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The Unilateral Mistaken Payment Case

Traditionally a mistake of fact could not ground recovery unless it was a ‘liability mistake’, in the sense that a mistake as to a fact which, if true, would have given rise to a legal liability to make the payment. In other words, the payment must have been made with the intention of discharging a legal obligation. In the case Alken v Short(1856) 1H & N 210; 156 ER 1180 Exchequer Chamber, the mistake had to be as to a fact which, if true, would make the person paying liable to pay the money; not where, if true, would merely make it desirable that he should pay the money.

In this scenario, if the fact was true, the bankers were at liberty to pay or not, as they pleased. Instead, relying on the belief that the defendant had a valid security, they, having a subsequent legal mortgage, chose to pay off the defendant’s charge. Body The American Restatement of the Law of Restitution: Quasi Contracts and Constructive Trusts, 1937, states the principle of unjust enrichment in the following simple terms: “A person who has been unjustly enriched at the expense of another is required to make restitution to the other.

” And, one of the leading Commonwealth texts on restitution details on the perception as follows: “[The rule of unjust enrichment] presumes three things. First, the defendant must have been enriched by the receipt of a benefit. Secondly, that benefit must have been gained at the plaintiff’s expense. Thirdly, it would be unjust to allow the defendant to retain that benefit. … ” Enrichment occurs where the loss of value to the plaintiff is gained by the defendant. Unjust circumstances as evidenced by the cases labeled unjust factors.

A central thesis of Birks approach is that enrichment can result from the transfer of value as opposed to a proprietary interest. Value replaces the notion of proprietary interest in the Birks scheme because it is a much more flexible and realistic concept. Therefore the plaintiff in an unjust enrichment action does not have to prove that the defendant received the plaintiff’s proprietary interest in property, all the plaintiff has to show is that the defendant gained the value of the plaintiff’s proprietary interest.

Value supersedes the need to consider the technical rules of the passing of property and in so doing makes unjust enrichment applicable in cases where a proprietary interest has in fact passed to the defendant or in cases where no proprietary interest has passed. It is the receipt of the value of the plaintiff’s property that is crucial not receipt of a proprietary interest. In summary enrichment remedies the acquisition of value by the defendant at the expense of the plaintiff in unjust circumstances.

In his final book, Unjust Enrichment, Birks’ study of civilian model of unjust enrichment led him to take the radical step of abandoning the identification of ‘unjust factors’ altogether, in favour of awarding restitution in unjust enrichment on the more general ground that there was no explanatory basis for the defendant’s enrichment. Birks warmly welcomed the later High Court decision of David Securities, which dealt with restitution of mistaken payments. It was not just the removal of the bar on recovery of payments made under a mistake of law that won his approval.

Of equal importance was the High Court’s logical analysis of the elements of an unjust enrichment claim, which clearly identified the ground of restitution. In a passage that may come to be relevant for determining the precise scope of the subsequent High Court decision in Roxborough v Rothmans of Pall Mall Australia Ltd, the decision also firmly rejected any requirement that the plaintiff must show that the enrichment was ‘unjust’, in addition to proving the existence of an established ground of restitution.

There was justifiable grumbling about the tortuous analysis of ‘good consideration’ received by a claimant in unjust enrichment and regarding the uncertain scope of the defence of voluntary submission to an honest claim. However, these were minor reservations, and the final verdict on David Securities was that it ‘once again demonstrates the scholarly and innovative qualities of the High Court of Australia under Mason CJ. ’

It is doubtful whether the High Court had committed itself to a policy of innovation in the law of restitution going beyond the removal of well-known cobwebs like the ‘mistake of law’ rule. But in any event, any illusions about the Court taking the lead in removing doctrinal obstacles to the recognition of a coherent law of unjust enrichment were soon dispelled. Baltic Shipping Co v Dillon confirmed the survival of what unjust enrichment writers regarded as two relics of the pre-unjust enrichment action for money had and received .

The first was the principle that restitution will only be ordered for failure of consideration if the failure is total. Birks justified the plaintiff’s failure to recover the price of her cruise ticket in Baltic Shipping by reference to a fact not relied upon in the High Court judgments, namely that she had already received a ‘pro rata’ refund from the shipping company. The Court’s insistence on the totality of a failure of consideration, he argued, ‘now looks very old-fashioned’.

