 February 2008)

Last Updated: 27 February 2008

[2008] HCATrans 095

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Adelaide No A39 of 2007

B e t w e e n -

MATTHEW LUMBERS

First Appellant

WARWICK LUMBERS

Second Appellant

and

W COOK BUILDERS PTY LTD (IN LIQUIDATION)

Respondent

GLEESON CJ
GUMMOW J
HAYNE J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 26 FEBRUARY 2008, AT 10.18 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR M.R. BURNETT, for the appellants. (instructed by Lynch Meyer Lawyers)

MR G.O’L. REYNOLDS, SC: May it please the Court, in this matter I appear for the respondent with my learned friends, MR R.D. ROSS-SMITH and MR B.R. KREMER. (instructed by Rick Schroeder)

GLEESON CJ: Yes, Mr Jackson.

MR JACKSON: Your Honours, the course which we would seek to follow in these submissions is dictated in perhaps significant degree by the approach adopted by the majority in the Full Court. Your Honour, I need to go to that in considerable detail in relation to a number of aspects, but may I first do two things. One is to go to the very basic facts giving rise to these issues, and the second is, having done that, may I indicate the bases on which the majority decided on the restitution issue and deal with those issues, deal with those matters. Your Honours, we would wish to challenge the bases on which they did so. After that, your Honours, I would seek to turn to the question arising under section 39 of the Builders Licensing Act.

Could I come then to the basic facts. As is apparent from the judgments below, the appellants entered into a contract with a company called W Cook and Sons Pty Ltd. May I call it “Sons” as it is described in the reasons. Sons was a long-established South Australian building company.

GLEESON CJ: Could I make a request for particulars of that contract? Was the contract express or implied; if express, was it oral or in writing; and, if oral, who said what and to whom and when?

MR JACKSON: Your Honour, the detail of it did not appear from material – I will come to various aspects of it – but it was a contract, fundamentally, to construct the house to a design that was the design of the architect. The basis of payment was that the payment was to be by us to Sons in amounts that were certified for by us being asked to pay them by Mr McAdam, who was an officer of that company.

GLEESON CJ: What I really had in mind was this, Mr Jackson – and I realise that it seems to have been common ground that there was a contract with Sons. Was it because Mr McAdam, in effect, nominated Sons as the contracting party?

MR JACKSON: No. Your Honour, at the time the arrangement was entered into, Sons was the building company. The other company was not operating.

GLEESON CJ: The only relevant company?

MR JACKSON: Yes.

GLEESON CJ: So the communications were between Mr Lumbers and Mr McAdam and Mr McAdam was a senior officer of and only relevantly of Sons?

MR JACKSON: Well, your Honour, he was director and employee of Sons. He was, I think at the time, also a director of Builders, but Builders was a company which did not operate - I will give your Honours a reference in a moment - but it was, in effect, dormant at that point. It came into being as an active company at a time after the arrangements had been entered into to build the house.

GLEESON CJ: But it was with Mr McAdam that Mr Lumbers had his communications?

MR JACKSON: Yes, yes.

GLEESON CJ: The conclusion that everybody seems to have accepted that the contract was with Sons was because Sons was Mr McAdams’ employer?

MR JACKSON: Well, it was also pleaded as to the contract.

GLEESON CJ: Yes, I just wanted to know why, that is all. As I say, I understand it was not in dispute.

MR JACKSON: Yes. Well, your Honour, so far as the contract was concerned, your Honour will see from the pleadings, and I will come to them later if need be, that the allegation was that the contract was between Sons and either – and one or other of the Lumbers, or both the Lumbers. We admitted the contract to build the property was with both the Lumbers and the case proceeded on that basis.

GLEESON CJ: Thank you.

MR JACKSON: Your Honours, what I was going to say was that Sons was I think a long-established South Australian building company in the residential building area with a very good reputation and the contract was to build a house, which was a large house of unusual design, on some land of Mr Matthew Lumbers, which he had received as part of a distribution of a trust, but over which his father was to have a life tenancy. Mr Warwick Lumbers, his evidence was accepted by the primary judge unreservedly and your Honours will see that set out in volume 2 of the appeal books, page 488, paragraph 30.

I should say the evidence made it clear that Mr Warwick Lumbers did not present as, if I can put it this way, a poor man and there was no question of inability to pay on his part. You will see some discussion of his position in volume 1 of the appeal books at page 359 going through to page 361.

I was taking your Honours to page 488 in volume 2 in paragraph 30 where his evidence was accepted unreservedly. Now, Mr Warwick Lumbers was to do the steelwork on the premises. His business was one that related fundamentally to providing garage doors and he did some of the work, but the builder was to be Sons. Now, your Honours, the contract was loose in a sense in that we were to pay Sons the cost of building plus a margin, and the margin was found at trial, as you will see at page 498, paragraph 64, to be 10 per cent for supervision.

Your Honours, the building was completed. The works had been carried on between late February 1994 and May 1995. You will see that in volume 2 of the appeal books at page 483 and in paragraph 9. Mr Lumbers, as appears from paragraph 54 at page 495, had moved in on or before Christmas Day 1994. That is page 495, paragraph 54. Your Honours, the appellants, by cheques which were made out to Sons, paid all the amounts that they were required to pay Sons. Those amounts, your Honours, are set out at page 496 in volume 2, paragraph 58.

GLEESON CJ: When you say they were required to pay Sons, there was at some stage a document or letter from Sons that said “You do not owe us anything”.

MR JACKSON: I will come to that in a moment, your Honour, if I may. It came about because – I will come to this in just a moment – after all this was over we received a request from the liquidator of Builders and it was in a sense in response to that. Could I say, your Honours, the amounts that your Honours will see we paid are set out at the bottom of page 496 and going over the top of the next page. At paragraph 58 you will see:

These payments followed requests from Mr McAdam for ad hoc sums –

and we paid a total of $419,309. The last payment was made on 15 December 1997 and, your Honours, Sons has made and makes no further claim against the appellants. I will come to that letter in just a moment.

Your Honours will see, however, that on 8 November 1999, which was four and a half years after the work was completed, and without prior warning, the appellants were served with a claim for $285,704 by the liquidator of another quite different, albeit rather similarly named, company, that is the respondent, W Cook Builders Pty Ltd. Your Honours will see that referred to at page 486 in paragraph 21. You will see that they were served with a notice of demand and the notice of demand your Honours can see set out in volume 2 at page 414.

GLEESON CJ: Somewhere in the judgments there is a reference to some evidence of Mr Lumbers where he said something like “If they’d asked me nicely, I would have paid”.

MR JACKSON: Your Honour will see in paragraph 21 at page 486 there is a suggestion to that effect and at the relevant page, you will see footnote 15 is the - - -

GUMMOW J: Page 400, is it not?

MR JACKSON: Page 419 of the original transcript and that is page 400 of volume 1. He said, your Honours, about line 13:

Well if the liquidator had sent me all of those –

and there is a reference to “6 volumes of documents for the trial”, just a little above that –

but he just sent [me] a simple letter of demand for $234,000 ‘Pay all cheques tomorrow within 7 days’, then maybe we wouldn’t be where we are today, that’s all I got was a letter of demand.

GLEESON CJ: I was wondering what, if any, relationship there was between that evidence and what appears on page 491 of the appeal book at lines 8 to 10?

MR JACKSON: Your Honour, prima facie nothing at all actually.

GLEESON CJ: What appears at page 491 seems to suggest that nobody suggests that the payments that were actually made to Sons bore a relationship to actual expenditure in respect of the building work. They seem to be just what Mr McAdam asked for from time to time.

MR JACKSON: Yes, your Honour, that is true. I think there was, however, some evidence that there was some disagreement about some particular items which resulted in there being some change, or perhaps no change, to them but it is not as if it were simply everyone came and everyone was just paid. There was an area, your Honour, where there was some discussion about whether some items should have been incurred by Sons, as we would put it, and on the other hand, your Honours will see a reference to the last payment which was a significant time after the earlier ones being described somewhere as a final payment. Perhaps I can get your Honours the references to those.

GLEESON CJ: I was just wondering whether Mr Lumbers suggested that he actually paid for all the work that was done.

MR JACKSON: What he is saying is he has paid all he has been asked to pay for the work that was done, I can put it that way. If there is more to pay he has to pay it to Sons. That is the point about that and, your Honours, that is the position. If it be that Sons had a claim against us and the claim was able to be made out, leaving aside questions of time or anything of that kind, we would have to pay.

Your Honour, we accept that, we always have accepted it. The payment was a payment to be made to Sons. Sons, your Honours, ultimately became a company which went into I think voluntary liquidation some years after all these events and after the letter of – the letter your Honour was referring to earlier of 1999, which your Honours can see in volume 2, page 474.

GLEESON CJ: Is it your case that there may well have been more money owing by Mr Lumbers to Sons, and if there was, so be it?

MR JACKSON: Well, yes, that is it, your Honour. We accept we have a relationship with Sons. The nature of the contract that we have with them was such that we have to pay what they had to pay plus the supervision fee. Now, your Honours, if there is more money owing, then we pay.

HAYNE J: But the liquidator of Sons has not pursued such a claim.

MR JACKSON: No, that is so, your Honour. Your Honour will see if I could go to page 475 of volume 2 that at a time when Sons was not in liquidation that a letter was sent to us because we were saying, “Do we owe you any more money?” Your Honours will see at the top of page 476, “no outstanding amounts owing . . . to W. Cook and Sons”. Well, now, your Honours, the liquidator or the persons looking after the liquidation of W Cook and Son might take a different view, but the reality of the situation, in our submission, is that if we owe anyone any money, we owe it to Sons, and if we have to pay it, we have to pay it.

Could I just say then I mentioned before that the respondent, or Builders, if I could call it that, had been a dormant company. Your Honours will see that in volume 2 at page 486, and your Honours will see that in paragraph 23 at page 486 where it said that:

Builders, was incorporated in July 1975 . . . David McAdam was also appointed a director upon incorporation, however retired as a director on 10 March 1994 . . . was effectively a moribund company until the re-organisation of the Sons’ business in the month of February 1994.

Now, your Honours, it began, however, to do the building work that Sons had previously carried out, and to put it shortly, Sons concentrated on what had been the other half of its business, and that was that it was a joinery business. Your Honours will see that at page 493 commencing about line 50. It said:

Q At the time of this arrangement in March 1994 W Cook Builders hadn’t done any of the building work.

A No.

Q Then it commenced doing that building work as a result of the arrangements that were entered into in March 1994?

Then, your Honours, if one goes to the remainder of that - - -

HAYNE J: All that masks a number of subsidiary issues. The corporation never gets out and swings a hammer. Presumably, the references are to the making of various arrangements with trades.

MR JACKSON: Your Honour, I am not quite sure which arrangements your Honour is referring to, but your Honours will see about line 10 – I am sorry. There is a reference at the top of the page to “the arrangements that were entered into in March 1994”. Could I pause to say that the view taken by Mr Jeffrey Cook, who was the builder in person, in effect, and he then took over the running of Builders, was that he just did, in effect, in relation to the separation of the work of the companies, what Mr McAdam told him. He and Mr McAdam were not, if I can put it that way, simpatico according to the evidence, but he said he just did what he was told. Your Honours, I do not think he is referring at about line 10 to subcontractors, in effect, but really referring to which of the two companies in question was doing the work.

HAYNE J: Doing the work in the sense of recording it in their books of account; that I can understand. Making contracts I can understand, but doing the work?

MR JACKSON: Your Honour, physically - the physical work that was carried out was done by someone. As your Honours said, they are companies. It really, one would have thought, could not in the end have mattered to us whether the same persons, in terms of human beings, did it, whether they be employed by Builders or employed by Sons. However, that works on the assumption that Sons may have made some arrangement with Builders in performing the work. Your Honour, we accept that some of the work had to be done by contractors to Sons.

CRENNAN J: Was the staff common as between the two building companies?

MR JACKSON: Your Honour, the staff were staff of Sons before the changeover, if I can use that expression. The staff who were involved in building then became employees of Builders or appeared to become employees of Builders.

GLEESON CJ: But were there also subcontractors, tradespeople, as Justice Hayne said, who were engaged?

MR JACKSON: Yes.

GLEESON CJ: That, I guess, is what is being talked about on page 475 in this letter in the second sentence of the second-last paragraph.

MR JACKSON: Yes, your Honour.

GLEESON CJ: Invoices and receipts were through the account system. I suppose that would at least include payments to tradespeople, plumbers, painters - - -

MR JACKSON: Electrical contractors, for example, people of that kind, yes. Your Honour, we knew nothing of all this. What was done was done by the company, Builders, apparently.

KIEFEL J: Did Mr McAdam stay with the project right through, including after the reorganisation in March 1994?

MR JACKSON: Your Honour, it is a question of what is meant by “stay with”. He was the person with whom we dealt. We had discussions with him about how the project was going, matters of this kind, and as far as we were concerned, we were dealing with the other company.

KIEFEL J: You were dealing with him. But he resigned his directorship of Builders at about the time of the reorganisation, but he still continued in a capacity of dealing with the Lumbers about the - - -

MR JACKSON: Yes, your Honour. He was the person with whom we dealt. We had some dealings with Mr Jeffrey Cook, but he was the person with whom we dealt and he was the person who asked us for the money.

Your Honours, could I just say this. We, as I submitted a moment ago, knew nothing of the arrangements between the two companies. No one told us anything about it, no one asked our approval, and, as I said, we knew nothing of it. But in a sense how could we, because, as the primary judge said, if one goes to volume 2 at page 494 at about line 49, your Honours had said – this goes to what your Honour Justice Kiefel was asking me a moment ago. At about line 42, it says:

It is clear that David McAdam resigned as a director of Builders on 10 March 1993.

I think that must be 1994. That seems an obvious mistake -

Externally however nothing appeared to have changed. The same employees...continued with the building work. Mr McAdam continued to occupy an office adjoining that of Mr Cook, and maintained direct contact with Mr Warwick Lumbers. Neither Mr Jeffrey Cook nor Mr McAdam made any mention to the Lumbers or the architect Mr Fielder of the existence of Builders, or even the re-organisation.

Your Honours will see that that goes on to the top of the next page. What followed from all that was that the house we wanted was built, we paid the builder with whom we had contracted all that we had ever been asked to pay. The contract was not – and the judge specifically rejected this contention – assigned to the respondent and yet we have been held liable to the respondent by the majority in the Full Court. Those are the basic facts I wanted to mention.

There are some additional facts which are germane to the question of section 39 of the Builders Licensing Act, and may I just mention them shortly and I will come to them in more detail later. They are essentially that these were works for which a licence was required. Builders did not hold such a licence and its failure to hold such a licence was held not to be due to inadvertence.

GLEESON CJ: Mr Jackson, just before you leave the facts, can I ask you again about that letter at pages 475 to 476. The author of the letter was Mr Malcolm Cook. Neither Mr Malcolm Cook nor Mr McAdam gave evidence. Is that right?

MR JACKSON: That is so.

GLEESON CJ: Mr Lumbers, the recipient of the letter, gave evidence. Did he give evidence about the circumstances in which this letter came to be obtained?

MR JACKSON: I think the answer is no, but I will check that.

GLEESON CJ: He was not asked, either in examination or cross-examination?

MR JACKSON: Your Honour, I think that is so and I will check that. I must say I had the impression that somewhere in the evidence there is a statement that he had heard, not long before this letter, that there had been some reorganisation and one might draw the inference that this was a letter that had been sought by him to clarify the position. You will see at the bottom of page 405 in volume 1, at about line 26:

I didn’t see him that much but I spoke to David –

that is Mr McAdam –

over a period of time while they were co-defendants.

Q. You are looking at P20.

You will see an extract from the letter and then at the bottom of the page he denied that he owed W Cook & Sons any money. You will see, going over to the top of the next page, he said that before the letter W Cook & Sons had not asserted that he owed it money, and after the letter to make that assertion he said:

I took this paragraph...to be that...there was no money owing to them but they couldn’t comment on my building arrangements with my subcontractors.

GLEESON CJ: So nobody asked him, maybe prudently, I do not know, what went on between him and Mr Cook leading up to the writing of this letter?

MR JACKSON: Mr Malcolm Cook, no.

GLEESON CJ: Mr Malcolm Cook.

MR JACKSON: Your Honour, the effect of the letter would no doubt have to be a matter of argument if there were litigation between Cook & Sons, on the one hand, and the Lumbers on the other, what effect it might have. But your Honours will have seen that the position of the company Sons, whilst Sons had been joined as a defendant in the litigation and claims being sought to be made through Sons, that the action against them was stayed because of the inability of the liquidator or the – because the liquidator did not comply with an order for security of costs.

Your Honours, could I come then to the basis of the majority’s decision in the present case. Your Honours will see the reasoning commences at page 519 in volume 2, paragraph 36. At page 520, paragraph 38, one sees a statement of the issue and a contention made on our behalf in paragraph 40. The respondent’s contention fundamentally your Honours will see set out at paragraph 42 of the majority’s reasons and the majority went on to hold that the appropriate legal principle was that of unjust enrichment in relation to which it is said there were three relevant basic elements which your Honours will see set out in their Honours’ reasons at page 525, paragraph 63.

Those elements, your Honours, in that paragraph were that the Lumbers must have received a benefit, the benefit must have been received at the expense of Builders and that it would be unjust if Builders were not remunerated. That, it was noted in that paragraph, was that that could also be put as meaning that Builders would have to show that it would be unconscionable for the Lumbers to retain the benefit. Presumably that means retain without paying for it as distinct from knocking down part of the house.

