'Is there an Unjust Enrichment Disaster in Australia' by Luke Bennett and Sagi Peari in (2023) 50(2) University of Western Australia Law Review 240 comments
Australia presently stands at the crossroads with respect to restitutionary claims. The recent vehement critique of the classical unjust enrichment formula for grasping the nature of those claims deserves attention. It has ignited a new wave of scepticism, challenging the fundamentals of the formula and the very notion of unjust enrichment as a legitimate ground of liability in private law. Does this critique, made primarily in the UK context, apply to Australia? To answer this question this article presents the critique and contemplates whether it applies to the Australian landscape.
The authors argue
Professor Peter Birks’ four-stage formula of unjust enrichment has been widely accepted as the normative framework for grasping the nature of the restitutionary claims. This formula asks the following four questions:
1. Has the defendant been enriched?
2. Was the enrichment at the plaintiff’s expense?
3. Was the enrichment unjust?
4. Do any defences apply?
The formula requires demonstrating that a plaintiff transfers some economic value/benefit to the defendant (aka ‘enrichment’). The ‘at the plaintiff’s expense’ element requires establishing a causal link between the defendant’s enrichment and the plaintiff. The ‘justice’ element in the formula has been perceived as referring to a broad range of factors or causative events recognised by law, such as mistake or undue influence. Finally, once the plaintiff establishes the first three elements of the formula, the defendant could argue that one of the defences applies. For example, the defendant could argue that they changed their position by spending the received value in good faith. Consider a trivial scenario of a mistaken payment according to which A confuses one of the numbers during an online bill payment process, erroneously paying $100 to C, instead of B. In order to meet the first three elements in this formula, A would need to show that C received the value (i.e. $100) from A and this benefit took place within the context of one of previously recognised unjust factors (i.e. mistake). C on their part could argue that they innocently spent the $100, what could amount to their ‘change of position’.
The Birks’ four-stage formula has been firmly endorsed by the United Kingdom’s (UK) highest courts. Following a wave of academic and judicial support, unjust enrichment has also been recognised as a separate cause of action in other jurisdictions, such as Canada, South Africa, Singapore, New Zealand, Germany, France and China. While some differences are present amongst the systems, it is clear that the core notion according to which defendant’s unjustified enrichment provides the normative basis for understanding the nature of the restitutionary claims, has been gaining overwhelming support. The law of unjust enrichment claims its distinctive place alongside the traditional categories of private law, such as property, contract and torts. The recognition of unjust enrichment is therefore critical to facilitating the internal rationality and coherency of private law.
However, unjust enrichment’s role in Australia is somewhat complicated. Australia’s jurisprudence hesitates on this point. Despite the early recognition of unjust enrichment in the seminal Pavey decision, the High Court remained hesitant to substantively engage with and apply the unifying formula; primarily influenced by the reasoning of Justice Gummow and the Farah decision where the brakes on the emerging unjust enrichment jurisprudence were firmly pressed, holding that ‘it was not the place of lower courts to develop or recognise novel forms of claims based on unjust enrichment reasoning that might render established equitable doctrine otiose’. Overall, ‘to read the High Court’s references to unjust enrichment is to appreciate the impressive range over which judicial prose can express disapproval’.
As it currently stands in Australia, unjust enrichment is not itself a cause of action, but instead functions as an analytical framework for structuring restitutionary claims. The distinction between ‘cause of action’ and ‘analytical framework’ is an obscure one that has only furthered conceptual uncertainty regarding the scope and nature of restitutionary claims in Australia. A solid framework is required to ensure these claims are not based on ‘idiosyncratic notions of what is fair and just’.
Against this background, the recent vehement critique of the Birks’ four- stage formula by University of Oxford academic, Professor Robert Stevens, deserves attention. Presented in the powerful 2018 article titled The Unjust Enrichment Disaster and more recently in The Laws of Restitution monograph (2023, Oxford University Press), the critique has ignited a new wave of scepticism, challenging the fundamentals of the four-stage formula and the very notion of unjust enrichment as a legitimate ground of liability in private law.29 Clearly, the effect of Stevens’ critique goes beyond fostering increased academic discourse. Thus, Lord Andrew Burrows, a former academic frankly acknowledged that the critique was influential in, and provided the foundation for, the Supreme Court’s decision to overrule Sempra Metals Ltd in Prudential Assurance Ltd in the UK.
This article has two goals. First, it involves a presentation and examination of the Stevens’ critique. Second, it considers the relevancy of those to the Australian jurisprudence. Accordingly, Part II presents the negative and positive aspects of Stevens’ argument, traces Stevens’ examples made primarily within UK jurisprudence and discusses the possible concerns that have been and could be raised against Stevens’ views. Part III examines the key restitutionary decisions in Australia and contemplates whether Stevens’ argument (and the concerns expressed against it) applies to the Australian landscape. Part IV offers some concluding remarks.