It is still an open question whether the requirement will be abolished or simply outflanked by the technique approved in David Securities of apportioning consideration where the basis of apportionment can be clearly identified. In Roxborough , the majority was set to sever contractual payments in respect of an unconstitutional tax from the rest of the purchase price for cigarettes in order to permit restitution of the contractual payments. The tax amounts payable were clearly distinguished in the defendant payee’s invoices.

However, courts will not always have the benefit of transparent invoicing to assist the apportioning process and, in its absence, apportionment may not be possible. A more sensitive method of balancing the claims of both payer and payee, where both have conferred benefits under a vitiated transaction or terminated contract, is to allow the plaintiff restitution for partial failure of consideration, offset by an award of counter-restitution to the defendant in respect of benefits conferred on the plaintiff.

The second doctrinal relic preserved by the High Court in Baltic Shipping is that a plaintiff must elect to claim either for expectation damages or for restitution. The rule against cumulation of remedies is based on sound policy, but the election requirement is a blunt instrument for giving effect to the policy. If, upon contract for breach termination, damages compensate the plaintiff for loss of the defendant’s expected full performance, then that award must take account of the fact that the plaintiff has to pay the price of the performance.

The plaintiff is not entitled to restitution of the price in addition to damages. Yet it seems preferable, as Birks and others have argued, to apply the principle against double counting in order to limit recovery, rather than to put the plaintiff to an election between claiming compensation for losses and seeking restitution of gains. In spite of the plaintiff’s failure to obtain restitution of her fare, Baltic Shipping is not inconsistent with the model of unjust enrichment championed by Birks.

To the extent that the High Court recognised failure of consideration, however attenuated, as a ground of restitution for unjust enrichment, the decision supports that model. An equally more serious challenge to the recognition of unjust enrichment as an independent head of obligation and also to Birks’ model of the law of obligations, predicated as it is on a series of responses to events, is posed by the strong and distinctive role played by equitable doctrine in Australian private law.

Apart from total failure of consideration , there are other relevant bases of restitution for claims against public authorities have included duress, where a public authority has made an unlawful threat to seize goods in respect of a debt which was not lawfully due; extortion by colour of office, where ‘a public officer demands and is paid money he is not entitled to, or more than he is entitled to, for the performance of his public duty’; and absence of consideration where the expected benefit from the defendant could not be provided as a matter of law.

Conclusion In conclusion, it would be unprecedented to assess Birks’ contribution to the recognition and development of unjust enrichment as an independent head of obligation. We are too close to his ideas on the subject, and to the controversies they generated, to be sure of their lasting legacy to the development of the law. Yet, as this brief survey shows, he undoubtedly influenced the thinking of High Court judges on the direction of Australian law.

His commitment to a structured inquiry into the elements of an unjust enrichment claim was accepted by the High Court in David Securities and his advocacy of a broad definition of ‘failure of consideration’ was influential in Roxborough. Moreover, good theorising about the law plays an important reactive role in legal scholarship. It compels opponents of a theory to define their position more accurately in order to better attack it. Birks has placed the onus on his Australian critics to define what is meant by a ‘conscience-based’ approach and to defend, if they can, its predictive value within private law.


David Securities Pty Ltd v Commonwealth Bank of Australia, (1992) 175 CLR 353 Sharon Erbacher, (2002), Restitution law, 2nd Edition, Routledge Cavendish. Goff and Jones, (2002) The Law of Restitution, 6th Edit. , London: Sweet & Maxwell, at p. 17, para. 1-016 Peter Birks, (2004) ‘Reviews and Notes: Meagher, Gummow and Lehane’s Equity Doctrines and Remedies. 4th ed’ 120 Law Quarterly Review 344. Peter Birks, (1992) ‘Modernising the Law of Restitution’ (1993) 109 Law Quarterly Review 164. The case: David Securities 175 CLR 353, 359–60 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ).

Peter Birks, (1995) ‘Overview: Tracing, Claiming and Defences’ in Peter Birks (ed), Laundering and Tracing 289, 340–1; G H Treitel, Remedies for Breach of Contract: A Comparative Account (1988) 102–4. P. D. Maddaugh and J. D. McCamus, (2004) The Law of Restitution, (Looseleaf Edit. ), (Aurora, Ont. : Canada Law Book, at pp. 3-16 – 3-18 Roxborough v Rothmans of Pall Mall Australia Ltd, (2001) 208 CLR 516 Westdeutsche Landesbank Girzoentrale v Islington LBC [1994] 4 All ER 890 (Hobhouse J); [1994] 1 WLR 938 (CA).

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