Your Honours, may I just say something about the second of those criteria. That aspect was dealt with by the majority very briefly at paragraph 86 on page 530. It appears to mean really no more than that Builders paid for the works which were performed. We would cavil, perhaps hardly surprisingly, at the concluding words in paragraph 86 “the expense incurred on the Lumbers’ behalf” but, your Honours, whilst it conveys a notion of agency on the one hand, presumably it is intended to refer to no more than that it was work done on the building.

GLEESON CJ: Did the majority form any conclusion one way or the other upon whether the Lumbers were liable to Sons for the amount claimed in these proceedings?

MR JACKSON: Well, your Honour, they seem to have taken a view, and a view which is very difficult, with respect, to justify, that there had been a breach – I am sorry, I am putting it badly, perhaps I could put it a little more exactly – they seem to have taken a view which your Honours will see at page 520, paragraphs 43 to 47. They seem to have taken a view that the contract between the Lumbers and Sons was, as they put it, “not to the point” – those are their words – because “Sons did not perform their part of the contract”.

Now, your Honours, I am speaking in a realm of contract and if I might divert to that for just a moment. It is necessary to examine what is actually contemplated by that. Your Honours will see it referred to in paragraph 45 and paragraph 47. They say in the third line of paragraph 45:

the fact that it did not perform its obligations under the contract.

Then you will see in paragraph 47:

It is not to the point for the Lumbers to claim that they are not liable to Builders because they have a contract with Sons, if Sons did not perform their part of the contract.

GLEESON CJ: I do not quite get that. Let it be supposed that the contract between the Lumbers and Sons did not authorise the engagement of a subcontractor by Sons. Unless such engagement was a breach that caused harm to the Lumbers then it would not affect Sons’ entitlement to claim for the value of the work, would it?

MR JACKSON: Well, your Honour, may I just answer that in this way? This was a contract that was never assigned by Sons to Builders. There was a finding to that effect in both courts. The contract was to build a building, the building was built. It was recognised from the start that the work would be carried out by Sons by the use in part at least of subcontractors. You will see a reference to subcontractors in the primary judge’s reasons, your Honours, I will not go to it in detail now but it is page 490, lines 43 to 48.

Your Honours, if one assumes that the conduct of Sons in giving the work to Builders was a breach of contract, the Lumbers contract would not by virtue simply of breach with Sons would not come to an end. Breach of contract, even a repudiatory breach by one party, does not of itself terminate the contract. Acceptance of the repudiation by the other party was required. Your Honours, it may be that Sons had some liability in damages to the Lumbers other than nominal damages.

HAYNE J: Why?

MR JACKSON: Just for one thing, your Honour. I do not suggest that it is a major thing, but the house did not have the cachet, in those circumstances, of a building built by Sons, that is what it would amount to. It is possible, your Honours, because the - - -

HAYNE J: Are we to close our eyes to the fact that Builders engaged subcontractors? Are we to close our eyes for the fact that subcontractors engaged by Builders often conduct their affairs through corporations?

MR JACKSON: Not at all, your Honour.

HAYNE J: In essence, the allegation of failure to perform, which we find in paragraphs 45 and 47, seems to be founded on the proposition that it was not open to Sons to engage a subcontractor, even a corporate subcontractor, to get out and swing a hammer. Absent that assumption, what is the content of the proposition “did not perform”?

MR JACKSON: Your Honour, your Honour will have noticed – and I was endeavouring to make a submission a moment ago. What I said was that if one assumes that the conduct of Sons in giving the work to Builders was a breach of contract, the contract would not come to an end, and I went on from there, your Honours. So I say if one makes that assumption, perhaps it was, perhaps it was not. But if there were some liability in damages to the Lumbers, then perhaps the only thing that would take it beyond a nominal case for nominal damages would be that the house was not built by Sons. I put that in a kind of question mark, your Honour.

But, your Honours, it is a very significant leap, in our submission, to take the view taken by the majority at paragraph 47 that the contract was not to the point. If one looks at the matter by asking, “What would our defence have been to a claim for the balance of the cost of the building if it had been brought by Sons?” then, your Honours, it is difficult to see, leaving aside any questions of workmanship and so on, what the defence would have been.

But, your Honours, there is a second point which, in a sense, arises from those observations at paragraphs 45 and 47. It relates to what is in paragraph 45 and there it is said that:

to uphold a claim in restitution by Builders in no way interferes with the contractual relationship between Sons and Lumbers.

But, your Honours, that, in our submission, is simply not correct. It is not correct because if we pay Builders its claim, does that satisfy pro tanto any claim that Sons might have against us? Your Honours, claims in our contract, claims as between us and Sons in our contract with Sons were to be adjudicated upon – and I use the term somewhat loosely – by Mr McAdam. Now, on the argument advanced by our learned friends and referred to in paragraph 45, now, they are, in effect, decided upon by a court in circumstances where Mr McAdam did not make or authorise such a claim, nor did Sons do so.

GUMMOW J: Can you just look at paragraph 47 for a minute, Mr Jackson, the second-last sentence in paragraph 47. What is the content of those last words “and have not paid for it”. What is the “it”?

MR JACKSON: Your Honour, the “it” in the context seems to be the difference between the amounts actually paid. I say “in the context”, your Honour, because the claim was not for the whole cost of building. So it seems to be for the difference between what was actually paid to Sons, on the one hand, and what the cost of the building, including a 10 per cent supervision fee with Builders’ claims was payable to it.

GLEESON CJ: Is it related back to the sentence on the top of page 491 at line 10?

MR JACKSON: That is in the primary judge’s reasons, your Honour. It is related in a broad sense, but I do not think there is a direct relationship between the two.

GLEESON CJ: As I understand it, subject to whatever this letter means that we have been talking about, nobody suggests that the amount of money that the Lumbers have so far paid for the work that was done is equal to the value of the work?

MR JACKSON: Your Honour, that is right, but I have to add a qualification to it. It is right in the sense that in the case between ourselves and the respondents, whilst there were to be many aspects of it debated, in the end I think a figure was arrived at as being the amount of the difference. If one goes to page 497 in the primary judge’s reasons at paragraph 60 that Mr Lumbers said in the last sentence “that the estimate was lower than what in fact was paid direct by him”. Your Honours will see in paragraph 65, page 498, the sum representing the deficiency was $181,904 and you will see that referred to in paragraph 59.

Ultimately, there was little dispute about the claim, and, your Honours, that is how one gets the $181,904 and then you get the 10 per cent on top, less some defects referred to in paragraph 65. So, your Honours, the position is it may well be that there would be a case for Sons to get more from us assuming there were no other difficulties with the case.

Your Honours, may I go back to the Court of Appeal’s reasons. I had referred to paragraph 86 of their reasons at page 530 and may I move back from that to the other two aspects which the - - -

HAYNE J: Just before you leave 86, “payments to subcontractors on behalf of the Lumbers”, does the majority consider other than in relation to questions of assignment the relationship between Builders and Sons?

MR JACKSON: It does, your Honour, in the sense that it describes what happened. It describes the arrangements that were entered into. More than that, it does not go into detail.

HAYNE J: The assumption that Builders engaging subcontractors was doing so on behalf of the Lumbers rather than on behalf of Sons, or for the purposes of some arrangement which it – Builders – had made with Sons is an assumption that is not explored in the reasons.

MR JACKSON: It is an assumption that is not correct. It is very difficult to see how payments to subcontractors other than Builders, if that be the correct classification of its position, could be regarded as being payments made on behalf of the Lumbers in a legal sense. That is why there appears to be looseness of language, as I observed to your Honours before, in paragraph 86 – because the payments were made by Builders to perform the task it was doing. Undoubtedly the work was to our advantage, ultimately, but to say it is on our behalf – and this is an observation which one sees elsewhere and to which I will come – really expresses the situation very loosely and incorrectly.

Could I come to the first of the three issues to which the majority had referred at paragraph 63. Your Honours will see that first issue was whether we had received a benefit. The approach taken by the majority on this issue really appears to involve approaching it from two points of view. One of them is described as “incontrovertible benefit”; the other is “free acceptance”.

GUMMOW J: These ideas seem to have come out of this textbook.

MR JACKSON: Yes, they do.

GUMMOW J: Why should I be fussed about that?

MR JACKSON: I am sorry.

GUMMOW J: Why should I take that as written?

MR JACKSON: It has been referred to in – there are some cases that have adopted parts of it.

GUMMOW J: Well, maybe.

MR JACKSON: But with some qualifications. There are two decisions in particular, one Brenner in Victoria and the other Angelopoulos in South Australia, which have taken these notions.

GUMMOW J: I know they have, but why should I take those cases as well? We are in the High Court.

MR JACKSON: I appreciate that, but what I am going to say is really at two levels, if I may – that the approach taken by the majority seems to leave out of account additional aspects that have been relied on in those cases as giving rise to any such cause of action.

GUMMOW J: As I said to you on the special leave application, Mr Jackson, I would be much happier, albeit old fashioned, to understand how this could be framed as a claim in a quantum meruit. It is dressed up with all this textbook writing but that is what it comes down to.

MR JACKSON: Yes. Well, your Honour, if it were to be framed as a claim in quantum meruit, the difficulty that it sustains, in our submission, is that there is nothing to indicate any feature which could amount to, on the one hand, a request from us to perform the work. There is nothing which could amount to any relevant type of acquiescence in the carrying out of the work.

GUMMOW J: The first point you make comes back to the point you earlier made in answer to Justice Hayne as to this expression “on behalf” at paragraph 86.

MR JACKSON: Yes.

HAYNE J: In particular, the relationships between three parties are analysed by reference to an imposed relationship between two of them where, in truth, none exists.

MR JACKSON: That is so, your Honour, yes.

HAYNE J: If you determine a relationship between Builders and the Lumbers where none exists, it seems to me you are in the middle of the ocean without much of a rudder.

MR JACKSON: That way madness lies, with respect, your Honour, some would put it. That is the problem. One can put it in a number of ways. May I come to what is said to be the sources of these notions in a moment, but you do have a situation where you have the contract with Sons, we know nothing about the position of Builders, yet Builders sues us on the basis that we first of all received a benefit - well, of course we did, in one sense – and on the other hand that we freely accepted it or it would be unjust for us to keep it.

GUMMOW J: Can we just get back to quantum meruit for a minute?

MR JACKSON: Yes.

GUMMOW J: The first step you were saying there is no request.

MR JACKSON: No request at all.

GUMMOW J: Now, that would be the end of it, would it not?

MR JACKSON: It is, your Honour. What I was trying to say is that if one opens up the cupboard to see what other bases there might be, it is an unrewarding task because the cupboard is bare.

GUMMOW J: What would the next step be? Even if you could show a request, what would the next step be in a quantum meruit?

MR JACKSON: The next step would have to be, your Honour, that the work was done in accordance - that the work requested was carried out, that it was carried out in circumstances where the type of activity, if I can put it loosely, was one for which there would be an expectation of payment and payment by the person who was requesting the work - there may be some qualification for that last part of it – and that it had not been paid or had not been paid in full. Now, your Honours, that is where you go on quantum meruit.

GLEESON CJ: Suppose it had all been out in the open and clear. Suppose Lumbers had made a building contract with Sons and Sons had made a subcontract with Builders and Sons had become insolvent, full stop. Would that have given Builders a claim against the Lumbers?

MR JACKSON: No. That is the short answer to it, your Honour. It would not have given a claim to the Lumbers because unless one created some new doctrine in the area of restitution, there would be no entitlement.

GLEESON CJ: If Sons’ disappearance from the contractual scene, assuming it to be a disappearance, is not on a count of insolvency, but is on account of some highhanded action on the part of Mr McAdam, what difference would that make?

MR JACKSON: Well, I am not quite clear what your Honour means by it in the sense the - - -

GLEESON CJ: If the proper analysis of the situation is that Sons made a contract with Builders for Builders to perform the work that Sons had agreed to carry out for the Lumbers, the principles on which the majority relied would have operated equally, would they not, if the explanation of Sons’ disappearance from the scene was its insolvency?

MR JACKSON: Yes, your Honour. Your Honour, that is so.

GLEESON CJ: There would have been the same benefit, as it were, the same free acceptance, the same – all the other elements would have been the same, would they not?

MR JACKSON: Well, your Honour, that is true. The position, we would submit, is that there is no real difference, if I can put it this way – in response to what your Honour the Chief Justice put to me, the majority’s view, in our submission, would result in there being an entitlement to claim on the basis on which they relied in circumstances where – if I could list a number of them – a head contractor had agreed to do the work for no price - it sometimes happens, family situations, the issue could arise, for no price, or secondly, had agreed to do it for a low price because of a shortage of work, for example, and a desire to retain a skilled workforce, or to do it for a price that turned out to be too low; or to do it where the head contractor was not able to pay or had gone to bankrupt or into liquidation, and that would result, your Honours, in a subcontractor or presumably sub-subcontractor or sub-sub-subcontractor - I do not want to go beyond that, your Honours - being able to claim against the principle whenever unpaid or perhaps not paid enough by the contractor to it.

Your Honours, if one separates out, as the judgments below and the notions underlying them do, the work from the quid pro quo for doing it, the work done would always be a benefit of the kind that would attract the form of relief that was given.

GUMMOW J: Now, this notion of free acceptance seems to me a sleight of hand. If one looks at Steele v Tardiani [1946] HCA 21; 72 CLR 386 at 393, perhaps as a matter of....Sir John Latham referred to Bullen and Leake. What it says is this:

“Where work is done by one party under a special contract, but not according to its terms, the other may refuse to accept it . . . but if he does accept it and takes the benefit of it –

then it is adopted and the value may be recovered. That is not this case.

MR JACKSON: Well, it is not at all, your Honour, and if one goes to the fuller discussion of the issue in Justice Dixon’s reasons in the same case, what he is astute to illustrate is that there has to be some actual form or something by which you can identify acquiescence in taking the non-performance as distinct from just the mere fact of non-performance. Could I go in that regard - - -

GUMMOW J: This is a bipartite arrangement they are talking about in Tardiani, not a tripartite one?

MR JACKSON: But even in a bipartite arrangement, your Honour.

GUMMOW J: Yes.

MR JACKSON: Your Honours will see that in the quite lengthy passage which commences at the top of page 402 and goes through to page 405. May I just say something about that case. It was one where the respondents in this Court were Italian internees during World War II who had been allowed to work and they were chopping timber and the timber was to be, I think, six feet long, it is assumed six inches diameter, some of it was much wider than the six inches diameter and the person who had engaged them to work on his property refused to pay and at the hearing raised the question that some of the timber which he later sold was not timber that met the six inches.

Your Honours will see at the top of page 402 it is said at about the sixth line:

To recover under a quantum meruit for wood split to substantially different widths from that required, the plaintiffs must show circumstances removing their right to remuneration from the exact conditions of the special contract . . . It is not enough that the work has been beneficial to him by turning his standing timber into the more valuable form of firewood . . . But, “taking the benefit of the work” means that the defendant has done so in the exercise of some choice that was actually open to him. As it is put in a recent treatise, “An implicit promise to pay connotes a benefit received by the promisor, but the receipt of the benefit is not in itself enough to raise the implication. No promise can be inferred unless it is open to the beneficiary either to accept or to reject the benefit of the work” -

The passage goes on, your Honours, to the top of page 403 where it is said in relation to a chattel if it is not done quite according to contract, then there might be treated as being, for example, “a dispensation of the conditions alleged, or an implied contract to pay for it according to its value”. It was said there were difficulties in doing that in relation to a building where a building has been erected on a person’s land. It would be difficult to draw such a conclusion from the mere fact of taking possession.

Then your Honours will see, if I could go down to about point 6 on the page, there is a reference to Lord Justice Collins in Sumpter v Hedges:

“Where, as in the case of work done on land, the circumstances are such as to give the defendant no option whether he will take the benefit of the work or not, then one must look to other facts than the mere taking the benefit of the work in order to ground the inference of a new contract . . . The mere fact that a defendant is in possession of what he cannot help keeping, or even has done work upon it, affords no grounds for such an inference.”

Could I just say, your Honours, that if one looks at about point 5 on the page you will see a reference to the need for some “language” or done some “act, from which acquiescence” might reasonably be inferred. The discussion goes on through page 404 and then on page 405 at about point 2 on the page, you will see the sentence commencing “In such circumstances” and then his Honour says “as possessing little importance to the defendant and as acquiesced in by him, with the consequence”, et cetera.

The point I am seeking to make about it, your Honours, is that the case contains indications that in order to succeed on the quantum meruit, it would not be enough merely to leave a situation where, as here, we had no choice about accepting or not accepting on the one hand. On the other hand, one does need something more and the court appears to treat it there as close to the implied contract notion.

GLEESON CJ: Just at the moment I am having some difficulty understanding how you can approach questions like “free acceptance” or “incontrovertible benefit” without first having formed a view on the contractual situation between the Lumbers and Sons and between Sons and Builders, because if the contractual situation were that Lumbers had a building contract with Sons and that Sons had a subcontract with Builders and the bricklayer who turned up for a week to place bricks was a sub-subcontractor engaged by Builders, then there was no question of free acceptance of the bricks. It was not free. The Lumbers were obliged to pay for the bricks. They were obliged to pay Sons for the bricks.

MR JACKSON: Indeed, your Honour. Your Honour, that is in a sense the point I was seeking to make before. If one takes the various elements that are said to be involved, if one speaks of, for example, the incontrovertible benefit, but to say - - -

GUMMOW J: What is the force of this word “incontrovertible”?

MR JACKSON: Your Honour, there are difficulties with it, but what it does - - -

GUMMOW J: Yes. Well, why should we buy this package?

