CRITIQUE AND COMMENT
COMMON LAW DIVERGENCES
When Sir Owen Dixon commented in 1942 that no good could come of
‘divergences’ between the common law administered in
English and
Australian courts, the then orthodoxy was that the common law of England was the
common law to be applied in Australia.
Over 40 years later and in a much changed
constitutional and legal environment, Sir Anthony Mason highlighted the need to
fashion
a common law for Australia that was best suited to our conditions and
circumstances. The common law of England, like the law of other
jurisdictions,
was simply a possible source of law in Australia. The assistance properly to be
derived from that source is a recurrent
issue for our courts. The recent
decision of the Full Court of the Federal Court in Grimaldi v Chameleon
Mining NL [No 2] provides an extended illustration. This lecture focuses
primarily upon equitable doctrine and remedy in Australia and England both
to
illustrate significant differences between the two legal systems and to explain
at least some of the causes. Reference necessarily
will be made to how
divergence is reflected in the differing extents to which commercial dealings
are regulated in the two jurisdictions;
to the debates about unjust enrichment
and its province; and to the significance statutes have in contriving the
context in which
Australia’s common law is
evolving.
CONTENTS
I
INTRODUCTION
Let me begin by setting the scene for what follows. The story of the changes
in the formal character of the common law in Australia
is well-known and
requires little elaboration. Seventy years ago, ours was the common law of
England. So much was this felt to be
so that Sir Owen Dixon could state
uncontroversially:
We are studious to avoid establishing doctrine which English courts would
disavow. For we believe that no good can come of divergences
between the common
law as administered in one jurisdiction of the British Commonwealth and as
administered in
another.[1]
Thus, it
was that the rules of contract law were the rules of English contract law. This
was their justification. That was
sufficient.
[2]
Forty-five years later, but in a changed Australia, Sir Anthony Mason gave
his imprimatur to a process which was then well in train:
There is ... every reason why we should fashion a common law for Australia that
is best suited to our conditions and circumstances.
... The value of English
judgments, like Canadian, New Zealand and for that matter United States
judgments, depends on the persuasive
force of their
reasoning.[3]
A year
later the transition from the common law of England to the
common law of Australia was belatedly formalised for all practical purposes
in the amendment made to
s 80 of the
Judiciary Act 1903
(Cth).
[4] As Justice
James Allsop neatly put it extra-curially: ‘The common law of England
had
ceased, literally overnight, to be law, but had become a source of law for
legal
development’.
[5]
Today, it is abundantly clear that there are separate bodies of English and
Australian common law.
[6] And there
are clear ‘divergences’ reflected, not merely in isolated and
specific court rulings, but also in differing
casts of mind, distinctive
methodologies and markedly different contexts (particularly legislative ones) in
which the respective
bodies of common law do their work. My purpose in this
lecture is to illustrate these matters.
If I have a message it is this. We have in the past borrowed, and will
continue to borrow, from abroad in the endeavour of making
our own law. But to
adapt the language of a great Californian Chief Justice and jurist, Roger
Traynor, we must, of necessity, ‘subject
[foreign decisions] to inspection
at the border to determine their adaptability to native
soil’.
[7]
This challenge for judge and counsel alike was demonstrated starkly in the
very recent decision of the Full Court of the Federal Court
in
Grimaldi v
Chameleon Mining NL [No 2]
(‘
Grimaldi’)
[8]
(a decision in which I participated). It did so in two respects. First,
despite the importuning of the appellants’ counsel,
the Court declined to
engage in detailed consideration of apparently relevant English authority on de
facto directors.
[9] This was
because, when examined by the Court, ‘the legislative context of the
English decisions ... so differs from Australia’s’,
as to warrant
their being treated with considerable
reserve.
[10] In any event, the
present state of Australian jurisprudence on de facto directors made it
unnecessary to seek guidance from
abroad.
[11]
The second illustration from
Grimaldi is the more revealing. In the
late 19
th century, the English Court of Appeal held in
Lister
& Co v Stubbs[12] that,
while an agent was accountable to its principal for a bribe or secret commission
received, the agent did not hold the bribe
as a constructive trustee nor could
the bribe be traced by the principal. That proposition was recently reaffirmed
by the English
Court of Appeal in
Sinclair Investments (UK) Ltd v Versailles
Trade Finance Ltd (‘
Sinclair
Investments’),
[13]
notwithstanding the contrary conclusion reached by the Privy Council in
1994.
[14] The Full Court in
Grimaldi refused to follow
Sinclair Investments. It applied what
it considered to be orthodox Australian fiduciary law; it endorsed the policy
reasons informing the grant of proprietary
relief to sanction the corruption of
fiduciaries,
[15] and in so doing it
aligned Australian law on bribes and secret commissions with that of the United
States,
[16]
Canada,
[17]
Singapore
[18] and New
Zealand.
[19] To revert to my opening
comments, this is the legal universe of Sir Anthony Mason, not Sir Owen
Dixon.
The subject of divergence has attracted recent scholarly attention in this
country.
[20] However, it has been
the ongoing, sometimes strident, debate between the predominantly English
advocates of an encompassing law of
restitution and the predominantly Australian
defenders of equity against the extravagant claims of unjust enrichment which
has given
the subject its sharper
edge.
[21]
My own interest is longstanding. Over 40 years ago, as a student in
Cambridge, I began to write an equity related textbook. Save for
the slight
marring caused by the need to refer to differing local statutory regimes in the
two countries, the equity I wrote about
appeared to be able to be described
properly as Anglo-Australian law. One matter was apparent to me at the time. A
very large part
of the English case law to which I referred was from the
19
th century. The 20
th century decisions — and they
were not voluminous — were primarily those of first instance judges. Save
for the first
decade or so of that century, House of Lords decisions were few
and far between and, as the century progressed, their reasoning appeared
more
problematic to Australian eyes. I would instance the two fiduciary decisions,
Regal (Hastings) Ltd v
Gulliver[22] and
Boardman v
Phipps[23] to illustrate the
latter comment. By way of contrast, while late 19
th century
Australian cases were reasonably represented in what I wrote, there was a
considerable number of 20
th century cases, many of which were
important High Court contributions to Australia’s equity jurisprudence.
The significance
of this will later become apparent.
Now let me move forward 40 years. I was again in England teaching in a course
on equitable intervention in commercial dealings. It
was presented on a
comparative basis using a number of other common law countries as comparators. I
was well aware that outside of
the law of
trusts
[24] and the remedies of
specific performance and the injunction, the equity jurisprudence of England and
Australia had long since parted
company in significant respects. What surprised
me though, was that in relation to quite a number of equitable doctrines,
English
law stood apart (though not invariably) from most or all of the other
countries with which I was concerned. It had its own concerns
which were not
shared elsewhere (either to the same extent or else at all). I will mention four
of these.
The
first is the privileging of contract law as the all but exclusive
source of voluntarily assumed rights and obligations — hence, for
example,
the observation in the Court of Appeal denying relief to a person who was
excluded from the commercial exploitation of a
confidential business plan to
which he was a contributor: ‘Mr Murray’s lack of any remedy arose
from the undisputed fact
that his relationship with the other five members of
the original team was not regulated by
contract.’
[25] Associated with
privileging contract is a corresponding reluctance to enlarge the scope of
equitable intervention in contracts. Relatedly,
there is a marked antipathy to
making relied upon voluntary promises and representations actionable.
The
second concern is with property and with maintaining the
integrity of property law as such. Emblematic of this is Lord Neuberger’s
observation in
Sinclair Investments:
Whether a proprietary interest exists or not is a matter of property law, and is
not a matter of discretion ... It follows that the
courts of England and Wales
do not recognise a remedial constructive trust as opposed to an institutional
constructive
trust.[26]
The
third concern, which infuses Lord Neuberger’s observation, is a
marked reticence in allowing judicial discretion to determine the
appropriate
type of equitable relief to be awarded. If there is to be a choice of remedy,
that is for a party to make.
Fourthly, a constant refrain in the cases is the earnest to leave
commercial parties to fend for themselves — hence the sentiment: ‘In
a commercial context ... a degree of self-seeking and ruthless behaviour is
expected and accepted to a
degree.’
[27] The assumption in
this, seemingly, is that commercial parties could and should look after their
own interests
[28] and should bear
the risk of their failure to do so. Little by way of concession is to be made
for the possibility that a small or
medium business enterprise might be quite
vulnerable to exploitation by a large, well-resourced enterprise because of its
inexperience,
lack of power, urgent need,
etc.
[29]
These four concerns are by no means reflected either at all, or else in the
same degree, in Australian law, as will become apparent.
Another unsurprising conclusion readily suggested
itself.
[30] Our law in its substance
bore close general affinities to that of major United States
jurisdictions
[31] — even
though the Americans, to over-generalise, do not consider themselves now as
having a separate body of doctrine which
they call ‘equity’ and
notwithstanding that relatively few Australian judges resort regularly to United
States case law.
As a prelude to illustrating (necessarily selectively) our divergence and to
provide some of the more obvious explanations for why
English and Australian law
are increasingly to be contrasted, not compared, it is necessary to begin with a
little legal history.
In England, the Judicature Acts
of 1873 and 1875
brought together the administration of the common law and equity in a single
court. Some, including Maitland, anticipated
that over time the separate systems
would themselves coalesce. One hundred and thirty-seven years on, one can see
this happening
in the United
Kingdom.
