DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   In this action the plaintiffs claim:

1. (a)
   Damages for breach of contract; and

2. (b)
   Recompense for use and occupation of real property.

There is also a claim for interest on any amount recovered, pursuant to s 47 of the Supreme Court Act 1995.

2. [2]
   The plaintiffs were the joint owners of real property situated at 31 Culbara Street, Mooloolaba, in the State of Queensland, more particularly described as lot 16 on CP AM83312, County of Canning, Parish of Mooloolah on title reference number 14724012 (“the property”). The land, an allotment of 728 m², had been purchased by them in the early 1980’s and it has waterfrontage, with deep water access to the Mooloolaba Harbour.

3. [3]
   In the 1980’s, the plaintiffs built what is described in evidence as, a good quality architecturally designed single level brick and tile dwelling on the land.

4. [4]
   The plaintiffs continued to reside in this property until they desired to move into unit accommodation, in about 2004 and they then sought to sell the property at 31 Culbara Street.  Eventually they contracted with the defendant in respect of the sale of the property and that contract has previously been the subject of proceedings in the Supreme Court before Douglas J.^[1]

5. [5]
   The circumstances of the formation of that contract and the termination of it were described by Douglas J as follows:

“[2] Mr Juniper, the applicant, offered to purchase a residential property from Mr and Mrs Roberts on 27 May 2004. The respondents accepted that offer by a facsimile sent to his solicitors on 28 May 2004. The contract was not due to settle for two years and entitled Mr Juniper to take possession on payment of the initial deposit and acceptance of title. He moved into possession on about 4 June 2004 and accepted title on 13 June 2004. While in possession he leased the property to other people and is said to have carried out renovation work, removed some fixtures and fittings and not to have maintained the property properly. He also advertised it for sale but presumably, did not obtain the price he wanted.

[3] Towards the end of his two year tenure of the land and shortly before settlement was due, he gave notice of termination of the contract by facsimile dated 9 May 2006.  The ground for termination of the contract advanced by him was its failure to conform with s 366 of the Property Agents and Motor Dealers Act 2000.  That section then required a contract to have attached as its first or top sheet a warning statement containing information mentioned in s 366(3).  If a warning statement was not attached to the contract the Buyer might terminate it (‘at any time before the contract settles’) by notice of termination under s 367(2).

[4] The contract was prepared by Mr N Roberts’ real estate agent as a number of draft contracts sent to Mr Juniper by facsimile.  Each facsimile had a coversheet as its first page, followed by the warning statement, and was received by Mr Juniper as separate unattached pages.  The special conditions were sent late in the day on 27 May 2004 as one page that was sent individually, apparently without a coversheet and without a warning statement.  The contract signed by Mr Juniper was compiled from the various facsimiles sent to him, signed by him and then faxed to the agent who witnessed his signature, but not in his presence.  The respondents then signed the faxed contract bearing Mr Juniper’s faxed signature and it was then sent back, again by facsimile, to Mr Juniper’s solicitors.

[5] The respondents allege that the agent sent Mr Juniper by mail a further original copy of the contract to be executed and returned by him.  That evidence is disputed but it is common ground that Mr Juniper did not sign and return any further copy.

[6] The Contract contained a special condition, Cl.6. it read:

‘Execution by Facsimile

The Seller and the Buyer separately acknowledged that this contract of sale is being signed on a facsimile of the contract and accordingly that the Seller and the Buyer separately shall be bound by all terms and conditions contained in the contract upon signing of the facsimile by them, and further that they shall sign the original contract immediately upon receipt.’”

6. [6]
   His Honour found that there had, in these circumstances, been a breach of s 366 of the Property Agents and Motor Dealers Act 2000 (“PAMDA”) and that there were no defences to the respondent’s entitlement to the following relief:

“1. Declare that the [plaintiffs] failed to comply with s 366(1) of the Property Agents and Motor Dealers Act 2000 by failing to attach a warning statement as its first or top sheet to the Contract in relation to the [defendant’s] purchase from the [plaintiffs] of lot 16 on CP AM83312, County of Canning, Parish of Mooloolah, title reference 14724012 (“the Contract”).

2. Declare that the [defendant] has lawfully terminated the contract pursuant to s 367(2) of the Property Agents and Motor Dealers Act 2000.

3. Order that there be judgment in favour of the [defendant] against the [plaintiffs] in the amount of $242,413.64.”

7. [7]
   Before Douglas J, the plaintiffs raised their right to counter-claim for damages relating to failure to maintain the property and costs of removal of fixtures and fittings. However, these were not seen as impeaching the defendant’s title to his statutory claim but liable to be the subject of separate proceedings.^[2] 

8. [8]
   As was further noted by Douglas J and is admitted in these proceedings, the defendant had possession of the property from 4 June 2004 until 9 May 2006, a period of 100.57 weeks. He did so pursuant to the following special condition of the contract:

“1. Possession

1.1 The Buyer may take possession of the property upon payment of the initial deposit of $107,500 and acceptance of title.

