Bond Law Review
Volume 28 | Issue 1 Article 2

2016

Restitution on a Partial Failure of Basis
Thomas Camp
Supreme Court of Western Australia

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Restitution on a Partial Failure of Basis
Abstract

For a claimant to receive restitution for the unjust factor of a failure of basis, the traditional rule requires the failure to be total. However, recent case law has questioned whether this requirement is still necessary. This article examines the current law to show that adherence to the total failure rule has been abrogated by several exceptions. After a careful analysis of the reasons for the rule, and the reasons for allowing recovery on a partial failure, it is argued that a better approach would be to allow recovery on a partial failure of basis where counter-restitution can be made of any received benefit and where restitution would not upset the contractual allocation of risk.
Keywords

claimant, unjust

This article is available in Bond Law Review: http://epublications.bond.edu.au/blr/vol28/iss1/2

Restitution on a Partial Failure of Basis
THOMAS CAMP
Abstract
For a claimant to receive restitution for the unjust factor of a failure of basis, the traditional rule requires the failure to be total. However, recent case law has questioned whether this requirement is still necessary. This article examines the current law to show that adherence to the total failure rule has been abrogated by several exceptions. After a careful analysis of the reasons for the rule, and the reasons for allowing recovery on a partial failure, it is argued that a better approach would be to allow recovery on a partial failure of basis where counter-restitution can be made of any received benefit and where restitution would not upset the contractual allocation of risk.

I Introduction
A claim for a failure of consideration vitiates an agreed or conditional transaction where the basis for it has failed, allowing for restitution of the unjust enrichment.1 This quaint summary belies the challenges of the area, which Edelman and Bant have noted `is intensely difficult -- one of the most difficult and controversial of all the unjust factors'.2 One major controversy is that traditionally for a restitutionary claim, where there has been a failure of consideration, the failure must be total.3 This means the plaintiff cannot have the benefit of any part of the basis contemplated as the reason for undertaking performance.4 This requirement has been accused of many things; it has been criticised as retention of a `doctrinal relic'5 and `very old-fashioned'.6 In the English case of Giedo van der Garde BV v Force India Formula One


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LLB(Hons)/BCom(Ec), University of Notre Dame Australia, Associate to the Hon Justice Le Miere, Supreme Court of Western Australia. Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498, 517 [31] (French CJ, Crennan and Kiefel JJ) (`Equuscorp'); Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (`Roxborough'); Moses v Macferlan (1760) 2 Burr 1005, 1012 (Lord Mansfield). James Edelman and Elise Bant, Unjust Enrichment in Australia (Oxford University Press, 2006) 242. Roxborough (2001) 208 CLR 516, 557 [105] (Gummow J); Baltic Shipping Co v Dillon (1993) 176 CLR 344, 388 (McHugh J) (`Baltic'); Fibrosa Spolka Akeyjna v Fairbairn Lawson Combe Barbour Limited [1943] AC 32 (`Fibrosa'); Hunt v Silk (1804) 5 East 449; see Re St Gregory's Armenian School Inc [2015] NSWSC 1465 (7 October 2015) [188]­ [189] (Black J). Roxborough (2001) 208 CLR 516, 557 [105] (Gummow J); Baltic (1993) 176 CLR 344, 388 (McHugh J). Michael Bryan, `Peter Birks and Unjust Enrichment in Australia' (2004) 28(3) Melbourne University Law Review 724, 729. Peter Birks, Unjust Enrichment (Oxford University Press, 2nd ed, 2005) 121.

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Team Ltd (`Giedo') Stadlen J stated the rule is unsatisfactory and liable

to work injustice.7 Mason, Carter and Tolhurst see the requirement of a total failure as the major problem associated with the concept of failure of consideration as a vitiating factor.8 The High Court of Australia and the United Kingdom Supreme Court were recently confronted by the question of whether a failure of consideration must be total. However, the question was left open by both courts.9 This article presents the legal and policy case for allowing restitution on a partial failure. By presenting the law of failure of consideration and the `exceptions' to the total failure rule, it uses this analysis to present a detailed, coherent and principled foundation to support recovery on a partial failure. The article also considers the impact of recent case law and the growing influence of equitable considerations in Australian unjust enrichment law. The article unfolds as follows: Part II defines key terms and concepts; Part III examines failure of consideration in the law and the requirement that a failure must be total; Part IV considers existing and purported `exceptions' to the total failure rule which provide evidence of a history of abrogation suggesting a willingness and ability to remove the effect of the total failure rule; Part V argues that the rule lacks compelling justification especially as there is a requirement of counter-restitution of received benefits, and a limit of when restitution will be available on a subsisting contract; and Part VI explains that reasons of uniformity and principle support allowing for restitution on a partial failure, and offers some opinion as to how courts should approach restitution in those cases. Decisions and commentary from similar common law jurisdictions are considered where appropriate.

II Terminology A Consideration as Basis
Stoljar notes that failure of consideration as a legal term of art has three meanings.10 The first two meanings relate to the law of contract; describing either a situation where a contract cannot be formed because the consideration is illusory, insufficient or formally void, or where a promisor breaches a contract due to a failure to perform.11 The third
[2010] EWHC 2373 (QB) (24 September 2010) [367]; See also Joachim Dietrich, Restitution: A New Perspective (The Federation Press, 1998) 135; Law Reform Commission of New South Wales, Frustrated Contracts, Report No 25 (1976) [5.8]. K Mason, J W Carter and G J Tolhurst, Mason & Carter's Restitution Law in Australia (LexisNexis Butterworths, 2nd ed, 2008) 331 [922]. Equuscorp (2012) 246 CLR 498, 518 [33] (French CJ, Crennan and Kiefel JJ); Barnes v Eastenders Cash & Carry plc [2015] AC 1, 43 [114] (Lord Toulson, with whom Baroness Hale DP, Lord Kerr, Lord Wilson and Lord Hughes agreed). Samuel Stoljar, `The Doctrine of Failure of Consideration' (1959) 75 Law Quarterly Review 53, 53. Ibid.

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meaning -- with which this article is concerned -- relates to a claim -- and the basis for that claim -- where part of an agreed exchange does not eventuate.12 The term `consideration' in the context of unjust enrichment has evolved beyond the concept of contractual consideration.13 Birks noted the continued use of `consideration' has been a source of confusion, causing `something close to an intellectual breakdown'.14 Accordingly, it is now trite to suggest that this area is addled by its terminology.15 As will be discussed, `consideration' in unjust enrichment is concerned with the basis for which a contract was entered or a benefit provided.16 The terminology of failure of basis `is more apt'17 and is already being widely used.18 Failure of basis is therefore preferred in this article instead of failure of consideration.

B Unjust Enrichment
Restitution is a remedy which restores to the claimant what the respondent has gained from them.19 Restitution may restore the value of the benefit rather than the benefit itself.20 Historically, the availability of restitution required a recognised form of action, such as indebitatus

12 13

14 15

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Birks, above n 6, 117. Ibid 117­19; Mason, Carter and Tolhurst, above n 8, 46­7 [145], 324­31 [916]­[923]; Andrew Burrows, The Law of Restitution (Oxford, 3rd ed, 2011) 319­20; Paul Mitchell, `Artificiality in Failure of Consideration' (2010) 29 University of Queensland Law Journal 191, 191; Charles Mitchell, Paul Mitchell and Stephen Watterson (eds), Goff & Jones: The Law of Unjust Enrichment (Sweet & Maxwell, 8th ed, 2011) 366­8 [12-10]­[12-15]; Carmel McLure, `Failure of Consideration and the Boundaries of Restitution and Contract' in James Edelman and Simone Degeling (eds), Unjust Enrichment in Commercial Law (Thomson Reuters, 2008) 209, 211­13; Charles Mitchell, `Unjust Enrichment' in Andrew Burrows (ed), English Private Law (Oxford University Press, 3rd ed, 2013) 1057­8. Roxborough (2001) 208 CLR 516, 525 [16] (Gleeson CJ, Gaudron and Hayne JJ), 556­7 [103]­[104] (Gummow J); Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014) [98] (Edelman J). See below Part III. Barnes v Eastenders Cash & Carry plc [2015] AC 1, 42 [105]­[106] (Lord Toulson, with whom Baroness Hale DP, Lord Kerr, Lord Wilson and Lord Hughes agreed). Birks, above n 6, 117­19; Paul Mitchell, above n 15, 191; Mitchell, Mitchell and Watterson (eds), above n 15, 366­8 [12-10]­[12-15]; Kit Barker and Ross Grantham, Unjust Enrichment (LexisNexis Butterworths, 2008) ch 9; Greg Weeks, `The Public Law of Restitution' (2014) 38(1) Melbourne University Law Review 198; Charles Mitchell, above n 15, 1057­8; Graham Virgo, The Principles of the Law of Restitution (Oxford University Press, 3rd ed, 2015) 308; Ralph Cunnington, `Failure of Basis' [2004] Lloyds Maritime and Commercial Law Quarterly 234; Roxborough (2001) 208 CLR 516, 525 [16] (Gleeson CJ, Gaudron and Hayne JJ), 557 [104] (Gummow J); Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014) [98] (Edelman J). Roxborough (2001) 208 CLR 516, 529 [25]­[26] (Gleeson CJ, Gaudron and Hayne JJ); Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51, 75 (Mason CJ); Mason v New South Wales (1959) 102 CLR 108, 146 (Windeyer J). Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 (`Pavey'); Barnes v Eastenders Cash & Carry plc [2015] AC 1.

Roxborough (2001) 208 CLR 516, 525 [16] (Gleeson CJ, Gaudron and Hayne JJ), 556­7 [103]­[104] (Gummow J); Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014) 29 [98] (Edelman J).

Ibid.

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been replaced in part by recognition of the legal concept of unjust enrichment.23 This theoretical breakthrough has been labelled as a `revolution in the approach to the subject'.24 Although unjust enrichment is a unifying legal concept in Australia,25 it is not a legal principle capable of direct application.26 Nor can it be used to remove or change settled doctrine and principles.27 Unjust enrichment captures some but not all situations of restitutionary relief in Australia.28 A claim for restitution of an unjust enrichment requires four considerations.29 1. The defendant must be enriched; and 2. That enrichment must be at the plaintiff's expense; and

assumpsit or money had and received.21 The High Court rejected this conceptualisation of restitutionary rights in Australia in Pavey.22 It has

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See Pavey (1987) 162 CLR 221. In United Australia Ltd v Barclays Bank Ltd [1941] AC 1, 29 Lord Atkin colourfully proclaimed `when these ghosts of the past stand in the path of justice clanking their medieval chains the proper course for the judge is to pass through them undeterred'. (1987) 162 CLR 221, 227 (Mason CJ and Wilson J), 256­7 (Deane J); see also Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548. See Equuscorp (2012) 246 CLR 498, 515 [29] (French CJ, Crennan and Kiefel JJ); Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, 673 (Mason CJ, Wilson, Deane, Toohey and Gaudron JJ). Thus there is no reason a claim for money had and received should always be treated as separate for a claim based on unjust enrichment; Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014) [45]­[48] (Edelman J); cf Perpetual Trustees Victoria Ltd v Burns [2015] WASC 234 (30 June 2015) [261] (Em Heenan J). K Mason and J W Carter, Restitution Law in Australia (Butterworths, 1st ed, 1995) 4 [102]. David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 375 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ), 389, 406 (Dawson J) (`David Securities'); Pavey (1987) 162 CLR 221, 256­7 (Deane J). Bofinger v Kingsway Group Ltd (2009) 239 CLR 269, 302 [97] (Gummow, Hayne, Heydon, Kiefel and Bell JJ); Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) (2007) 230 CLR 89, 156 [150] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ). Bofinger v Kingsway Group Ltd (2009) 239 CLR 269, 302 [96]­[98] (Gummow, Hayne, Heydon, Kiefel and Bell JJ); Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) (2007) 230 CLR 89, 156 [151] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ); J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane's Equity Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) 375 [9-120]; cf Dart Industries Inc v Decor Corp Pty Ltd (1993) 179 CLR 101, 111 (Mason CJ, Deane, Dawson and Toohey JJ). Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, 596­7 [78] (Hayne, Crennan, Kiefel, Bell and Keane JJ); Roxborough (2001) 208 CLR 516, 544 [72] (Gummow J); Equuscorp (2012) 246 CLR 498, 516 [30] (French CJ, Crennan and Kiefel JJ); Birks, above n 6, 17. Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014) 18 [52]­[55] (Edelman J); Alexiadis v Zirpiadis (2013) 302 ALR 148, 154­5 [30] (Kourakis CJ); Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd [No 3] (2006) 229 ALR 615, 629­35 [65] (Bleby J); Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285, 300 [48] (Finkelstein J); see also David Securities (1992) 175 CLR 353, 379 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, 619 [141] (Gageler J); Equuscorp (2012) 246 CLR 498, 516 [30] (French CJ, Crennan and Kiefel JJ).

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3. There must be a qualifying or vitiating factor -- sometimes called an unjust factor30 -- giving rise to an obligation to make restitution.31 The categories of unjust factors are still open.32 4. This obligation can be displaced in circumstances where the law recognises that an order for restitution would be unjust.33 The focus of this article is on the unjust factor of failure of basis. The nature of unjust factors was described by Campbell J in Wasada Pty Ltd v State Rail Authority of New South Wales [No 2] as follows:
`Unjust' is the `generalisation of all the factors which the law recognises as calling for restitution'. Because we need to search for recognised factors ... the reference to `injustice' as an element of unjust enrichment, is not a reference to judicial discretion.34

Therefore, to identify an unjust enrichment for the purposes of this article, the third consideration looks to the existence of a failure of basis without asking whether that failure is somehow unjust.