[32] Relatedly, the law of
trusts and equitable remedies apart, one can see as well the progressive demise
of significant parts of an
enfeebled equity jurisprudence often unable to
withstand the imperialism of restitution — an essentially common law
invention
as presently conceptualised.
In Australia, the story has been very different. In the colonial period, the
Judicature Act system was quickly adopted in all of the
colonies save New South
Wales. There the separate systems remained. And so things stood until 1970 when
the Judicature Act system
was adopted, although it did not come into force until
1972.
[33]
This almost century long New South Welsh exceptionalism had profound effects.
It produced generations of practising lawyers, judges
and educators who were
masters of equity jurisprudence. I mention only Sir Frederick Jordan, Sir Frank
Kitto, Sir Kenneth Jacobs,
Sir Anthony Mason and Sir William Deane. The legacy
of this in turn was that Australia alone of the Commonwealth countries was to
have some number of large, well-known textbooks devoted to equity, or to
specific aspects of it (to the exclusion of trusts and property
law). I note in
contrast that the last significant equity textbook as such in England —
Ashburner’s Principles of
Equity[34] — fell from
grace not long after the publication of its second edition in
1933.
[35]
A related development in New South Wales was also significant. The pre-1973
Equity Division developed a commercial jurisdiction —
aided by the ability
from 1965 to use the declaration in commercial
matters.
[36] An obvious consequence
was that commercial disputes were being argued by equity lawyers. As is pointed
out in
On Equity,
[37] perhaps
a little extravagantly, the thinking used to solve commercial disputes was the
thinking of equity.
[38] Nonetheless,
here again the contrast with England is marked. Perhaps it goes some way to
explain the apparent differences in emphasis
in the following two comments.
First, Sir Peter Millett: ‘It is of the first importance not to impose
fiduciary obligations
on parties to a purely commercial
relationship’.
[39] Secondly,
Sir Anthony Mason: ‘it is altogether too simplistic, if not superficial,
to suggest that commercial transactions
stand outside the fiduciary
regime’.
[40]
I do not for one moment suggest that a knowledge of equity was, and remains,
the peculiar province of New South Wales lawyers. Far
from it. Victoria’s
role call is equally impressive: Sir Leo Cussen, Sir Owen Dixon, Sir Wilfred
Fullagar and Sir Douglas Menzies.
What I do suggest, though, is that the failure
to adopt a Judicature Act system for so long had large consequences for the
orientation,
preoccupations and methodologies of Australian law.
This takes me back to a theme I have foreshadowed. Across the first seven
decades of the 20
th century, the High Court of Australia dealt
regularly with cases involving equitable doctrines and, to a lesser extent,
trust principles.
That period was one of measured and orderly development of the
law and one in which Sir Owen Dixon was a long and influential presence.
Importantly, the contemporary significance and reach of doctrines evolved in
England in earlier centuries were reaffirmed and elaborated.
This provided the
intellectual foundations for what was to come in the 1980s.
What needs emphasis is that the relatively large number of High Court
decisions created for us a distinctive corpus of equity jurisprudence
on which
we could build, and have built. Outside of mainstream trust law and equitable
remedy, there was no parallel English development.
The doctrines then dealt with
by the High Court — and I mention these without elaboration —
included the unconscionable
dealings
doctrine,
[41] undue
influence,
[42] fiduciary
obligations,
[43] the law of
assignments and the rule in
Milroy v
Lord,
[44] the constructive trust
in its myriad of manifestations,
[45]
trusts of money receipts,
[46]
contribution,
[47] statutory
trusts,
[48] and directors’
duties and judicial review of board
decisions.
[49]
Now to the 1980s. The first truly creative burst in the rethinking of
Australian law began in 1983. Almost predictably given what
I have said so far,
its focus was in the main on equitable intervention in contract and commercial
dealings. In the ensuing decade
it travelled far beyond equity, but that is not
my present concern. One need only go to the Commonwealth Law Reports of 1983 and
1984 to appreciate the dimensions of the change that was on
foot.
[50] The equity cases are
well-known. I will mention only three by name:
Commercial Bank of Australia v
Amadio
(‘
Amadio’),
[51]
Taylor v Johnson[52]
and
Hospital Products Ltd v United States Surgical Corporation
(‘
Hospital
Products’).
[53] Much more
was to come.
Here, in contrast to the earlier period, resort was made to basal principle
and to organising ideas. It was necessary. This was a
time of evolution and
adaptation. And in revealing their mastery of equity jurisprudence, Justices
Mason and Deane took us back far
more explicitly to ‘unconscionable
conduct’. They were using language more than half forgotten in England,
but not so
in Australia or the United
States.
[54]
How the concept of unconscionable conduct has been used both historically and
in Australian law is often misunderstood by English
judges and
scholars,
[55] increasingly to the
point of criticism, rejection or
abandonment.
[56]
Forgetting, though, is as much a characteristic of legal memory as is
remembering.
[57]
Largely, I venture, as a response to English inspired criticisms, the High
Court has on several occasions explained how the unconscionable
conduct formula
is used in Australian equity. So, for example, in
Tanwar Enterprises Pty Ltd
v Cauchi the plurality commented:
The terms ‘unconscientious’ and ‘unconscionable’ are ...
used across a broad range of the equity jurisdiction.
They describe in their
various applications the formation and instruction of conscience by reference to
well developed principles.
Thus, it may be said that breaches of trust and
abuses of fiduciary position manifest unconscientious conduct; but whether a
particular
case amounts to a breach of trust or abuse of fiduciary duty is
determined by reference to well developed principles, both specific
and flexible
in character. It is to those principles that the court has first regard rather
than entering into the case at that higher
level of abstraction involved in
notions of unconscientious conduct in some loose sense where all principles are
at large.[58]
So far
I have told only the Australian story. However, it needs to be said that outside
of the mainstream of trust law, breach of
confidence and equitable remedy, there
is little by way of an English counterpart story to narrate. House of Lords
decisions have
been few indeed until the near end of the 20
th
century. It is difficult to avoid the conclusion that there was a progressive
decline of equity jurisprudence from the early 20
th century until a
rebirth or, perhaps more accurately, a re-imagining of sorts began in the 1980s.
This obviously is a crude oversimplification
but it will suffice for present
purposes.
With the benefit of hindsight one can venture some possibly controversial
suggestions to explain this. Relatively speaking, the 20
th century in
England can properly be described as the century of the common law. For much of
it the pre-eminent Law Lords were, generally,
common and commercial
lawyers.
[59] Save for its early
years,
[60] it was not a Chancery
lawyer’s century.
[61] One very
obvious manifestation of this was to be seen in the shaping of English contract
law. That certainty should triumph over
fairness became an almost unchallenged
and unchallengeable creed
[62] and
made the more so because, unlike in Australia, the United States, Canada and New
Zealand, statute did little to redress the imbalance
between certainty and
fairness. The misnamed
Australian Consumer
Law[63] (and its
predecessor)
[64] has no British
counterpart. Yet, it has federal and state reflections in the United States, in
the Canadian province of Ontario and
in New Zealand.
In the last 40 years there have been obvious changes in the constitutional,
social and legal concerns of the two countries. I would
instance simply one
legal concern which is of present consequence because of its impact on equity
jurisprudence in England. That
is the fascination with the law of restitution or
unjust enrichment.
[65] How much over
time it will be invoked to explain, rebadge or replace in England what in this
country is longstanding equitable doctrine
remains to be seen. There are some
intimations it is happening
already.
[66]
Let me turn now to a few specific doctrines and principles to illustrate what
I have been saying. There is quite a number from which
I could have chosen.
II THE UNCONSCIONABLE
DEALINGS DOCTRINE
It is this doctrine which precludes a person from taking advantage of a
person in a position of special disadvantage. The doctrine
itself had its modern
genesis in the mid-18
th century decision of Lord Hardwicke in
Earl
of Chesterfield v Janssen.
[67]
Quite some number of the earlier cases involved the exploitation of that now all
but extinct species, the expectant heir. By the
19
th century many of
the cases involved the improvident sale of land by an ignorant vendor whose only
advice came from the purchaser’s
solicitor. The last reported English case
of that century was
Fry v Lane in which the following formulation of the
law was given:
The result of the decisions is that where a purchase is made from a poor and
ignorant man at a considerable undervalue, the vendor
having no independent
advice, a Court of Equity will set aside the
transaction.[68]
Consistent
with what I am going to say, after
Fry v Lane the English version of this
doctrine went into hibernation for almost 90
years.
[69]
There was, not for the first time, an historical discontinuity. As reborn, the
doctrine now required the conduct in question to be
‘morally
reprehensible’.
[70] This is
quite some distance from what in Australia is required to establish
unconscionable conduct.
[71] It was
later confirmed in England that this particular jurisdiction had very limited
availability.
[72]
The Australian 20
th century story was markedly different.
Beginning with
Dowsett v
Reid[73] in 1913, the High Court
by mid-century considered the doctrine on some number of
occasions.