MR JACKSON: It seems to me - - -

GUMMOW J: It is just slogans.

HAYNE J: Mr Reynolds will tell us why we should buy these things, Mr Jackson.

MR JACKSON: Your Honour, may I seek to answer what your Honour put to me? What “incontrovertible” seems to mean is that it is beyond legitimate controversy.

GUMMOW J: What does “legitimate” mean?

MR JACKSON: Your Honour, I appreciate that what I have said just extends it.

KIEFEL J: I think they also refer to it as a “no reasonable person” test. That is how Burrows refers to it.

MR JACKSON: Your Honours, it is just a name in a way, but what it seems to say is it is looking at the relative difficulties of proving that there has been benefit. It goes about it by saying if you get money that is incontrovertibly a benefit. No one could deny that getting money is a benefit, and then it goes on from there. The difficulty with it all, your Honour, is this, that to adopt that notion gives a kind of false precision to circumstances because, where there is a contractual contract around, you are taking part only of the circumstances. The part you are taking is to say one side, the party sought to be made liable, has received something. It is something which it did not have before. Ergo, it has received a benefit and if one likes to say, an incontrovertible benefit.

GUMMOW J: Yes, but benefit from whom?

MR JACKSON: That is it, your Honour.

GUMMOW J: All this reasoning can work in a bipartite situation. I understand that. It may be difficult in a bipartite situation where there is a contract. Tardiani is an example of that. But nevertheless, it may work. When it becomes a tripartite situation it becomes quite difficult.

MR JACKSON: It does, your Honour, and it would be very common. If one takes building a house, the owner contracts with the builder. No doubt the owner will go there from time to time. The owner will see vehicles and so on that have got on them the names of other people, but the owner in the ordinary course of events, except the enthusiastic owner, would be careful not to deal with those people other than through the contractor.

GUMMOW J: Yes. It is a question of when you talk about procedure and incontrovertible benefit, received from whom in discharge of what legal obligation and a benefit accompanied by what burden – obligation to pay someone.

MR JACKSON: That was the next thing I was going to say – that to have the notion of a benefit which is in some way incontrovertible, but to leave out of account the fact that the benefit is accompanied by obligations is really to select out part of the issue and the way in which the other part of the issue left out in that aspect of the case is dealt with is then to put it into the unjust or unconscionable part of it. Inevitably, that does involve a division of the notions which is one which is not correct, it just does not represent the true situation and it treats the weight to be given to the obligation undertaken by the person against whom the cause of action is sought to be made out as not having the relationship to the provision of the so-called benefit as is provided for by the basic areas of law in which it is to be found.

HAYNE J: The imposition of obligation assumes the absence of any other relevant obligation.

MR JACKSON: Yes, it does. That is the way in which it is expressed, your Honours.

GUMMOW J: There may be another problem, too, because the imposition of the secondary obligation, to use that, may have a particular significance where the primary obligation has been interrupted by an insolvency, because the imposition of the secondary obligation may disrupt or give a preference, however you like to put it, to the administration of the obligations involved on the primary side.

MR JACKSON: It means that there will be a direct payment by the principal to a person in the position of a subcontractor. That means that the amount that might otherwise be payable – if one takes the simple case where the head contractor in quite a large business goes bad, there may well be money payable to it by the principal, that money will go to its creditors. Of course, there may be particular contractual provisions, as there often are, which deal specifically with what is to happen in relation to moneys attributable to the work of subcontractors, but absent that, you have a situation where you find money being taken out of the fund available otherwise in the liquidation of the company.

GLEESON CJ: It is more complicated even than that, is it not? Am I not right in thinking that in a number of Australian jurisdictions there is now legislation which protects the position of subcontractors and operates in a certain way to deal with the problems that arise in the event of insolvency of the contractor?

MR JACKSON: Your Honours, I was just going to give your Honours a reference to those in a moment, if I may. There is legislation in a number of places. In our written submissions we have given a reference to South Australia and Queensland, but I was going to give your Honours a reference to where other things can be found. Perhaps I can go to that issue now.

GUMMOW J: Could you just give us that paragraph, Mr Jackson?

MR JACKSON: Yes, I will, your Honour. It is paragraph 61 in our principal submissions-in-chief at page 12. Q in brackets has been left out of the – it should be at the end of the paragraph. But I was going to say, your Honours, that there are at least five Australian jurisdictions in which there is legislation of the general type of the Worker’s Liens Act. I will come to its terms in just a moment, your Honours. But you will see those summarised in our book of additional materials. “Supplementary Documents” it is called, your Honours. There is a summary in the extract from Brooking on Building Contracts at page 84 of that book. I am sorry, your Honour, I think I gave the wrong reference. It is a book called “COPY OF ITEMS 14 - 21 IN THE APPELLANT’S LIST OF AUTHORITIES” and at page 84 of that document there is an extract from Brookings on Building Contracts and you will see it is the page with handwriting up the top, page 84. Your Honours, that goes through to page 86.

There has been legislation of this kind for many years. The Subcontractors Charges Act (Qld) was preceded by a much older Contractors and Workmen’s Liens Act. Your Honours, if one goes to the Worker’s Liens Act (SA) 1893, to section 5 of that, you will see that:

A contractor or sub-contractor shall have a lien for the contract price, so far as accrued due, on the estate or interest in land of any owner or occupier in each of the following cases -

and you will see that set out:

(a) Where the work is done, with the assent, express or implied, of the owner –

et cetera. There is a reference to materials in paragraph (b). You will see the extent to which the lien may operate over the purchase price in section 6, and the definitions in section 2 of “contractor” and “sub-contractor”.

GLEESON CJ: Was that not the basis under which this claim was originally made?

MR JACKSON: It was attempted to, your Honour, yes. It was attempted to and it does not really seem to have been pursued in the end because - - -

GUMMOW J: How would it have panned out?

MR JACKSON: Sorry. They were not pursued. They were not permitted to because it was a derivative claim, your Honour. I think that is right.

GUMMOW J: Derivative?

MR JACKSON: I am sorry. What I mean by that is the order that was made which stayed the case against the - - -

GUMMOW J: It was caught up in the stay?

MR JACKSON: It was caught up in a stay.

GUMMOW J: How would it have worked out, in theory, as you understand it, the claim under the Lien Act?

MR JACKSON: Well, the claim under the Act - - -

GUMMOW J: In this case how would it have worked out, assuming it favourably to the claimant?

MR JACKSON: Your Honour, the situation would be for them to make a claim for the lien, or they claim the lien, that is under section 5. You will see under section 6 that the lien is not to:

extend beyond that portion of the contract price payable by the owner or occupier under the contract for the purposes of which the work or materials are done, furnished, or manufactured and unpaid at the time when the owner or occupier shall receive notice of the lien -

Now, it might require a bit of activity on the part of Mr McAdam to get to the price, but one suspects that if the claim were otherwise good that the court would say, well, obviously, if something had happened to Mr McAdam that there had to be another way of working it out, but that is where one goes.

Then, your Honours, there is provision in Part II commencing at section 10 for registration and discharge of liens. Section 21, Part III, sets out the legal procedure for enforcing liens; that is by actions and so on. There is a provision in section 29 for, in effect – I use the word “inexactly” - a kind of class action to join together the various persons because the difficulty that is always found with this type of case is because you have a number of contractors who are likely to have plans. Your Honours will also see section 36, the law generally speaking applies.

GLEESON CJ: Is Builders a “worker” within the definition in section 2?

MR JACKSON: Well, one would suspect not, your Honour, because the – it depends, your Honour. If one is talking about a builder who is not a company, it may be.

GLEESON CJ: This would be legislation to protect the bricklayer I mentioned earlier, would it not?

MR JACKSON: Well, section 4, your Honour, one would think, deals with individuals. Then section 5 deals with contractors and subcontractors.

GUMMOW J: Yes. The satisfaction of the lien affects a discharge of the other obligation, does it?

MR JACKSON: The answer, your Honour, is, yes, I think. The exact provision for that - - -

GUMMOW J: I could not find it.

MR JACKSON: Your Honour, may I come back to that? The other feature is that if one – speaking more generally about the contract, what we would submit is that the adoption of the approach taken by the majority would rather severely cut across the general law of contract and, your Honours, one sees in a number of cases that claims by subcontractors against principals have been rejected. One of them is the decision of the House of Lords in Hampton v Glamorgan County Council [1917] AC 13. There, there was a contract to build a school with the contractor, having a subcontract with an engineer to supply heating, and the contractor was unable to pay the engineer the balance of the contract sum and sued the principal. The claim failed on the basis of no privity of contract. The reasons for the speeches at the bottom of page 18, the last paragraph on the page, it said:

The facts of one case are hardly ever of any value when considering the facts of another case -

One suspects that Earl Loreburn had been sitting with the Earl of Halsbury on many occasions. But the decision that was made, one can see, for example, Viscount Haldane, page 20, thought the case was “hopeless”. Page 21, first new paragraph:

What have we here? The answer to that question is to be looked for only in the contract.

That goes through the whole of that paragraph where he refers to the privity. Viscount Haldane again, page 22, first new paragraph, the other members of the House of Lords agreed. Your Honours, one can say that that is a case that turns on its particular facts. Contract cases usually do. But, your Honours, having said that, there is not the slightest hint in the case that in the ordinary case of a contract between A and B where B arranges for the work to be performed by C that C, absent something more, has a claim against the first party.

Could we refer also, your Honours, to what was said by Lord Goff in Pan Ocean Shipping Ltd v Creditcorp Ltd. The reference I have, I am afraid, is [1994] 1 All ER 470. At page 475 between letters f and g you will see that Lord Goff said that:

I am of course well aware that writers on the law of restitution have been exploring the possibility that, in exceptional circumstances, a plaintiff may have a claim in restitution when he has conferred a benefit on the defendant in the course of performing an obligation to a third party . . . But, quite apart from the fact that the existence of a remedy in restitution in such circumstances must still be regarded as a matter of debate, it is always recognised that serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract.

Lord Lowry agreed specifically at the top of page 476.

GUMMOW J: What Lord Goff is doing is warning against what Justice McHugh would have called “top-down reasoning”.

MR JACKSON: Yes, that is so, your Honour.

GUMMOW J: Which infests a lot of the academic writing in this field.

MR JACKSON: Well, your Honour, it is always a temptation to convert instance into principle. Sometimes that is the right thing to do perhaps, but if one is going to convert instance into principle, one has to arrive at what is the principle to be derived from the instances and where there is a body of law which is founded in contract which appears to effect a fundamentally equitable, although I use the term loosely, distribution of obligations, what is the point of creating a new cause of action which is to overcome something which is an established area of law where you have parties freely contracting, if I can use the word “freely”?

GUMMOW J: There is also the problem that the common law develops by being hammered out on an anvil of fact in particular cases. This litigation illustrates it probably.

MR JACKSON: Yes, your Honour, and these are not the cases to which I have referred. One can see observations of a similar kind in an earlier Full Court decision in South Australia, perhaps a similar kind, opposite to those in the present case. It is Marriott Industries Pty Ltd v Mercantile Credits Ltd (1991) 160 LSJS 288. The passages to which I wanted to go can be seen at page 296 in Chief Justice King first of all.

Your Honours will see about two-thirds of the way down the page, that his Honour said, “In my opinion” – I do not think I need to go into the facts of it but the nature of it was that a claim was sought to be made by a person who was held to be in contract with a person – a claim was sought to be made by A against a person with whom B, who had contracted with it, had a contract with C. A was seeking to sue C directly. His Honour said:

In my opinion, Taminga entered into the contract with the respondent on its own behalf and for its own purposes. The appellant was not a party to the transaction -

Your Honours will see, in the first four lines of the next paragraph, that reliance was based on unjust enrichment. His Honour said at the top of the next page that it was therefore necessary to consider whether there was any basis upon which that could be done. He then proceeded to say:

The mere fact that the owner of property has derived benefit from work being done to his property for which he has not agreed to pay, has never previously been held to be the basis of a legal obligation to pay for it.

He referred, amongst other things, to Hampton v Glamorgan County Council, which he said appeared “to deny the existence of any such obligation”. He referred to Pavey and Matthews Pty Ltd but said that that was a case of accepting work under an unenforceable contract between two parties. He then said:

Not only is the respondent unable to point to any recognized legal basis for recovery of any amount by which the appellant has been enriched, he is unable to show that such enrichment has occurred.

He goes on to a slightly different point. One sees also at page 316, in the top right-hand corner, Justice Olsson, with whose reasons, as your Honours will see on the next page, Justice Mohr agreed, said, in the third paragraph on that page:

Quite aside from that point, it must in any event be recognised that as is pointed out by the learned authors of Goff & Jones . . . that there are a number of well established limits to the application of the principle of unjust enrichment. One of those specific classes of case is where a plaintiff confers an alleged benefit whilst performing an obligation which he owes to another or otherwise whilst acting voluntarily in his own self-interest.

That really goes effectively through the next two paragraphs, I think. May I also give the reference – unfortunately your Honours do not have the case – to a Tasmanian decision of Christiani & Nielsen v Goliath Portland Cement Co Limited (1993) 2 Tas R 122 at 171, to similar effect.

GLEESON CJ: Were the income tax returns of either Sons or Builders for the relevant years in evidence?

MR JACKSON: No.

GLEESON CJ: Were their internal accounts for the relevant years in evidence – financial statements, I mean.

MR JACKSON: The answer is no, your Honour. My hesitation was due to the fact that you will see in some of the exhibits that are extracted – for example at page 117 of the summary of claims and so on, but it is taken from those documents but the actual documents no. Taken from documents that one assumes have ended up in someone’s statement.

GLEESON CJ: There are now, I presume, two different liquidators, a liquidator of Sons and a liquidator of Builders. Is that right?

MR JACKSON: The liquidator of Builders is obviously involved in this litigation. So far as Sons is concerned, the position, your Honours, I think, is that Sons have now been deregistered. But, no doubt, if that were an issue, it could be reregistered.

GLEESON CJ: I just wondered whether Builders made any claim in the winding up of Sons. Presumably they did because they tried to sue Sons at one stage.

MR JACKSON: Your Honour, they tried to sue Sons. As your Honours will see, Sons was in existence for a considerable time longer than Builders in terms of when it went to liquidation. Your Honours, could I just say, one does see in relation to the undesirability of claims of this kind, some discussion in the article by Professor Watts which is in the book to which I referred a moment ago, at page 40 under the heading “Does a subcontractor have restitutionary rights against the employer?” - your Honours, may I just, in effect, give your Honours what are really the headings, in a sense, of it. At page 41 in the first new paragraph he says:

It is suggested that, in the absence of special features, such as a direct undertaking or inducement by the employer, there is properly no personal restitutionary claim available to the subcontractor against the employer. A number of reasons can be given. The strongest of these is dealt with last.

The first one, your Honours, one can see commencing the first two lines about point three on that page. He says:

First, a direct claim would unduly complicate the legal position between both the employer and its head contractor and also the head contractor and the subcontractor.

That is explained. His second reason is set out at the start of the last paragraph on page 41:

A second reason for denying the direct claim is that other creditors of the head contractor may have been relying on the head contractor’s being the sole person entitled to receive payment for the work done for the employer.

GUMMOW J: I am sorry. Whereabouts are you reading from, Mr Jackson?

MR JACKSON: Page 41 of this book we have entitled “COPY OF ITEMS - - -

GUMMOW J: Yes.

MR JACKSON: Page 41, last paragraph on the page. That is the second reason. The first reason was the start of the second new paragraph on that page.

GUMMOW J: Yes, I see, thank you. Now, in Esso Resources v The Federal Commissioner of Taxation [1999] HCA 67; 201 CLR 49 at 62, paragraph 24 there is reference to speeches of Lord Wilberforce and of Lord Diplock and this proposition that where the legislature has been active in ameliorating what seemed to be some defect in the legal system, you do not stand on your head to develop the common law.

MR JACKSON: Your Honour, that is really what we were seeking to say in relation to the presence for many, many years of subcontractors’ legislation. It does reflect a recognition of the fact that the laws are changed by parliaments and by the courts and that the relationship between them is, to a degree, symbiotic. It is a matter which I would not want to overdo, your Honours, but having said that, a good reason for not creating new common law is the fact that the area is one which has been dealt with by legislation of a beneficial nature by legislatures.

Your Honours, one reason for doing that or adopting that attitude is because if Parliament has set out what parliaments recognise as being a solution, perhaps not the best solution but a solution, then that is something which provides for a weighing of the rights of parties involved and it takes away the need perhaps or the imperative for creating a change in the law. Your Honours, if I can just go to page - - -

GLEESON CJ: Another consideration is that a number of these principles are developed to supplement deficiencies in the law but not to supplement deficiencies in the evidence.

MR JACKSON: Yes, your Honour, that is true. Yes, your Honour, I accept that. If I can just go to page 42 of that document for a moment. The third argument is referred to in the first new paragraph on page 42, bona fide purchaser argument, which perhaps the complication of which perhaps demonstrates that it may not be the most acceptable argument. But your Honours will see at the bottom of page 42 Professor Watts sets out what he regards as the strongest argument and this is something we would adopt. He says:

Although it does not feature strongly in the judgments or the commentaries, it is suggested that the best reason why, in general, the subcontractor cannot sue the employer in restitution is that in relation to the defendant the plaintiff will not usually be able to establish any ground for restitution. Thus, in most cases it is a legitimate assumption of fact that the plaintiff’s performance of work on the defendant’s assets is, vis-à-vis the defendant, voluntary – neither mistaken nor conditioned.