C Failure of Basis
Failure of basis as a vitiating factor makes the retention of a benefit prima facie unjust.35 It is not a contractual concept,36 nor is it confined to situations involving contracts or unformed contracts.37 Dodds-Streeton JA in the Federal Court noted that the High Court has not definitively stated `the precise scope of and principles governing a claim to restitution based on total failure of consideration in Australian law.38 A claim for restitution on a failure of basis requires three key features.
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Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014) 18 [52]­[55] (Edelman J); Lahoud v Lahoud [2010] NSWSC 1297 (10 November 2010) [152] (Ward J); Alexiadis v Zirpiadis (2013) 302 ALR 148, 154­5 [30] (Kourakis CJ); David Securities (1992) 175 CLR 353, 379 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, 619 [141] (Gageler J). Equuscorp (2012) 246 CLR 498, 516 [30] (French CJ, Crennan and Kiefel JJ); David Securities (1992) 175 CLR 353. Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, 570 [6] (French CJ); Equuscorp (2012) 246 CLR 498, 516 [30] (French CJ, Crennan and Kiefel JJ); Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635, 665 [85] (Gummow, Hayne, Crennan and Kiefel JJ). Equuscorp (2012) 246 CLR 498, 516 [30] (French CJ, Crennan and Kiefel JJ); David Securities (1992) 175 CLR 353. [2003] NSWSC 987 (14 October 2003) [16], quoting Mason and Carter, above n 24, pp 59­ 60; Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, 619 [141] (Gageler J). Equuscorp (2012) 246 CLR 498, 517 [31] (French CJ, Crennan and Kiefel JJ). Ibid 517 [32] (French CJ, Crennan and Kiefel JJ); Roxborough (2001) 208 CLR 516, 556­7 [103]­[104] (Gummow J). Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; Muschinski v Dodds (1985) 160 CLR 583; Roxborough (2001) 208 CLR 516, 525 [16] (Gleeson CJ, Gaudron and Hayne JJ). Management 3 Group Pty Ltd v Lenny's Commercial Kitchens Pty Ltd [No 2] (2011) 281 ALR 482, 513 [213].

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1. There must have been an agreement or conditional transfer between the parties; and39 2. There must have been some performance by the claimant, which they wish to recover; and40 3. Most importantly, the basis on which the agreement or transfer was entered must have failed.41 This action, like others that aim to prevent unjust enrichment, is rooted in the common law and equity, meaning that notions of good conscience and unconscionability are relevant to its application.42

III Characterising Failure of Basis A The Rationale for Restitution on a Failure of Basis
The unjust factor of failure of basis allows for restoration of what the claimant has transferred to the unjustly enriched defendant.43 When a benefit is provided to a recipient on a conditionally agreed basis, it is unjust for the recipient to retain the benefit if that basis is ultimately unfulfilled.44 It is an unjust factor because, as Birks noted, where a claimant specifies a condition for retaining an enrichment which fails `he did not mean the defendant to have the benefit'.45 It is not due to a party's fault,46 or any implied contract,47 it is simply because what was meant to occur has not.48 The requirement of restitution is imposed by the law to prevent

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Ibid. Ibid; Fibrosa [1943] AC 32; Goss v Chilcot [1996] AC 788 (`Goss'). Equuscorp (2012) 246 CLR 498, 517 [32] (French CJ, Crennan and Kiefel JJ); Baltic (1993) 176 CLR 344, 376 (Deane and Dawson JJ); Roxborough (2001) 208 CLR 516, 525 [16] (Gleeson CJ, Gaudron and Hayne JJ), 557 [104] (Gummow J); Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, 593­6 [68]­[74] (Hayne, Crennan, Kiefel, Bell and Keane JJ); Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51, 75 (Mason CJ). Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51, 75 (Mason CJ); Roxborough (2001) 208 CLR 516, 529 [26] (Gleeson CJ, Gaudron and Hayne JJ). McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 (`McDonald'); Anderson v Mcpherson [No 2] [2012] WASC 19 (25 January 2012) [205] (Edelman J); Mason, Carter and Tolhurst, above n 8, 67­8 [170]; Mitchell, Mitchell and Watterson (eds), above n 15, 363 [12-01]; Frederick Wilmot-Smith, `Reconsidering "Total" Failure' (2013) 72 Cambridge Law Journal 414, 430. Peter Birks, `Restitution and the Freedom of Contract' (1983) 36 Current Legal Problems 141, 158. Fibrosa [1943] AC 32. Pavey (1987) 162 CLR 221, 227 (Mason CJ and Wilson J), 255 (Deane J); Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 710 (Lord Browne-Wilkinson); Fibrosa [1943] AC 32, 63­4 (Lord Wright). James Edelman, `The New Doctrine of Partial Failure of Consideration' (1996) 15 Australian Bar Review 229.

Roxborough (2001) 208 CLR 516; Baltic (1993) 176 CLR 344.

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unjust enrichment.49As Lord Wright in Fibrosa held, if the basis fails `the right to retain the money must simultaneously fail'.50

B The Meaning of Consideration
Consideration in this context is best understood as `basis'. The uneasy relationship between the unjust enrichment nomenclature of consideration and its contractual counterpart may have contributed to it being `easier to illustrate than to define'51. Historically, due to the association with the contractual term, a failure of basis could only occur under a contract that was void ab initio.52 It was also thought that consideration referred to the promise of performance.53 Yet it is a term unique to its field.54 In unjust enrichment, it is now recognised that consideration generally refers to the performance of the promise.55 Indeed, because failure of basis refers to any promised counter-performance, the basis need not be contractual.56 This has lent itself to becoming more similar to what Birks believed was the original meaning of consideration in Roman law and early common law, which was the reason, ground or basis for entering a bargain or making a transfer.57 The High Court has, multiple times,58 used Birks' statement that failure of basis relates to the `state of affairs contemplated as the basis or reason for the payment'59. In Roxborough, the High Court adopted this language, referring to consideration as the basis or purpose for entering a transaction,60 such as a condition or contemplated state of affairs motivating the transfer. 61 The contemplated basis of the payment in question was the requirement to pay a tax.62 As it includes a contemplated state of affairs, a basis is not limited

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50 51 52 53 54

55 56

57 58

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60 61 62

Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 710 (Lord Browne-Wilkinson); Pavey (1987) 162 CLR 221. [1943] AC 32, 65. Ian Jackman, The Varieties of Restitution (The Federation Press, 1998) 44. Chandler v Webster (1904) 1 KB 493 (`Chandler'). Ibid. Roxborough (2001) 208 CLR 516, 525 [16] (Gleeson CJ, Gaudron and Hayne JJ), 556­7 [103]­[104] (Gummow J); Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014) 29 [98] (Edelman J). Fibrosa [1943] AC 32, 48 (Lord Simon LC). Roxborough (2001) 208 CLR 516, 525­6 [16] (Gleeson CJ, Gaudron and Hayne JJ), 555­6 [102]­[103] (Gummow J); Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285; Anderson v Mcpherson [No 2] [2012] WASC 19 (25 January 2012) [233] (Edelman J); Muschinski v Dodds (1985) 160 CLR 583; Rover International Ltd v Cannon Film Ltd [1989] 1 WLR 912 (`Rover'); Martin v Andrews (1856) 119 ER 1148, 1149 (Lord Campbell CJ). Birks, above n 6, 118. David Securities (1992) 175 CLR 353, 382 (Mason CJ, Deane, Toohey, Gaudron, McHugh JJ); Baltic (1993) 176 CLR 344, 389 (McHugh J); Roxborough (2001) 208 CLR 516, 525 [16] (Gleeson CJ, Gaudron and Hayne JJ), 555 [104] (Gummow J). Peter Birks, An Introduction to the Law of Restitution (Clarendon Press, revised ed, 1989) 223. (2001) 208 CLR 516, 556­7 [103]­[104] (Gummow J). Ibid 525 [16] (Gleeson CJ, Gaudron and Hayne JJ). Ibid.

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to a promise that has not been fulfilled.63 The plurality in Roxborough stated failure of basis `is not limited to non-performance of a contractual obligation, although it may include that'.64 Therefore, even in contractual cases it is not simply a matter of identifying received contractual benefits. The basis is determined by considering the shared objective purpose for an agreement or transfer.65 What constitutes the basis is therefore limited only by the minds of the parties, and it has included: receiving legal title,66 the right to profit,67 the enjoyment of a leisure cruise,68 as well as the creation of a valid contract.69 As failure of basis looks to the benefit bargained for and not just benefits that have been received in fact,70 if some reciprocation or counter-performance is received which is not part of the basis it will be merely incidental.71 For instance, in Fibrosa the basis was the delivery of machines built for an order.72 This is contrasted with Stocznia Gdanska v Latvian Shipping Co (`Stocznia') where the basis included the work on and delivery of a ship.73 Although both bases required work to be undertaken, only Stocznia contemplated the work as part of the basis.74 Charles Mitchell suggests it may be possible for a transfer to have multiple bases.75 Mitchell argues this is evident in Guinness Mahon Co

Ltd v Chelsea & Kensington Royal London Borough Council (`Guinness')76 as either a failure of performance or a failure to form a

valid contract which could constitute a failure of basis in the circumstances of that case.77 However the basis in Guinness was found to be a valid contract for interest rate swaps.78 It is respectfully submitted that the correct action in the case of a failure to perform that contract would be another remedy. The basis was the benefit of the contractual

63

64 65

66 67 68 69 70

71 72 73 74 75 76 77 78

Ibid 556­7 (Gummow J); Barnes v Eastenders Cash & Carry plc [2015] AC 1, 42 [106] (Lord Toulson, with whom Baroness Hale DP, Lord Kerr, Lord Wilson and Lord Hughes agreed). Roxborough (2001) 208 CLR 516, 525­6 [16] (Gleeson CJ, Gaudron and Hayne JJ). Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 218 ALR 166, 252 [239] (Mason P), 261 [293] (Sheller JA), 261 [294] (Hodgson JA); Roxborough (2001) 208 CLR 516, 526 [17] (Gleeson CJ, Gaudron and Hayne JJ) , 557 [104] (Gummow J); Giedo [2010] EWHC 2373 (QB) (24 September 2010) [286] (Stadlen J); contra The State Of Western Australia v Hartmann-Nieto [2014] WADC 70 (22 May 2014) [192] (Stevenson DCJ); cf David Securities (1992) 175 CLR 353, 381­382 (Mason CJ, Deane, Toohey, Gaudron, McHugh JJ). Rowland v Divall [1923] 2 KB 500 (`Rowland'). Rover [1989] 1 WLR 912. Baltic (1993) 176 CLR 344. Guinness [1999] QB 215; cf Cunnington, above n 18, 239­40. David Securities (1992) 175 CLR 353, 382 (Mason CJ, Deane, Toohey, Gaudron, McHugh JJ). See Rover [1989] 1 WLR 912; Rowland [1923] 2 KB 500; ibid. Fibrosa [1943] AC 32. [1998] 1 WLR 574. Fibrosa [1943] AC 32; ibid. Charles Mitchell, above n 15, 1059. [1999] QB 215. See Charles Mitchell, above n 15, 1059; ibid. Guinness [1999] QB 215.

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obligation, and not the performance of that obligation.79 The better view is that there cannot be multiple bases; an entire payment can only secure one basis, although that basis may encompass several events or conditions. 1 Conditions and Bases Entire It is possible for a basis to only be capable of entire performance or a basis may also be capable of partial performance. Some transfers may be based on non-promissory conditions which are either fulfilled or fail. Such a condition could relate to a future or past situation; such as a gift for life after marriage 80 or a gift on the basis that a party was already married. There cannot be partial performance of such conditions. Finkelstein J in the federal court noted that it does not matter whether the condition is based on a promise or belief, because in either case the `the defendant's enrichment is the same in that ... the basis for the claimant's conferral of the benefit is undermined'. 81 As the basis is the shared objective basis of the parties,82 if a transfer is conditional it must be clear to both parties. It is also important to distinguish between bargained for benefits that are entire and those which are capable of partial performance. Where the basis is entire -- like a conditional transfer -- it will either be fulfilled or fail. This can be seen in Guinness where the basis was a legally binding contract.83 As the contract was not binding the basis failed in full notwithstanding both parties exchanged all of the contractual benefits.84 In Baltic the basis was a 14 day pleasure cruise which was capable of partial performance. 85 Although the destination was not reached, nor the contract entirely performed, some of the basis had been fulfilled when the ship sank on the ninth day of the cruise because the passenger had the benefit of some of the bargained for leisure.86 There was no total failure of basis.87 Similarly in Goss, a lender recovered funds advanced under a mortgage which was invalidated although there had been two payments of interest, because the basis was only the repayment of the capital sum.88

79 80 81

Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285, 302 [51]; quoting Andrew Burrows, The Law of Restitution (Butterworths, 2nd ed,
2002) 407.

Ibid; Charles Mitchell, above n 15, 1059. See Re Ames Settlement [1946] Ch 217.

82

Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 218 ALR 166, 252 [239] (Mason Guinness [1999] QB 215; Charles Mitchell, above n 15, 1059­1060. Guinness [1999] QB 215; a similar situation occurred in Rowland [1923] 2 KB 500; See Paul Mitchell, above n 15, 192; Baltic (1993) 176 CLR 344, 351 (Mason CJ).
383 (Toohey J), 386 (Gaudron J), 392 (McHugh J); cf Edelman and Bant, above n 2, 255. Baltic (1993) 176 CLR 344. [1996] AC 788. P), 261 [293] (Sheller JA), 261 [294] (Hodgson JA).

83 84

85 86

Baltic (1993) 176 CLR 344, 353 (Mason CJ), 367 (Brennan J), 375 (Deane and Dawson JJ),

(1993) 176 CLR 344.

87 88

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The Privy Council acknowledged that if some of the capital sum had been paid, this would have been a partial failure.89 2 Broad and Narrow Meanings There are some who believe that `partial failure of basis' is a misnomer. Birks distinguished a failure of basis from a failure of reciprocation.90 He also held that the basis is always required to be fulfilled in toto.91 Where the basis for a transaction is not entirely fulfilled, it fails irrespective of whether there has been partial reciprocation.92 Therefore Birks believed `there is no such thing as a partial failure of basis'.93 This is the narrow conception of basis. Birks argues that in Baltic the basis had failed because the claimant intended to experience a fourteen day pleasure cruise; but only received eight.94 Yet as the claimant insisted on an entire refund the fact she received some contractual reciprocation meant she was not entitled to recover the ticket price.95 It was only for this reason the claimant needed to show she had received nothing.96 Edelman and Bant suggest that `once "consideration" is understood in this way, then there should be no difficulty with a rule requiring a total failure'.97 This is similar to recognising that all bases or contemplated states of affairs are only capable of entire performance. This is an intellectually attractive position and such a change in approach would be welcome because it recognises that when people agree on a particular basis that is conditional, even when it is partially fulfilled the condition will not be satisfied. However the prevailing orthodoxy takes a wider view of the basis of the transfer and if there has been any performance relating to that basis, recovery will be precluded.98 The fact the claim is often labelled a `total failure of consideration' also supports this view.99 The Privy Council decision of Goss held that the basis for a loan was repayment of the
89 90 91 92

93 94 95 96 97 98

99

Ibid. Birks, above n 6, 120­1, 125. Ibid 120­1. Ibid 120­1; Roxborough (2001) 208 CLR 516, 526 [17] (Gleeson CJ, Gaudron and Hayne JJ), 525 [16]. Birks, above n 6, 122. Ibid 121; Baltic (1993) 176 CLR 344. Birks, above n 6, 121. Ibid. Edelman and Bant, above n 2. Baltic (1993) 176 CLR 344, 388­9 (McHugh J); Roxborough (2001) 208 CLR 516, 578 [167] (Kirby J); Mason, Carter and Tolhurst, above n 8, 329­330 [920]; Burrows, The Law of Restitution, above n 15, 322­5; Virgo, above n 18, 306­7; Mitchell, Mitchell and Watterson (eds), above n 15, 379 [13-05]; Keith Mason, `Strong Coherence, Strong Fusion, Continuing Categorical Confusion: The High Court's Latest Contributions to The Law of Restitution' (2015) 39 Australian Bar Review 284; McLure, above n 15, 209, 215. Baltic (1993) 176 CLR 344, 388 [194] (Callinan J); Management 3 Group Pty Ltd (in liq) v Lenny's Commercial Kitchens Pty Ltd [No 2] (2011) 281 ALR 482; Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 (4 August 2005); see also Equuscorp (2012) 246 CLR 498, 515 [28] (French CJ, Crennan and Kiefel JJ).