[74] In that process the
simple formulation of
Fry v Lane had become the authoritative exposition
of Fullagar J in
Blomley v Ryan:
The circumstances adversely affecting a party, which may induce a court of
equity either to refuse its aid or to set a transaction
aside, are of great
variety and can hardly be satisfactorily classified. Among them are poverty or
need of any kind, sickness, age,
sex, infirmity of body or mind, drunkenness,
illiteracy or lack of education, lack of assistance or explanation where
assistance
or explanation is necessary. The common characteristic seems to be
that they have the effect of placing one party at a serious disadvantage
vis-Ã -vis the other. It does not appear to be essential in all cases that
the party at a disadvantage should suffer loss or
detriment by the
bargain.[75]
The
concluding ‘common characteristic’ identified by Fullagar J is of no
little importance. The platform had been laid
for the landmark decision of the
High Court in
Amadio.
[76] It
is unnecessary to elaborate here upon
Amadio other than to say it
signalled an enlarging of the reach of the doctrine in the fashion suggested by
Fullagar J. The issue it left
open was the extent to which the doctrine could
have any purchase in commercial dealings. Both United States and Canadian courts
have acknowledged it can, albeit in unusual
circumstances.
[77] The High Court
has shown diffidence in this
regard,
[78] although it is hard to
see why, in appropriate circumstances, the doctrine should not be able to be so
invoked by vulnerable small
business parties. The Canadian cases in particular
are testament to this.
The final point to be emphasised, and this has real contextual significance
now, is that in Australia, the United States and Ontario,
but not in the United
Kingdom, the equitable doctrine (or the common law in the United States) is
reinforced by significant statutory
provisions.
[79]
III UNDUE INFLUENCE
A like, though more complex, story could be told of the fates of the law of
undue influence in 20
th century Australia and England. As was
emphasised both by Mason J and Deane J in
Amadio, unconscionable dealing
and undue influence are closely related but are
distinct.
[80] Again against the
background of 19
th century English cases, the course of Australian
law was set: first in the 1936 decision of
Johnson v Buttress,
and
particularly in the reasons of Dixon J which gave relational undue influence a
fiduciary (or abuse of trust and confidence)
orientation;
[81] and, secondly, in
Bank of New South Wales v
Rogers[82] in 1941 which
extended liability to a third party who knowingly dealt with the person subject
to influence. English law again parted
company from ours in the 1985 House of
Lords decision of
National Westminster Bank Plc v
Morgan[83] when, unexpectedly,
the law was given a new foundation. Any fiduciary connection was discarded. Put
inexactly, undue influence was
now to be tied to victimisation resulting in
manifest disadvantage. So conceived, it appears to be subsuming much of what
potentially
fell within the unconscionable dealings doctrine which, as I have
noted, is now near to lifeless.
[84]
It was no matter for surprise that Lord Browne-Wilkinson, an eminent Chancery
lawyer, was later to question the requirement of ‘manifest
disadvantage’ and the unexplained departure from long established
principle.
[85] I will not refer
further to this other than to say that English law cannot sensibly be a subject
of comparison with our
doctrine.
[86]
IV AUSTRALIAN FIDUCIARY
LAW
The principles which inform this body of law date back some centuries, but
the calls made upon it grew exponentially from the late
19
th century
with the rise of new business forms and relationships, the proliferation of
types of agency relationship, the increasing
utilisation of advisers and the
value and advantage that could be given by the possession of non-public
information
or the awareness of a yet unexploited opportunity. Given the nature and size
of the Australian economy in the 20
th century, it is almost
counterintuitive
to suggest that we earlier developed a more defined and coherent fiduciary
law than other Commonwealth countries including the United
Kingdom.
[87]
Yet we did.
I would ascribe this to the phenomenon I have been discussing — the
regularity with which fiduciary cases came to the High Court
and the equity
scholarship brought to bear on them. I note first those cases concerned with
setting the standards of conduct to be
imposed on fiduciaries — standards
which find their ultimate expression in the two themes of ‘conflict of
duty and interest’
and ‘misuse of fiduciary position’
identified by Deane J in
Chan v
Zacharia.
[88] The roll call is
impressively long. I merely note the following:
Birtchnell v Equity Trustees,
Executors & Agency Co
Ltd,
[89] Furs Ltd v
Tomkies,
[90] Peninsular and
Oriental Steam Navigation Co v
Johnson,
[91] Keith Henry and
Co Pty Ltd v Stuart Walker and Co Pty
Ltd,
[92] Hospital
Products,
[93] Chan v
Zacharia,
[94] United
Dominions Corporation Ltd v Brian Pty
Ltd,
[95] Breen v
Williams,
[96] and
Pilmer v Duke Group Ltd (in
liq).
[97]
To these may be added those decisions concerned with judicial review of the
exercise of fiduciary powers, especially by directors
— and I instance
such decisions as
Mills v
Mills[98] and
Thorby v
Goldberg[99] — and,
finally, those concerned with the remedies available against defaulting
fiduciaries as, for example,
Warman International Ltd v
Dwyer[100] and
Hospital
Products.
It is fair to say that the principles of modern Australian fiduciary law have
anticipated and so provide the benchmarks of orthodoxy
both in doctrine and for
remedy against which the law of other Commonwealth countries, including England,
is to be measured.
[101] This said,
and save in relation to remedy, English fiduciary law more closely approximates
to our own.
[102] A likely reason
for this is the regard that has been had both to High Court decisions, in
particular both to Mason J’s judgment
in
Hospital Products and
Deane J’s in
Chan v Zacharia,
and to Australian legal
scholarship.
V ESTOPPEL IN EQUITY
This provides much the most important but complex illustration of divergence.
For present purposes I will focus primarily on those
aspects of estoppel which
give rise to a cause of action in equity. Their 19
th century
development was tortuous and confused. Four strands in the modern emergence of
what I will call ‘cause of action (or
equitable) estoppel’ warrant
note.
Historically, two of these related exclusively to property. If I encouraged
you to believe my property was or would be yours, or if
I acquiesced in your
mistaken belief that my property was yours, and if, in either case you acted in
reliance on that assumption,
I could be compelled to make the assumption good or
else make good your loss because of your reliance on it. These two forms of
estoppel,
which have differing requirements, themselves give rise to causes of
action. They are often referred to collectively as ‘proprietary
estoppel’. They have survived in England and Australia to this day, though
again both experienced a long hibernation in the
first half of the
20
th
century.
[103]
A third species of estoppel, which applied both to representations of fact
and, importantly, of intention, could in some circumstances
require a
representation to be made good or else compensation be paid for loss arising
from detrimental reliance. That is, it could
give rise to a cause of action.
This jurisdiction was emasculated by a series of House of Lords decisions in the
second half of the
19
th
century.
[104] Estoppel by
representation in equity was limited to representations of fact. And only
fraudulent representations were actionable.
At the centre of these developments
was the sentiment expounded by Lord Cranworth in
Jorden v
Money[105] that to be
enforceable, a representation of intention had to be contractual in character.
Contract and the doctrine of consideration
were driving equity from the field.
That proprietary estoppel escaped the scythe of
Jorden v Money (to the
extent proprietary estoppel would enforce reliance upon gratuitous promises) was
probably due to its being totally overlooked
in England in the first half of the
20
th century.
[106]
A fourth species of estoppel involved a slight retreat from
Jorden v
Money. If a person represented how they would exercise their right against
another, and that other relied upon that, he or she could use
estoppel
defensively so as to prevent the right being exercised otherwise than as
represented, or at
least only after giving reasonable notice that the representation was no
longer operative. It is this species of estoppel that Lord Denning
resurrected
in 1947 in
Central London Property Trust Ltd v High Trees House
Ltd,
[107] and which the
High Court in
Legione v
Hateley[108] incorporated into
Australian law as ‘promissory estoppel’ in 1983.
Legione v
Hateley, I would note in passing, was the herald of the equity revolution in
Australia which commenced in that year.
The first seven decades were wholly unremarkable for equitable estoppel in
Australia. This body of law had its long sleep as in England.
And when
‘promissory estoppel’ and then ‘proprietary estoppel’
were resurrected we followed English law.
However, there were in the interim
three important extraneous developments that require notice.
The first resulted from two landmark judgments on common law estoppel,
Thompson v Palmer[109]
and
Grundt v Great Boulder Pty Gold Mines Ltd
(‘
Grundt’).
[110]
In them, Dixon J exposed the essential unity of the manifestations of
estoppel by conduct at common law. Their rationale lay in not
permitting
‘an unjust departure by a party from an assumption of fact which he has
caused another party to adopt or accept
for the purpose of their legal
relations’.
[111] The trigger
to this species of estoppel (which was not a cause of action) was that:
That other must have so acted or abstained from acting upon the footing of the
state of affairs assumed that he would suffer a detriment
if the opposite party
were afterwards allowed to set up rights against him inconsistent with the
assumption.[112]
A
foundation had been laid for the rejuvenation of estoppel in equity.
The second development occurred in the United States. At the turn of the
20
th century there were marked similarities in presently relevant
equity jurisprudence between United States jurisdictions and the United
Kingdom.
[113] Nonetheless, there
was real appreciation in the United States that in a number of disparate areas
of the law, the courts were enforcing
relied upon gratuitous promises and that
this was apparently anomalous given that United States contract law was premised
on a bargain
theory. A promisee’s unsolicited reliance on a promise would
not constitute consideration precisely because it was not bargained
for. To give
several examples, apart from gratuitous promises to convey land, charitable
subscriptions were enforced as were promises
to abandon existing rights —
the very thing that, in
Jorden v Money, the House of Lords refused to
do.