“Conditioned” seems to mean subject to condition for payment. Your Honours, fundamentally those are the oral submissions we wish to make on that issue unless there is something your Honours wanted to take us to. It is a case, in our submission, where a risk is taken by Builders and the risk matured.

Could I come then to the Builders Licensing Act, your Honours. Under section 9(1) of the Builders Licensing Act:

No person shall carry on business as a builder . . . unless the person holds a licence.

You will see section 9(2) also provides that:

No builder shall perform . . . building work of a particular kind unless the person holds a licence authorizing the performance of work of that kind.

There are probity and proficiency requirements for holding a licence. They are set out shortly in section 10(8) and your Honours will see “natural person” in paragraph (a), “body corporate” in paragraph (b).

Part IV of the Act, which commences in section 19, deals with the disciplinary powers of the tribunal. Then one comes to Part V of the Act which contains the relevant provision, which is section 39. But may I, just before coming to section 39, refer your Honours to the fact that one sees in section 37 and in section 38 requirements on the one hand prohibiting advertising unless the advertisement contains particular things, including the builder’s “licensee’s licence number”. That is 37(1)(b). One sees in section 38 that there is a requirement that there be:

on the site of any building work performed by the licensee or on the outside of the place where the building work is being performed –

(a) the licensee’s name . . .

(b) the licensee’s licence number –

One comes then, your Honours, to section 39. Section 39 speaks of:

An unlicensed person who performs building work in circumstances in which a licence is required under this Act shall not be entitled to recover any fee or other consideration in respect of the building work unless the Tribunal or any court hearing proceedings for recovery of the fee or consideration is satisfied that the person’s failure to be licensed resulted from inadvertence only.

Your Honours, the failure to hold a licence by Builders was held not to be due to inadvertence. Your Honours will see that at page 489 of volume 2 in paragraph 35. So the first question was whether Builders was a person which performed building work in circumstances where a licence was required. “Building work” is a term defined by section 4(1). Your Honours, it plainly refers to the work of building a house. The requirement for a licence is provided for again by section 9, particularly section 9(2).

The view taken by the Full Court was that Builders’ failure to hold a licence precluded recovery only of contractual damages. You will see that referred to, your Honours, in volume 2 of the appeal book at page 533, paragraph 99 and, in particular, in the last sentence of paragraph 99. Now, the majority in saying that, and saying that so shortly, were following an earlier decision of the Full Court.

Could we say before I come to that that certainly the words “fee or other consideration” and “fee or consideration” used in the two ways in section 39 cover claims which are contractual; of course it does. But the expressions, in our submission, go beyond that. The notion that only contractual sums are the subject of section 39 can be seen in the decision of the Full Court, if I could give an abbreviated name, Yunti v A L Seeley Constructions Pty Ltd (1998) 72 SASR 21.

Now, could I go first to the reasons for judgment of Justice Prior at page 25, and yours Honours will see that Justice Olsson on page 26 agreed with Justice Prior. Justice Prior at page 25 at the start of the first new paragraph on the page adopted an earlier decision of Justice Bollen who:

upheld a decision of a magistrate in which the magistrate spoke of the words “fee or other consideration” as words of contract, meaning quite simply entitlement of the builder for the builder’s reward under the contract.

Now, your Honours will see there is a discussion of Pavey, which was legislation in quite different terms.

GUMMOW J: Where do we see the statute in Pavey, the statute that they were construing in Pavey?

MR JACKSON: Yes, I will see if I can get your Honour a page for it.

GLEESON CJ: Page 224, 162 CLR 224. There was a question, there was a question stated for decision. The builder was licensed and the question assumed that the builder was licensed, and it asked whether a licensed builder can recover in certain circumstances.

MR JACKSON: Yes, and your Honours will see, if I could perhaps go to Pavey 162 CLR 224, that the focus of section 45 was on a contract being not enforceable unless the contract is in writing, et cetera. So, your Honours, that is why I say it is a provision which is in terms significantly different from those of section 39.

GUMMOW J: Just looking at section 45 of the New South Wales Act in Pavey, when it says “shall not be enforceable”, that would stultify an action for damages for repudiation, I suppose, would it?

MR JACKSON: Yes, your Honour. Your Honour will see in Pavey there is a discussion at some length by - - -

GUMMOW J: But in Pavey the work has been done.

MR JACKSON: Yes, that is so, your Honour. One sees, if I could say, two things about it. The first is that you see in Justice Mason’s reasons in Pavey a discussion of the relevance of the contract that is unenforceable to the entitlement to recover the restitutionary amount, if I can put it that way, and saying that the terms of section 45 do not mean that you treat the contract as if it never existed. In fact, the fact that it did exist is something that brings you into the restitutionary area. That is the first thing, your Honours.

The second thing is that, the ultimate decision in the case really works on the assumption that the words “a contract is not enforceable” do not have application to the restitutionary claim because the thing you are enforcing is ex hypothesi not the contract. If I might go back, your Honours, to the - - -

GUMMOW J: What would be the policy of that? To get in the back door when you cannot get in the front door? How does it square with the statute?

MR JACKSON: I suppose it depends from where one starts.

GUMMOW J: I am talking about the New South Wales statute – Pavey itself.

MR JACKSON: Yes, I know. The policy of it seems to stem from this. The case was one where you had a contract which, by statute, had been declared not to be enforceable. That provision, which takes away rights, is to be read as not going beyond what it actually says. What it actually says was to make the contract not enforceable. It did not touch, appeared to be the underlying view, other forms of relief which did not fall directly within the prohibition.

GUMMOW J: That is right. Was Yango Pastoral referred to, for example? There is a whole area out there of illegality which operates without a necessary anchor in statutory words. That, at the moment, worries me about Pavey because that is not, I think, faced.

MR JACKSON: Your Honour, of course, one does need to look at the statute which creates the illegality to see the extent of the illegality created and what its effect is intended to be. That was dealt with in – I have just forgotten the name – a later case about not complying with war service homes restrictions.

GUMMOW J: Nelson v Nelson.

MR JACKSON: Yes; that is so.

GLEESON CJ: Take the Money-Lenders and Infants Loans Act, which I think in its terms rendered contracts of loan unenforceable if they did not comply with certain requirements. Lending somebody money is conferring a benefit, without question. These restitutionary principles would never operate in that area, would they?

MR JACKSON: It would be unlikely, your Honour. Perhaps I misunderstood what your Honour Justice Gummow was putting to me, but there can be detected in some statutes that deal with – may even make things illegal, and in parliamentary intention, if I can put it that way, that the effect of illegality is not to be diminished by going around it by other forms of action or by other consideration.

Take, for example, the question of the extent to which there is an estoppel by reason of a judgment in an earlier case in which it is held that a transaction was not illegal in terms of a particular statute. Your Honours, cases of that kind give rise to issues whether a finding of that kind is applicable in a second case in view of the nature of the statute. It has been dealt with in this Court on a couple of occasions, I think. It is referred to in passing, your Honours, in Justice Aickin’s reasons in Queensland v The Commonwealth, the second territorial senators’ case, and in a later case, I think, your Honour. So, one can sometimes detect a policy.

The point I was seeking to make about the particular legislation in this case is that if you look at the context of it, it says builders have to be registered. To get registered, builders have to show, to put it shortly, matters relating to propriety and their ability to carry on the work. They have to have on premises where they are carrying out work something showing their building number. These are all matters for the protection of the public. What is then said is not to adopt words that necessarily carry with them considerations of contract, but to say that if an unlicensed person carries out building work then they are not entitled to any fee or other consideration in respect of the work.

Now, your Honours, the decision in Yunti does not, in our submission, give sufficient width either to the term “fee” or to “consideration”. Could I just say, your Honours, the relevant parts of Yunti commence in the first new paragraph on page 25. It is then said about point 7 on the page:

True it is that s 39 makes no specific reference to contracts at all. It denies entitlements which arise in respect of building work. Those entitlements are entitlements “to recover any fee or other consideration in respect of the building work”. That language is referable to contractual sums alone.

The Act does not make contracts illegal.

That does involve perhaps something of a jump, because it says you cannot carry out this work - - -

GUMMOW J: It depends what you mean by “illegal”.

MR JACKSON: Of course, your Honour.

GUMMOW J: Imposes a penalty.

MR JACKSON: That is so, your Honour. That is a fair indication of illegality. Your Honours will see that the discussion goes on really to the top of page 26 or perhaps the end of the reasons. Chief Justice Doyle at page 23 had a little more reluctance to agree to the proposition. Your Honours will see that at page 23, first new paragraph. His Honour said that:

Returning to s 39, I agree that the expression “fee or consideration” is an expression suggestive of a contractual entitlement, although capable of being read more widely. I lean against the wider reading because of the consequences of giving that wider meaning.

Your Honours will see that elaborated upon through I think to the end of the next paragraph. Certainly the considerations to which his Honour refers are considerations which are of some relevance in determining the meaning of the provision, but what one does see, however, is that neither the term “fee” nor the term “consideration” appears to have been given much consideration, if I can use that expression, in the reasons for judgment.

Could I say something, your Honours, as to each of those, first of all as to fee. The ambit of that term was dealt with in relation to different legislation but in a similar general context by Justice White in the Queensland Supreme Court in Mostia Constructions Pty Ltd v Cox [1994] 2 Qd R 55. Her Honour at page 59 said, speaking of the term “fee”, first at line 5:

The word “fee” as defined in both the Shorter Oxford and the Macquarie Dictionaries is a payment for services.

We simply say that that is what a fee is, a payment for services. If you go to the term “consideration”, the fact that the term has had for quite some time a quite wide meaning was referred to in this Court in Roxborough v Rothmans of Pall Mall (2001) 208 CLR 516. At page 524 your Honours will see in paragraph 14 that three members of the Court said:

The appellants based their case, in part, upon the principles underlying the common indebitatus count for money had and received –

Then there is a reference to Bullen and Leake and your Honours will see it said:

“Money paid by the plaintiff for a consideration that has failed, may be thus recovered –

Then paragraph 16:

Failure of consideration is not limited to non-performance of a contractual obligation, although it may include that.

Your Honours will see also in the preceding paragraph a reference to Lord Mansfield in Moses v Macferlan referring:

to money paid “upon a consideration which happens to fail” as an example of money which, ex aequo et bono, a defendant ought to refund and, therefore, money for the recovery of which the count for money had and received lies.

The only point I would seek to make about it, your Honours, is that the term “consideration” does not necessarily have a contractual meaning although it is sometimes and very often used in the context of contract. Your Honours, we would submit that the provision is one which had a direct application in the present case. There was a claim for a fee or other consideration for carrying out the building work.

HAYNE J: Is there any other use in the Act of the expression that we are concerned with in 39 for your consideration. I see that price is mentioned in the domestic provisions.

MR JACKSON: Yes. Your Honour, I think the answer is no. I will give your Honour a reference if there is, if I may?

HAYNE J: Yes, thank you.

MR JACKSON: Your Honours, in dealing with the earlier aspect there was one further reference I wanted to give your Honours in relation to risk taking. If I could take your Honours to the book to which I have been referring. Your Honours will see an article at page 46 by Jaffey, The Nature and Scope of Restitution. I wanted to refer to an observation made at page 57 under the heading “Unconscientiousness”. Your Honours will see that it is said:

Birks’s argument is that free acceptance is a matter of unconscientiousness, not agreement inferred from silence, i.e. it is based not on the plaintiff inferring acceptance and acting in reliance accordingly, but on the wrongfulness of the defendant’s behaviour, even if the plaintiff did not rely on him. But where the plaintiff is a risk-taker–i.e., where he knows that he has no contractual right to payment–it is difficult to see how there can be any unconscientiousness on the defendant’s part.

In our submission, that is so in the present case. Your Honours, if one looks at the situation, if one is talking about any kind of acceptance by us we do not know of the existence of the other side until years after the building is built. What are we supposed to do at that point? Are we supposed to pack up and leave? Are we supposed to, as I said before, engage someone to modify the building to reduce the value of it? Are we to, your Honours – and one comes also - but when did we accept it, which is a - - -

CRENNAN J: Did the Full Court deal at all with the question of the ease with which Builders could have checked with Lumbers about the benefit which they were to give Lumbers?

MR JACKSON: No, your Honour.

CRENNAN J: Was that dealt with?

MR JACKSON: No, it is not, your Honour. I was just going to say that one sees one rather odd thing, if I could put it that way, in the approach taken by the majority in the Court of Appeal. Could I just say this, your Honours, that in dealing with the question of whether we had received a benefit, your Honours will see at paragraph 82 on page 529 that they said that:

more than simple acceptance of a benefit is involved. It is necessary to establish that the defendant acquiesced in the provision of the service, in circumstances –

they there set out. They also say in the same paragraph:

It is also necessary to establish that the defendant had a reasonable opportunity to reject the provision of the service and did not do so.

Having said that, they do not deal with either of those issues at all. Your Honours, it is not at all clear why those matters which seem to be the way in which Chief Justice Doyle in Angelopoulos had restricted the possible operation of the notion, were not dealt with. Your Honours, there are a number of matters I said I would give your Honours an answer to. May I do so a little later after lunch?

GLEESON CJ: Yes. Just one matter of fact - on page 5 of the appeal book in paragraph 8 of the document entitled “Second More Explicit Statement of Claim”, there is an assertion made by your opponents, I think, about the contract. Was it ever suggested in the alternative that there was a novation of that contract?

MR JACKSON: To Builders, your Honour? The case was, your Honour, that there was an assignment of the contract to Builders, but that case failed. It failed at two levels. It failed at both levels below and is not pursued here, of course.

GLEESON CJ: Implicit in that seems to be an assumption that Mr McAdam never said to Mr Lumbers, “By the way, we are having a bit of a reorganisation here. From now on it will be Builders who will be doing this”.

MR JACKSON: There may have been a difficulty about that, because evidence of Mr Lumbers, which like his other evidence was accepted, was to the effect that Sons was a company well known in South Australia as at least a residential builder of some experience and general renown and he wanted the cachet of the Sons as builders to be on his house. Now, it is one thing to say same people, same building, same everything, but you do not have the name. He said he would not have agreed to there being anyone other than Sons doing the work.

GUMMOW J: Just looking again at Pavey & Matthews, what seems to have been in the forefront of the Court’s mind was the apparent impediment to the quantum meruit viewed as an implied contract when you would be implying a contract in the face of the operation of section 45 of the Builders Licensing Act upon one might say the direct contract.

MR JACKSON: That is so, your Honour.

GUMMOW J: They were saying, and one can understand it, that quantum meruit and these other claims are not exclusively to be understood as depending upon the implication of a contract.

MR JACKSON: That is so, your Honour. They do say that. We rely of course on our written submissions as well.

KIEFEL J: Mr Jackson, just before you do sit down, was it ever put to Mr Lumbers that, so long as he was dealing personally with Mr McAdam, that the identity of Sons was not so important? That is to take up your point just made that Sons was an important aspect – on another view of the facts it would seem that McAdam was the critical point.

MR JACKSON: The answer directly I think, your Honour, is no, but again I will check that.

HAYNE J: In that regard I would be glad if you would tell me then whether paragraph 84 of the Full Court’s reasons is accurate, because the second sentence of paragraph 84 is:

The fact that Warwick Lumbers said he would not have accepted the benefit if he had known Builders was doing the work, and because he relied on Sons’ name and the fact that Sons was licensed and, therefore, insured - - -

MR JACKSON: Yes, there is evidence to that effect.

HAYNE J: There is evidence to that effect, is there?

MR JACKSON: I was dealing with the negative, I think, your Honour. Yes. Can I give your Honour a reference to that.

GLEESON CJ: Thank you, Mr Jackson. Yes, Mr Reynolds.

MR REYNOLDS: Your Honours, I would like to start by dealing with a matter that your Honour Justice Gummow raised with my learned friend earlier. There are two aspects that I would like to raise. The first is the question of High Court authority in this area of quantum meruit. The second and closely related question is what are the requirements for a claim in quantum meruit.

What I would like to do to try and realign the axis of this argument is to suggest, by taking your Honours to two decisions of this Court – namely Pavey and Steele v Tardiani - I want to suggest, in due course, that these reasons in the Full Court are, or should be seen to be, quite orthodox applications of the principles which are binding presently on this Court – principally the judgment of Justice Dixon, with whom Justice McTiernan agreed, in Steele v Tardiani, that being a three-Justice Court and, secondly, the majority judgments of Justices Mason, Wilson and Deane in the Pavey case.

What I want to suggest in due course is that a close reading of Pavey in particular, but also of Steele v Tardiani, shows that my client has a strong case for a quantum meruit, although I also accept that there are various particular arguments which my learned friend has outlined which I will need to deal with more specifically.

Now, to try and establish that proposition, in effect, that the judgment of the Full Court is or should be seen to be an orthodox application of principle, can I take your Honours to the Full Court judgment, in particular at paragraphs 77 to 85, and we have dealt with this in our submissions, these are the respondent’s written submissions, in particular at paragraphs 13 to 18.

If your Honours, perhaps, could go to those submissions briefly. We have pointed to the reasoning of the Full Court in paragraph 16, and in paragraph 17 we have outlined a summary of that reasoning. Your Honours will have noticed that included in paragraph 17 is not only this notion of acceptance, but also various other matters going to we say the elements going to the rudiments of a claim in quantum meruit.

Your Honours will notice from paragraph 82 that there is reference in the second line to the defendant acquiescing “in the provision of the service”, and as I say, we have attempted to summarise in paragraph 17, looking back on paragraphs 15 and 16 and also 18, the other elements in the reasoning. It is clear, we submit, from paragraphs 78 through to 81, and indeed all the way through to paragraph 85, that what their Honours are here doing is applying the statements of principle articulated by Chief Justice Doyle in the Angelopoulos Case [1995] SASC 5230; (1995) 65 SASR 1. If I can take your Honours briefly to that decision, your Honours will see at pages 6 to 10 in particular - - -

GUMMOW J: What was the dispute about in Angelopoulos? The Adelaide Grand Prix?