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loaned sum, and any payment on the capital sum would have constituted partial satisfaction of the basis.100 This is also the conception of the rule that is apparent in many of the decisions of the lower courts in Australia,101 and evident in English cases such as Stocznia and Giedo.102 This article assumes that the broad view of basis prevails. Some lower court judgments suggest that Australia now recognises the narrow view of basis.103 It may be that the modernising of the language of failure of basis will lead to recognition that a partial failure is impossible. The total failure rule would therefore be defined out of existence. This article's discussion will still be of utility as rules of law do not exist by mere chance,104 and it would be unwise for courts to eliminate such a rule without good reason. Further, the arguments in this article for how a court should respond when benefits have been received or where a contract subsists are equally applicable whether the benefits are characterised as part of or incidental to the basis.

C The Requirement of Total Failure
Notwithstanding the disquiet surrounding the rule, the traditional view is that a failure of basis must be total.105 As Lord Porter said in Fibrosa `a partial failure of consideration gives rise to no claim for recovery of part of what has been paid'.106 In cases where the basis is entire this doctrine plays no role, as a basis will either fail or be fulfilled. However where the basis is capable of partial performance, the total failure rule will bar restitution if some part of the bargained for benefit is received.107 To test for a total failure one must be careful to identify the basis of a transfer to distinguish between the `benefit bargained for by the claimant rather than any benefit which might have been received in fact'.108 As Kerr LJ stated in Rover, the test therefore `is whether or not the party

100 101

102

103

104

105

106 107 108

Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd [No 3] (2006) 229 ALR 615, 632 [78] (Bleby J); Nea Pty Ltd v Magenta Mining Pty Ltd [2005] WASC 106 (1 June 2005) (`Nea '); Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 (4 August 2005); Ovidio Carrideo Nominees Pty Ltd v Dog Depot Pty Ltd [2006] VSCA 6 (8 February 2006) [21] (Chernov JA). Stocznia [1998] 1 WLR 574; Giedo [2010] EWHC 2373 (QB) (24 September 2010) [299] (Stadlen J). Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014) [112] (Edelman J); see also Ovidio Carrideo Nominees Pty Ltd v Dog Depot Pty Ltd [2006] VSCA 6 (8 February 2006) [31] (Nettle JA). Ewan McKendrick, `Total Failure of Consideration and Counter-Restitution: Two Issues or One?' in Peter Birks (ed), Laundering and Tracing (Clarendon, 1995) 217, 221. Baltic (1993) 176 CLR 344, 388­9 (McHugh J); Roxborough (2001) 208 CLR 516, 557 [105] (Gummow J), 578­9 [167]­[173] (Kirby J); Fibrosa [1943] AC 32; Hunt v Silk (1804) 5 East 449. Fibrosa [1943] AC 32, 77. Ibid; Baltic (1993) 176 CLR 344, 388­9 (McHugh J). David Securities (1992) 175 CLR 353, 382 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ).

[1996] AC 788.

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claiming total failure of consideration has in fact received any part of the benefit bargained for'.109 The benefit does not need to be physically received by the claimant. This is apparent when considering agreements that may contemplate work as well as delivery; such as the shipbuilding contract in Stocznia.110 Thus Lord Goff in Stocznia said `the test is not whether the promisee has received a specific benefit, but rather whether the promisor has performed any part of the contractual duties in respect of which the payment is due'.111 It is important to emphasise that not all contractual duties will constitute part of the basis of the transfer.112 Thus in Rover recovery was allowed notwithstanding substantial performance of the contractual duties.113 The duties must be part of the basis of the transaction.114

IV Common Law Exceptions to the Total Failure Rule
Even though a failure must generally be total to vitiate a transfer, the rule has been abrogated in certain circumstances. The High Court has shown on numerous occasions that it is willing and able to disregard the rule in order to provide more just results.115 This part will further explore the circumstances where, despite some counter-performance, recovery will still be allowed for a total failure, while also examining whether a party can recover after a partial failure of basis.

A Apportionment
The principle `exception' to the total failure rule is the ability to apportion aspects of a payment to particular benefits, treating parts of it as severable and separate. Lord Porter in Fibrosa noted that apportionment can occur where it is possible to attribute part of the consideration solely to a divisible part of the transaction.116 In such a case, insistence on total failure can be confusing or misleading.117 Where it can be discerned that a portion of the payment was made for a particular basis within the transaction, that identification does not circumvent the total failure rule.118 The majority in David Securities explained apportionment is available `where both parties have impliedly acknowledged that the consideration can be "broken up" or
109 110 111 112 113 114

115

116 117

118

(1989) 1 WLR 912, 923; quoted in David Securities, ibid. Stocznia [1998] 1 WLR 574. Ibid 588 (Lord Goff). See Roxborough (2001) 208 CLR 516; Rover [1989] 1 WLR 912. Rover [1989] 1 WLR 912. Giedo [2010] EWHC 2373 (QB) (24 September 2010) [299] (Stadlen J); Roxborough (2001) 208 CLR 516. Roxborough (2001) 208 CLR 516, 557­8 [106] (Gummow J); David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Equuscorp (2012) 246 CLR 498, 552 [136] (Heydon J). Fibrosa Spolka Akycjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, 77. David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). Mason, Carter and Tolhurst, above n 8, 498 [1221].

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apportioned'119. In those circumstances, `any rationale for adhering to the traditional rule requiring total failure ... disappears'.120 Stadlen J in Giedo clarified that the majority `was not saying that it is only in cases where the parties have impliedly acknowledged that the consideration may be apportioned by the structure of the transaction that apportionment will be possible'.121 Although present in David Securities, apportionment is not reliant on an implicit agreement.122 Instead, as the majority in Haxton v Equuscorp Pty Ltd (`Haxton') noted, Australia and England take a liberal approach to apportionment.123 The availability of apportionment depends on an `analysis of the nature of the subject matter of the consideration and the circumstances in which it is to be delivered or performed'.124 This contextual approach was borne out in Roxborough where under a fully performed contract the High Court found part of a lump sum payment was severable and apportionable to a tax element of the contract.125 The money was recoverable on a failure of basis because the tax was invalid.126 Only Gummow J in his judgment noted there was an indication in the contract that the payments could be apportioned.127 The plurality in that decision found that despite a lump sum payment in the contract, the tax amount represented a distinct part of the payment and it was treated `as separate from the wholesale price of the goods sold'.128 In such a case, the court is simply identifying separate bases for distinct parts of a payment. Apportionment is also allowed where it is simple to do so. In Whincup v Hughes (`Whincup') Bovill CJ stated `if there were a contract to deliver ten sacks of wheat and six only were delivered, the price of the remaining four might be recovered back. But there the consideration is clearly severable'129 because apportionment of the payment to each unit is simple.

1 Apportionment on a Partial Failure
It is also possible for apportionment to be undertaken on a partial failure of basis. The Privy Council in Goss said that although the basis had totally failed, if the basis had partially failed
David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and

119

120 121 122

123

124 125 126 127 128 129

McHugh JJ). Ibid. Ibid; Giedo [2010] EWHC 2373 (QB) (24 September 2010) [300] (Stadlen J). David Securities (1992) 175 CLR 353; Giedo [2010] EWHC 2373 (QB) (24 September 2010) [300] (Stadlen J). Haxton v Equuscorp Pty Ltd (2010) 28 VR 499, 501 [1] (Ashley JA), 502 [5] (Neave JA), 535 [178] (Dodds-Streeton JA); affd Equuscorp (2012) 246 CLR 498. Giedo [2010] EWHC 2373 (QB) (24 September 2010) [304] (Stadlen J). Roxborough (2001) 208 CLR 516. Ibid. Ibid 558 [109] (Gummow J). Ibid 524 [13] (Gleeson CJ, Gaudron and Hayne JJ). (1871) LR 6 CP 78, 81.

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the law would not hesitate to hold ... the balance ... recoverable on the ground of failure of consideration; for at least in those cases in which apportionment can be carried out without difficulty, the law will allow partial recovery on this ground.130

This was favourably referred to in Giedo where Stadlen J suggested that courts should approach such a situation with common sense.131 Another situation of a partial failure is exemplified in D O Ferguson & Associates v Sohl (`Ferguson') where the English Court of Appeal found a purchaser had paid $26,738 for work that was only worth $22,065, leading to a total failure of $4,673.132 However the overpayment was not a separate payment.133 Thus the basis of the payment for the work had only partially failed. Further, there was no suggestion that the payments were for distinct aspects of the work.134 This decision was noted by the United Kingdom Supreme Court as reflecting `commercial reality'.135 Stadlen J in Giedo stated that Ferguson `is a good example of the willingness of the court to adopt a flexible and robust approach so as to avoid, if consistent with existing principle, leaving a victim of unjust enrichment without an effective remedy'.136 Yet Ferguson is noted as an example of how recovery on a partial failure could operate.137 In Goff & Jones it is suggested that Ferguson may establish that payments can be considered severable to single units of currency, effectively meaning that the total failure rule has disappeared.138 It is submitted that this may be open in Australia. Deane J in Commonwealth v Amann Aviation Pty Ltd (`Amann') said `even in a case where the consideration has not failed completely, it would seem that that doctrine will found a direct action for the excess of money paid ... over the value of any consideration actually received'.139 Some lower court decisions support the possibility of apportionment on a partial failure.140 Yet the position is unclear after the dicta of McHugh J in Baltic
130

131 132 133 134 135

136

137

138

139 140

Goss [1996] AC 788, 798 (Lord Goff on behalf of Lord Jauncey, Lord Steyn, Lord Hoffmann and Lord Cooke). Giedo [2010] EWHC 2373 (QB) (24 September 2010) [299]­[300] (Stadlen J). (1992) 62 BLR 95. Ibid. Ibid. Barnes v Eastenders Cash & Carry plc [2015] AC 1, 43 [114] (Lord Toulson, with whom Baroness Hale DP, Lord Kerr, Lord Wilson and Lord Hughes agreed). Giedo [2010] EWHC 2373 (QB) (24 September 2010) [323] (Stadlen J); Ferguson (1992) 62 BLR 95. Peter Birks, `Failure of Consideration' in Francis Rose (ed), Consesus Ad Idem: Essays in the Law of Contract in Honour of Guenter Treitel (Sweet & Maxwell, 1996) 179, 199­0; Gerard McMeel, `Construction and Failure of Consideration -- The Primacy of Contract' [1998] Lloyds Maritime and Commercial Law Quarterly 308, 311 n 20; Ferguson (1992) 62 BLR 95. Mitchell, Mitchell and Watterson (eds), above n 15, 376 [12-31]; Ferguson (1992) 62 BLR 95. (1991) 174 CLR 64, 117. Clarke v Great Southern Finance Pty Ltd [2014] VSC 516 (11 December 2014) [4166] (Croft J); Wasada Pty Ltd v State Rail Authority of New South Wales [No 2] [2003] NSWSC 987 (15 December 2003) [20] (Campbell J); see also Ministry of Sound (Ireland) Ltd v World Online Ltd [2003] 2 All ER (Com) 823, 845 (Strauss QC).

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that `the common law has no doctrine of apportionment in respect of a partial failure of consideration'.141 The dissenting judgment of Kirby J in Roxborough also denied any ability to recover on a partial failure.142 For reasons that will be expanded upon, it is submitted that apportionment on a partial failure should be open to Australian courts.

B Where Counter-Restitution is Relatively Simple
The majority in David Securities said, `in cases where counter-restitution is relatively simple, insistence on total failure of consideration can be misleading or confusing'.143 This suggests that similar to Birks, the High Court saw a claimant's right to restitution limited not by the total failure rule, but instead by the inability of a claimant to make counterrestitution.144 Counter-restitution is where a party claiming relief has received some benefit from another, and must return that benefit before restitutionary relief will be granted. It need not be the precise benefit received, and can instead be its value.145 The effect of an exception based on the availability of counter-restitution is described in Goff & Jones. The authors ask whether a person has received a benefit:
If he has and he is not in a position to make counter-restitution, then his restitutionary claim must fail. Conversely, if he has received no part of the consideration, or if it is still possible for him to make counter-restitution in respect of the part which he received, then his restitutionary claim should succeed.146

The words in David Securities were thought to have heralded the end of the thorn in the side of failure of basis, which is the requirement of total failure.147 Birks thought `"Total" will now fade away' and instead the court will ask whether counter-restitution can be made.148 Support for this exception can be found in Australian decisions,149 the Privy Council in Goss,150 and arguably the judgment of Lord Goff in
141

142 143

144

145

146

147

148 149

CJ, Deane, Toohey, Gaudron and McHugh JJ). Roxborough (2001) 208 CLR 516, 578 [167]. David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). Birks, An Introduction to the Law of Restitution, above n 59, 242, 423­4; Birks, `Failure of Consideration', above n 137; see also McKendrick, above n 104. Ovidio Carrideo Nominees Pty Ltd v Dog Depot Pty Ltd [2006] VSCA 6 (8 February 2006) [20] (Chernov JA), [47]­[48] (Nettle JA). Baron Goff and Gareth Jones, The Law of Restitution (Sweet & Maxwell, 6th ed, 2002) 488 [19-005]. McKendrick, above n 104; Peter Birks, `Equity in the Modern Law: An Exercise in Taxonomy' (1996) 26(1) University of Western Australia Law Review 1, 78; Edelman, `The New Doctrine', above n 48; David Securities (1992) 175 CLR 353. Birks, `Equity in the Modern Law', above n 147, 78. David Securities (1992) 175 CLR 353; Fensford Pty Ltd v Nour Pty Ltd [2006] VSCA 118 (1 June 2006) [40] (Nettle JA), [1] (Chernov JA), [76] (Ashley JA) Australia & New Zealand Banking Group Ltd v Londish [2013] NSWSC 1423 (26 September 2013) [25] (Hall J).