These disparate
strands
[114]
provided the underpinning for the ‘Promissory Estoppel’ doctrine
propounded by the American Law Institute in § 90
of
the first
Restatement of the Law of Contracts in
1932.
[115] In its present form,
§ 90 provides:
(1) A promise which the promisor should reasonably expect to induce action
or forbearance on the part of the promisee or a third
person and which does
induce such action or forbearance is binding if injustice can be avoided only by
enforcement of the promise.
The remedy granted for breach may be limited as
justice requires.[116]
To make the obvious observation, this eliminated the need to find a bargain.
It did not require consideration to hold a person liable
on his or her promise.
A real and early issue for § 90 was whether its reach would be extended by
the courts beyond what I will
call donative promises (or proposed gifts) to
gratuitous promises made in commercial
transactions.
[117] Could
promissory estoppel be used as a substitute for a bargain in a commercial
setting, especially where a later contract was contemplated?
There was initial
resistance to this but a number of originally controversial decisions broke the
opposition.
There were three particularly noteworthy cases all of which involved
precontractual negotiations in which representations of intention
as to entry
into a future contract were made and relied
upon.
[118] The representations in
each case were relied upon but not honoured. In each case damages were awarded
for reliance losses. I only
mention one of these cases by name —
Drennan v Star Paving
Co[119] — for
reasons which will next appear. I should add that the
Restatement’s
provision and this subsequent case law were the subject of debate in Australia
in the 1980s.
[120]
The third development passed unnoticed. It was a decision of the
Supreme Court of India in 1978 in
Motilal Padampat Sugar Mills Co Ltd v
State of Uttar Pradesh.
[121]
India was the first Commonwealth country to adopt what we in this country now
call ‘equitable estoppel’ as a cause of
action. Voluntary or
gratuitous promises or representations made and assurances given, if reasonably
relied upon, were actionable,
if resiled from to the detriment of the reliant
party. The Supreme Court reached that conclusion by drawing together the English
law of proprietary and promissory estoppel, Dixon J’s judgment in
Grundt, § 90 of the
Restatement[122] and
the decision in
Drennan v Star Paving Co.
Then, in 1987 in
Waltons Stores (Interstate) Ltd v Maher
(‘
Waltons
Stores’),
[123] the High
Court began Australia’s journey down the same path — a path against
which England has resolutely turned its
back. While our estoppel waters have
been muddied unhelpfully by a regression by some judges of the New South Wales
Court of Appeal
to an earlier prescriptive formalism more suited to English
law,
[124] the High Court has not
subsequently disavowed the views of Mason CJ and Wilson J, and Brennan J, in
Waltons Stores, that cause of action estoppel (ie equitable estoppel) is
not limited to what in England is now designated as ‘proprietary
estoppel’.
[125]
That there was no reason in principle for so limiting equitable estoppel was
adverted to explicitly by Brennan J in
Waltons Stores:
If it be unconscionable for an owner of property in certain circumstances to
fail to fulfil a non-contractual promise that he will
convey an interest in the
property to another, is there any reason in principle why it is not
unconscionable in similar circumstances
for a person to fail to fulfil a
non-contractual promise that he will confer a non-proprietary legal right on
another?[126]
Thus,
the majority in
Waltons Stores reached a conclusion similar to that of
United States judges who, for example, could find no rational basis for
distinguishing a
relied upon non-contractual promise to give a franchise from
one to give an interest in
property.
[127]
In both the United States and now Australia this development has given
equitable estoppel a real salience in commercial settings —
the very
domain which the English wish to keep immunised from ‘fiduciary
obligations and equitable
estoppel’.
[128] This in turn
provides their justification for limiting equitable estoppel to cases of
proprietary estoppel.
The difference between English and Australian jurisprudence here is stark and
is acknowledged in England to be so.
Baird Textile Holdings Ltd v Marks and
Spencer Plc[129]
demonstrates this. In that case, the Court refused to invoke equitable
estoppel where a long-term business relationship involving
large scale
investment was terminated peremptorily after 70 years. The relationship was
conducted designedly without any contract
being entered into, but with
assurances that it would only be terminated upon the giving of reasonable
notice. There being no question
of proprietary estoppel, it was recognised that
such development as would be necessary to make Baird’s reliance loss
actionable
could only ‘now take place in the highest
court’
[130] although
Waltons Stores was raised to point up ‘the road to development of
English law’.
[131] It was
acknowledged that Baird could well have fared differently in Australia. There
was no appeal.
[132]
VI THE CONSTRUCTIVE
TRUST
Now let me turn briefly to the constructive trust and particularly to its use
as a remedy. I have already referred to Lord Neuberger’s recent
observation
in
Sinclair Investments: ‘the courts of England and Wales do not
recognise
a remedial constructive trust as opposed to an institutional constructive
trust’.
[133] As is
well-known, the remedial versus institutional constructive trust debate was
silenced in Australia by the landmark judgment
of Deane J in
Muschinski v
Dodds.
[134] As Deane J
observed: ‘for the student of equity,
there can be no true dichotomy between the two
notions.’
[135] He went on to
comment:
Indeed, in this country at least, the constructive trust has not outgrown its
formative stages as an equitable remedy and should
still be seen as constituting
an in personam remedy attaching to property which may be moulded and adjusted to
give effect to the
application and interplay of equitable principles in the
circumstances of the particular case. In particular, where competing common
law
or equitable claims are or may be involved, a declaration of constructive trust
by way of remedy can properly be so framed that
the consequences of its
imposition are operative only from the date of judgment or formal court order or
from some other specified
date. The fact that the constructive trust remains
predominantly remedial does not, however, mean that it represents a medium for
the indulgence of idiosyncratic notions of fairness and justice. As an equitable
remedy, it is available only when warranted by established
equitable principles
or by the legitimate processes of legal reasoning, by analogy, induction and
deduction, from the starting point
of a proper understanding of the conceptual
foundation of such
principles.[136]
So
much so has this been accepted in this country that the debate has moved on to
the place of the constructive trust in equity’s
remedial scheme. Here,
there is an interplay between considerations of ‘appropriateness’
and the requirement ‘to
do what is practically
just’.
[137] The High Court
has stressed on a number of occasions now that: ‘before the court imposes
a constructive trust as a remedy,
it should first decide whether, having regard
to the issues in the litigation, there are other means available to quell the
controversy.’
[138]
The recent decision of the Full Court of the Federal Court in
Grimaldi[139] illustrates
the application of this. The facts were quite complex. The following is only an
abbreviated version of them. Directors
of Company A (Chameleon) misappropriated
$150 000 which they paid to Company B thus enabling it to meet an instalment of
the purchase
price of $1.1 million for the Iron Jack iron ore tenements in
Western Australia. These were later acquired. Company B was found for
Barnes
v Addy[140] purposes to have
been a knowing recipient. Company A claimed that it was entitled to a
proportionate interest in the tenements which
Company B held for it on a
constructive trust. The Iron Jack tenements were developed into an operating
iron ore mine exporting to
China. Around $400 million was spent in exploration
and the development of the mine. At the trial it was suggested the value of the
mine was in the order of $1 billion.
On orthodox principles a constructive trust was an available
remedy.
[141] But was it an
appropriate one? The Court said no and ordered an account of profits or
compensation at Company A’s election.
It referred to quite a number of
factors to explain why it exercised its discretion as it did. These included:
a) the money paid was part of outlays being made for a projected mining
operation;
b) that operation required an enormous contribution of debt and equity
finance, ie third parties were involved;
c) the development required enterprise, expertise and risk-taking to which
Company A did not contribute or was not exposed;
d) to give Company A a proportionate interest would be to thrust the parties
into a business relationship in which comity and mutual
confidence were likely
to be lacking;
e) the increase in value of the tenements was brought about in large measure
by the contributions etc of Company B and its investors
and financiers; and
f) the award of a constructive trust in such circumstances would be a
punitive measure against Company B and would result in its liability
becoming a
vehicle for Company A’s unjust enrichment.
As the Court concluded: ‘Proprietary relief in the form of a
constructive trust is in the circumstances an inappropriate remedy.
It goes well
beyond “the necessities of the
case.”’
[142] For those
who strongly oppose judicial discretion in remedy — a prevalent view in
English writings — this conclusion
cannot be said to reflect ‘the
formless void of individual moral
opinion’.
[143]
VII THE STATUTORY
CONTEXT
Left to last is what today is probably the most significant catalyst to our
divergence from England. It is the legislative environment
in which our common
law and equity exist, evolve and do their work. In Australia, as in the United
States
[144] and to some degree in
Canada and New Zealand, generally-cast statutes proscribe unfair trade
practices, unconscionable conduct and
deceptive or misleading conduct in trade
or commerce. For present purposes, I need only refer to our misnamed
Australian Consumer Law and to its predecessor the
Trade Practices Act
1974 (Cth)
pts IVA and V (‘
Trade Practices Act’).
Matching this is specifically focussed legislative regulation of particular
commercial relationships, for example, franchisor
and
franchisee.
[145]
Such legislation is without any substantial counterpart in the United
Kingdom. In consequence, and given the state of English equity
jurisprudence, it
is essentially contract law and tort that are to be called on to provide relief,
if at all, against a perceived
wrong or injury suffered in commercial and other
relationships and dealings. The significance of this becomes apparent once one
appreciates
that many failed contract cases in the United Kingdom — and
there are some spectacular
examples
[146] — would
have been likely to have been actionable in Australia under either the old
pt
IVA or
s 52 of the
Trade Practices Act and their equivalents in the
Australian Consumer Law
today.