MR REYNOLDS: Yes, that summarises my recollection of the facts. If I can take your Honours to the principles that the Chief Justice applied your Honours will see that at pages 6 through to 10 there is a rather exhaustive analysis of exactly what Pavey stands for. I will take your Honours in a moment to Pavey, but to anticipate things, there are a very large number of uses of the word “acceptance” in the Pavey Case which I will need to take your Honours to in due course.

This notion of acceptance is referred to by the Chief Justice at page 9 at about point 7 and at the bottom of the page and then over on page 10 at about point 2 and again at point 3 and his Honour keeps referring to this principle of acceptance or notion of acceptance on page 11. Finally, his Honour concludes on page 12 and I would like to take your Honours briefly to this paragraph at point 8 at page 12. He says that:

In my opinion the plaintiffs in the present case were entitled to succeed. This is a case in which the defendant accepted benefits (freely accepted, if the addition of that adverb adds anything) - - -

GLEESON CJ: Was this a case in which there was simply no relevant contract?

MR REYNOLDS: And no request.

GUMMOW J: No request?

GLEESON CJ: I am just looking at the headnote which says:

The matter was decided by the trial judge and argued on appeal on the basis that there was no contract between the plaintiffs and either defendant for the provision of work or equipment –

and I interpolate there, as I understand it, no contract between anybody else either.

MR REYNOLDS: I believe that is the case, your Honour.

GLEESON CJ:

but that Angelopoulos was clearly aware of their involvement and their work, and that they were not hired workers . . . Angelopoulos was aware of that expectation –

that they would receive a benefit and encourage them to do what they did.

MR REYNOLDS: There were particular facts which obtained in that case, not all of which apply here. But the statement that the Chief Justice makes, if I may pick up this reference to page 12, is that he says this:

It is a case in which there has been an acceptance of a benefit under circumstances such that the law should, in my opinion, impose an obligation to make fair and just restitution.

Now, I submit that that is an importance sentence because it gives greater content to this notion of acceptance, and that is that you have to look a little more broadly to the circumstances to see whether in the context of an acceptance there is an obligation imposed by law to make fair and just restitution. His Honour then sets out on pages 12 to 13 about nine particular points and concludes on page 13 at about point 8:

In my opinion, for those reasons this is a case of acceptance (or free acceptance) by the defendant of a benefit conferred by the plaintiffs under circumstances such that the law should impose an obligation to make fair and just restitution. I consider that - - -

GUMMOW J: Wait a minute, Mr Reynolds, what about the top of page 13, have you taken us to that? Third line on page 13:

It is not necessary for me to find that there was a request . . . but were it necessary to do so I would be prepared to conclude - - -

Well, what is all this about? Why were they standing on their head? That would be the end of the case.

MR REYNOLDS: If there was a request for the work.

GUMMOW J: Well, the Chief Justice is saying are you prepared to say that? Why does he not just say that?

MR REYNOLDS: Well, your Honour, perhaps he could.

GUMMOW J: Everyone go home.

MR REYNOLDS: Perhaps he could have. I gather that your Honour is putting to me that if the work is being requested - - -

GUMMOW J: It is a work of supererogation, this judgment, that is what I am putting to you.

MR REYNOLDS: If the work has been requested, that is the end of the matter. Why go on, your Honour asks me, and write about acceptance? Well, that may well be so, but what his Honour was doing was interpreting - - -

GUMMOW J: I am putting to you in the real world it would be very unlikely that you would have these debates about acceptance in the absence of any request. .....does not work that way.

MR REYNOLDS: Well, to anticipate things - - -

GUMMOW J: .....expect of these English academics.

MR REYNOLDS: - - - a little I will be suggesting that there is, as you will have seen from my submissions, a request for this work to be done, and I want to explore that in a little more detail later on.

HAYNE J: But in Angelopoulos, Chief Justice Doyle seems to be saying, acceptance is not enough, you have to find more. I find more, implied request. Have we not done 360 degrees at that point?

MR REYNOLDS: Your Honour, I accept the first portion of your Honour’s sentence. I am not quite certain where the 360 degrees comes in, but importantly his Honour is interpreting a judgment of this Court in Pavey, and it may be that his Honour has given undue weight to this notion of acceptance, and it may have been that, as Justice Gummow says to me, this request, express or implied, for the work may have been enough to have decided this case.

GUMMOW J: All I am saying is Bullen and Leake would have solved this.

MR REYNOLDS: It would have, but what I am trying to suggest is - - -

GUMMOW J: Third edition, 1868, no problems. Why are we having this big case in the South Australian Full Court in 1995 about something that would have been clear in 1868?

MR REYNOLDS: That may well be so, your Honour, but what I am trying to show is that this judgment of the Full Court that your Honours are dealing with is an application, as your Honour Justice Gummow said to my learned friend, of High Court principle. That is important because what was happening here is that the Full Court was interpreting the decision of this Court in Pavey about acceptance, albeit through the lens of the Full Court decision which is also - - -

GUMMOW J: There is no doubt there was a request in Pavey. That was not the problem in Pavey.

MR REYNOLDS: If it is convenient just to pause and analyse that for a moment and ask this question, looking at what could have been characterised in Pavey as a request, namely, very simply, Mrs Pavey wanted a home to be built, she asked the builder to build it and he built it. Your Honours, subject to one qualification, that is exactly what happened here. There is only one difference between these facts in this case, I submit, certainly one important difference, and that is that the Lumbers, Warwick Lumbers, did not know – and this is clear – he did not know that it was Builders that was doing the work on his property and he did not know that it was Builders that were paying the subcontractors.

He believed, erroneously as the Full Court has held, that it was Sons that was doing that work. I submit that the principal issue which your Honours are going to need to determine in this case in relation to quantum meruit is fundamentally a very narrow one. It is one which is very close to the principle in the law of contract – that, if one party is mistaken as to the identity of the other party, then there is no contract. If that proposition applies mutatis mutandis to the law of quantum meruit, then my client fails. The question is, I submit, does that principle apply to a claim for quantum meruit? That, I submit, is the essential issue in the case.

GUMMOW J: Could you explain that again, Mr Reynolds? What is the analogy?

MR REYNOLDS: Could I try and explain my point by an allusion to the facts in Steele v Tardiani. Your Honour is familiar with the judgments and read Justice Dixon, who has two bases for his decision. One is that there was dispensation from the terms of the contract. Secondly, he talks about an obligation imposed by law. Sir John Latham looked at the facts of Steele v Tardiani. What he was concerned to find is whether there was a new contract. So they are different facts. They are talking about doing work which was not in conformity with the contract. Sir John Latham said when you look at all the facts, there was a new contract to do the work differently.

If we can just underline that word “differently”. Let us assume that my client had brought an action purely in contract against the Lumbers, what would his position have been there? The answer is that his claim in contract would have to have failed, and the reason is because the Lumbers did not know his identity, and because of that it could not be suggested that there was a new contract with Builders replacing the old contract with Sons, and there have been questions that have been asked along these lines today. If they had have known that one extra fact – that is, if the Lumbers had known that – there would have been a new contract - - -

GLEESON CJ: If they had agreed to it as well?

MR REYNOLDS: If they had agreed to it. There are a number of issues in this case, obviously, and my learned friend has floated most of them. It is a matter really for your Honours in which direction I take the argument in one sense, but I can either – he is running two main points, vis-à-vis quantum meruit, and the first is that this is unorthodox. He has picked up, on your Honour Justice Gummow’s suggestion at the special leave application, a ground of appeal which did not form part of his draft, namely, that this decision is a case of free acceptance, and if I may put it baldly, that this is new-fangled nonsense.

So I want to first of all deal with that proposition and then I am planning to go to this slightly more difficult issue, which I have flagged in relation to mistaken identity, although I am content to deal with the latter one first if your Honours are more interested in it.

GLEESON CJ: Is it convenient to come back to this after lunch, Mr Reynolds?

MR REYNOLDS: I am sorry, your Honour, I did not see the time, thank you.

GLEESON CJ: We will adjourn until 2.15 pm.

AT 12.43 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

GLEESON CJ: Yes, Mr Reynolds.

MR REYNOLDS: Thank you, Chief Justice. I think before the luncheon adjournment, your Honours, I was attempting to persuade you that the Full Court’s judgment in this case is an orthodox application of High Court principle. What I would like to do is to take your Honours briefly to some key portions of the decision of this Court in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221.

GLEESON CJ: Which ultimately was decided, or the issue in the case was identified as an issue of statutory construction, that is, the question of the interpretation of section 45 of the Builders Licensing Act.

MR REYNOLDS: Yes. Anterior to that, on one view, is the formulation of principle in relation to the basis for a claim in quantum meruit. I submit there are two or three key portions of the judgment. The first is page 227 at about point 3 on the page:

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.

Further down the page their Honours refer, at about point 6, to restitution or unjust enrichment.

GUMMOW J: But that first sentence cannot be a complete statement, can it?

MR REYNOLDS: No.

GUMMOW J: There will be quantum meruit cases where there is no contract at all.

MR REYNOLDS: No, it cannot. That is exactly what is implicit in the statement of principle by Chief Justice Doyle. To give an example, on that page – I may anticipate things a little – on the last line their Honours say that “the benefits were not intended as a gift”. That is an indication of a factor moving outside the notion of acceptance or, using Chief Justice Doyle’s phrase - - -

GUMMOW J: There is a distinction though. If you look at the sentence you read beginning “Deane J” that talks about an action on a quantum meruit. Do you see that?

MR REYNOLDS: Yes.

GUMMOW J: Then about 10 lines from the bottom of the page, “Once the true basis of the action”. That could mean the action in this particular case and things would fall together. Otherwise it cannot be a complete statement of the basis of a quantum meruit.

MR REYNOLDS: What their Honours say eight lines up, approximately, is that, “the true basis of the action on a quantum meruit” which, I suggest, is a general principle rather than one that is highly particularised and tied to the facts of this case.

GLEESON CJ: But what they are doing is construing section 45 of the Act and section 45 says that the contract is not enforceable against the other party to the contract and they are asking whether in this case somebody is trying to enforce the contract. One thing I must admit I had not noticed until I had read this case again is that under that statute the contract was enforceable against the builder.

MR REYNOLDS: Quite.

GLEESON CJ: It was only not enforceable against the homeowner.

MR REYNOLDS: And that is one of the things their Honours focused on, pointing to the injustice that would have arisen if they did not interpret the section as they did.

GLEESON CJ: So what they were asking themselves, what all these judgments are directed towards is asking themselves whether the builder is trying to enforce the contract within the meaning of the statute.

MR REYNOLDS: That is the end game.

GLEESON CJ: That is the issue in the case. That explains, does it not, the first sentence on the bottom of the page that you have just been referring to “it is difficult to regard the action as one by which the plaintiff”, that is the builder, “seeks to enforce the oral contract” because that is what is prohibited by the statute; the builder enforcing the oral contract.

MR REYNOLDS: Yes. The true basis of the action on the quantum meruit is that referred to higher up on the page. Justice Deane also dealt with this issue at page 255 at about - - -

GLEESON CJ: You will find him on page 245, four-tenths of the way down the page, identifying the issue which is a question of statutory construction.

MR REYNOLDS: It is, and in order to answer it, their Honours had to, as they put it, determine the true basis of the action of a quantum meruit, which was not on the implied contract theory which is why the section does not apply. It is on the basis of – and I am paraphrasing – acceptance of the benefits accruing from the performance of the contract and that that ultimately is a claim to restitution or one based on unjust enrichment. Justice Deane at the top of page 255 talked about making:

payment for an executed consideration given and received under an unenforceable contract should now be accepted as lying in restitution or unjust enrichment.

GUMMOW J: Just go back to the middle of the page, “The issue between the parties”, see that, the Chief Justice took you to that:

whether the words of the section should be construed as applying to preclude - - -

MR REYNOLDS: This is 254, your Honour?

GUMMOW J: Page 245 at about point 5, the sentence beginning “The issue between the parties”.

MR REYNOLDS: Yes.

GUMMOW J: What was not an issue between the parties is to whether motion to illegality would nevertheless apply there being circumstances where illegality applies without being found in the particular words of any section. You can get it out of the subject, scope and purpose of the Act, can you not? Is that not what Yango is all about? All I am putting to you is that Pavey & Matthews has a number of aspects to it which you have to understand before you decide what it is authority for.

MR REYNOLDS: I accept that, of course, your Honour, but what I am trying to get to, my point of departure, as it were, into the case law has been to contest my learned friend’s proposition that this – these are my words, not his – is new-fangled unorthodox doctrine and what I am trying to show is that it is quite the opposite but what Chief Justice Doyle was doing was going to this case, Pavey, analysing it closely, determining what he thought it meant, which involved focusing on the notion of acceptance and also appreciating, as I think your Honour the Chief Justice said to me a moment ago, that acceptance is not the be all and end all of the matter; one must look further to the circumstances to determine whether the acceptance is of the character necessary to support the claim.

So that one of the difficult things, I submit, about Pavey is that there are indications in the judgment – and I will be taking your Honours to them in a moment, briefly I hope – which indicate – and I have taken your Honours to one already at the last line on page 227 – that their Honours were looking at acceptance in a more contextual way, they were not just focusing on acceptance, but that this - - -

HAYNE J: Would it be fair to understand what you say is coming out of Pavey, though, as being the court identifying one species of a genus which it identified or Justice Deane identified as restitution or unjust enrichment?

MR REYNOLDS: That may well be a very good way of putting it.

HAYNE J: If that is right, if what is identified is a particular species of the genus, what is the process that you would have us then embark upon? Having identified this genus, do what? Recognise a new species? Recognise a different species? Is that not the key difficulty in this argument by reference to taxonomy?

MR REYNOLDS: With respect, your Honour, that is a very accurate statement and we say the issue that arises here; a very accurate one. Can I answer what your Honour has put to me in this way. I said before luncheon and I say again now that in the end, subject to the issue I identified of mistaken identity, that this is as clear a case as one could get of a case for quantum meruit based on very basic and well-known principles relating to request for work to be done and acquiescence in the doing of it.

GLEESON CJ: I think your opponent would say that is right, that is to say, quantum meruit by Builders against Sons.

MR REYNOLDS: Your Honour, one of the things about my learned friend’s argument, just to anticipate things a little, is that without ever showing your Honours how there was a subcontract, he assumed throughout the whole of his argument that there was a subcontract between Sons and Builders. There is the hottest of hot debates about that issue and your Honours should not assume, with respect, otherwise. You are not dealing here, we submit – and I will be taking your Honours probably tomorrow to that issue – with a clear case of a head contract in writing to a head contractor and a further subcontract out to a subcontractor. It is not, in our submission, that case and, indeed, none of the judges below with a possible exception of Justice Vanstone even went anywhere near such a finding. My learned friend in his written submissions has for the first time, we submit, formulated the terms of that subcontract and in his submissions to your Honours today has just taken it for granted that that exists but that, as I say, is by the by.

Can I return before I forget, with respect, exactly what your Honour Justice Hayne put to me. The first part of my answer is what I said just a moment ago. The second part of my answer, the part that may be more interesting to your Honour, is yes, that, on one view of this judgment in Pavey, what is involved is the formulation perhaps to begin with ad hoc tied to the particular circumstances of a case, what the particular factors showing why acceptance of a benefit is in all the circumstances to be treated as a basis for restitution. But there is, as your Honour has pointed out to me, a broader question there which is, how exactly does one go about that?

Your Honours have the benefit of an analysis by Chief Justice Doyle of this precise point. I do not quite have the passage to hand but his Honour said something like this at one point in the judgment. He said, “It is not altogether easy, but this is the way I think I need to go about it in the current state of the law in relation to quantum meruit and restitution”. What he did is – and the key passage is from about page 12, point 8 through to about the bottom of page 13 – his Honour dealt with the particular circumstances, and they were highly particular, that arose in this particular case and formulated, if your Honours look closely at the full paragraph on page 13, at about nine factors, and coming back again with the key paragraph at about point 8 beginning “In my opinion” and says that:

I consider that my decision is consistent with the basis upon which Pavey’s case was decided –

So getting back to your Honour Justice Hayne’s question, this is one way, perhaps not the only way, of interpreting the decision in Pavey. I said both in relation to my case here, the case before your Honours, that it is really not a very difficult case looking at the elements of quantum meruit, subject to the one thing that I raised with your Honours before the luncheon adjournment, but there is a more difficult question here which is, what other factors need to be introduced into this notion of acceptance?

Now, what I want to suggest, and I am anticipating things a little, having gone through Pavey, I want to suggest that your Honours will be able to see in more than just embryonic form what some of those factors are and I have pointed to one already and that is “not intended as a gift”. I will try and draw that together in a moment if I may take your Honours back to this decision.

Acceptance is mentioned at a rough count about 20 times in this judgment. I have mentioned a couple on page 227. There is a further reference at 228 at about point 4 and at 229 at about point 2 where your Honour Justice Gummow will note at about the sixth line the words “where the building owner requests and accepts the building work” which rather tends to suggest that this was a fairly clear case of what might be called plain vanilla quantum meruit as, we submit, subject to one matter, this case is also.