Baltic (1993) 176 CLR 344, 388­9; cf David Securities (1992) 175 CLR 353, 383 (Mason

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sometimes cited as returning the Court to the requirement of total failure.152 It is submitted that when the judgments in Baltic are analysed in their particular context, this may not be so. In Baltic the plaintiff sought total restitution of her payment, and therefore required a total failure of basis.153 Thus the judgment of McHugh J found that the payment became unconditional upon the provision of any of the contemplated basis and therefore the claim was not for partial restitution.154 In considering whether there was a total failure, Mason CJ focused not on receipt of a benefit by the plaintiff, but instead `receipt and retention'.155 Indeed there was an absence of any offer of counterrestitution despite the receipt of some reciprocation by the plaintiff.156 Mason CJ noted the Court of Appeal's observation of a requirement of counter-restitution to avoid over-compensation, and that the nature of the claim required the basis to have wholly failed.157 In those circumstances the claimant could not recover.158 Brennan and Toohey JJ agreed with those reasons.159 Similarly, Deane and Dawson JJ noted this was not a case where partial failure was argued and instead the claim was for the whole of the fare, the argument being that the basis had wholly failed.160 The judgments in Baltic are specific to its facts; a partial failure was not pleaded, leaving open the possibility that in a case of partial failure the offer of counter-restitution could allow recovery.161 Although in Roxborough Kirby and Gummow JJ noted the total failure requirement,162 the plurality focused on apportionment and was not drawn on the counter-restitution point.163 Notably, Callinan J recognised that David Securities relaxed the total failure rule.164 The position may be different in England. In Giedo, Stadlen J also stated that the `receipt of even a small part of that consideration is
150

Westdeutsche Landesbank Girozentrale v Islington LBC.151 However, later judgments have cast doubt on this possible exception, and Baltic is

151 152

Goss [1996] AC 788, 798 (Lord Goff on behalf of Lord Jauncey, Lord Steyn, Lord Hoffmann and Lord Cooke); David Securities (1992) 175 CLR 353. [1996] AC 669, 682 (Lord Goff); David Securities (1992) 175 CLR 353. Baltic (1993) 176 CLR 344. Baltic (1993) 176 CLR 344.

Edelman and Bant, above n 2, 260; McLure, above n 15, 209, 211­13; Mason, above n 98;

153 154 155 156 157 158 159 160 161

162 163 164

Ibid 388­9. Ibid 350­1. Ibid. Ibid 348­9 (Mason CJ). Ibid 353 (Mason CJ). Ibid 367 (Brennan J), 383 (Toohey J). Ibid 375. See Edelman, `The New Doctrine', above n 48; James Edelman, `Restitution for a Total Failure of Consideration: When a Total Failure is not a Total Failure' (1996) 1(3) The Newcastle Law Review 57, 61­4; Birks, `Failure of Consideration', above n 137, 200­1; Birks, above n 6, 120­1; Baltic (1993) 176 CLR 344. Roxborough (2001) 208 CLR 516, 558 [107]­[109] (Gummow J), 579 [173] (Kirby J). Ibid 527 [20] (Gleeson CJ, Gaudron and Hayne JJ). Ibid 588­9 [198] (Callinan J); David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ).

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inconsistent with' proof of total failure.165 Goff & Jones stated that Stadlen J was denying the availability of this exception.166 In any case, even if this exception does exist in Australian law, it has not been applied. Although it was pleaded before the High Court in Equuscorp,167 only the joint judgement of Bell and Gummow JJ referred to counter-restitution; noting the previous reluctance of the High Court to engage with abstract concepts,168 and cautioning that `the term "counterrestitution" has been used in this Court but, without further analysis, is an unfortunate expression for several reasons ... which provides a framework for analysis at too high a level of abstraction'.169 Unfortunately, that judgment did not add clarity to the debate. Although it initially seemed clear, the obiter relating to counterrestitution by the majority in David Securities has not yet been precisely explained or applied.170 This has led to a withdrawal of support from commentators who believed that the judgment allowed for recovery on a partial failure.171 However, unless and until a majority of the High Court give further guidance, it appears open to a claimant to plead for restitution on a partial failure of basis where counter-restitution would be relatively simple.

C Where No Satisfactory Remedy Exists
Heydon J in Equuscorp noted that, as
Sir Guenter Treitel says, the supposed requirement that there be a total failure of consideration is now much qualified. One of these qualifications supports the view that it `should ... no longer apply where the [payer] has no remedy, or no satisfactory remedy, for breach'.172

Gummow J in Roxborough also supported this exception.173 Gummow J agreed with Sir Treitel that part of the merit of the total failure rule is that restitution for a partial failure could allow a party to escape from a bad bargain and `cut across the compensatory principle'.174 The challenge of apportioning payments made under a contract was another reason he

165 166 167

Giedo [2010] EWHC 2373 (QB) (24 September 2010) [304], [359], [366]­[367] (Stadlen J).

168 169 170

171

172

173 174

Mitchell, Mitchell and Watterson (eds), above n 15, 730 [31-04] n 5. Equuscorp, `Appellant's Submissions', Submission in Equuscorp Pty Ltd v Haxton, M 128/2010, 1 February 2011, 16 [91]­[92]. Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635. Equuscorp (2012) 246 CLR 498, 545 [114]. David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). Edelman, `The New Doctrine', above n 48; Goff and Jones, above n 146, 488 [19-005]; cf Edelman and Bant, above n 2, 260; Mitchell, Mitchell and Watterson (eds), above n 15, 729­30 [31-04]. Equuscorp (2012) 246 CLR 498, 552 [136]; quoting Edwin Peel (ed), Treitel on the Law of Contract (Sweet & Maxwell, 13th ed, 2011) 1132­4 [22-004]. Roxborough (2001) 208 CLR 516, 558 [105]­[106]. Ibid 558 [105] (Gummow J); Peel (ed), above n 172, 1132­3 [22-004].

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found for the rule.175 Where those reasons do not apply, or no satisfactory compensation is otherwise available, Gummow J thought it would be appropriate to allow a court to circumvent the total failure rule.176 The Victorian Court of Appeal in Haxton thought that while
Gummow J appeared to approve modification of the traditional insistence on totality where the claimant had no alternative remedy or the transaction was relevantly severable, both factors were present in that case. It is not clear that his Honour viewed each as an independent basis for restitutionary relief even if the claimant had received some of the benefit bargained for.177

On appeal, Heydon J found that where the claimant had no satisfactory remedy available `it was not necessary that there be a total failure of consideration'.178 Heydon J adopted the position of Sir Treitel and held that where either apportionment is available or there is no other satisfactory remedy, then a court can jettison the requirement of total failure.179 With one judge of the High Court supporting the qualification in obiter and another applying the reasoning of Sir Treitel, the question of whether this exception applies is live.180 Seriously considered dicta of the High Court has significant persuasive value.181 Yet lower courts should not too eagerly apply High Court obiter to remove an existing requirement.182 Thus this exception may not be available in Australia without further guidance. It is submitted that it in any case it would be preferable to allow for recovery on a partial failure where apportionment is possible or counter-restitution is relatively simple,183 making this exception largely unnecessary.

D Incidental and De Minimis Benefits
Incidental benefits are any benefits that are not part of the basis of the transaction. Thus this is truly a closer examination of the basis rather than an exception to the total failure rule. Yet the law was not always so discerning.184 The majority in David Securities said that:
Roxborough (2001) 208 CLR 516, 557­8 [106] (Gummow J); Peel (ed), above n 172, 1132­ Roxborough (2001) 208 CLR 516, 558 [107]­[109] (Gummow J); Peel (ed), above n 172, Haxton (2010) 28 VR 499, 501 [1] (Ashley JA), 502 [2] (Neave JA), 536 [182] (DoddsStreeton JA), affd Equuscorp (2012) 246 CLR 498. Equuscorp (2012) 246 CLR 498, 552­3 [136]­[137] (Heydon J); see 518 [33] (French CJ,
1132­3 [22-004].

175

3 [22-004].
176 177

178

179 180

181

182 183 184

Crennan and Kiefel JJ), 544 [112] (Gummow and Bell JJ). Ibid 552­3 [136]­[137] (Heydon J); Peel (ed), Peel (ed), above n 172, 1132­3 [22-004]. Equuscorp (2012) 246 CLR 498, 552 [136] (Heydon J); Roxborough (2001) 208 CLR 516, 557­8 [106] (Gummow J). See Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) (2007) 230 CLR 89, 150­151 [134], 155 [148] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ). Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604. See below Part VI. Hunt v Silk (1804) 5 East 449;Whincup (1871) LR 6 CP 78. Cf Paul Mitchell, above n 15; Giedo [2010] EWHC 2373 (QB) (24 September 2010) [279].

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The law has traditionally not allowed recovery of money if the person who made the payment has received any part of the `benefit' provided for in the contract. However ... the notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact'.185

In Baltic Deane and Dawson JJ used the example of someone who boards a flight in order to reach a destination, but the plane returns to the departure airport after service of meals without any alternative transport to the destination being provided.186 Although a benefit is provided, it is merely incidental to the basis of the payment.187 In Nea, Heenan J stated `partially executed contracts will not produce a situation of total failure of consideration'.188 With respect, such a statement is not correct after David Securities.189 Receipt of part of the contractual benefit will not always mean there is not a total failure of basis.190 One must look to the basis of the transaction, not just the contract. Whether a benefit is incidental does not depend on whether it is of negligible value. In Australia the authorities favour a de minimis exception to the rule,191 yet incidental benefits may be of substantial value. Rowland,192 Butterworths v Kingsway Motors Ltd193 and Warman v Southern Counties Car Finance Corp Ltd194 are all cases where a claimant has had the benefit of the use of a car under a purported transaction for four, over 11, and seven months respectively. Although of substantial value, the use was merely incidental to the actual basis. In the former two cases the basis was to acquire lawful possession of the car,195 and in the latter it was to acquire an option to purchase a car.196 In these cases restitution was ordered without counter-restitution being given for the use of the cars.197 This article submits that this is unsatisfactory and
185

186 187 188

189 190

191

192 193 194 195 196 197

Ibid. [2005] WASC 106 (1 June 2005) [128]; National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675, 687. David Securities (1992) 175 CLR 353; Edelman and Bant, above n 2, 260. Roxborough (2001) 208 CLR 516; Mulkearns v Chandos Developments Pty Ltd [No 3] [2005] NSWSC 504 (30 May 2005) [31] (Young CJ in Eq). Baltic (1993) 176 CLR 344, 350 (Mason CJ); Re Hair Industrie Penrith Pty Ltd, Hair Industrie Merrylands Pty Ltd [2015] NSWSC 1578 (27 October 2015) [50] (Black J); Luo v Zhai [2015] FCA 350 (17 April 2015) [36] (Perram J); Mason, Carter and Tolhurst, above n 8, 333 [926]. See also Jack Beatson, The Use and Abuse of Unjust Enrichment (Clarendon Press, 1991) 58; Virgo, above n 18, 672. The position in England appears to be different; Giedo [2010] EWHC 2373 (QB) (24 September 2010) [287] (Stadlen J); H G Beale (ed), Chitty on Contracts (Sweet & Maxwell, 31st ed, 2012) vol 1, 2065 [29-057] n 323. Rowland [1923] 2 KB 500. [1954] 1 WLR 1286. [1949] 2 KB 576. Rowland [1923] 2 KB 500. Warman v Southern Counties Car Finance Corp Ltd [1949] 2 KB 576, 582 (Finnemore J). Ibid; Rowland [1923] 2 KB 500; Butterworths v Kingsway Motors Ltd [1954] 1 WLR 1286.

David Securities (1992) 175 CLR 353, 382 (Mason CJ, Deane, Toohey, Gaudron, McHugh JJ); see Hunt v Silk (1804) 5 East 449; Whincup (1871) LR 6 CP 78. Baltic (1993) 176 CLR 344, 378 (Deane and Dawson JJ).

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argues, in Part V, that even where a benefit is incidental the law should require counter-restitution before ordering restitution.198

E Rejecting a Benefit
Generally where a party has a legal right to reject a benefit it is still possible to claim for total failure. For instance, the Australian Consumer Law gives a person a right to reject defective goods where there is a `major failure'.199 This may enliven a situation of failure of basis. As restitution on an unjust enrichment is not fault based, even if a party rejects a benefit and thereby breaches a contract they can still receive restitution.200 In Dies v British and International Mining & Finance Corp Ltd (`Dies') a buyer part payed for arms and ammunition and later refused to take delivery, resulting in the defendant repudiating the contract.201 Although otherwise decided, it has been used as authority for the proposition that a party whose breach has brought about the failure of basis may still make a restitutionary claim.202 As McHugh J opined in Baltic, once `the condition for retaining the money has failed the fact that it failed in response to the payer's own breach does not matter'.203 Any initial unfairness is countered by the fact that other remedies such as damages will likely be open to the defendant.

F Operation of the Rule
The total failure rule is subject to limitations, including the historical exception of apportionment on a total failure. A party can also recover where they have received incidental benefits, and may be able to recover where counter-restitution of part of the basis is possible. There is also the possibility that where no satisfactory remedy is available a party may receive restitution notwithstanding only a partial failure has occurred. As has been noted, if apportionment on a partial failure or counter-restitution of received benefits is to be allowed, then the total failure rule would effectively be excised from the law. Why the rule exists at all must now be considered, before it can be concluded that recovery should be allowed on a partial failure.

V Rationale Behind the Total Failure Rule
It is clear from the preceding part that courts are willing and able to depart from `total failure' in numerous circumstances. This part will
See Jim Davis (ed), Contract: General Principles -- The Laws of Australia (Thomson Reuters, 2nd ed, 2012) 839 [7.9.2010]. Competition and Consumer Act 2010 (Cth) sch 2 s 259. McDonald (1933) 48 CLR 457; Fibrosa [1943] AC 32. Dies [1939] KB 724. Rover [1989] 1 WLR 912, 931 (Kerr LJ); Baltic (1993) 176 CLR 344, 390 (McHugh J). Baltic (1993) 176 CLR 344, 390, quoting Peter Birks, An Introduction to the Law of Restitution (Clarendon Press, 1985) 236­8.

198

199 200 201 202 203

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examine the historical and contemporary sources supporting the requirement that a failure of basis be total. In considering the reasons why this rule is necessary, counter-arguments mitigating the importance of those reasons will also be explored.