[147] But probably they
would also have succeeded in equity. And this goes to the heart of the
matter.
It has for some decades now been acknowledged that many of Australia’s
major developments in equity from the 1980s involved
conduct which would have
been actionable under legislation such as the
Trade Practices Act in any
event.
Amadio and
Waltons Stores are conspicuous examples. In the
age of statutes, the influence of statute upon such as remains of the common law
may often be no
more than osmotic. Nonetheless, as statements of prevailing
public policy and of appropriate standards to be adhered to in commercial
and
consumer dealings, they provide both a context in which judicial law making will
take place and a measure against which it may
be judged.
The High Court has on some number of occasions acknowledged the possibility
of the common law adapting itself to a ‘consistent
pattern of legislative
policy’.
[148] The
Trade
Practices Act and the
Australian Consumer Law, and their State and
Territory equivalents, surely provide just such a pattern. It is more than
likely that with these statutory
analogues so close to hand, and with the Bar
slowly awakening to this matter, our equity jurisprudence will continue to
mutate in
ways that are consistent with the policy of fair dealing in commercial
and consumer dealings which is fundamental to that
legislation.
[149] A related impact
of this legislation is that it mandates flexibility in the award of appropriate
remedies. As with equitable remedy
in Australia, so also in our statutes,
discretion, appropriateness and practical justice are encouraged. Thus, the
seeming inevitability
of continuing divergence in remedy as
well.
[150]
VIII CONCLUSION
It may seem to you that I have spoken as though I was equity’s champion
and an admirer of its separateness. I am not. As in
the United States, we could
get along well enough without equity. What we could not do without, though, are
the animating ideas of
our equity jurisprudence. These, in large measure, temper
our judge-made law. They mitigate the rigours and inflexibilities of the
common
law and stand ready to supplement its deficiencies. Often enough they control
the abuse of power in our relationships and
dealings, commercial and otherwise.
Characteristically, one of their major functions is to promote fair dealing. And
in the award
of remedies, they often seek more than simply rough justice. As
Roscoe Pound long ago recognised, it is these ideas and not a separate
body of
equity as such that a legal system
requires.
[151] The extent to which
such ideas are acknowledged and respected necessarily requires balances to be
struck and often enough between
certainty and fairness. Different countries for
differing reasons will strike their balances differently as the English and we
have
done — hence ‘divergences’ and this lecture.
[*] BA, LLB (UQ); LLM (Lond); PhD
(Cantab). Professorial Fellow, Melbourne Law School, The University of
Melbourne; Former Justice of
the Federal Court of Australia. This lecture was
originally presented by the author as ‘Common Law Divergences’
(Speech
delivered at Allen Hope Southey Memorial Lecture, Melbourne Law School,
21 November 2012).
[1] Sir Owen Dixon, ‘Two
Constitutions Compared’ in Sir Owen Dixon,
Jesting Pilate: And Other
Papers and Addresses (Law Book, 1965) 104. This address was originally
presented on 26
th August 1942.
[2] This cast of mind was highly
formalistic and largely unquestioning of the law’s policies and purposes.
It was reflected in
the style of legal education for much of the 20
th
century.
[3] Sir Anthony Mason,
‘Future Directions in Australian Law’
[1987] MonashULawRw 6;
(1987) 13 Monash University
Law Review 149, 154.
[4] Law and Justice Legislation
Amendment Act 1988 (Cth)
s 41. The reference in
s 80 of the
Judiciary Act
1903 (Cth) to the ‘common law of England’ was deleted and
replaced with the ‘common law in Australia’.
[5] James Allsop, ‘Some
Reflections on the Sources of Our Law’ (Speech delivered at the Supreme
Court of Western Australia
Judges’ Conference, 18 August 2012) 7 [20]
<
http://nswca.jc.nsw.gov.au/courtofappeal/Speeches/allsop180812.pdf>
.
I am grateful to his Honour for providing me with a copy of this important
piece.
[6] See Mark Leeming,
‘Subrogation, Equity and Unjust Enrichment’ in Jamie Glister and
Pauline Ridge (eds),
Fault Lines in Equity (Hart Publishing, 2012) 27,
especially 29–33.
[7] Roger J Traynor,
‘Statutes Revolving in Common Law Orbits’
(1968) 17 Catholic
University Law Review 401, 409.
[8] [2012] FCAFC 6;
(2012) 200 FCR 296.
[9] Including the United Kingdom
Supreme Court decision in
Revenue and Customs Commissioners v Holland
[2010] UKSC 51;
[2010] 1 WLR 2793: see ibid 318–19 [51]–[53] (Finn, Stone and
Perram JJ).
[10] Grimaldi [2012] FCAFC 6;
(2012) 200
FCR 296, 320–1 [59] (Finn, Stone and Perram JJ). This matter was not
explored by counsel.
[11] Ibid.
[12] (1890) 45 Ch D 1.
[13] [2012] Ch 453. This
decision was widely, but not universally, acclaimed in England by academic
commentators: see, eg, Graham Virgo, ‘Profits
Obtained in Breach of
Fiduciary Duty: Personal or Proprietary Claim’
(2011) 70 Cambridge Law
Journal 502. Cf David Hayton, ‘Proprietary Liability for Secret
Profits’
(2011) 127 Law Quarterly Review 487. See also, since
Grimaldi, Lord Peter Millett, ‘Bribes and Secret Commissions
Again’
(2012) 71 Cambridge Law Journal 583;
FHR European
Ventures LLP v Mankarious [2013] EWCA Civ 17;
[2013] 3 WLR 466.
[14] Attorney-General for
Hong Kong v Reid [1993] UKPC 2;
[1994] 1 AC 324.
[15] Grimaldi [2012] FCAFC 6;
(2012) 200
FCR 296, 422 [582] (Finn, Stone and Perram JJ).
[16] United States v
Carter,
[1910] USSC 115;
217 US 286 (1910).
[17] Insurance Corporation of
British Colombia v Lo (2006) 278 DLR (4
th) 148.
[18] Sumitomo Bank Ltd
v Tharir [1993] 1 SLR 735 (Singapore High Court).
[19] Attorney-General for
Hong Kong v Reid [1993] UKPC 2;
[1994] 1 AC 324.
[20] See, as recent examples,
Justice James Douglas, ‘England as a Source of Australian Law: For How
Long?’
(2011) 86 Australian Law Journal 333; Jamie Glister and
Pauline Ridge (eds),
Fault Lines in Equity (Hart Publishing, 2012);
Allsop, above n
5.
[21] See, eg, Joachim Dietrich,
‘Unjust Enrichment Versus Equitable Principles in England and
Australia’ in Jamie Glister
and Pauline Ridge (eds),
Fault Lines in
Equity (Hart Publishing, 2012) 1; Andrew Burrows, ‘The Australian Law
of Restitution: Has the High Court Lost Its Way?’ in Elise
Bant and
Matthew Harding (eds),
Exploring Private Law (Cambridge University Press,
2010) 67; Peter Birks, ‘Equity in the Modern Law: An Exercise in
Taxonomy’
[1996] UWALawRw 1;
(1996) 26 University of Western Australia Law Review 1;
Justice W M C Gummow, ‘
Moses v Macferlan: 250 Years On’
(2010) 84 Australian Law Journal 756. See also
Roxborough v Rothmans
of Pall Mall Australia Ltd (2001) 208 CLR 516.
[22] [1942] UKHL 1;
[1942] 1 All ER 378; [1967]
2 AC 134. For an excellent account of the course of this problematic litigation,
see Richard Nolan, ‘
Regal (Hastings) Ltd v Gulliver (1942)’
in Charles Mitchell and Paul Mitchell (eds),
Landmark Cases in Equity
(Hart Publishing, 2012) 499.
[23] [1966] UKHL 2;
[1967] 2 AC 46. I obviously
exempt Lord Upjohn from the criticism implicit in what I have said.
[24] I leave out of
consideration the bewildering English preoccupation with the proper taxonomy of
trusts. For recent examples in this
genre, see Ying Khai Liew,
‘
Rochefoucauld v Boustead (1897)’ in Charles Mitchell and
Paul Mitchell (eds),
Landmark Cases in Equity (Hart Publishing, 2012)
423; William Swadling, ‘Understanding Resulting Trusts’
(2008) 124
Law Quarterly Review 72.
[25] Murray v
Yorkshire Fund Managers Ltd [1997] EWCA Civ 2958;
[1998] 1 WLR 951, 960 (Schiemann LJ). For, to
Australian eyes, a stunning example, see
Baird Textiles Holdings Ltd v Marks
and Spencer Plc [2001] EWCA Civ 274;
[2002] 1 All ER (Comm) 737.
[26] [2012] 1 Ch 453, 470
[37].
[27] Vercoe v Rutland
Fund Management Ltd [2010] EWHC 424 (Ch) (5 March 2010) [343] (Sales
J).
[28] Including by taking legal
advice if necessary.