1.2 Clause 2.1 of the Terms of Contract shall not apply.

1.3 In addition to clause 8.5 of the Terms of Contract:

1. (a)
   The purchaser shall pay all outgoings and consumables (including water, power and telephone) in respect to the property from the date of possession.

2. (b)
   The Buyer shall insure in the names of the Seller as unpaid vendors and the Buyer, the property for its full insurable value from the first business day after the contract date.  If called upon to do so by the Seller, the Buyer shall produce on demand evidence of the insurance and payment of the premium.

1.4 Any adjustments of the outgoings and consumables shall be calculated as at the date of possession.”

9. [9]
   The contract was in the form of the standard REIQ contract and clause 8.5 provided as follows:

“8.5 Possession before Settlement

If possession is given before settlement:

1. (1)
   The buyer must maintain the property in substantially its condition at the date of possession, fair wear and tear excepted;

2. (2)
   Entry into possession is under a licence personal to the buyer revocable at any time and does not:

1. (a)
   Create a relationship of Landlord and Tenant; or

2. (b)
   Waive the Buyer’s rights under this Contract;

3. (3)
   The Buyer must insure the property to the Seller’s satisfaction; and

4. (4)
   The Buyer indemnifies the Seller against any expense or damages incurred by the Seller as a result of the Buyer’s possession of the Property.”

The Claim for Damages for Breach of Contract

10. [10]
    As described by Dixon J, in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, at 477, damages may be sought for breach of a contract which is otherwise terminated:

“When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning.  Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired.  Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected.”

11. [11]
    Prior to 4 June 2004, the plaintiffs had sought to maintain their property in a good condition. This included having the landscaped gardens attended and maintained on a regular basis through a business operated by the plaintiffs’ son.

12. [12]
    Upon resumption of their possession of the Property, in May 2006, the plaintiffs’ found that the property was not then in the same condition as they had left it, when the defendant took possession.

13. [13]
    It is clear from the photographic evidence presented to the Court that the gardens had not been maintained to the same prior standard and there had been the loss of many plants, including a number of well established and mature plants, which would take time to replace to the same extent of establishment. In addition, it is not disputed that during his possession and occupancy^[3], the defendant effected alterations to the residence.

14. [14]
    The defendant is a property developer and he had originally purchased this property with a view to resale and his position is that the alterations which were effected were done to and did enhance, rather than diminish the value of the property. This included the removal of plants (some contained in pots) and pool fencing^[4], from around the swimming pool area and so as to open up or allow unimpeded water views.  It also included the removal of some built in features of the residence, such as in the nature of bars, screening and a sound system.

15. [15]
    However and whatever may have been the motivation for it, this conduct of the defendant was in breach of clause 8.5(1) of the contract. By the conclusion of the trial, this breach was not in contest and the only issue was as to what, if anything, could and should be recovered by the plaintiffs as damages.

16. [16]
    Presented with the situation of the defendant’s termination of the contract and their desire to sell to the property, the plaintiffs decided to expend some money on the most obviously deficient maintenance issues^[5] and to seek to re-sell the property. 

17. [17]
    Pursuant to a further contract dated 21 September 2006, they re-sold to another purchaser, in the sum of $2,100,000, on the basis that the contract would settle on or before 4 August 2007, which it did.

18. [18]
    The contract which had been terminated by the defendant had provided for a purchase price in the sum of $2,336,250. As has already been noted, that contract allowed for a two year period from the date of the contract, for settlement.

19. [19]
    However, it can also be noted that there was also a further special condition of the contract which related to an adjustment to the purchase price, should settlement occur earlier than two years from the contract date. That special condition was as follows:

“2. Early Settlement

2.2 In the event of the settlement of this contract prior to the date two years from the contract date, the purchase price shall be reduced by $105,425.00 per annum or a pro-rata amount thereof calculated on a per diem basis.”