A Traditional Valuation Problems
An oft-cited reason for the requirement of a total failure is that courts are unwilling to reopen a transaction and value its different aspects.204 For this reason Viscount Simon LC in Fibrosa said that the `common law does not undertake to apportion a prepaid sum'.205 Yet as discussed, apportionment is at least available where a payment is implicitly capable of being `broken up'.206 The reasons why apportionment was not always available are exemplified in Whincup where a master died one year into an apprenticeship contract and the apprentice's father tried to bring an action for a failure of basis.207 It was noted that apportionment would be unfair where the recipient relied on the receipt of an entire payment.208 However, the acceptance of the defence of change of position deals with that problem.209 That defence protects a defendant who has irreversibly changed their position in reliance of the receipt of a benefit, when that decision was made in good faith.210 Apportionment was also rejected in Whincup because of the difficulty of valuing each time period, as the apprentice would initially require more intensive training and would provide little value to the master, whereas the later stages of his apprenticeship would see this reversed.211 For those reasons payment was found to be whole and indivisible.212 Yet throughout the law, and particularly unjust enrichment, courts are willing to conduct difficult valuations. Burrows reminds us that `simplicity is hardly justice'213 and difficult valuations occur for restitution on unjust enrichments where counter-restitution is required in cases of mistake, necessity, or where a contract is discharged for breach, is void, or unenforceable.214 Similarly claimants are entitled to restitution on an unjust enrichment as a quantum meruit for in kind performance,
204

205 206

207 208

209 210

211 212 213 214

Roxborough (2001) 208 CLR 516, 557­8 [106] (Gummow J), 579 [173] (Kirby J); Law Commission of England and Wales, Pecuniary Restitution on Breach of Contract, Report No 121 (1983) [3.9]. Fibrosa [1943] AC 32, 49 (Viscount Simon LC). David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). Whincup (1871) LR 6 CP 78. Ibid 82 (Bovill CJ), 84 (Willes J); Jack Beatson, The Use and Abuse of Unjust Enrichment (Clarendon Press, 1991). See McKendrick, above n 104, 220­5. David Securities (1992) 175 CLR 353; Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560. Whincup (1871) LR 6 CP 78, 81 (Bovill CJ). Ibid. Burrows, The Law of Restitution, above n 15, 331. Ibid; see also Birks, above n 6, 228.

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and the courts are willing and able to value such claims for goods delivered or work done.215 Such valuations are not dissimilar to those which would need to be made on a partial failure of basis, evidencing the transparency of this objection. Mason, Carter and Tolhurst also point out that it is not consistent with the law around the unjust factors of misrepresentation and undue influence, where difficult valuations are required to allow for substantial counter-restitution of any benefit received.216 This is the same requirement for a rescinded contract,217 where the right to counterrestitution is premised on unjust enrichment.218 The unjust factor of failure of basis is therefore the exception. In the major reports on the law of frustration, this concern was seen as insufficient to maintain the current rule.219 Further, it would only be exceptional cases where it would be impossible to substantially value a partial benefit conveyed to the plaintiff.220 In those exceptional cases it would therefore be impossible to make counter-restitution and restitution should not be allowed. To hold otherwise would be to demand the court undertake guesswork. 221 Such complication may also suggest that the parties never intended the contract to be capable of being broken-up. However, problems relating to valuation are exaggerated and the fact it may rarely be impossible to value partial performance should not support a bar preventing restitution on a partial failure where valuation is possible.

B Undermining Contracts and Escaping Bad Bargains
Cases of failure of basis often involve contracts, and considerations of the law of contract are used to support the total failure requirement.222 For

215

216

217

William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932; Pavey (1987) 162 CLR 221; Way v Latilla [1937] 3 All ER 759; Competition and Consumer Act 2010 (Cth) s 40(2); Burrows, The Law of Restitution, above n 15, 331. Mason, Carter and Tolhurst, above n 8, 327 [918]; see Maguire v Makaronis (1997) 188 CLR 449; Spence v Crawford [1939] 3 All ER 271, 288­9 (Lord Wright). Maguire v Makaronis (1997) 188 CLR 449; Spence v Crawford [1939] 3 All ER 271, 288­9
(Lord Wright).

218

219

Foran v Wight (1989) 168 CLR 385, 438 (Deane J); Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353, 370 (Mason P), 371 (Priestly JA), quoting Gunter Treitel, The Law of Contract (Sweet & Maxwell/Stevens and Sons, 9th ed, 1995). Law Reform Committee of South Australia, Relating to the Doctrine of Frustration in the Law of Contract, Report No 71 (1983); Law Reform Commission of New South Wales, above n 7, [6.4]; The Law Reform Commission of British Columbia, Report on the Need For Frustrated Contracts Legislation in British Columbia, Project No 8 (1971); Law Reform (Frustrated Contracts) Act 1943 (UK); contra Law Commission of England and Wales, Pecuniary Restitution on Breach of Contract, Report No 121 (1983); but see Andrew
Burrows, `Law Commission Report on Pecuniary Restitution on Breach of Contract' (1984) 47(1) Modern Law Review 76. Virgo, above n 18, 324­5. See David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); McKendrick, above n 104; ibid. McMeel, above n 137, 311.

220 221

222

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instance, Kirby J dissenting in Roxborough noted the importance of preserving the parties' bargain as a reason for the total failure rule.223 It is desirous that restitutionary relief does not upset the contractual allocation of risk or allow a claimant to escape from a bad bargain. This is best understood as protecting the will of the parties, rather than making restitutionary relief subsidiary to the law of contract.224 Yet there are many ways to protect a contractual arrangement outside the total failure rule. The most obvious is by agreement. In Whincup the contract provided that `the master undertakes to teach, and the apprentice undertakes to serve for a period of six years if they both shall live so long'.225 After the master's death the apprentice's father could not recover, and two judges held that to allow an action for failure of basis would undermine the parties' intentions.226 The judges implied that the payment was to be retained irrespective of the death of a party.227 If parties do agree to allow for retention regardless of performance, there can be no failure of basis. Such an agreement, express or implied, may be rare,228 yet McHugh J in Baltic found that an agreement existed permitting Baltic to unconditionally retain the fare once performance began .229 Where the parties incorporate a clause relating to their rights and remedies , it would be wrong for a court to subvert this by awarding restitution.230 However, it is not the case that the mere availability of damages will preclude restitution.231 Nor will the absence of a contractual remedy deny recovery for unjust enrichment, because it is a free-standing concept.232 As well as stopping the subversion of a contract, courts are unwilling to allow an escape from a bad bargain. If a party can make out a claim for restitution on a failure of basis, they may subsequently be able to escape a bad bargain. This is because restitution allows a party to recover the sum they paid; if they have agreed to a price that is more than the performance is truly worth, they escape the obligation to pay the excess. They may
223 224

Roxborough (2001) 208 CLR 516, 579 [173].

225 226 227 228 229 230

231

232

Angus O'Brien, `The Relationship between the Laws of Unjust Enrichment and Contract: Unpacking Lumbers v Cook' (2011) 32 Adelaide Law Review 83, 97­9; Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635, 654­5 [46] (Gleeson CJ), 674 [124]­ [127] (Gummow, Hayne, Crennan and Kiefel JJ). Whincup (1871) LR 6 CP 78, 83 (Willes J), 84 (Montague Smith J), 86 (Brett J). Ibid 81 (Willes J), 84 (Montague Smith J), 86 (Brett J). Ibid 81. Mitchell, Mitchell and Watterson (eds), above n 15, 370 [12-19]. Baltic (1993) 176 CLR 344, 388­9, 392. Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635, 655 [47]­[48] (Gleeson CJ), 663 [79] (Gummow, Hayne, Crennan and Kiefel JJ); Pavey (1987) 162 CLR 221, 238 (Brennan J), 256 (Deane J); Chen v Cui [2015] NSWSC 1480 (12 October 2015) [16]­[18] (Fagan J); see also McKendrick, above n 104, 223­4; O'Brien, above n 224, 90. See Baltic (1993) 176 CLR 344; Rowland [1923] 2 KB 500; Warman v Southern Counties Car Finance Corp Ltd [1949] 2 KB 576; cf Taylor v Mobility Finance Ltd [2004] EWHC 2619 (Comm Ct) (12 November 2004) [23] (Cooke J). Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548; Pavey (1987) 162 CLR 221; David Securities (1992) 175 CLR 353.

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also recover more than is available from contractual damages.233 Two High Court judges have recently noted this as a leading reason why there is insistence that a failure of basis must be total.234 In its 1983 report, the Law Commission of England and Wales observed that restitution for a total failure of basis `does not have as its purpose the provision of an escape route from a bad bargain' as the parties are only `incidentally entitled to escape from a bad bargain'.235 As Burrows notes, restitution on a partial failure is based on the same purpose as that of a total failure; to stop the unjust enrichment of one party against another.236 The only reason that this is more of a problem for restitution on a partial failure is the possibility of more claims allowing a party to escape a bad bargain. Kirby J in Roxborough assumed the removal of the rule would mean `the brake on legal claims that has hitherto been imposed will be released'.237 Yet the law already has a way of limiting restitutionary claims in the context of contracts. There is a general but not absolute rule that requires a contract be ineffective before restitution is awarded.238 As explained by Mason P in Coshott v Lenin, this rule is qualified insofar that it allows a court to order restitution on a valid contract where it would not `subvert or undermine the contractual allocation of risk'.239 The operation of such a consideration can be seen in Roxborough where the plurality noted that `to permit recovery of the tax component would not result in confusion between enforcing a contract and claiming a right by reason of events which have occurred in relation to a contract'240 because inter alia, it was

233

234

235 236 237 238

239

240

See Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) NSWLR 234, affd Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 20 Legal Rep SL 1; Edelman and Bant, above n 2, 260­4; Beale (ed), above n 191, vol 1, 2068­9 [29061]. Equuscorp (2012) 246 CLR 498, 552 [136] (Heydon J); Roxborough (2001) 208 CLR 516, 557 [105] (Gummow J); see also Law Commission of England and Wales, above n 204, [3.9]. Law Commission of England and Wales, above n 204, [3.9]. Burrows, `Law Commission Report', above n 219, 85­6. Baltic (1993) 176 CLR 344, 579 [173]. Kwei Tek Chao v British Traders & Shippers Ltd [1954] 2 QB 459; The Olanda (1917) (1919) 2 KB 728; Re Richmond Gate Property Co Ltd [1965] 1 WLR 335; see also Roxborough (2001) 208 CLR 516, 579 [172]­[173] (McHugh J); Alexiadis v Zirpiadis (2013) 302 ALR 148, 152 [19] (Kourakis CJ); Beale (ed), above n 191, vol 1, 2068 [29060]; Mitchell, Mitchell and Watterson (eds), above n 15, 375 [12-30]; Burrows, The Law of Restitution, above n 15, 328­31. [2007] NSWCA 153 (20 June 2007) [10]; see also Anderson v Mcpherson [No 2] [2012] WASC 19 (25 January 2012) [205], [239] (Edelman J); Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635, 655 [46] (Gleeson CJ), 663 [79] (Gummow, Hayne, Crennan and Kiefel JJ); Peter Birks `Failure of Consideration and its Place on the Map' (2002) 2 Oxford University Commonwealth Law Journal 1; Jack Beatson, `The Temptation of Elegance: Concurrence of Restitutionary and Contractual Claims' in W Swadling and G Jones (eds), The Search for Principle: Essays in Honour of Lord Goff of Chieveley (Oxford University Press, 1999) 143, 151­3. Roxborough (2001) 208 CLR 516, 528 [21] (Gleeson CJ, Gaudron and Hayne JJ).

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not part of the contractual negotiations and was a mandatory statutory scheme.241 This can be contrasted with the situation in Re Richmond Gate Property Co Ltd where a managing director was to be paid for work at a rate to be fixed by the board. The company went into liquidation after work had been completed but before this payment was made.242 Restitution for the work would be unavailable because it was always possible that the board would fix no value to it.243 Such a requirement ensures an appropriate and principled limit on claims for restitution and protects contracts. The total failure rule is an inefficient way of limiting claims. That task is already performed far more discriminately by the general rule limiting recovery on a subsisting contract.244 McKendrick also argues that the recognition of the change of position defence means the defences available in unjust enrichment will prevent an overabundance of restitutionary claims.245 Courts can be tasked with the responsibility of ensuring that contracts are not subverted by restitutionary relief.246 This is similar to the role played by judges in the overlap of tort and contract.247 It is also questionable whether holding someone to a bad bargain in this context is justifiable in any case. Since a contract cannot be subsisting, or restitution upon it needs to not upset the contractual risk, there seems no good reason to reward a party the amount that party would have gained over the performance price had the contract not come to an end. To use this to support the total failure rule protects someone who strikes a good bargain above protecting the basis of the bargain itself. The absurdity of this can be seen by the fact that in many jurisdictions where a contract has been frustrated -- i.e. no party is at fault -- a claimant will be allowed to escape from a bad bargain on a partial failure,248 but otherwise the total failure rule would not allow a claimant to recover even when the other party is at fault. Thus, due to the total failure rule, a party who benefits from a bad bargain is in a better restitutionary position when they breach a contract compared to when it is frustrated. Although unjust enrichment is not fault based, such a result seems anomalous.

241 242 243

244 245 246 247

248

McKendrick, above n 105, 220­5. Virgo, above n 18, 324. See Brookfield Multiplex v Owners Corporation Strata Plan 61288 (2014) 313 ALR 408; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515. Fair Trading Act 1999 (Vic) s 32ZG; Frustrated Contracts Act 1988 (SA) s 12; Frustrated Contracts Act 1978 (NSW) s 12; Law Reform (Frustrated Contracts) Act 1943 (UK).

Barnes v Eastenders Cash & Carry plc [2015] AC 1, 44 [115] (Lord Toulson, with whom Baroness Hale DP, Lord Kerr, Lord Wilson and Lord Hughes agreed). Burrows, The Law of Restitution, above n 15, 330­1; Virgo, above n 18, 324­5.

Ibid; O'Brien, above n 224, 93­5. [1965] 1 WLR 335.

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C Open Contracts
One historical reason for the rule was that where there was an unperformed contract with the possibility of damages for breach the contract was seen as open.249 No liability could lie outside of the contract until performance was rendered or compensation paid.250 Thus the plaintiff would only be entitled to relief if the contract was rescinded ab initio.251 Fibrosa overturned the requirement from Chandler252 that a contract must be rescinded ab initio.253 Furthermore, the decision of Roxborough allowed for restitution on a failure of basis, notwithstanding the contract had been fully performed.254 Discharged contracts can also support a claim for failure of basis.255 This reason no longer has any force.