[29] By way of contrast, the law
in the United States, Canada and Australia is more alert to this possibility as
the case law on franchises
attests: see, eg,
Goodman v Dicker,
169
F 2d 684 (DC Cir, 1948) (United States);
A & K Lick-a-Chick Franchises
Ltd v Cordiv Enterprises Ltd (1981) 119 DLR (3d) 440 (Canada);
Burger
King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187;
(2001) 69 NSWLR 558
(Australia).
[30] I say
‘unsurprising’ for this reason. For some time now, the citation of
United States texts on equity and trusts in
decisions of the High Court has been
the commonplace: see, eg,
Andrews v Australia and New Zealand Banking
Group [2012] HCA 30;
(2012) 247 CLR 205;
Aid/Watch Incorporated v Commissioner of
Taxation (2010) 241 CLR 539. I would instance specifically Joseph Story and
Melville M Bigelow,
Commentaries on Equity Jurisprudence: As Administered in
England and America (Little, Brown, and Co, 13
th ed, 1886); John
Norton Pomeroy and Spencer W Symons,
A Treatise on Equity Jurisprudence: As
Administered in the United States of America (Bancroft-Whitney,
5
th ed, 1941), Austin Wakeman Scott, William Franklin Fratcher and
Mark L Ascher,
Scott and Ascher on Trusts (Aspen, 5
th ed,
2006); American Law Institute,
Restatement (Third) of the Law of Trusts
(2003). On the regular recent resort to Story’s work, see Chief Justice
French, ‘Home Grown Laws in a Global Neighbourhood:
Australia, the United
States and the Rest’
(2011) 85 Australian Law Journal 147, 153. See
also Allsop, above n
5, 14–15
[39]–[41].
[31] Explaining the reasons for
the similarities is for another day.
[32] In the latest edition of
Michael A Jones and Anthony M Dugdale (eds),
Clerk & Lindsell on
Torts (Sweet
& Maxwell, 20
th ed, 2010), for example,
the action for breach of confidence and privacy has its own chapter: ch 27.
[33] Supreme Court Act
1970 (NSW). For an interesting account of the developments in New South
Wales, see Mark Leeming, ‘Equity, the Judicature Acts and
Restitution’
(2011) 5 Journal of Equity 199.
[34] Walter Ashburner and Denis
Browne,
Ashburner’s Principles of Equity (Butterworth,
2
nd ed, 1933).
[35] In saying this, I do not
mean to demean John McGhee (ed),
Snell’s Principles of Equity
(Sweet
& Maxwell, 32
nd ed, 2010).
[36] See Justice Peter W Young,
‘Foreword’ in Kanaga Dharmananda and Anthony Papamatheos (eds),
Perspectives on Declaratory Relief (Federation Press, 2010) v;
Forster
v Jododex Australia Pty Ltd [1972] HCA 61;
(1972) 127 CLR 421, 435 (Gibbs J).
[37] Peter W Young, Clyde Croft,
Megan Louise Smith,
On Equity (Thomson Reuters, 2009) 51–2
[1.550].
[38] The Common Law Division, I
should note, operated a Commercial List until 1 January 1987:
Supreme Court
Act 1970 (NSW) s 56, as repealed by
Supreme Court Act (Commercial
Division) Act 1985 (NSW) sch 1 item 5.
[39] Sir Peter Millett,
‘Equity’s Place in the Law of Commerce’
(1998) 114 Law
Quarterly Review 214, 217. See also, to like effect,
Cobbe v
Yeoman’s Row Management Ltd [2008] UKHL 55;
[2008] 1 WLR 1752, 1785–6 [81] (Lord
Walker).
[40] Hospital Products Ltd v
United States Surgical Corporation [1984] HCA 64;
(1984) 156 CLR 41, 100.
[41] See, eg,
Blomley v Ryan
[1956] HCA 81;
(1956) 99 CLR 362.
[42] See, eg,
Johnson v
Buttress [1936] HCA 41;
(1936) 56 CLR 113.
[43] See, eg,
Furs Ltd v
Tomkies [1936] HCA 3;
(1936) 54 CLR 583. The cases involving fiduciary obligations are
numerous.
[44] [1862] EngR 951;
(1862) De GF & J
264;
45 ER 1185. See, eg,
Anning v Anning [1907] HCA 13;
(1907) 4 CLR 1049.
[45] See, eg,
Birmingham v
Renfrew [1937] HCA 52;
(1937) 57 CLR 666 (mutual wills);
Black v S Freedman & Co
[1910] HCA 58;
(1910) 12 CLR 105 (stolen property).
[46] See, eg,
Palette Shoes
Pty Ltd (in liq) v Krohn [1937] HCA 37;
(1937) 58 CLR 1.
[47] See, eg,
Albion
Insurance Co Ltd v Government Insurance Office (NSW) [1969] HCA 55;
(1969) 121 CLR 342,
348–52 (Kitto J).
[48] See, eg,
Fouche v
Superannuation Fund Board [1952] HCA 1;
(1952) 88 CLR 609.
[49] See, eg,
Mills v Mills
[1938] HCA 4;
(1938) 60 CLR 150;
Thorby v Goldberg [1964] HCA 41;
(1964) 112 CLR 597.
[50] See Paul Finn,
‘Commerce, the Common Law and Morality’
[1989] MelbULawRw 5;
(1989) 17 Melbourne
University Law Review 87.
[51] [1983] HCA 14;
(1983) 151 CLR 447.
[52] [1983] HCA 5;
(1983) 151 CLR 422.
[53] [1984] HCA 64;
(1984) 156 CLR 41.
[54] Explicit reference was made
to such conduct: see, eg,
Uniform Commercial Code § 2-302 (2012)
(‘UCC’).
[55] An egregious example is to
be found in Birks, above n
21,
16–17.
[56] See, eg,
Royal Brunei
Airlines Sdn Bhd v Tan [1995] UKPC 4;
[1995] 2 AC 378, 392 (Lord Nicholls) (‘
Royal
Brunei’);
Twinsectra Ltd v Yardley [2002] UKHL 12;
[2002] 2 AC 164;
Barlow
Clowes International Ltd (in liq) v Eurotrust International Ltd [2005] UKPC 37;
[2006] 1 WLR
1476; Sir Anthony Mason, ‘Fusion’ in Simone Degeling and James
Edelman (eds),
Equity in Commercial Law (Lawbook, 2005) 15; George
Spence,
Equitable Jurisdiction of the Court of Chancery (Lea and
Blanchard, 1846) vol 1, 411;
National City Bank of New York v Gelfert,
29
NE (2d) 449, 452 (Loughran J for Lehman CJ, Loughran, Finch, Rippey, Sears
and Conway JJ) (1940). I have attended quite some number of lectures
and
seminars in England where Australian equitable doctrine has been subjected to
misguided and ahistorical criticism precisely because
of its fidelity to the
idea of ‘conscience’ as a fundamental precept of equity.
[57] To take but one example.
Speaking in the context of accessorial liability in equity in
Royal Brunei
[1995] UKPC 4;
[1995] 2 AC 378, 392, Lord Nicholls observed:
Unconscionable is a word of immediate appeal to an equity lawyer ... It must
be recognised, however, that unconscionable is not a
word in everyday use by
non-lawyers. If it is to be used in this context, and if it is to be the
touchstone for liability as an accessory,
it is essential to be clear on what,
in this context, unconscionable
means. If unconscionable means no
more than dishonesty, then dishonesty is the preferable label. If unconscionable
means something different,
it must be said that it is not clear what that
something different is. Either way, therefore, the term is better avoided in
this
context.
Given the less than distinguished sequel to this invocation of
‘dishonesty’, one cannot be altogether surprised at Sir
Anthony
Mason’s later wry comment: ‘So much for the superior claims of
“dishonest” conduct over “unconscionable”
conduct in the
search for certainty’: Sir Anthony Mason, ‘Fusion’, above n
56, 15.
[58] [2003] HCA 57;
(2003) 217 CLR 315, 324
[20] (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ). The judgment went on to
acknowledge that
the phrase ‘unconscionable conduct’ tends to mislead in several
respects ... [I]t encourages the false notion that (i)
there is a distinct cause
of action, akin to an equitable tort, wherever a plaintiff points to conduct
which merits the epithet ‘unconscionable’;
and (ii) there is an
equitable defence to the assertion of any legal right, whether by action to
recover a debt or damages in tort
or for breach of contract, where in the
circumstances it has become unconscionable for the plaintiff to rely on that
legal right:
at 325 [23]–[24].
[59] As, for example, Lords
Atkin, Wright, Radcliffe, Devlin and Diplock.
[60] See, eg,
Nocton v
Ashburton [1914] AC 932;
Vatcher v Paull [1916] AC 372;
Cook v
Deeks [1916] UKPC 10;
[1916] 1 AC 554.
[61] One must nonetheless
mention Lord Upjohn and Lord Wilberforce.
[62] The efforts of Lord Denning
MR to ameliorate this state of affairs were often flawed and were largely
unsuccessful as, for example,
the proposed principle of inequality of bargaining
power. Even where they served purposes that have been embraced in other
jurisdictions,
eg mistake in equity, they have suffered reverses and abandonment
in England: see, eg,
Great Peace Shipping Ltd v Tsavliris Salvage
(International) Ltd [2002] EWCA Civ 1407;
[2003] QB 679; cf
Chwee Kin
Keong v Digilandmall.com Pte Ltd [2005] SGCA 2;
(2005) 1 SLR 502 (Singapore Court
of Appeal).