Further down the page at about point 4 talks about a “liability to pay for building work upon which he insists and the performance of which he accepts”. Again, it is insisting on the building work as, we submit, occurred here and it is the performance of that work which we say was accepted here. At page 244 at about point 8 – this will not take very much longer, your Honours – Justice Deane refers to the work having been completed and “Mrs Paul had accepted the benefit of it and taken up occupation”. At page 245 at about point 6 he refers to the fact that “the work has been fully completed by the builder and accepted by the building owner”.

GLEESON CJ: She had actually paid for most of it.

MR REYNOLDS: Quite.

GLEESON CJ: This was just an action to recover a fairly small balance owing.

MR REYNOLDS: As if. Not, from my client’s point of view, a small balance but about roughly 25 per cent, so it is again very similar. At page 250 at about point 4 there is reference to a quote from Chief Justice Jordan in Horton v Jones [No.1] where he talks about acceptance of the benefit of the performance of a contract. At page 260 point 9 there is reference to the consideration being executed and accepted; at page 263 to work being done and accepted; at page 263 point 9 talking about work which was unsolicited but subsequently accepted and at page 264 point 3 the work done and the benefit accepted.

There is not, I submit, any doubt at all that this case is putting the notion of acceptance front and centre in terms of the court’s consideration of quantum meruit and, I submit, that in their adoption of what the Full Court said in Angelopoulos, itself interpreting Pavey, their Honours did not err at all.

I said a moment ago I would take your Honours back to some perhaps embryonic indications of what these extra circumstances are in relation to acceptance. There are three that I can point to. The first is the one I pointed to at the bottom of page 227 that the work was “not intended as a gift”. Secondly, at page 245 point 6 and page 260 point 9, that the consideration was complete and fully executed, as here I submit; and, thirdly, where there had been a prior insistence on the work or a request for the work. I concede that these are only the beginnings of a series of factors that are being pointed to and I have also submitted that it is a fairly obvious case that probably did not require this extra analysis of the - - -

GUMMOW J: I am not sure where we are going, Mr Reynolds. Are you saying that acceptance can be sufficient for your pleading even if you could not plead a request or that you need both?

MR REYNOLDS: You do not need both is my answer. Acceptance, with other matters, may be a basis for - - -

GUMMOW J: Yes, but does it require a request?

MR REYNOLDS: I submit not, but I submit - - -

GUMMOW J: Yes, that is the point, is it not?

MR REYNOLDS: I submit it is a point which is academic in this case because there are the clearest of clear requests for all of the work, every tiny aspect of it, all the way through. Where these issues normally arise is - - -

GUMMOW J: No, no, requests by whom to whom?

MR REYNOLDS: To all the relevant personnel, those persons being the identical personnel who would have performed the contract on behalf of Sons.

GLEESON CJ: But the common indebitatus account was money payable by the defendant to the plaintiff for work done and materials provided by the plaintiff to the defendant at the defendant’s request. That was the count.

MR REYNOLDS: Quite. That is so. By the plaintiff to the defendant at the defendant’s request. The request relating to the work.

KIEFEL J: You are drawing a request from the benefit received, is that how you are approaching it?

MR REYNOLDS: Essentially, yes. I am focusing on whether there was a request.

KIEFEL J: You are implying or drawing an inference of a request from the fact of benefit received?

MR REYNOLDS: In this case?

KIEFEL J: Yes.

MR REYNOLDS: No.

KIEFEL J: I am just not quite sure where your request is coming from then.

MR REYNOLDS: The point I am trying to make is that if you compare the facts of Pavey, whereas Justices Mason and Wilson at one point said there was a request and what you have there is the performance of a building contract, I say so too here there was a performance of building work at the request of the defendant.

HAYNE J: That might address the question of whether a payment must be made. How does it address the question to whom the payment should be made?

MR REYNOLDS: That, I submitted before lunch, is, as your Honour Justice Hayne has put it to me very crisply, the essential issue that will arise in relation to quantum meruit in this case, apart of course - - -

HAYNE J: I understand that is the issue. I am waiting for your answer to the issue, Mr Reynolds, sorry. What is the answer?

MR REYNOLDS: I need to - - -

HAYNE J: You need to approach it slowly.

MR REYNOLDS: I do, your Honour. I need to set the context.

GLEESON CJ: There was no doubt about the request in Pavey & Matthews. Not only was there a request, there was a contract and it was a contract that was enforceable by Mrs Paul. It was just not enforceable by the builder. The question that had to be decided was whether what was going on here was an attempt by the builder to enforce the contract, that is to say, to do what was prohibited by the statute.

MR REYNOLDS: Quite, but getting back to what your Honour Justice Kiefel said to me, everything in this case is either identical with or pretty much the same as the acceptance and request in Pavey with this one important difference.

KIEFEL J: With the absence of a contract that became unenforceable. That is why I wondered whether you were seeking to overcome the missing request directed to the right person by saying if you have an acceptance of a benefit, that somehow becomes redundant because you imply a request to whomever does the work, so you lose identity. It is not clear to me that that is what you are saying, but I cannot think of any other way of interpreting your reliance on acceptance. But it is not clear to me whether or not you are denying the relevance of request, as Justice Gummow has been putting to you.

MR REYNOLDS: I am submitting that that is an issue which really does not arise in this case because there is no doubt that the work has been requested. I forget your Honour’s phrase a moment ago, you were talking about a request to persons. There is no doubt that the request was made to these persons, but what - - -

KIEFEL J: A request to the world, perhaps. Whoever is going to carry out the work which really would seem to be the way you are approaching it.

MR REYNOLDS: Yes, but what the defendant did not know is the ultimate corporate payee, W Cook Builders, rather than W Cook Sons. So it is a rather small but important issue that is raised here and, looking at your Honour Justice Hayne, I would better get to it.

KIEFEL J: But essentially what you are saying is, so long as the work is done and Lumbers receive the benefit, it does not matter. Is that not really what you are driven to say?

MR REYNOLDS: I might have to if your Honours form the view that there was not a request here. What I am trying to say, apparently not clearly enough, is that, leaving the question of identity to one side, you have got the full menu of quantum meruit factors here, which I will come back to later on, but to summarise, you have got request, you have got acquiescence, you have got acceptance in absolutely everything that is going on at this property right down to the finishes on every cupboard and the taps in the bathrooms and what have you, but the one bit we do not have is a contract because there is an issue about identity.

GLEESON CJ: Is it the corollary of your argument that if both of these companies have become insolvent, that is, both Sons and Builders have gone out of business, the bricklayer of whom we spoke this morning could sue the Lumbers?

MR REYNOLDS: The answer is - - -

GLEESON CJ: Leaving aside the Worker’s Liens Act.

MR REYNOLDS: Can I say the answer is in some circumstances, yes, but not as a general proposition. Picking up two statements, first of all by Lord Goff, who from recollection said as a general rule or something similar, and your Honour Justice Gummow referred to Pan Ocean per Lord Goff in the Roxborough Case and said something similar. I will be conceding in due course that in what might be called the paradigm head contractor/subcontractor case that in most circumstances the subcontractor will not be able to bring a claim in quantum meruit against the owner. But what I will be submitting in due course is that if it is held against me that there is a subcontract on the facts, my fallback submission is that in the particular circumstances of this case there may be a claim by the subcontractor direct against the owner.

I was going to take your Honours to Steele v Tardiani but, if I may be so bold, I sense some impatience to get at the issue that I have said is so important and, if I may respectfully say so, that is fair enough and that is the question of the identity of the payee. When we wrote the submissions we referred at one point – which I will just try and turn up – to a decision of Justice Lightman who addressed this issue – this is referred to in paragraph 22 of our submissions – in Rowe v Vale of White Horse, thinking at the time that that was just about the only authority that had dealt with this precise question.

That particular observation in a single sentence in that judgment is directed to answering what I have described as the critical question on this quantum meruit claim and it is in my favour but the difficulty with it and the difficulty with the position that I am in right this very second is that there are authorities on this very issue but they are against me. I have not referred to them in our submissions, so what I need to do is to take your Honours to them and explain how it is my client overcomes these decisions. The first case is the decision of Boulton v Jones [1858] EngR 216; (1858) 120 ER 275. I have only got the reprint reference.

GUMMOW J: It is 2 H & N.

MR REYNOLDS: Thank you, your Honour. This, as your Honours see, is only a brief case – I am reading from page 232 at about point 7 – but what happened here was that the plaintiff had been foreman and manager to a fellow called Brocklehurst who was a pipe hose manufacture. The defendants had been in the habit of dealing with Brocklehurst and they had a running account. What happened was that the plaintiff bought Brocklehurst’s business from him and what happened is that soon afterwards the defendant ordered some leather hose addressed to Brocklehurst and, of course, Brocklehurst did not supply the hose but the plaintiff did. The plaintiff’s bookkeeper struck out the name of Brocklehurst and inserted the name of the plaintiff and the invoice was sent in by the plaintiff to the defendants later and they said, “Who are you?”

Upon these facts, the jury, under the direction of the Assessor, found a verdict for the plaintiff –

GUMMOW J: This was an action for goods sold, was it not?

MR REYNOLDS: That is important, your Honour. I was going to come back to that just to explain something, but, yes.

GUMMOW J: It was just a plea of never indebted.

MR REYNOLDS: Exactly. Now, the difficulty for me – and I had not focused on this previously when I first looked at this case – is that line is very important because that covers not only a claim in contract but a common money count and, therefore, this decision is relevant, at least in theory, on not only the law of contract but also the law of indebitatus assumpsit. The plaintiff lost and there are some brief judgments on the following page. Chief Barron Pollock said:

It is a rule of law, that if a person intends to contract with A, B cannot give himself any right under it. Here the order in writing was given to Brocklehurst. Possibly Brocklehurst . . . But since the plaintiff has chosen to sue, the only course the defendants could take was to plead that there was no contract with him.

Just pausing there, not too much reference to the issue of the indebitatus claim.

GLEESON CJ: But the defendant kept the hose.

MR REYNOLDS: Quite, and did not pay for it.

GLEESON CJ: What Chief Baron Pollock seems to be saying is that Brocklehurst, by agreement with the plaintiff, could have maintained an action the defendant.

MR REYNOLDS: Possibly, yes. He says possibly Brocklehurst.

MARTIN, B. I am of the same opinion. This is not a case of principal and agent. If there was any contract at all, it was not with the plaintiff. If a man goes to a shop and makes a contract, intending it to be with one particular person, no other person can convert that into a contract with him.

BRAMWELL, B. The admitted facts are, that the defendants sent to a shop an order for goods, supposing they were dealing with Brocklehurst. The plaintiff, who supplied the goods, did not undeceive them. If the plaintiff were now at liberty to sue the defendants, they would be deprived –

and this is important factually –

of their right of set-off as against Brocklehurst. When a contract is made –

My learned friend would no doubt like this passage –

in which the personality of the contracting party is or may be of importance . . . no other person can interpose and adopt the contract. As to the difficulty that the defendants need not pay anybody, I do not see why they should, unless they have made a contract either express or implied.

Those last two words are important because it is the closest that any of the Barons of the Exchequer get to considering in terms the indebitatus claim, common money count rather than the contract claim:

I decide the case on the ground that the defendants did not know that the plaintiff was the person who supplied the goods, and that allowing the plaintiff to treat the contract as made with him would be a prejudice to the defendants.

CHANNEL, B. In order to entitle the plaintiff to recover he must show that there was a contract with himself.

If your Honours refresh your recollections from the books, this case is usually cited in contract text in relation to formation of contracts saying if there is a mistake as to the identity of the other party, then there is no contract. I accepted before and I accept now that it is still good law on that point. The question is, though, whether or not the case is still good law particularly in the light of what this Court has said in Pavey. It looks like their Honours have been focusing only on, or almost exclusively on the question of the express contract.

Baron Bramwell has looked also at the implied contract, that is, implied as a matter of fact, not one imposed by law, but there does not seem to be any real consideration of the precise issue that your Honours are dealing with, namely, whether a mistake as to identity is fatal if there is a claim on a common money count. Or, to use Sir Owen Dixon’s words in the Steele v Tardiani Case, there is not any discussion of whether there would have been an obligation imposed by law in these circumstances but the problem, as your Honour Justice Gummow pointed out to me, is given that the nature of this action they must have dismissed that action for goods sold notwithstanding the mistake. So technically it is against me.

The other decision which I will come to in a moment, but just to anticipate things, what I am going to be saying in due course is that the decision in this case Boulton v Jones is wrong and I will be taking your Honours in due course to some discussion of it and some discussion of the other case, an American case I will take your Honours to in a moment.

But just to anticipate things slightly, Sir Gunter Treitel, for example, in the Twelfth Edition of his book on The Law of Contract at page 1149 refers to Boulton v Jones and says that, in the light of Craven-Ellis v Canons a quantum meruit may have been available on these facts. Your Honour Justice Hayne asked me before where I was heading. That is part of what I am heading to in due course. The other case I need to take your Honours to is the decision of the Supreme Judicial Court of Massachusetts in the Boston Ice Company v Edward Potter which is a similar case to Boulton v Jones but in this case there was not a set-off. The headnote notes:

A., who had bought ice of B., ceased to take it on account of dissatisfaction with B., and contracted for ice with C. Subsequently B. bought C.’s business and delivered ice to A. without notifying him of his purchase until [importantly] after the delivery and consumption of the ice. Held, that B. could not maintain an action for the price of the ice against A.

The nature of the action is in the next paragraph, namely, it is a “CONTRACT on an account annexed, for ice sold and delivered”. So again both contractual but also, to use the old terminology, quasi-contractual. The reasoning of Justice Endicott starts:

To entitle the plaintiff to recover, it must show some contract with the defendant.

Again the emphasis on contract.

There was no express contract, and upon the facts stated no contract is to be implied.

The reference to this is (1877) 123 Mass. 28 and using those page numbers – I assume your Honours have those – at page 29, I think it is, there is a paragraph which reads:

There was no privity of contract established . . . and without such privity the possession and use of the property will not support an implied assumpsit.

So again that is against me because it is importing into the notion of assumpsit or quantum meruit the same principles of privity as exist in contract. Then at page 30:

A party has a right to select and determine with whom he will contract –

et cetera. Further down that page there is reference to a few authorities including Orcutt v Nelson and the judge goes on to say:

If he had received notice and continued to take the ice as delivered, a contract would be implied.

He then refers at page 30 again to Boulton v Jones and on page 31 refers to the fact that there was no set-off in this case and says:

But the actual existence of the claim in set-off cannot be a test to determine that there is no implied assumpsit or privity –

The next paragraph begins:

The implied assumpsit arises upon the dealings between the parties to the action –

et cetera. He talks about the original contract to which the plaintiff was not a party, he talks about no privity, but, importantly, in the final paragraph, which may be my saviour on this as an authority, he says:

We are not called upon to determine what other remedy the plaintiff has, or what would be the rights of the parties if the ice were now in existence.

Again, this decision is very much pregnant with discussion of both express contract and implied contract, that is, a contract implied from the facts, but does not really address, and on one view reserves for consideration, the issue of a quantum meruit claim imposed by law and whether the same principle would apply. What has happened with these two cases, as I have discovered only too recently, is that they have generated a lot of debate. That debate took place principally in the United States in the last century. We have given your Honours - - -

GUMMOW J: But before you get there, what do you mean by acceptance in your theory? In other words, is not what is being said in Massachusetts implicitly this; that you cannot accept unless you know from whom you are accepting?

MR REYNOLDS: Quite. It is using the word “acceptance” in the contractual sense.

GUMMOW J: What other meaning do you give to acceptance other than motions of acquiescence which seem to be what Sir Owen Dixon was talking about in Tardiani.

MR REYNOLDS: I adopt that and the short way of answering your Honour’s question is to say I adopt what their Honours in this Court said in Pavey as to what constituted acceptance and your Honour’s response to that is, before your Honour gives it, is, well, where is that? The answer is that there are passages there which say that the acceptance of the benefit, that is, the performance of the contract, amounted to the acceptance in that particular case. Your Honour then says to me, what is in this notion of acceptance? Where is it defined in Pavey? The answer is it is not. But I would say - - -

GUMMOW J: No, and the other thing I wanted to say to you – maybe you anticipate this too – is that notions of acquiescence usually involve an awareness of what it is you are acquiescing in.

MR REYNOLDS: Quite, and they usually involve - - -

GUMMOW J: Namely, what your rights are if you do not acquiesce.

MR REYNOLDS: Exactly.

GUMMOW J: It comes back to the same point.

MR REYNOLDS: Going back to how much knowledge do you need for there to be an acquiescence. So on these facts my submission is, as it has to be, that there is knowledge of all the facts essentially, as there were in Pavey, except one and that is the ultimate corporate payee who was to be paid for this work and was in fact doing this work, does that make all the difference to a quantum meruit claim? I submit it does not.

What your Honours, I submit, are going to have to do is to look at these two decisions and some of the scholarship on them and also return to the issue your Honour Justice Hayne raised with me earlier on because it is not going to be possible, I submit, to determine this issue without asking the hard question, which is, what is the true basis of the claim in quantum meruit, because probably the answer to this particular question will depend very much upon the answer to that larger question. I said that we would - -

GUMMOW J: What are you putting to us as the foundation for quantum meruit? It cannot be simply what was said in Pavey, that may be an instance of it, but Pavey is not the universe of quantum meruit. That is what my worry is.

MR REYNOLDS: Yes, that is what I need to explore on this voyage with your Honours.

GLEESON CJ: Pavey is a case in which acceptance was so obvious because Mrs Paul had made a contract with the builders, had paid most of the money owing under the contract and, indeed, the contract remained enforceable by her. Acceptance in Pavey & Matthews of the building work was so obvious that it is really unlikely that you will find in Pavey & Matthews any discussion of the outer limits of the concept of acceptance.