D Discharged Contracts and Counter-Restitution
Another historical reason for the requirement of a total failure was the fact that the common law did not hold a discharged contract returned the property rights to the original owner.256 However since rescission now requires substantial counter-restitution this concern no longer lies.257 It also relies on the relic of insistence of rescission ab initio. However, the idea that a party may be left with no recompense for partial performance of a basis does still linger. This is exemplified by the words of Heenan J in Nea that
the inapplicability of relief for total failure of consideration in these circumstances is also justified by the fact that to treat this as a total failure of consideration case, would leave the plaintiff with no form of recompense for the work and labour done ... because restoration of the value of that work would not occur.258

Heenan J did not explicitly explain why this was the case.259 It is worth noting that his Honour seemed to have limited difficulty valuing some of the work that was completed.260 Therefore it is respectfully suggested that following David Securities, parties could be provided with counter-restitution in such cases.261 Irrespective, the lack of compensation would be a failing of the law which is not restricted to cases of partial failure. In many cases where a
249 250 251 252 253 254 255 256 257 258 259 260 261

See Gompertz v Denton (1832) 149 ER 376, 377. Mason, Carter and Tolhurst, above n 8, 327 [918]. Ibid. (1904) 1 KB 493. Fibrosa [1943] AC 32; see also Baltic (1993) 176 CLR 344, 355­6 (Mason CJ). Roxborough (2001) 208 CLR 516. Pavey (1987) 162 CLR 221; David Securities (1992) 175 CLR 353. Street v Blay (1831) 2 B & AD 456. Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102. Nea [2005] WASC 106 (1 June 2005) [129]. Ibid [127] (EM Heenan J). Ibid [117]­[120] (EM Heenan J). David Securities (1992) 175 CLR 353.

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total failure has been found despite incidental counter-performance -- such as Rover and Rowland -- the party who has proffered that benefit goes uncompensated.262 It seems odd that while restitution for a failure of basis will be ordered in such cases, there is no restitution for the incidental benefit provided even if that incidental benefit is of substantial value.263 A requirement of counter-restitution eliminates the possible injustice of ordering restitution on a partial failure. 1 Counter-Restitution as a Requirement It is submitted that, as in New Zealand,264 counter-restitution is a precondition of restitutionary relief in Australia, at least in respect of incidental benefits. In Australia the equitable standard of substantial counter-restitution applies,265 so even where valuation is imprecise, a claim may succeed.266 It does not need to be counter-restitution in specie (the precise benefit) but simply substantial counter-restitution of the value of the benefit.267 Substantial counter-restitution of received benefits in the restitutionary context has been considered and ordered in numerous decisions of superior courts,268 and it was considered but not required in the High Court by Brennan J in David Securities, and by Mason CJ in Baltic.269 This draws upon a long history of substantial restitutio in integrum being ordered as the price of rescission or discharge.270 In arguing against the requirement of a total failure, Birks saw `total' as a reference to a general requirement of counter-restitution of any

262 263

Rover [1989] 1 WLR 912; Rowland [1923] 2 KB 500. Rover [1989] 1 WLR 912; Butterworths v Kingsway Motors Ltd [1954] 1 WLR 1286; Warman v Southern Counties Car Finance Corp Ltd [1949] 2 KB 576; Fibrosa [1943] AC Equiticorp Industries Group Ltd (in stat man) v The Crown (No 47) [1998] 2 NZLR 481, Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102; see, eg, Supreme Court Act 1935 (WA) ss 23­5. Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218, 1278 (Lord Blackburn); O'Sullivan v Management Agency & Music Ltd [1985] QB 428; Alati v Kruger (1955) 94 CLR 216; Maguire v Makaronis (1997) 188 CLR 449. Alati v Kruger (1955) 94 CLR 216; Equiticorp Industries Group Ltd (in stat man) v The Crown (No 47) [1998] 2 NZLR 481, 641­58 (Smellie J). Heckenberg v Delaforce [2000] NSWCA 137 (8 June 2000) [34] (Mason P), [87] (Beazley JA); Anderson v Mcpherson [No 2] [2012] WASC 19 (25 January 2012) [209]­[210] (Edelman J); Sydney Water Corporation Ltd v Industrial Relations Commission of NSW (2004) 61 NSWLR 661, 671 [39] (Mason P), 677 [79] (McColl JA); Fensford Pty Ltd v Nour Pty Ltd [2006] VSCA 118 (1 June 2006) [40] (Nettle JA), [1] (Chernov JA), [76] (Ashley JA); Ovidio Carrideo Nominees Pty Ltd v Dog Depot Pty Ltd [2006] VSCA 6 (8 February 2006) [20] (Chernov JA) [47]­[48] (Nettle JA); Baltic Shipping Company v Dillon `Mikhail Lermontov' (1991) 22 NSWLR 1, 26 (Kirby P), rev Baltic (1993) 176 CLR 344; National Mutual Life Association of Australasia Ltd v Walsh (1987) 8 NSWLR 585, 596 (Clarke J); cf Schipp v Cameron [1999] NSWSC 997 (9 July 1998) [619]­[623] (Einstein J). David Securities (1992) 175 CLR 353, 388, 400 (Brennan J); Baltic (1993) 176 CLR 344, Maguire v Makaronis (1997) 188 CLR 449; Alati v Kruger (1955) 94 CLR 216; Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102.
348­9 (Mason CJ). 641­58 (Smellie J). 32; see also Davis, above n 198, 925­6 [7.9.2810].

264

265

266

267

268

269

270

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benefits received.271 Notably, a leading Australian text on restitution has removed a previous statement that `there is no general rule requiring counter-restitution as the price of restitution'.272 Edelman and Bant take the same approach as Birks and appropriate the comments of the majority in David Securities for this purpose.273 However, the words of the majority relied upon are that `in cases where consideration can be apportioned or where counter-restitution is relatively simple, insistence on total failure of consideration can be misleading or confusing'.274 With respect, those words are unlikely to have the meaning the learned authors suggest. This is especially so considering the preceding paragraphs approve of the English cases of Rover and Rowland where restitution was allowed notwithstanding counter-restitution was not ordered of substantial incidental benefits received.275 Stadlen J in Giedo noted in England after those cases, the receipt of an incidental benefit will not prevent recovery on a total failure of basis.276 Although those words in David Securities may not mean what those authors suggest, this does not suggest that the rule as explained by Edelman and Bant is wrong, as it is supported by other Australian case law.277 However, this likely suggests a divergence with English law. Although a requirement, it would be erroneous to hold that receipt of benefits incidental to the basis means there is not a total failure of basis.278 Because of this, in Australia the requirement of counterrestitution is better understood as a condition of relief,279 the fourth consideration for restitution of an unjust enrichment - where the prima facie obligation to make restitution is displaced where it would be unjust.280 Inability to make substantial counter-restitution will be rare and likely limited to when a party is impecunious.281 This is because the court must only come to a close valuation of the benefit and, as discussed, courts are

271 272

273

274

275

276 277

278

279 280 281

Birks, `Failure of Consideration', above n 137. Mason, Carter and Tolhurst, above n 8, 328 [918]; cf Mason and Carter, above n 24, 290 [918]. Edelman and Bant, above n 2, 258­60; David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Edelman and Bant, above n 2, 258­60. David Securities (1992) 175 CLR 353, 382­3 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Rover [1989] 1 WLR 912; Rowland [1923] 2 KB 500. Giedo [2010] EWHC 2373 (QB) (24 September 2010) [236], [281], [339]. See Heckenberg v Delaforce [2000] NSWCA 137 (8 June 2000) [34] (Mason P), [87] (Beazley JA); Anderson v Mcpherson [No 2] [2012] WASC 19 (25 January 2012) [209]­ [210] (Edelman J); Sydney Water Corporation Ltd v Industrial Relations Commission of NSW (2004) 61 NSWLR 661, 671 [39] (Mason P), 677 [79] (McColl JA); David Securities (1992) 175 CLR 353, 388, 400 (Brennan J); Baltic (1993) 176 CLR 344, 348­9 (Mason CJ). Giedo [2010] EWHC 2373 (QB) (24 September 2010); see Rover [1989] 1 WLR 912; see also Rowland [1923] 2 KB 500; David Securities (1992) 175 CLR 353. Barker and Grantham, above n 18, 489 [15.26]. Equuscorp (2012) 246 CLR 498, 516 [30] (French CJ, Crennan and Kiefel JJ). Burrows, The Law of Restitution, above n 15, 250.

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able to value complicated benefits. It is also possible an incidental benefit will have no value attached and no adjustment will need to be made.282 In all other circumstances there will be a requirement of adjustment before restitution is made.283 This is in accordance with first principles, discussed by Lord Wright in Spence v Crawford generally: If a plaintiff...seeks to have the contract annulled and his money or property restored to him, it would be inequitable if he did not also restore what he had got under the contract from the defendant. The defendant...must not be robbed, nor must the plaintiff be unjustly enriched, as he would be if he both got back what he had parted with and kept what he had received in return.284 To not order counter-restitution is to recognise unjust enrichment on a failure of basis for the plaintiff while at the same time ignoring that they have been unjustly enriched at the expense of the defendant.285 A party should not be `left with the fruits of the transaction of which they complain'.286 This requirement can be removed by legislation.287 In lieu of that, it should be recognised that there is a general rule that when restitution is granted each side must give back what it receives. This ensures fair results, and allows for recovery of benefits provided under a partial failure.

E The Total Failure Rule
It is submitted that the total failure rule is therefore too blunt an instrument to undertake the work it has been set. The requirement that a restitutionary claim should not undermine the contractual allocation of risk and the ability of a court to apportion or order counter-restitution are better ways of dealing with the concerns that are used to justify the total failure rule. Further, its removal would help make the law around a failure of basis more uniform and in line with the award of restitution for other unjust factors, as well as the requirement of counter-restitution for rescission

282 283

284

285

286

287

See Luo v Zhai [2015] FCA 350 (17 April 2015) [47] (Perram J). Mason, Carter and Tolhurst, above n 8, 845 [2325]; Mitchell, Mitchell and Watterson (eds), above n 15, 729 [31-02]. [1939] 3 All ER 271, 288­9; Vadasz v Pioneer Concrete (SA) Pty Ltd (1994) 62 SASR 150, 156­7, affd Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102. See Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353, 370 (Mason P), 371 (Priestly JA); Spence v Crawford [1939] 3 All ER 271, 288­9 (Lord Wright); Vadasz v Pioneer Concrete (SA) Pty Ltd (1994) 62 SASR 150, 156­7, affd Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102; see Burrows, The Law of Restitution, above n 15, 250. Maguire v Makaronis (1997) 188 CLR 449, 475 (Brennan CJ, Gaudron, McHugh and Gummow JJ). Cook's Construction Pty Ltd v SFS Pty Ltd (2009) 254 ALR 661, 681­2 [72]­[76] (Keane JA), 697­8 [143]­[146] (Fraser JA), 700 [160] (Daubney J).

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which is part of the legal concept of unjust enrichment. The justifications used to support the total failure requirement can and should be overcome.

VI Partial Failure of Basis
The concerns underpinning the total failure rule are dealt with by other means. The rule requiring a total failure of basis can lead to arbitrary results and can act as a block to the more principled development around the vitiating factor of a failure of basis. This is why commentators and judges alike have called for the rule's demise.288 This part will show that courts do have the power to remove the total failure requirement as well as analysing the benefits of allowing for restitution on a partial failure. It will also conceptualise when recovery should be available.

A Can Common Law Reform Occur?
Deane and Dawson JJ in Baltic said `artificial constraints imposed by the old forms of action can, unless they reflect coherent principle, be disregarded where they impede the principled enunciation and development of the law'.289 It has been shown that the reasons behind the total failure rule do not reflect coherent principle. In line with those words, it should be disregarded. Although it was suggested in Fibrosa that any change to the total failure rule needed to be undertaken by parliament,290 the widely held and better view is that it is open to the courts to enact such a change.291 This is evidenced by the multiplicity of judgments in Australia and throughout the common law world which have already abrogated the total failure rule, or show the appetite and willingness for change.292 Decisions of the High Court and the United Kingdom Supreme Court suggest whether the total failure rule still operates is a question that they could answer in an

288

NSW v Commonwealth Bank of Australia (2001) 217 ALR 691, 713 [151] (Young CJ in Eq); Heckenberg v Delaforce [2000] NSWCA 137 (8 June 2000) [41] (Mason P), [87] (Beazley JA); Giedo [2010] EWHC 2373 (QB) (24 September 2010) [367] (Stadlen J); Burrows, The Law of Restitution, above n 15, 322­6; Paul Mitchell, above n 15; Charles Baltic (1993) 176 CLR 344, 376. Fibrosa [1943] AC 32.
Mitchell, above n 15, 1059, 1060; Peel (ed), above n 172, 1132­3 [22-004].

289 290 291

292

Mitchell, Mitchell and Watterson (eds), above n 15, 376 [12-31]; Birks, An Introduction to the Law of Restitution, above n 59, 243­4; Virgo, above n 18, 326; contra Beatson, The Use and Abuse of Unjust Enrichment, above n 191, 74­5. New South Wales v Commonwealth Bank of Australia (2001) 217 ALR 691, 713 [151] (Young CJ in Eq); Equuscorp (2012) 246 CLR 498, 552 [136] (Heydon J); Roxborough (2001) 208 CLR 516, 557­8 [106] (Gummow J); Heckenberg v Delaforce [2000] NSWCA 137 (8 June 2000) [41] (Mason P), [87] (Beazley JA); Giedo [2010] EWHC 2373 (QB) (24 September 2010) [367] (Stadlen J); Goss [1996] AC 788, 798 (Lord Goff on behalf of Lord Jauncey of Tullichettle, Lord Steyn, Lord Hoffmann and Lord Cooke of Thorndon); David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 682 (Lord Goff); Ferguson (1992) 62 BLR 95; Ministry of Sound (Ireland) Ltd v World Online Ltd [2003] 2 All ER (Com) 823, 845 (Nicholas Strauss QC).