[63] Competition and Consumer
Act 2010 (Cth) sch 2.
[64] See
Trade Practices Act
1974 (Cth)
pts IVA, V.
[65] Even the correct
nomenclature has produced a battleground.
[66] See, eg,
Banque
Financière de la Citè v Parc (Battersea) Ltd [1998] UKHL 7;
[1999] 1 AC 221,
231, where Lord Hoffman asserted that equitable subrogation belongs to unjust
enrichment. See also Burrows, above n
21. Cf
ENE Kos 1 Ltd v Petroles Brasiliere SA [No 2] [2012] UKSC 17;
[2012] 2 AC 164.
[67] [1750] EngR 119;
(1750) 2 Ves Sen 125,
155–6;
[1750] EngR 25;
28 ER 82, 100.
[68] (1889) 40 Ch D 312, 322
(Kay J).
[69] See David Capper,
‘The Unconscionable Bargain in the Common Law World’
(2010) 126
Law Quarterly Review 403. Its limp resuscitation occurred in
Cresswell
v Potter [1978] 1 WLR 255, in which no High Court decision, of which there
were now a number, was cited.
[70] Multiservice
Bookbinding Ltd v Marden [1979] Ch 84, 110 (Browne-Wilkinson J). See also
Boustany v Pigott [1993] UKPC 17;
(1995) 69 P & CR 298, 303–4 (Lord
Templeman for Lords Templeman, Lowry, Mustill and Slynn).
[71] See
Amadio [1983] HCA 14;
(1983)
151 CLR 447, 478 (Deane J).
[72] Portman Building
Society v Dusangh [2000] 2 All ER (Comm) 221. In a comparative piece, a
British scholar, David Capper, above n
69,
408, concluded:
It is quite clear that the doctrine applied by the English courts during this
period of reincarnation for the unconscionable bargain
is significantly
different from that applied by courts in other common law jurisdictions. ...
[W]hat is more curious is that English
developments equally clearly reject the
English doctrine of the late 19
th century.
[73] [1912] HCA 75;
(1912) 15 CLR 695.
[74] See, eg,
Wilton v
Farnworth [1948] HCA 20;
(1948) 76 CLR 646;
Blomley v Ryan [1956] HCA 81;
(1956) 99 CLR 362.
[75] [1956] HCA 81;
(1956) 99 CLR 362, 405.
[76] [1983] HCA 14;
(1983) 151 CLR 447.
[77] See, eg,
Construction
Associates Inc v Fargo Water Equipment Company,
446 NW 2d 237 (1989),
especially 242 (Erickstad CJ);
Harry v Kreutziger (1978) 95 DLR (3d) 231;
A & K Lick-a-Chick Franchises Ltd v Cordiv Enterprises Ltd (1981) 119
DLR (3d) 440. See also the provocative dissent of Frankfurter J in
United
States v Bethlehem Steel Corporation, 315 US 281 (1941), especially at
326.
[78] See
Australian
Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003)
214 CLR 51;
Kakavas v Crown Melbourne Ltd [2013] HCA 25;
(2013) 298 ALR 35.
[79] See
Australian Consumer
Law pt 2-
2; UCC § 2-302 (US). On Canadian law, see generally
G H L Fridman,
The Law of Contract in Canada (Carswell,
5
th ed, 2006) ch 9.
[80] [1983] HCA 14;
(1983) 151 CLR 447, 461
(Mason J), 474 (Deane J).
[81] [1936] HCA 41;
(1936) 56 CLR 113,
134–6.
[82] [1941] HCA 9;
(1941) 65 CLR 42.
[83] [1985] UKHL 2;
[1985] 1 AC 686.
[84] John McGhee
(ed),
Snell’s Equity (Sweet
& Maxwell, 32
nd
ed, 2010) treats undue influence over 25 pages, and unconscionable dealing over
9 but 3 of which are devoted to money lending statutes:
at 251–85
[8-008]–[8-042].
[85] See
CIBC Mortgages Plc v
Pitt [1993] UKHL 7;
[1994] 1 AC 200, 209 where his Lordship observed:
The difficulty is to establish the relationship between the law as laid down
in [
National Westminster Bank Plc v Morgan [1985] UKHL 2;
[1985] AC 686] and the
long standing principle laid down in the abuse of confidence cases viz the law
requires those in a fiduciary position who
enter into transactions with those to
whom they owe fiduciary duties to establish affirmatively that the transaction
was a fair one.
The abuse of confidence principle is founded on considerations
of general public policy, viz that in order to protect those to whom
fiduciaries
owe duties
as a class from exploitation by fiduciaries
as a class,
the law imposes a heavy duty on fiduciaries to show the righteousness of the
transactions they enter into with those to whom they
owe such duties. This
principle is in sharp contrast with the view of this House in
Morgan that
in cases of presumed undue influence (a) the law is not based on considerations
of public policy and (b) that it is for the
claimant to prove that the
transaction was disadvantageous rather than for the fiduciary to prove that it
was not disadvantageous.
Unfortunately, the attention of this House in
Morgan was not drawn to the abuse of confidence cases and therefore the
interaction between the two principles (if indeed they are two separate
principles) remains obscure (citations omitted) (emphasis in original).
[86] A lengthy account of why
this is so is to be found in Rick Bigwood’s critique: Rick Bigwood,
‘From
Morgan to
Etridge: Tracing the (Dis)Integration of
Undue Influence in the United Kingdom’ in Jason W Neyers, Richard Bronaugh
and Stephen G A
Pitel (eds),
Exploring Contract Law (Hart Publishing,
2009) 379.
[87] See, eg, Charles Hollander
and Simon Salzedo,
Conflicts of Interest (Sweet
& Maxwell,
4
th ed, 2011) 1–2 [1-001].
[88] [1984] HCA 36;
(1984) 154 CLR 178,
198–9.
[89] [1929] HCA 24;
(1929) 42 CLR 384.
[90] [1936] HCA 3;
(1936) 54 CLR 583.
[91] [1938] HCA 16;
(1938) 60 CLR 189.
[92] [1958] HCA 33;
(1958) 100 CLR 342.
[93] [1984] HCA 64;
(1984) 156 CLR 41.
[94] [1984] HCA 36;
(1984) 154 CLR 178.
[95] [1985] HCA 49;
(1985) 157 CLR 1.
[96] (1996) 186 CLR 71.
[97] [2001] HCA 31;
(2001) 207 CLR 165.
[98] [1938] HCA 4;
(1938) 60 CLR 150.
[99] [1964] HCA 41;
(1964) 112 CLR 597.
[100] [1995] HCA 18;
(1995) 182 CLR 544.
[101] See, eg, P D Finn,
‘The Fiduciary Principle’ in T G Youdan (ed),
Equity, Fiduciaries
and Trusts (Carswell, 1989). See also Hollander and Salzedo, above n
87, 1–2 [1-001].
[102] It is appropriate though
to mention that what has become known in England as the rule in
Pallant v
Morgan [1953] Ch 43 seems to be a superfluous invention so far as Australian
law is concerned. It has been referred to but, seemingly, never applied
here.
The rule, as later described in
Holiday Inns Inc v Broadhead (Unreported,
Court of Chancery, Megarry J, 19 December 1969), as quoted by Chadwick LJ in
Banner Homes Group Plc v Luff Developments Ltd [2000] Ch 372, 391, is
that:
if A and B agree that A will acquire some specific property for the joint
benefit of A and B on terms yet to be agreed and B in reliance
on A’s
agreement is thereby induced to refrain from attempting to acquire the property
equity ought not to permit A when he
acquires the property to insist on
retaining the whole benefit for himself to the exclusion of B.
That is, a constructive trust arises. I merely note that in Australia that
problem would be dealt with either as a breach of fiduciary
duty or on the basis
of equitable estoppel. It needs no separate rule. The English rule is explicable
though. It dates from 1953
and thus predates modern English developments both in
fiduciary law and equitable estoppel. See the unsuccessful attempt by Etherton
LJ to bring
Pallant v Morgan within the fiduciary regime in
Crossco No
4 Unlimited v Jolan Ltd [2011] EWCA Civ 1619;
[2012] 2 All ER 754.
[103] Their reinvigoration
commenced in New Zealand in 1956:
Thomas v Thomas [1956] NZLR 785. This
was followed quickly, but often confusingly so, in England: see P D Finn,
‘Equitable Estoppel’ in P D Finn (ed),
Essays in Equity (Law
Book, 1985) 59.
[104] On this jurisdiction and
its emasculation, see generally Michael Lobban, ‘Part Two —
Contract’ in William Cornish
et al,
The Oxford History of the Laws of
England (Oxford University Press, 2010) vol 12, 366–72, 416–17.
See also Finn, ‘Equitable Estoppel’, above n
103, 62–5.
[105] (1854) 5 HLC 185, 216;
10 ER 868, 882.
[106] There were some number
of Indian Privy Council appeals in the early decades of the century which had no
apparent influence in England.
[107] [1947] KB 130.
[108] [1983] HCA 11;
[1983] 152 CLR 406.
[109] [1933] HCA 61;
(1933) 49 CLR 507, 547
(Dixon J).
[110] [1937] HCA 58;
(1937) 59 CLR 641,
674–5 (Dixon J).
[111] Ibid 674.
[112] Ibid.