MR REYNOLDS: I agree and, indeed, I tried to put that submission earlier as one of the reasons why there is not much discussion about these extra contextual factors and this is the difficulty which, it is clear, Chief Justice Doyle found himself in in resolving this issue, is what does acceptance mean? As your Honour Justice Gummow said, where do we find in the definition in effect in Pavey & Matthews of what this is? The answer is, there is not. As your Honour the Chief Justice said to me, the reason probably is because it is such an obvious case, but that is – if I may just pause to emphasise this – good news, I submit, for my client because, again putting this important issue of identity to one side, which is critical and may be decisive against me, my client has the whole kit and caboodle of all of the factors involving acquiescence, request and acceptance that took place in Pavey except this one thing.

GUMMOW J: But one factor in Pavey was, and it did not succeed but it was being said, granted all of that, to permit the claim in this case would be to overturn the existing order of the law respecting the contract and what the statute permits by way of contractual allocation of responsibilities, striking at one side and not the other and so on.

MR REYNOLDS: Your Honour is putting to me as someone, possibly your Honour, put before that this case is arguably like Angelopoulos, that is, Pavey’s Case could have been decided on a very simple basis of request, but that is - - -

GUMMOW J: No, no, what I was putting to you I think was something that is said in various places but in particular in Article 29 of the Draft Restatement (Third). A claim will be denied where the imposition of a liability and restitution would overturn an existing allocation of risk or limitation of liability previously established by contract.

MR REYNOLDS: Well, that is the other - - -

GUMMOW J: Not its true contract between these particular actors but between two of the three actors. When you are talking about acceptance I think you keep bumping up against acceptance in the light of contractual stipulations.

MR REYNOLDS: Your Honour, the Full Court dealt with this issue of what I will call the one contract scenario.

GUMMOW J: If we are going to find what the fundamentals are, one of the fundamentals has to be whether you should be disturbing previously arranged contractual distribution of risks and liabilities through this restitutionary, or whatever you would like to call it, action.

MR REYNOLDS: Your Honour, certainly with a contract and subcontract situation I have some work to do, probably tomorrow, to take your Honours to a formulation which concedes that as a general proposition in a contract/subcontract situation the subcontractor will not be able to claim against the owner, but I will be submitting that there are particular circumstances here which would warrant the imposition by law of a claim and restitution. Just to flag things a little, your Honour has mentioned the American Law Institute tentative draft on section 29. At page 8 at about point 2 – this is on our list of authorities. I do not want to get too far down this road - - -

GUMMOW J: It is not tentative any more really. It has been accepted. The question is the balance of it yet has not been proffered.

MR REYNOLDS: Thank you, your Honour. The paragraph beginning:

The large volume of such decisions -- rejecting a claim –

and then this sentence appears:

Most of these decisions carry the reasonable implication, even if they do not state directly, that the plaintiff’s restitution claim would be viable if the benefits in question had not been paid for.

Just pausing there, we submit, to anticipate things a little, that the owner has not paid what my learned friend says is the head contractor and I am going to try and build on that proposition there - - -

GUMMOW J: I was not suggesting that everything here was hostile to you. I just wanted to see what you got out of it. That is all.

MR REYNOLDS: No, I did not take it that way, your Honour. I was a willing victim to the discussion of the American Law Institute formula. But that is a bit - - -

GUMMOW J: Mr Jackson said it does not matter. If the right party choose to recover this balance, to use that expression, his client is ready to pay it. He is not going to pay the wrong party because it cannot then get a discharge from the right party.

MR REYNOLDS: Their problem is that they did not perform the contract. I mean in similar terms - - -

GUMMOW J: The problem with this passage in the restatement is that it does not face up the need to get a discharge from someone with contractual rights against you.

MR REYNOLDS: In this particular case - - -

GUMMOW J: Unless you have a tripartite action, everyone join in the suit.

MR REYNOLDS: Ideally that would happen. It did not happen here for procedural reasons.

GUMMOW J: That is right.

MR REYNOLDS: And that causes some anomalies but, on one view, it is those very anomalies that raise the interesting questions that your Honours are looking at.

HAYNE J: The theoretical underpinning for your proposition is what you advance in paragraph 29 of your submissions, is it not? Is not paragraph 29 of your submissions critical to your argument?

MR REYNOLDS: Yes, it is.

HAYNE J: Can I just anticipate then, since we are into anticipation at the moment, two questions about paragraph 29. The first part of it contains the proposition that B breaches its contract by not doing the work. Applying it to the facts of this case you would say that Builders breached its contract by not doing the work. Is that right?

MR REYNOLDS: Probably. I am sorry, Sons.

HAYNE J: Sons breached its contract by not doing the work, is that the proposition?

MR REYNOLDS: Yes.

HAYNE J: That is founded on a factual premise that Sons could not perform its contract by procuring Builders to perform the work, is that right?

MR REYNOLDS: No, I do not say it is dependent on that. What I say essentially happened here, if I can put it in metaphorical terms, is that Sons walked.

GLEESON CJ: No.

HAYNE J: Sons were rendering bills after the reorganisation, were they not?

MR REYNOLDS: What happened is that there was a continuation of oral invoices indicating the amount owing, but these are not invoices headed Sons and that is, in short, my answer. Can I give your Honours - - -

KIEFEL J: I am sorry, I do not understand what you are saying. Are you referring to Mr McAdam requesting sums and effectively certifying for them?

MR REYNOLDS: What he did is he would just get on the phone to, I think, Mr Lumbers and say the bill is X. There were never any formal invoices rendered.

KIEFEL J: Was there any finding as to who he was acting for when he did this?

MR REYNOLDS: Yes. My learned junior, Mr Kremer, is pointing me to paragraph 41 on page 491 which states that:

Throughout the building work, David McAdam would telephone Warwick Lumbers and state that “he” needed a certain sum of money –

Your Honour Justice Hayne will notice the word “he”.

GUMMOW J: And “by cheque directed to Sons”.

MR REYNOLDS: Quite, and there was a joint bank account and there are findings that my client did the work and paid the bills to the subcontractors.

GLEESON CJ: This is not a case, is it, where it is suggested that Mr McAdam was acting as agent for an unidentified principal and the principal happened to change during the course of the progress of the work?

MR REYNOLDS: That is not the way the case has been analysed. I have to say that - - -

HAYNE J: Nor pleaded, nor argued, nor put at any point, is it, Mr Reynolds?

MR REYNOLDS: I think that is correct, your Honour, yes. Can I give the sort of example that perhaps may arise in everyday life for your Honours to ponder on for a moment. Take a situation where a man has a lawn mowing business. Let us call it Jim’s Mowing Pty Limited. He has a contract to mow lawns on approximately a fortnightly basis on request and he and his son do the lawn mowing, sometimes the two of them, sometimes one or the other. Eventually dad gets to the point where he wants to retire and his accountant tells him that he just needs to wind this company up, Jim’s Mowing Pty Limited, and dad does that but dad decides that he does not want to completely retire; he still likes to go out and mow some of the lawns.

The son incorporates a company called “Jim’s Son Mowing” and is not as well organised as his father in the sending out of invoices. He goes around and knocks on the same doors, with his father sometimes, and mows the lawns. At the end of a couple of months he sends out his invoices, late. Are the owners of all of these houses simply entitled to say, “Our contract is with Jim’s Mowing Pty Ltd” or, on a quantum meruit claim, should not Jim’s Son Mowing Pty Ltd be able to claim? That is the sort of situation where this may well arise in everyday life.

I was reading – I will get your Honours the reference overnight – a judgment of Justice Rogers, who is Chief Judge of the Commercial Division, in a case involving the Qintex Group where he talked about how frequent it was that in commercial life there was confusion as to precisely which company in a group of companies may be the party to a relevant contract.

Now, that is all fairly humdrum stuff, but the point I am making, if it is not obvious, is that this is the sort of thing that is likely to happen out there in the community both at an everyday level and also at a far more sophisticated level. Looking at those sorts of situations, the decision in this case would mean that people in the position of Jim’s Mowing and Son Pty Ltd would be completely without remedy in restitution if this notion of corporate identity is critical. So, in the example that I have given, Jim’s Mowing Pty Ltd walked, it ceased to perform its various contracts with these homeowners. These two fellows who do not know much about companies or company law simply got on with the job of mowing the lawns just as Mr Cook got on with the job of building this house.

If my learned friend’s argument is right, it would mean that if the nature of this arrangement/contract was that all of the payments be at the end, it would mean that a million dollar home, which is what this cost to construct, a million dollar home could be built by someone in the position of my client and if a bill was sent on completion, according to my friend’s argument, not one dollar could be recovered.

CRENNAN J: What about the point – and this surfaces frequently as a criticism of Professor Birks - which is this. Why should one jump straight to acceptance and start debating complexities there before you ask this question or think about this question? What about the ease with which the person in the position of Builders could have said something to the Lumbers about the benefit once they understood what the new arrangements were going to be? It is an anterior question to the acceptance issue.

MR REYNOLDS: A lot would depend perhaps on whether there is any active deception and my learned friend has pointed out, we submit properly, that a relevant factor, going back to the discourse between your Honour Justice Hayne and myself earlier about factors and injustice and what have you, is the basis upon which the plaintiff was acting, what was in the mind of the plaintiff when all this was occurring.

I mentioned when we first discussed the Boulton v Jones case that the problem that Professor Treitel had with the decision was that he said – it is only briefly in a footnote – that in his opinion a quantum meruit in those circumstances, that is, in the circumstances of Boulton v Jones, may be available by reason of the decision in Craven-Ellis v Canons. I am going to be taking your Honours to that decision to show your Honours what the basis of my client’s belief was and, essentially to cut to the chase, it was that Builders per medium of Mr Cook believed that it was performing an obligation, that is, Builders was performing an obligation which it had to the Lumbers.

GLEESON CJ: Which Mr Cook?

MR REYNOLDS: Jeffrey. He gave evidence of this, which I will be taking your Honours to, which was not challenged at all on that point and this is one of the issues which seems to be discussed in the – again going back to our discussion before, that is, Justice Hayne and myself – the sort of factor which will be relevant to this notion of acceptance/unjust enrichment is, as my learned friend says, the basis upon which the plaintiff was acting is something referred to by Chief Justice Doyle and he embraces that; so do we. We say that too is also an important aspect of the equation.

GUMMOW J: Before we leave Boulton v Jones, it is discussed in Bullen and Leake in the third edition at page 38. The count was “Goods sold and delivered” not quantum meruit, after all is said and done, but this is what is said:

the defendant must have some option of accepting or returning the goods and becoming bound to the plaintiff to pay for them, otherwise he cannot be held liable, as no contract can be implied. Thus, where the defendant ordered goods of one person, and the plaintiff a different person sent the goods, and the defendant consumed the goods before he had notice that they belonged to the plaintiff, it was held that he was not liable to the plaintiff for the price, because not having any option of returning the goods to the plaintiff he did not enter into any contract with him.

That is a notion of acceptance, opportunity for rejection. Where we are talking about fixtures and land, those ideas do not run very well.

MR REYNOLDS: They require some adjustment, certainly. There is no doubt about that. Mr Leake by this time was picking up the statement in Boulton v Jones and treating it, as most text writers do, as being authoritative for the proposition which it - - -

GUMMOW J: But not about formation of contract; they are talking about implying a contract. You will not be implying it in these circumstances because you did not have an opportunity to reject.

MR REYNOLDS: You will not have a contract implied from the facts, I concede that also, so there is a second concession, no express contract, no contract implied from the facts or, as it is sometimes put, acceptance by conduct. But the issue I am raising is, what about quantum meruit, does that stand or fall by the same principle or not?

I submit it does not and that when one looks at the basal requirements of a quantum meruit, looks at the sorts of factors that are relevant contextually, there can be a quantum meruit claim in some circumstances even where - - -

GUMMOW J: What does quantum meruit actually mean?

MR REYNOLDS: As much as it is worth.

GUMMOW J: Yes, exactly.

MR REYNOLDS: That too is important because the criticism which Justice Mason and Professor Carter in the first edition of their work entitled Restitution law in Australia – I say the first edition because I gather a second one is due – at paragraph 1038 they too disapprove of Boulton v Jones and the point they make is that the different identity may be relevant to quantum but not to liability.

In other words, take the situation of the set-off and assume that it is not a set-off as to the whole, set-off being the facts in Boulton v Jones, there has to be an argument that if there was a set-off, say, as to the value of half of the goods and that the defendant would otherwise have only had to pay 50 pence, say, for the hose rather than 100, there has to be an argument that that would be a ceiling on the level of the recovery by the plaintiff because again, begging I concede a few questions, looking at the justice of the situation, it would be difficult in that circumstance to suggest that the plaintiff on a quantum meruit should be able to recover more than the defendant would have had to pay to the other party.

So that is very relevant, we submit, this idea of quantum in the notion of quantum meruit because that may very well be the answer to, I submit, a lot of these questions. For example, before I forget, if I could just say this, your Honour, I have not got the passage to hand but in the Pavey decision one of the issues raised by Justice Deane was whether or not the lack of writing in that case may have been to the prejudice of the defendant and talked about the possibility of that involving a reduction in the quantum of the claim.

Just before I forget, if you look at this case there might have been an argument available to the defendant that because of the particular nature of Builders, the building it built may have been worth less than the building built by Sons.

GLEESON CJ: Yes, a purchaser might have said to Mr Lumbers, “Was this built by a licensed builder”, and he might have had to say, “I’m obliged to tell you that it wasn’t”.

MR REYNOLDS: I concede – it is not relevant now because there is no appeal on quantum – that that is an argument that might have been run. But, I submit, that is where it would fit into the equation as going to quantum, that being an issue that is by the by in this Court.

HAYNE J: But does that chain of argument mean that a necessary step in your argument to entitlement as on quantum meruit is demonstration that the Lumbers owed no obligation to another or do you contend that you may have a quantum meruit at the same time as the Lumbers are separately obliged to Sons?

MR REYNOLDS: Yes, I do.

GUMMOW J: How are they protected against two demands?

MR REYNOLDS: In this case there is a finding that Sons did not perform its contract, so there is no prospect of double liability, plus there has been an indication in written form from Sons that there are no further moneys owed to it, an indication, we say, that it walked and did not perform the contract.

GUMMOW J: That is right, Mr Reynolds. That will not get you off the hook here but, at a level of principle, how does that answer the problem?

MR REYNOLDS: I have answered it in terms of the particular case here.

GUMMOW J: That is consistent with the situation where the principle applies only when there is one demand possible.

MR REYNOLDS: To answer it as a matter of principle I first need to understand, with respect, the facts that we are dealing with. This is one of the problems I have faced and my client has faced in this case. A lot of the debate with my learned friend or his predecessors in the courts below has been talking about, if there is a contract and a subcontract but without ever looking at what the terms of those contracts are. So to try and answer your Honour Justice Gummow’s question, the facts are that there is a contract – we will use the same names – between Lumbers and Sons to build the building and instead of Sons building the building, it is built by Builders.

GUMMOW J: Your client.

MR REYNOLDS: My client. The answer whether Builders – and I concede it sounds like I am ducking your Honour’s question – is to say, the answer whether it can recover depends on the circumstances.

HAYNE J: Do you say the contract with Sons is discharged, terminated, at an end?

MR REYNOLDS: No, because – I think my learned friend went into this – there has been a breach, on one view, a repudiation. I think he said it had not been accepted; there has not been any termination. I think I have to accept that the contract in some form remains on foot, albeit unperformed, with one party in breach.

GLEESON CJ: When you say “unperformed” it was in fact performed by somebody else at the request of Sons.

MR REYNOLDS: That is what I meant, with respect, about other facts, about how much extra we introduce into the equation. So going back to my lawnmower example, if dad just says, “I’m off, I’m not doing this any more”, or if the son just says, “I’m off, I’m not doing this any more - - -

GLEESON CJ: Yes. The son has to find out the address of these places, for a start. There is no suggestion here that somebody representing Sons said to somebody representing Builders, “Get off the site”. There was just Mr McAdam managing all this, was there not, and he did something that seems to have been rather high handed?

HAYNE J: One bank account and a few entries and a few computer records, but that is an uncharitable view of it, Mr Reynolds.

MR REYNOLDS: Perhaps, your Honour. There is not a finding to that effect in this case and there are findings by the Full Court that Sons ceased to perform the contract and that Builders did perform the work leading to the construction of this building. It is only by footling with the factual circumstance combination that I can answer any further of your Honour Justice Gummow’s question, although I am quite happy to if your Honour wants to introduce other circumstances. But the answer is, it will depend.

HAYNE J: Depend on what?

MR REYNOLDS: The circumstances.

GUMMOW J: What circumstances?

MR REYNOLDS: It will depend upon the precise - - -

GUMMOW J: We are not in the happy world of section 88F of the Industrial Arbitration Act (NSW).

MR REYNOLDS: Your Honour, the argument was not that bad, was it? A fair go all round. I am not putting that to your Honours, even though I have mentioned unjust enrichment and unconscionability. Again, I am repeating myself. I do rest on the findings in the Full Court on this point. The contract simply was not performed by Sons. It did not perform the job. It was performed by another company. Now, the fact that there remained extant a contract between Lumbers and Sons, we submit, is neither here nor there, particularly where there is no claim by Sons. I mean, it has said in writing, “We are not owed any money. We did not do this job”.

GLEESON CJ: What do you submit, if any, are Builders’ contractual entitlements against Sons?