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appropriate case.293 As Heydon J in Equuscorp noted, the common law has already `much qualified' the total failure rule.294 Indeed, the total failure rule in Australia has been consistently subject to abrogation. Initially it was limited by the apportionment exception,295 before incidental296 and de minimis benefits297 were disregarded. There are also cases which contemplate apportionment on a partial failure298 or recovery on a partial failure where counter-restitution is relatively simple.299 Recovery on a partial failure may also be available if no satisfactory remedy exists.300 It is submitted that piecemeal change should be replaced by an excise of the total failure rule. Although distinguishing the action for a `failure of consideration' from the concept of `total failure of consideration' the plurality in Equuscorp did not consider the status of the total failure rule in detail.301 However, Keith Mason has suggested that there are strong hints in Equuscorp that failure of consideration need not be total.302 Not only can the High Court answer whether recovery should be available on a partial failure, they should. In light of several judgments of judges of that Court,303 as well as other common law decisions which either appear to allow for recovery on a partial failure, or suggest that such a claim could be supported,304 there is confusion surrounding the total failure rule.305 Some lower court judges
293

294

295

296

297

298

299

300

301

302 303

304

305

Hale DP, Lord Kerr, Lord Wilson and Lord Hughes agreed). Equuscorp (2012) 246 CLR 498, 552 [136]; quoting Peel (ed), above n 172, 1132­4 [22004]. Roxborough (2001) 208 CLR 516; Whincup (1871) LR 6 CP 78. (1871) LR 6 CP 78, 81 (Bovill CJ). David Securities (1992) 175 CLR 353; Giedo [2010] EWHC 2373 (QB) (24 September 2010); Rover [1989] 1 WLR 912; Rowland [1923] 2 KB 500. Baltic (1993) 176 CLR 344, 350 (Mason CJ); In the matter of Hair Industrie Penrith Pty Ltd, Hair Industrie Merrylands Pty Ltd [2015] NSWSC 1578 (27 October 2015) [50] (Black J); Luo v Zhai [2015] FCA 350 (17 April 2015) [36] (Perram J); Mason, Carter and Tolhurst, above n 8, 333 [926]. Ferguson (1992) 62 BLR 95; Goss [1996] AC 788, 798 (Lord Goff on behalf of Lord Jauncey of Tullichettle, Lord Steyn, Lord Hoffmann and Lord Cooke of Thorndon); David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). Roxborough (2001) 208 CLR 516, 557­8 [106] (Gummow J); Equuscorp (2012) 246 CLR 498, 552 [136] (Heydon J). Equuscorp (2012) 246 CLR 498, 518 [33] (French CJ, Crennan and Kiefel JJ); similarly, in the United Kingdom Supreme Court Lord Toulson noted the `lively academic debate' about the total failure rule, before deciding he need not decide on whether the total failure rule is still a part of the modern law; Barnes v Eastenders Cash & Carry plc [2015] AC 1, 42 [114] (Lord Toulson, with whom Baroness Hale DP, Lord Kerr, Lord Wilson and Lord Hughes agreed). Mason, above n 98. David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Equuscorp (2012) 246 CLR 498, 518 [33] (French CJ, Crennan and Kiefel JJ), 552 [136] (Heydon J); Roxborough (2001) 208 CLR 516, 558 [105] (Gummow J); Amann (1991) 174 CLR 64, 117 (Deane J). Ferguson (1992) 62 BLR 95, 106; Goss [1996] AC 788; Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 682 (Lord Goff). See Luo v Zhai [2015] FCA 350 (17 April 2015) [36] (Perram J).

Equuscorp (2012) 246 CLR 498, 518 [33] (French CJ, Crennan and Kiefel JJ); Barnes v Eastenders Cash & Carry plc [2015] AC 1, 43 [114] (Lord Toulson, with whom Baroness

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have even suggested that there is already no requirement of total failure.306

B Uniformity in Unjust Enrichment
1 Equitable Notions of Good Conscience The High Court in Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd reiterated that restitutionary recovery is based upon equitable notions of good conscience.307 Although restitution is not premised on judicial discretion, equitable principles can inform its application.308 The continued influence of equitable principles within unjust enrichment means regard should be had to `matters of substance over technical form'.309 Where only partial counter-performance of the basis has been provided, the plaintiff's intention that the defendant has a benefit will be vitiated.310 The defendant's retention is the same type of injustice as for a total failure.311 Substance demands recognition of the vitiation in both cases. This is particularly important in Australia where restitutionary relief turns on `who should properly bear the loss and why'.312 If the claimant bears the loss of a partially unfulfilled basis or condition, this would protect the defendant's right to a benefit in circumstances where they were never intended to benefit. The equitable `conscience spoken of here is a construct of values and standards against which the conduct of `suitors'-- not only defendants -- is to be judged'.313 As such considerations underlie restitutionary relief for an unjust enrichment, it is submitted that it offends conscience that a party is able to retain a benefit in those circumstances.
306

Clarke v Great Southern Finance Pty Ltd [2014] VSC 516 (11 December 2014) [4166] (Croft J); Wasada Pty Ltd v State Rail Authority of New South Wales [No 2] [2003] NSWSC 987 (15 December 2003) [20] (Campbell J); see also Ministry of Sound (Ireland) Ltd v World Online Ltd [2003] 2 All ER (Com) 823, 845 (Nicholas Strauss QC); see also Andrew Burrows, A Restatement of the English Law of Unjust Enrichment (Oxford

307

308

309 310 311 312

313

University Press, 2012) 88­9. (2014) 253 CLR 560, 568 [1], 573 [12] (French CJ), 593­5 [68]­[74] (Hayne, Crennan, Kiefel, Bell and Keane JJ), 618 [138] (Gageler J); See also Equuscorp (2012) 246 CLR 498, 516, 517 [32] (French CJ, Crennan and Kiefel JJ); Roxborough (2001) 208 CLR 516, 556­7 [103]­[104] (Gummow J); Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, 673 (Mason CJ, Wilson, Deane, Toohey and Gaudron JJ); Moses v Macferlan (1760) 2 Burr 1005. Baltic (1993) 176 CLR 344, 376 (Deane and Dawson JJ); Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; Equuscorp (2012) 246 CLR 498. Baltic (1993) 176 CLR 344, 376 (Deane and Dawson JJ). Virgo, above n 18, 324; Charles Mitchell, above n 15, 1060. Burrows, The Law of Restitution, above n 15, 331. Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, 596­7 [78] (Hayne, Crennan, Kiefel, Bell and Keane JJ). Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, 400 [16] (French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ); quoted in Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560, 596 [76] (Hayne, Crennan, Kiefel, Bell and Keane JJ).

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Counter-restitution is required of benefits in a restitutionary context, and is based on the same principles as the requirement of counterrestitution in the context of rescission. As Heydon, Leeming and Turner note `equity does not demand a total failure of consideration' in the context of counter-restitution.314 The link between equity and unjust enrichment noted in ASFL suggest the same standards should apply.315 Indeed, recovery on a partial failure for unjust enrichment was contemplated by Deane J in Amann:
Even...where the consideration has not failed completely, it would seem that that doctrine will found a direct action for the excess of money paid by the innocent party to the other party over the value of any consideration actually received if the circumstances are such that it would be unconscionable conduct on the part of the guilty party to retain the excess.316

Unconscionability in this context refers to the requirement of a vitiating factor,317 exemplifying that `contemporary legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience'.318 Just as there is no total failure requirement for counter-restitution, substance and uniformity suggest that there should be no total failure requirement for a failure of basis. 2 Recovery at General Law The inability of a court to provide for restitution on a partial failure of basis has contributed to a fragmentation of the law. There is a strand of case law clearly representing unjust enrichment for a failure of basis, but the right to recovery is treated as distinct.319 These are cases where payments have been made before a contract is terminated. It is exemplified in the case of Dies where a buyer paid for a tranche of arms and ammunition but refused delivery.320 The buyer received nothing for his money, and Virgo points out that this is an `archetypal case of total failure of consideration'.321

314

315 316 317

Heydon, Leeming and Turner, above n 27, 596 [18-130]; see also Real Estate Securities Ltd v Kew Gold Links Estate Pty Ltd [1935] VLR 114. Australian Financial Services & Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560. Amann (1991) 174 CLR 64, 117. Equuscorp (2012) 246 CLR 498, 518 [32] (French CJ, Crennan and Kiefel JJ); quoting Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 156 [150] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

318

Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164

319

320 321

CLR 662, 673 (Mason CJ, Wilson, Deane, Toohey and Gaudron JJ). Dies [1939] KB 724; Intertransport International Private Ltd v Donaldson [2005] VSCA 303 (15 December 2005) [29] (Chernov JA), [45] (Eames JA); Moffet Farms v Pauls Services (1991) 7 SR (WA) 351 (`Moffet '); Vandyke v Vandyke (1976) 12 ALR 621, 637; Turner v Californian Cars & Sports Trucks Pty Ltd [2002] NSWSC 666 (2 August 2002) [22] (Davidson AJ); Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132 (3 December 2003) [51]­[54] (Young CJ in Eq). Dies [1939] KB 724. Virgo, above n 18, 335.

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However, Sable J in Dies expressly stated that `the real foundation of the right ... is not a total failure of consideration ... but the right of the purchaser derived from the terms of the contract and the principle of law applicable to recover back his money'.322 This approach is explicable by the fact that Sable J was bound by Chandler which held restitution could not occur unless a contract was void ab initio,323 so an action for failure of basis was impossible.324 In Baltic McHugh J said that the buyer's right to recover outside of any damages claim should have been based on a failure of basis, as have Birks, Lord Goff, Jones, Mason, Carter and Tolhurst.325 Cases have also used it as an example of a failure of basis.326 However, Mason CJ and Gaudron J in Baltic adopted the reasoning of Beatson that the right to recover rests upon a construction of the contract.327 Thus there is an alternative rule occasionally invoked for recovery outside of a failure of basis. This allows for recovery of a payment due to the terms of the contract, though there is no express term allowing for recovery.328 In Australia, Moffet involved delivery of a cultivator which was cancelled by the purchaser after they had made partial payment.329 Hammond DCJ decided in accordance with Beatson's interpretation of Dies.330 Similarly, in McDonald the payee was able to recover instalment payments that were made when the contract for the sale of land was discharged for a repudiatory breach before performance was rendered.331 It has sometimes been suggested that, akin to Moffet, the right of

322 323 324

325

326

327

328

329 330

331

203, 236­7; Mitchell, Mitchell and Watterson (eds), above n 15, 58­9 [3-36]­[3-39]; Virgo, above n 18, 335; Mason, Carter and Tolhurst, above n 8, 424 [1125]; Contra John Tarrant, `Total Failure of Consideration' (2006) 33 University of Western Australia Law Review 132, 144. Rover [1989] 1 WLR 912; PCE Investors Ltd v Cancer Research UK [2012] EWHC 884 (Ch); Dr Bronte Douglass v Lawton Pty Ltd [2007] NSWCA 89 (18 April 2007); Cadogan Petroleum Holdings Ltd v Global Process Systems [2013] CLC 721; Omar v El-Wakil [2001] EWCA Civ 1090 (11 July 2001); Quirkco Investments Ltd v Aspray Transport Ltd [2011] EWHC 3060 (Ch) (23 November 2011). Baltic (1993) 176 CLR 344, 352­3 (Mason CJ), 386 (Gaudron J); Beatson, The Use and Abuse of Unjust Enrichment, above n 191. Turner v Californian Cars & Sports Trucks Pty Ltd [2002] NSWSC 666 (2 August 2002); Moffet (1991) 7 SR (WA) 351; Dies [1939] KB 724. (1991) 7 SR (WA) 351. Ibid 355­6; Dies [1939] KB 724; Beatson, The Use and Abuse of Unjust Enrichment, above n 191. McDonald (1933) 48 CLR 457.

Dies [1939] KB 724, 744. Chandler (1904) 1 KB 493. See Cadogan Petroleum Holdings Ltd v Global Process Systems [2013] CLC 721, 733­4 [23] (Eder J); Burrows, The Law of Restitution, above n 15, 3354­5; Mitchell, Mitchell and Watterson (eds), above n 15, 58­9 [3-36]­[3-39]; Birks, An Introduction to the Law of Restitution, above n 203, 236­7; Virgo, above n 18, 335. Baltic (1993) 176 CLR 344, 390; Birks, An Introduction to the Law of Restitution, above n

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recovery was contractual.332 However, the widely held position that these cases exemplify recovery on a failure of basis is the better view.333 Beatson appreciates the `intellectual attraction' in the approach based on failure of basis but prefers the approach based on construction largely because a claim based on a failure of basis `requires consideration to have totally failed'334 and `the artificiality of the concept of total failure of consideration...suggest that in its current state of development it cannot provide a satisfactory general solution'.335 He also lamented the fact that where there has been substantial performance outside of the basis the performing party will have no recompense under a failure of basis.336 Thus, for Beatson, the parallel right to recover combats the injustice of the total failure rule. Yet each of these situations could be remedied. Performance that is not the basis must be compensated by counter-restitution. Further, allowing for restitution on a partial failure will allow a party to recover when they have received some counter-performance of the basis. This would allow these two rights of recovery to be brought together as the current major difference is that the approach based on construction allows recovery on a partial failure.337 The unification could be achieved without detriment; where both have pleaded that a person is able to recover their money on either.338 The rule in Dies is sometimes thought to have come from equity. 339 Yet Beatson thought that gave too much scope for judicial discretion. 340 An approach based on failure of basis gives a principled foundation for recovery which better incorporates equitable considerations. It also avoids the problem that the contractual construction approach skirts dangerously close to reviving the rejected fallacy of the implied contract theory of restitution.341 Therefore it should be recognised that the right to recover in
332

Ibid; See Stocznia [1998] 1 WLR 574, 589 (Lord Goff); Beatson, The Use and Abuse of Unjust Enrichment, above n 191; Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132 (3 December 2003). [81] (Bell J); J W Carter and G J Tolhurst, `Conditional Payments and Failure of Consideration: Contract or Restitution?' (2001) 9 Asia Pacific Law Review 1; J W Carter, Carter's Guide to Australian Contract Law (LexisNexis Butterworths, 2nd ed, 2011) 485 [3012]; N C Seddon, R A Bigwood and M P Ellinghaus, Cheshire & Fifoot: Law of Contract (LexisNexis Butterworths, 10th ed, 2012) 1239 [26.4]; J W Carter, Elisabeth Peden and G J Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed, 2007) 892 [37-35], 894 [37-38]; Mitchell, Mitchell and Watterson (eds), above n 15, 363 [12-01]. Ibid 71; See Dr Bronte Douglass v Lawton Pty Ltd [2007] NSWCA 89 (18 April 2007). Beatson, The Use and Abuse of Unjust Enrichment, above n 191, 71. Ibid 74­7; Rover [1989] 1 WLR 912. Beatson, The Use and Abuse of Unjust Enrichment, above n 191, 74­7. Turner v Californian Cars & Sports Trucks Pty Ltd [2002] NSWSC 666 (2 August 2002) [22] (Davidson AJ); Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132 (3 December 2003) [51]­[54] (Young CJ in Eq). Geeveekay Pty Ltd v Director of Consumer Affairs Victoria (2008) 19 VR 512, 530­1 [79]­ [81] (Bell J); Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132 (3 December 2003) [51]­[54] (Young CJ in Eq). Beatson, The Use and Abuse of Unjust Enrichment, above n 191, 50­1. Carter and Tolhurst, above n 333, 10.