[113] So much so that
Story’s
Equity Jurisprudence then had an English edition: Justice
Joseph Story and W E Grigsby,
Commentaries on Equity Jurisprudence:
First English Edition (Stevens and Haynes, 1
st ed, 1884).
[114] Outlined in Samuel
Williston and Richard A Lord,
A Treatise on the Law of Contracts (Lawyers
Cooperative Publishing, 4
th ed, 1992) 38–70, § 8:4.
[115] The title
‘promissory estoppel’ has since been adopted in United States
jurisprudence — it is not used in the
Restatements — to
differentiate estoppels relating to assumptions of fact and those relating to
promises or assurances as to future conduct.
With the promulgation of the first
Restatement the promissory estoppel doctrine began to flourish. As
Williston notes, the extent to which the courts made use of the doctrine
inspired
the drafters of the
Restatement (Second) of Contracts (1981) to
expand dramatically the applicability of promissory estoppel: Williston and
Lord, above n
114, 48. The story of the
evolution of the two
Restatements of Contracts is outlined in, amongst
other places, Jay M Feinman ‘Promissory Estoppel and Judicial
Method’
(1983) 97 Harvard Law Review 678, 679–96.
[116] American Law Institute,
Restatement (Second) of Contracts (1981).
[117] By gratuitous promises I
here mean no more than promises not supported by consideration.
[118] Two cases related to the
proposed grant of a franchise:
Goodman v Dicker,
169 F 2d 684 (DC
Cir, 1948);
Hoffman v Red Owl Stores Inc,
133 NW 2d 267 (Wis, 1965); the
other to a subcontractor’s bid:
Drennan v Star Paving Co,
333 P 2d 757 (Cal, 1958).
[119] 333 P 2d 757 (Cal,
1958).
[120] See, eg, K C T Sutton,
‘Promises and Consideration’ in P D Finn (ed),
Essays on
Contract (Law Book, 1987) 35, 65–9; P D Finn, ‘Equity and
Contract’ in P D Finn (ed),
Essays on Contract (Law Book, 1987)
104, 112, 119–20, 122.
[121] [1978] INSC 254;
[1979] 2 SCR 641.
[122] American Law Institute,
Restatement of the Law of Contracts (1932).
[123] [1988] HCA 7;
(1988) 164 CLR 387.
[124] The principal exponent
of this manoeuvre is the Hon Ken Handley: see, eg, Justice
K R Handley,
Estoppel by Conduct and Election (Sweet
& Maxwell, 2006) 180–1 [11-030], 220–4
[13-037]–[13-042]; Justice K R Handley, ‘The Three High Court
Decisions
on Estoppel 1988–1990’
(2006) 80 Australian Law
Journal 724;
DHJPM Pty Ltd v Blackthorn Resources Ltd [2011] NSWCA 348;
(2011) 285 ALR
311, 333–9 [92]–[143].
[125] See Michael Bryan
‘Almost 25 Years On: Some Reflections on
Waltons v Maher’
(2012) 6 Journal of Equity 131.
[126] [1988] HCA 7;
(1988) 164 CLR 387, 426.
See also Mason CJ and Wilson J’s judgment, which is consistent with
Brennan J’s views: at 403–8.
[127] The landmark franchise
cases in the US were
Goodman v Dicker,
169 F 2d 684 (DC Cir, 1948) and
Hoffman v Red Owl Stores Inc,
133 NW 2d 267 (Wis, 1965).
[128] See
Cobbe v
Yeoman’s Row Management Ltd [2008] UKHL 55;
[2008] 1 WLR 1752, 1785 [81] (Lord
Walker).
[129] [2001] EWCA Civ 274;
[2002] 1 All ER (Comm)
737.
[130] Ibid [91].
[131] Ibid [95].
[132] The limiting effect of
the proprietary interest requirement is demonstrated in the contrast of the
decision of the House of Lords
in
Cobbe v Yeoman’s Row Management
Ltd [2008] UKHL 55;
[2008] 1 WLR 1752 and that of White J in the Supreme Court of New South
Wales in
E K Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC
1172 (16 November 2006). They have relevantly similar factual settings.
Cobbe v Yeoman’s Row Management Ltd was a property
development case where, in anticipation of a contract for the sale to Cobbe of
Yeoman’s property which was to
be developed and sold on a proceeds sharing
basis, Cobbe took steps to obtain planning permission as it was commonly assumed
he would.
Both parties proceeded on the understanding that the contract would
only be entered into if planning permission was obtained, although
its core
terms had been agreed including as to price and proceeds sharing. Three months
before the permission was granted, Yeoman’s
decided to resile from the
understanding. It did not tell Cobbe until after permission had been given. He
made a claim based on equitable
estoppel. Put shortly, it was held he had, and
he knew he had, no contract. He took the risk of it not eventuating.
Yeoman’s
may have behaved unconscionably, but there could be no
proprietary estoppel. Cobbe lost. This said, but with little explanation,
he was
awarded a quantum meruit payment for his services in obtaining regression to the
planning permission by formalism on the ground
of unjust enrichment.
In
E K Nominees v Woolworths Ltd in contrast, Woolworths in
falsifying a similar assumption upon which precontract action was taken, was
held liable for E K’s
reliance losses. It might have borne the risk of no
contract being able to be successfully negotiated. It did not bear the risk of
the assumption being falsified on which it was encouraged to act — ie a
contract was to be negotiated. See also the decision
of the Delaware Chancery
Court in
Pharmathene Inc v Siga Technologies Inc (Del Ct Ch,
2627-VCP, 22 September 2011) (Parsons V-C).
[133] [2012] 1 Ch 453, 470
[37].
[134] [1985] HCA 78;
(1985) 160 CLR 583,
614.
[135] Ibid.
[136] Ibid 615.
[137] Erlanger v New
Sombrero Phosphate Co (1878) 3 App Cas 1218, 1278–9 (Lord Blackburn).
See also
Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102,
113–14 (Deane, Dawson, Toohey, Gaudron and McHugh JJ).
[138] Bathurst City Council
v PWC Properties Pty Ltd [1998] HCA 59;
(1998) 195 CLR 566, 585 [42] (Gaudron, McHugh,
Gummow, Hayne and Callinan JJ). See also
Giumelli v Giumelli [1999] HCA 10;
(1999) 196
CLR 101, 113–14 [10] (Gleeson CJ, McHugh, Gummow and Callinan JJ) (an
equitable estoppel case);
John Alexander’s Clubs Pty Ltd v White City
Tennis Club Ltd [2010] HCA 19;
(2010) 241 CLR 1, 45–6 [128]–[129] (French CJ,
Gummow, Hayne, Heydon and Kiefel JJ) (an alleged breach of fiduciary duty
case).
[139] [2012] FCAFC 6;
(2012) 200 FCR 296.
[140] (1874) LR 9 Ch App
244.
[141] See, eg,
Paul A
Davies (Aust) Pty Ltd (in liq) v Davies [1983] 1 NSWLR 440.
[142] [2012] FCAFC 6;
(2012) 200 FCR 296, 442
[681] (Finn, Stone and Perram JJ), quoting
John Alexander’s Clubs
[2010] HCA 19;
(2010) 241 CLR 1, 46 [129] (French CJ, Gummow, Hayne, Heydon and Kiefel
JJ).
[143] Muschinski v Dodds
[1985] HCA 78;
(1985) 160 CLR 583, 616 (Deane J).
[144] In the main this is in
state legislation: see, eg, Mass Gen Laws ch 93A, a statute which declares
unlawful (§ 2) and renders
actionable (§ 9) ‘[u]nfair methods of
competition and unfair or deceptive acts or practices in the conduct of any
trade
or commerce’.
[145] Such exists in Australia
(
Trade Practices (Industry Codes — Franchising) Regulations 1998
(Cth)), the United States and a majority of the Canadian provinces.
[146] See, eg,
Baird
Textiles Holdings Ltd v Marks and Spencer Plc [2001] EWCA Civ 274;
[2002] 1 All ER (Comm) 737;
Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55;
[2008] 1 WLR 1752.
[147] Australian Consumer
Law s 18 (misleading and deceptive conduct), pt 2-2 (unconscionable
conduct).
[148] See especially
Esso
Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67;
(1999) 201 CLR
49, 61–3 [23]–[28] (Gleeson CJ, Gaudron and Gummow JJ). See also
Paul Finn, ‘Statutes and the Common Law: The Continuing
Story’ in
Suzanne Corcoran and Stephen Bottomley (eds),
Interpreting Statutes
(Federation Press, 2005) 61–2; Paul Finn, ‘Statutes and the Common
Law’
[1992] UWALawRw 1;
(1992) 22 University of Western Australia Law Review 7.
[149] A like story could be
told of the impact of the
Corporations Act 2001 (Cth) (and its
predeccessors) and its symbiotic relationship with judge-made law. The treatment
of de facto directors and officers
in
Grimaldi is testament to this: at
314–26 [28]–[76] (Finn, Stone and Perram JJ).
[150] By way of an aside I
would simply ask, for example, whether, despite our agonising over the
justifications for, and scope of, a duty
of good faith and fair dealing in
contract law, we already have the essence of such a duty in
s 21 of the
Australian Consumer Law?
[151] Roscoe Pound, ‘The
Decadence of Equity’
(1905) 5 Columbia Law Review 20, 35.
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