MR REYNOLDS: That involves an examination of whether there is a subcontract between Sons and Builders and we say that (1), there is no finding by the trial judge, indeed quite the opposite. There is a notation in that my client’s concession that there was no subcontract, that is in relation to the lien argument, was a proper concession. Second of all, the reasoning of the Full Court which we have been talking about is directly inconsistent with the existence of a subcontract and Justice Vanstone talked only about some contract I think in the nature of a subcontract.

So my learned friend – and I said this before – still has a lot of work to do in this case given the submissions which we have made in writing, which is that when you look at the discussion that took place between Mr McAdam and Mr Cook, that it, with respect, does not go anywhere near proving a contract between Builders and Sons.

Now, my learned friend, as I said, did not have any findings in his favour really below at all on that point and, notwithstanding that we have submitted quietly but respectfully that the argument is weak, my learned friend for some reason has decided not to take your Honours to that issue, take your Honours to the evidence, what he says are the terms of that subcontract, and demonstrate it to your Honours.

So the short answer is that that would make in the tripartite situation that we are looking at, potentially a very big difference. I concede that. We will come in due course to when, if ever, a subcontractor in a building situation could claim directly against an owner and the answer is but rarely, only in exceptional circumstances. But the short answer to this argument based on a subcontract is that there just is not a subcontract at all.

HAYNE J: How does that sit with the pleading which is reproduced in the primary judge’s reasons at 491 to 492? In particular, do I read paragraph 18(a) appearing at page 492 a right as being a plea by your side of the record that the legal effects of the arrangements made in-house were that Builders became bound to Sons to do the work?

MR REYNOLDS: Yes, your Honour.

HAYNE J: You then tack on to that, “Oh, and by the way it was an assignment”. A tad awkward, I would have thought.

MR REYNOLDS: There is quite a number of what might be called in the present context infelicities in the pleading of my client’s case, at least with the benefit of hindsight. That case, although it was part of the pleaded case was not pressed. The reason it was in there, as I understand it, was in order to generate a claim under the Worker’s Liens Act where you need to show, relevantly, a contract and subcontract. But at the top of page 504 there is an important sentence by the trial judge that “the plaintiff properly conceded that it did not claim as a sub-contractor”. Of course, the reasoning of the Full Court is quite inconsistent with that. So ultimately, I mean, your Honour Justice Hayne’s point is a good one at one level, that is, that is how we pleaded the case but that is not how it was run on my client’s behalf in due course.

Now, I said that I would take your Honours to some of the scholarship on these two decisions in Boulton v Jones and the Boston Ice Company v Edward Potter and my learned junior will provide copies of the articles to the Clerk of the Court. What I have extracted here are two articles, one by a Mr Costigan called The Doctrine of Boston Ice Company v Potter (1907) 7 COL L REV 32. I might go to that first. There is another article by Mr Woodward and there are a couple of textbooks that I will take your Honours to.

To be candid, I have not been able to digest all of the material in these four articles and it may be that my learned friend, myself and the Court need to look at it overnight, but there is a discussion in Mr Costigan’s article of the correctness of the Boston Ice Company Case and he concludes at page 48 that on quantum meruit the decision:

would be erroneous because the plaintiff, reasonably believing itself entitled to act as assignee, was not an officious intermeddler –

or, as my learned friend put it in a slightly different way, taking a risk.

That really picks up this idea of the basis upon which my client was acting. While I am on that page, for those of your Honours with an interest in what the civilians have done in this area, there is an interesting footnote at the bottom of page 48 where Mr Costigan notes that Dean Roscoe Pound has informed him that in Roman law “an error in persona” – paraphrasing it – will prevent a contractual obligation from arising but “is not material to the question of quasi-contract”, and there are references given to the pandects. I am not suggesting that your Honours would be importing necessarily civilian ideas into this discussion, but to those of your Honours with a comparativist bent I refer to that passage.

Now, the other article is by Mr Woodward in (1904) 18 Harvard Law Review 23, and in particular at pages 26 to 27. He - this is about page 27 about 12 lines down – concludes that the decision in the Boston Ice Company Case “is wrong”. So, there are a couple of discussions of this point of principle by two scholars which have looked at the decision, in particular in Boston Ice, and formed the view for the reasons they give that the decision is wrong.

Now, your Honours probably know that Mr Woodward is perhaps better known for his monograph entitled “The Law of Quasi Contracts”, and your Honours have some portions of that. There is quite a long discussion of the issues with which we are concerned from pages 85 through to 93. Can I point your Honours in the direction of some of these passages. At page 88 about halfway or a third of the way down - - -

GUMMOW J: Page?

MR REYNOLDS: Page 88.

GUMMOW J: We do not have 88. We start at 89.

MR REYNOLDS: My learned friend is telling me to start at page 89, which is therefore where I do start.

GUMMOW J: Article 56.

MR REYNOLDS: Yes, discusses Boston Ice v Potter. I think at the bottom of page 90 there is what is sometimes called the championship section. He says:

This raises an interesting question in quasi contracts. If A renders a benefit to B with the intention of charging for it, and B, reasonably believing that he is dealing with C, accepts the benefit with the intention of paying for it, does the fact that A is a person with whom B for some reason does not wish to deal, justify B in refusing, when he learns the truth, to make restitution? Before considering this question, however, it may be noted that it was not necessarily involved, apparently, in Boston Ice Co. v Potter.

He then goes into the facts. I will not read all of that, but at page 92, the paragraph at point 3 beginning “The latter doctrine” talking about the plaintiff’s officiousness – and I interpolate here we deny that here – is discussed by Professor Keener. I will take you to that in a moment. He says:

It is, of course, a recognized doctrine of quasi contract that an officious intermeddler, though he enrich another, may be denied restitution. But the mere fact that A is persona non grata, or that for some other reason B does not wish to deal with him, is insufficient, without other evidence, to convict A of officious meddling.

If your Honours could read the rest of that page in due course. On the following page, page 93, he says at line 2:

This point is the one relied upon by Professor Keener to support his conclusion that the plaintiff in Boston Ice Co. v. Potter was officious. “This case differs from the case of Boulton v. Jones,” he says, “in that the plaintiff knew that the defendant did not desire to deal with him, and was, therefore, officious in supplying him with ice without notifying him of that fact.” But what is there to suggest to A, under the circumstances, that he owes a duty to reveal the fact? When it is remembered -

and I underline these words:

that he believes himself to be the assignee of a valid contract, and consequently that B cannot avoid dealing with him even if informed of the assignment, it will be seen that he would feel no obligation whatever to give B such information. Moreover, if, as might well be, his concealment of the fact were prompted by consideration for the feelings of B -

et cetera. Now, I said in answer to your Honour Justice Crennan that we are not dealing here with an active concealment of that fact but simply with a situation where my client believed that it was performing an obligation owed to the Lumbers. That is material I will be taking your Honours to tomorrow. I did check what Professor Palmer in his magnum opus had to say about Boston Ice Co v Potter, and the answer is not much. So I hope that assists your Honours.

The bottom line is that we submit that these two cases, although they veer near the relevant principle, first of all have to be looked at with a number of caveats, which I hope I have pointed out in taking your Honours through them, and, secondly, these decisions have been much criticised, not only by Professor Treitel, Justice Mason, Professor Carter, but also by some of the most famous scholars in the American world on this issue.

I have not taken your Honours to the relevant portion from Professor Keener’s work, Treatise on the Law of Quasi-Contracts. We have there pages 358 through to 362. Professor Keener is a little more keen on the decision in the Boston Ice Case. But if I can point out to your Honours that in discussing the issue of Boulton v Jones at page 359, about halfway down the page the case is mentioned, he says at about point 8 that:

the case would hardly seem to call for the application of the rule applied to parties acting officiously. Since the act was not authorized by the defendant, the plaintiff should act at his peril to this extent, that the defendant should not be prejudiced thereby. But that a proper regard for the right of a man to select his creditor requires that he shall profit at the expense of the plaintiff in such a case seems hardly necessary.

In other words, he is critical of the decision. He does, in using the words “should not be prejudiced thereby”, pick up this idea of quantum which is also raised by Justice Mason and Professor Carter and that is that this issue of identify in a quantum meruit situation is, in most cases, I submit, more properly considered in relation to issues of quantum rather than liability. In this particular case, your Honours will probably have noticed that when one looks at the formulation of the quantum of the claim in restitution, it was in dollar and cents terms a mirror image of what would have been recovered by Sons from the Lumbers if it had performed the building contract and completed the building.

GLEESON CJ: If you begin with an assumption that the contract was entered into between Mr Lumbers and Sons and you end up with the fact that part of the work was performed by Builders, as a matter of principle it does not make any difference, does it, whether Builders and Sons were closely related companies or whether Builders was a complete stranger to the group of which Sons was a member? It would not make any difference in principle if instead of Builders you had BHP, would it?

MR REYNOLDS: That gets back to this ongoing discussion, in one sense, that your Honour Justice Hayne and I have had about the whole basis of the principles are in quantum meruit. At one level we are just talking about factual matters, fleshing out a principle which is located elsewhere.

GLEESON CJ: Yes. The fact that Builders happens to be a member of the same group of companies as Sons is the factual explanation of how this came about, but as a matter of entitlement to sue, it would not make any difference, would it, if Builders was BHP?

MR REYNOLDS: It may, both factually and, on one view, doctrinally, which begs some questions, but I will come back to that. Factually, it may be part of the matrix of circumstances which demonstrates the basis upon which the builder was acting because the – take the situation in a group of companies that may provide a factual explanation of why it is that one of the companies believed that it was performing an obligation on these facts to Lumbers.

On the other hand, it may go back to what your Honour Justice Hayne was talking about before with me which is, are we looking at – put perhaps more clearly than I have so far – a reformulation of the classic Bullen and Leake probanda for a quantum meruit claim to include possibly other requirements, of which knowledge that there is no gratuitous intent is an element or an honest and reasonable, perhaps, belief that one is performing an obligation owed in law. Are these purely factual matters that are relevant to the determination of the principle or are they part of the principle itself?

I have to say, your Honours, Chief Justice Doyle, evidently in the light of Pavey, found himself in the position where he felt that he had to adumbrate the principle – I just cannot find my copy of the judgment – in the way he did at, I think, page 13 and again at the bottom of page 12. That is one way of doing it. That appears to be the way the Full Court approached the matter in this particular case. That is not to say that there are not other ways of analysing the problem, but - - -

GLEESON CJ: Does it appear from the evidence, Mr Reynolds – and I am not suggesting this affects the conclusion one way or the other, but does it appear from the evidence whether this is an insolvent winding-up of Builders?

MR REYNOLDS: My company, W Cook Builders, is in liquidation, but can I say this, and I believe it to be an answer to your Honour the Chief Justice’s question.

GLEESON CJ: That is what I am asking about.

MR REYNOLDS: My learned friend, in - - -

GUMMOW J: What sort of liquidation, voluntary or involuntary?

MR REYNOLDS: I have not gone into that so far as my client is concerned. My learned friend has treated Sons, stated it to be, a company in liquidation. Now, if that is the case, I do not know that fact and, more importantly, there is no material to my knowledge in the appeal books or elsewhere as part of the record in this case to say that. Your Honours can see why my learned friend may have wanted to introduce that particular element into the discussion – I do not suggest improperly – but, on one view to colour your Honours’ thinking about this particular problem just as he did not delve into the issue of whether in fact there is a subcontract between Sons and Builders because there is not, to my knowledge, any evidence to suggest that Sons is in liquidation and I will be submitting to your Honours that there is not much of a case at all on the facts to suggest that there was a subcontract between Builders and Sons.

I have said, referring to what Professor Treitel said, albeit in a footnote, that on one view the issue or the basis upon which the provider of the services acted may be a matter relevant, certainly factually, on one view, at another level, to the issue of whether or not there should be a claim in quantum meruit. Now, I think my learned friend and I are ad idem doctrinally or on the facts, as it were, or the relevance of this fact, because we agree that the basis upon which the provider of the services acted may well be a relevant matter.

It is dealt with in the evidence at pages 262 through to 265, and this is not said by way of criticism of the examiner, but these passages are, because of objections and discussions with the judge, a little bit tortuous to read, but can I try and summarise or point your Honours to some of the key passages, although all of them are important.

At page 262 at about lines 30 to 33 Mr Cook is asked whether he had a view about the responsibility of Builders to carry out the Lumbers’ work and he says that the responsibility of Builders was to Mr Lumbers. There is an issue about the formulation of the question in 262 to 263.

GLEESON CJ: What does “responsibility” mean in this context? Does it mean who would have been liable to Lumbers if the house had fallen down?

MR REYNOLDS: Your Honour, we are dealing here with a builder being asked as to what his state of mind is - - -

GLEESON CJ: Yes, but it is a state of mind about something and I am not sure what the word “responsibility” is intended to mean. Is it intended to refer to the contractual obligation to do the work, or is it intending to refer to potential liability if the work is badly done?

MR REYNOLDS: Your Honour, I can but take you to the passages but there is a passage at page 263 at about line 30 that he had a view that he had an obligation to the client. Now, your Honour could ask me similar questions about that, too, I concede.

GLEESON CJ: Yes, if the house fell down and killed somebody, where would that leave Builders?

MR REYNOLDS: When your Honours look at these passages, remembering that you are dealing with a builder - this was the man who did the wet work, Mr Cook, who actually builds the houses and he is giving evidence as to his state of mind, and questions that your Honour the Chief Justice is asking of me are, with respect, fair, but to over-examine and parse exactly what this man means might have a risk of being a trifle unfair to him.

GLEESON CJ: Well, except that on page 265 the questioner refines the concept of responsibility as responsibility to Lumbers to build the house.

MR REYNOLDS: Can I just try and get - - -

GLEESON CJ: His Honour attributes to the witness – and I am not sure whether this is fair or not - the view that there was no responsibility.

MR REYNOLDS: Well, the question at the bottom of 264 is:

What I am interested to have his Honour know is your thinking, your belief, your understanding, at the time that the work was done. You have said that you regarded Builders as being responsible for Lumbers to build the house.

A. Yes.

There is also a reference to the judge saying something that has been asked three times, is there not?

GUMMOW J: Yes, 265, line 22, “He has answered that three times, actually”.

MR REYNOLDS: Yes, and going to 265 at line 5:

Q. Before the changeover, the party responsible to build the house was W. Cook & Sons.

A. Yes.

Q. My interest is whether you thought that, as well as having the responsibility to Lumbers to build the house, Builders had any responsibility to Cook relating to –

I think that means Sons. That is why the answer at line 29 is “no responsibility”. In other words, this deals with his view as to whether there was an obligation owed by Builders to Sons as well as whether there was an obligation owed by Builders to Lumbers.

GLEESON CJ: Now, after all this psychoanalysis of the witness what, if any, was the evidence about what was said or written between the parties as to how it came about that Builders turned up and started doing this work on Mr Lumbers’ property?

MR REYNOLDS: That is some evidence which we will be looking at probably in a lot of detail - - -

GLEESON CJ: Presumably the person who really knew the answer to that question was Mr McAdam.

MR REYNOLDS: There is evidence from Mr Cook of a conversation and some dealings that he had with Mr McAdam about the changeover, which is very oblique. There is going to be inevitably a detailed examination of that on the question of whether there was a subcontract between Sons to Builders. I will be, with your Honours’ leave, dealing with it in that context.

GLEESON CJ: Can I ask you this question? What are the competing possibilities? In other words, if there were no subcontract between Sons and Builders, what were Builders up to?

MR REYNOLDS: Your Honours will have seen some reference in the articles that I took you to about a belief that the obligation had been transferred by Sons to Builders - - -

GLEESON CJ: Assignment.

MR REYNOLDS: In effect; that is what we would call it as lawyers.

GLEESON CJ: That was the case you principally tried to win on at first instance, was it not?

MR REYNOLDS: On the assignment, yes.

GLEESON CJ: Yes. That was your main – and it may be you had been forced into it by what had happened in relation to the stay of proceedings; I understand that. But, however it came about, the judgment of the primary judge seems to deal mainly with the issue of assignment.

MR REYNOLDS: That is fair. I can but take your Honours to the evidence. This man is not a lawyer but my - - -

HAYNE J: Rather than take us to the evidence, or when you are taking us to the evidence, would you do so by reference to what the trial judge appears to have found to be the facts, including the following: paragraphs 8 and 9, notably paragraph 9 at the third sentence and following of paragraph 9. Perhaps if I simply list them, Mr Reynolds, rather than have you deal with them sequentially - so paragraph 9, page 483, particularly the third sentence and following of that paragraph. I think the next would be paragraph 66, page 498, “Mr Cook did not understand the effect of the re-organisation”; paragraph 67:

His evidence was to the effect that Builders did the work “in the books”.

Page 499, paragraphs 72 and 73: Jeffrey Cook did not speak to McAdam, Lumbers or Fielder about the contract; 73 - Cook did not request the Lumbers to make payments directly.

The point to which you will need to give some consideration is whether the findings do not support the view which seems to me at least to be expressed by the trial judge at paragraphs 8 and 9. This was a simple case where the work:

was either performed by Builders or by Sons. Insofar as it was performed by Builders, it either performed that work as a sub-contractor to Sons or alternatively as an assignee –

held not as assignee, what is left on the books. Now, there is a shopping list for the night, is there not?

MR REYNOLDS: That is very fair of your Honour. We are duly warned and I hope duly noted. Would that be a convenient time?

GLEESON CJ: Yes, certainly. I am only asking this question for the benefit of the people in the next case, how long do you think you will require, Mr Reynolds?

MR REYNOLDS: At least two and a half hours.

GLEESON CJ: We will say the next case will be not before 2.15 pm and we will adjourn until 10.15 in the morning.

AT 4.13 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 27 FEBRUARY 2008