333

Geeveekay Pty Ltd v Director of Consumer Affairs Victoria (2008) 19 VR 512, 530­1 [79]­

334 335 336 337 338

339

340 341

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cases like Dies and Moffet is truly a right to restitution on a failure of basis. Allowing recovery on a partial failure of basis would allow this to happen. Failure of basis can also explain the associated rule as to why a party will be unable to reclaim a deposit made in similar transactions.342 The law to determine whether a payment is a deposit asks questions similar to those asked when determining the basis of a transaction.343 Further, the basis of a deposit will almost always be as an earnest or security for a contract,344 which will not fail where the contract is formed and subsequently fails. It is a payment to secure formation of a contract, not its performance.345 3 Quantum Meruit An analysis of the case law surrounding quantum meruit also evidences why the coherency of the law requires recognition of restitution for a partial failure. It has been acknowledged by the High Court that quantum meruit is based on a claim for restitution and hence can be based on unjust enrichment,346 and therefore a failure of basis.347 Such an interpretation has been applied to the High Court's reasoning in Pavey, where building work was carried out on an unenforceable oral agreement.348 In such a case the basis for doing the work is understood as payment of a reasonable sum, this will fail if payment is an unreasonably low amount or nothing.349 In the same sense that a part payment of a capital sum can constitute partial performance of a basis,350 quantum meruit claims have been suggested as evidencing restitution on a partial failure of basis.351 Yet it is difficult to understand how a payment can be partially reasonable, enlivening a partial failure. The better view is that a requirement of reasonableness is only capable of entire performance.352 In this regard it is crucial to remember that counter-performance does not always equal partial performance of the basis.

342

Gribbon v Lutton [2002] QB 902, 920­1 [59]­[62] (Robert Walker LJ); Howe v Smith
(1884) 27 Ch D 87.

343 344 345 346

347

Stephens v The Queen (1978) 139 CLR 315. Farr Smith & Co Ltd v Messers Ltd [1928] 1 KB 397. See Lloyd v Nowell [1895] 2 Ch 744. Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635, 664 [83] (Gleeson CJ); Pavey (1987) 162 CLR 221, 227 (Mason CJ and Wilson J), 255­6 (Deane J). Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014); Burrows, The Law of Restitution, above n 15, 346, 347; Virgo, above n 18, 308; Pavey (1987) 162 CLR 221; Andrew Burrows, `Free Acceptance and the Law of Restitution' (1998) 104 Law Quarterly Review 576; Edelman and Bant, above n 2, 258. Goss [1996] AC 788.
Burrows, `Free Acceptance', above n 348; Edelman and Bant, above n 2, 258. Mitchell, Mitchell and Watterson (eds), above n 15, 2077 [29-071] n 425; Burrows, The Law of Restitution, above n 15, 333; Beale (ed), above n 191, vol 1, 2073 [29-066]. See also Edelman and Bant, above n 2, 258­9. Bryan, above n 5.

348

349 350 351

352

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However, there may be other circumstances in a claim where the basis is capable of part performance and acceptance of partial failure as a vitiating factor will improve the uniformity of judgments concerning unjust enrichment.353 This is not least because quantum meruit is an example of undertaking complicated valuations, exposing the transparency of some of the arguments against recognising restitution on a partial failure.354 4 Statute Allowing recovery on a partial failure of basis would also bring the common law into line with provisions within the national Australian Consumer Law,355 and the frustrated contracts Acts in New South Wales, South Australia and Victoria.356 Although other acts incidentally deal with a partial failure of consideration, it suffices to note these acts.357 It is now well established that common law can be informed by statute,358 and generally the development of the common law should parallel legislative reform.359 It has been noted in the High Court that this will only be appropriate when there is pattern of federal statute law or a consistent pattern of state legislation;360 and established authority should only be disturbed after careful consideration of earlier decisions and the consequences.361 Related statute law is piecemeal, as unjust enrichment is one of the common law's last great domains. Careful analysis of the authorities and rationale behind the total failure rule shows the legislature has been

353 354

355

356

357 358

359 360

361

Burrows, The Law of Restitution, above n 15, 333. See Pavey (1987) 162 CLR 221; British Steel Corp v Cleveland Bridge & Engineering Co Ltd [1984] 1 All ER 504; William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932; Way v Latilla [1937] 3 All ER 759; Competition and Consumer Act 2010 (Cth) s 40(2); Burrows, The Law of Restitution, above n 15, 331. Competition and Consumer Act 2010 (Cth) ss 243(d), 278, 280; Fair Trading (Australian Consumer Law) Act 1992 (ACT); Fair Trading Act 1987 (NSW); Consumer Affairs and Fair Trading Act (NT); Fair Trading Act 1989 (Qld); Fair Trading Act 1989 (SA); Australian Consumer Law (Tasmania) Act 2010 (Tas); Fair Trading Act 2010 (WA); Australian Consumer Law and Fair Trading Act 2012 (Vic). Frustrated Contracts Act 1959 (Vic); Frustrated Contracts Act 1978 (NSW) pt 3; Frustrated Contracts Act 1988 (SA) pt 3; See also Law Reform (Frustrated Contracts) Act 1943 (UK); Edelman, `When a Total Failure is not a Total Failure', above n 161. See generally Mason, Carter and Tolhurst, above n 8, 69 [172], 450 [1147]. Esso Australia Resources Ltd v The Commissioner of Taxation (1999) 201 CLR 49, 62­3 [25]­[28] (Gleeson CJ, Gaudron and Gummow JJ); see also Moorgate Tobacco Co Ltd v Philip Morris Ltd [No 2] (1984) 156 CLR 414; R v L (1991) 174 CLR 379; Warnink v J Townend & Sons (Hull) Ltd [1979] AC 731, 743 (Lord Diplock); Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, 843; Moragne v States Marine Lines Inc (1970) 398 US 375; South Pacific Manufacturing Co Ltd v New Zealand Security Consultants Investigations Ltd [1992] 2 NZLR 282. Erven Warnink BV v J Townend & Sons (Hull) Ltd [1979] AC 731, 743 (Diplock J). Esso Australia Resources Ltd v The Commissioner of Taxation (1999) 201 CLR 49, 62­3 [25]­[28] (Gleeson CJ, Gaudron and Gummow JJ). Esso Australia Resources Ltd v The Commissioner of Taxation (1999) 201 CLR 49, 71 [55] (Gleeson CJ, Gaudron and Gummow JJ).

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correct to remove it.362 This was noted by Young CJ in Equity in New South Wales v Commonwealth Bank of Australia where he said that the distinction between total and partial failure is `really a rather awkward concept that would best be forgotten for many reasons and, indeed, under the Sale of Goods Act 1923 (NSW) it has been abrogated'.363 As Robert Goff J said of the Act which the Victorian frustration legislation is modelled, `underlying the Act ... is prevention of unjust enrichment of either party to the contract at the other's expense'.364 The same rationale supporting partial failure as a vitiating factor in those statutory contexts apply more generally to the common law. The common law should also allow for recovery on a partial failure.

C Artificial Distinction
The application of the total failure rule has been perceived as artificial.365 That perception has been challenged,366 but irrespective, the distinction between incidental and bargained for benefits can be artificial. Rowland is one case argued to show this artificiality.367 A car was purchased and used for two months before it was reclaimed due to it having been stolen.368 The Court of Appeal held that there was a total failure of basis because there was no transfer of title.369 The use and enjoyment of the car was held not to have been part of the basis of the transfer, although the use of the car would clearly have resulted from the transfer.370 In Rover the benefits received were held to not be bargained for benefits, although their delivery was essential for the satisfaction of the basis.371 In both cases, where the incidental benefits were directly linked to the basis of the transfer, the distinction can appear contrived. Burrows suggests cases such as Rowland and Rover exemplify an artificial view of total failure.372 However with respect, the better view is
362

Competition and Consumer Act 2010 (Cth) s 243(d); Fair Trading (Australian Consumer Law) Act 1992 (ACT); Fair Trading Act 1987 (NSW); Consumer Affairs and Fair Trading Act (NT); Fair Trading Act 1989 (Qld); Fair Trading Act 1989 (SA); Australian Consumer Law (Tasmania) Act 2010 (Tas); Fair Trading Act 2010 (WA); Australian Consumer Law and Fair Trading Act 2012 (Vic); Frustrated Contracts Act 1959 (Vic); Frustrated Contracts Act 1978 (NSW) pt 3; Frustrated Contracts Act 1988 (SA) pt 3; See also Law Reform (Frustrated Contracts) Act 1943 (UK); see Toll FGCT Pty Ltd v Alphapharm Pty Ltd (2004)

363 364

365

366 367 368 369 370 371 372

219 CLR 165, 182­3 [48] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). (2001) 217 ALR 691, 713 [151]. BP Exploration Co (Libya) Ltd v Hunt [No 2] [1979] 1 WLR 783, 799, affd BP Exploration Co (Libya) Ltd v Hunt [1981] 1 WLR 232; Law Reform (Frustrated Contracts) Act 1943 (UK); Frustrated Contracts Act 1959 (Vic). Burrows, The Law of Restitution, above n 15, 324; Virgo, above n 18, 324; Contra Paul Mitchell, above n 15, 193­6; Wilmot-Smith, above n 44. Paul Mitchell, above n 15, 193­196; Wilmot-Smith, above n 44, 420. Rowland [1923] 2 KB 500. Ibid. Ibid. Ibid. Ibid. Burrows, The Law of Restitution, above n 15, 325; Burrows, A Restatement, above n 306, 88­9.

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that these cases show the incidental benefits can be substantial and important. This highlight the fact that distinguishing between incidental benefits and bargained for benefits can disregard the importance and substantial value of the former. Such a distinction is entirely artificial considering the rationale behind the total failure rule is spurious, and the requirement of counter-restitution can operate with incidental and non-incidental benefits. The law has the mechanisms in place so that the right to recover need no longer be reliant on the distinction between incidental benefits and bargained for benefits, and instead can focus on when a transfer is vitiated.

D Recovery on a Partial Failure
It is submitted that the best course of reform would be to recognise recovery on a partial failure. The dicta of the majority in David Securities,373 indicates that this can be achieved by apportioning payments to various aspects of the contract and ordering counterrestitution to the defendant where required. The common law is sophisticated enough to ensure the protection of the contractual risk. Some commentators have suggested that recovery on a partial failure should require that the failure is substantial in order to justify restitution,374 leaving no scope for a narrow view of basis.375 Considering recovery will require counter-restitution and will rarely be available on a subsisting contract this is unnecessary as recovery will only be open on a partial failure in justifiable circumstances. This will also remove any need for a court to decide when a partial failure can be said to be `substantial'. The focus should be on when a transfer is vitiated, and not constrained by considerations of totality or substantiality which confuse the reason for relief in such cases. The removal of the total failure rule without a need for substantiality also allows for a narrower conception of basis to be adopted in Australia­ leaving no room for a partial failure. The effect would be the same, and the same considerations would still drive relief, absent any examination of partial failures. Either reform would lead to the law being more uniform, flexible and better able to work justice. It is important to examine what a court would require before restitution would be allowed. It is submitted that restitution should be allowed for an unjust enrichment due to a failure of basis where: 1. A party is enriched. 2. The enrichment is at the other party's expense.

373

David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and

374 375

McHugh JJ). Wilmot-Smith, above n 44, 429­31; Mason, Carter and Tolhurst, above n 8, 333­4 [926]. Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 (7 May 2014) [112] (Edelman J).

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3. The basis on which the agreement or transfer was entered must have failed in part or in full.376 4. Restitution will be recognised as unjust in the circumstances where: a. The contract is subsisting and awarding restitution would alter the fundamental allocation of risk.377

b. There has been some performance by the respondent and the claimant cannot provide substantial counterrestitution of the benefit.378 Thus, where it would be just to do so, restitution would be ordered with adjustments made for apportioned parts of a payment,379 and/or an accompanying order of counter-restitution for partial or incidental performance.380

VII Conclusion
Parts II, III and IV of this article explore when and how a party can receive restitution for a failure of basis, and the circumstances where the total failure rule does not or may not apply. This evidenced a history of abrogation. Part V established that the justification for the requirement of a total failure is lacking. It also established that generally in unjust enrichment there is and should be a requirement of counter-restitution, and a limit of when restitution will be allowed on a subsisting contract. Part VI established that reform is possible, that it should be undertaken, and that this would make restitution on an unjust enrichment more uniform. It also explained the ease with which this could occur. This article has shown that the rule requiring a total failure has in many cases been circumvented. The general requirement of counterrestitution and limit of restitution on subsisting contracts are more effective ways to deal with the concerns justifying the total failure requirement. The case for it is limited and the case for recovery on a partial failure is compelling. In cases of a partial failure, there is an unjust retention of a benefit in the sense of an unfulfilled basis or condition. It would be wrong to make the claimant bear this loss. This highlights the
376

Roxborough (2001) 208 CLR 516; Baltic (1993) 176 CLR 344; Fibrosa [1943] AC 32; Goss

377

378

379 380

[1996] AC 788. Roxborough (2001) 208 CLR 516; Baltic (1993) 176 CLR 344; Anderson v Mcpherson [No 2] [2012] WASC 19 (25 January 2012) [205], [239] (Edelman J); Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 (2008) 232 CLR 635, 655 [46] (Gleeson CJ), 663 [79] (Gummow, Hayne, Crennan and Kiefel JJ); Coshott v Lenin [2007] NSWCA 153 (20 June 2007). Roxborough (2001) 208 CLR 516; Baltic (1993) 176 CLR 344; Goss [1996] AC 788; David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). See Ferguson (1992) 62 BLR 95. David Securities (1992) 175 CLR 353, 383 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ); Heckenberg v Delaforce [2000] NSWCA 137 (8 June 2000); Goss [1996] AC 788.

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oddity of the artificial bar that is the total failure rule. It is therefore submitted that the total failure rule should be removed. It is important to note that, if this occurs, the improvement on substance does not mean that all technical form will be lost. It has been shown that allowing recovery on a partial failure in specific circumstances simply takes advantage of existing technical form in unjust enrichment. Recovery after a partial failure would provide a more principled approach to unjust enrichment and failure of basis that focuses on vitiation of a transfer and equitable considerations. The removal of the total failure requirement will give the courts more flexibility without opening them to a litany of new claims. The requirement of a total failure should be dispensed with, and the law will be better for it.