Discussion of the Claim for Breach of Contract

20. [20]
    For the conceded breach of clause 8.5(1), the defendant also concedes that the plaintiffs are entitled to recover an agreed amount of $4,000, representing the monies actually spent by the plaintiffs in contemplation of re-sale and which is attributable to reinstatement costs due to the failure of the defendant to maintain the property over and above fair wear and tear.^[6] 

21. [21]
    However, there remained dispute as to the balance of the plaintiffs’ claim for this cause of action. By the conclusion of the trial, the plaintiff claimed the following as further damages, on the basis of the following agreed amounts as to the replacement cost of each of the following removed items:

22. [22]
    Accordingly and notwithstanding that none of these items were actually replaced and therefore none of the respective costs actually incurred, the plaintiffs, at the conclusion of the evidence, sought the sum of $24,245 as the appropriate further measure of their damages, on the basis of the principles discussed in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd^[7] (“the Tabcorp decision”).

23. [23]
    In that case, the High Court was concerned with an issue relating to the appropriate basis of measuring damages for breach of a lease in respect of an office building in Melbourne, due to actions of the lessee in renovating the foyer of the leased premises.  That occurred in breach of clause 2.13 of that lease, which was described in the following terms^[8]:

“[7] By cl 2.13, the Tenant covenanted:

‘Not without the written approval of the Landlord first obtained (which consent shall not be unreasonably withheld or delayed) to make or permit to be made any substantial alteration or addition to the Demised Premises’.

The Tenant also covenanted, by cl 2.10, to keep the premises in repair; by cl 2.11, to yield up the premises on the determination of the lease in good repair; and, by cl 2.12.4, to make good any breakage or damage.”

24. [24]
    In the Tabcorp decision, cl 2.13 was described as “an express negative covenant” which “serve[d] a function of considerable practical utility in relation to the Landlord's capacity to protect its legitimate interest in preserving the physical character of the premises leased” and which might have appropriately been a foundation for injuncting what had occurred, if discovered at an appropriately early stage.^[9]

25. [25]
    The High Court rejected the tenant’s argument that damages were only properly measured by diminution in the value of the reversion and by application of the reasoning underlying that court’s earlier decision in Bellgrove v Eldridge^[10], determined that:

“…the landlord was contractually entitled to the preservation of the premises without alterations not consented to; its measure of damages is the loss sustained by the failure of the tenant to perform that obligation; and that loss is the cost of restoring the premises to the condition in which they would have been if the obligation had not been breached.”^[11]

26. [26]
    However, it was also observed:

“[17] The tenant stressed that in Bellgrove this Court pointed out that there was a qualification to the rule it stated in regard to damages recoverable by a building owner for the breach of a building contract.  ‘The qualification ... is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.’  The example which the Court gave of unreasonableness was the following:

‘No one would doubt that where pursuant to a building contract calling for the erection of a house with cement rendered external walls of second-hand bricks, the builder has constructed the walls of new bricks of first quality the owner would not be entitled to the cost of demolishing the walls and re-erecting them in second-hand bricks.’

That tends to indicate that the test of ‘unreasonableness’ is only to be satisfied by fairly exceptional circumstances.  The example given by the Court aligns closely with what Oliver J said in Radford, that is, that the diminution in value measure of damages will only apply where the innocent party is ‘merely using a technical breach to secure an uncovenanted profit.’  It is also important to note that the ‘reasonableness’ exception was not found to exist in Bellgrove.  Nothing in the reasoning in that case suggested that where the reasoning is applied to the present circumstances, the course which the Landlord proposed is unnecessary or unreasonable.”

27. [27]
    In the Tabcorp decision, damages were awarded on the reinstatement basis, notwithstanding that no such reinstatement could occur, if it did, until a future date, at the end of the lease.  It can be noted that in observations as to the date of the assessment of damages and that the conclusion was open to an argument as to allowance of a “betterment discount” (which just as here, was not raised in that case) the judgment appears to expressly contemplate that actual expenditure on reinstatement was not a necessary pre-condition of the award.^[12] 

28. [28]
    In this case the complication is that the plaintiffs actually determined to attempt to mitigate their position and any loss, by reselling the property in its altered form (apart from dealing with the most pressing maintenance and repair issues), rather than first reinstating it to its unaltered condition. There is therefore no question of the plaintiffs ever actually incurring the further costs of reinstatement. Accordingly, the plaintiff sought to reinforce their claim on this basis, by evidence of diminution of value, as a result of the alterations and lack of maintenance.

29. [29]
    On the other hand, the defendant contended that whereas here there has not been rectification and the plaintiffs have liquidated the property, as altered, application of the principle of restoration to the same position as if the contractual obligation had been performed^[13], required assessment on the basis of diminution in value.

30. [30]
    The only evidence given as to this issue was that of the valuer called by the plaintiffs, Mr Duncan. Evidence of this kind is necessarily imprecise and Mr Duncan himself conceded that a 5-10% variation in range, is recognised and may be accepted within his industry.

31. [31]
    More particularly, in this case, Mr Duncan was attempting to assess, well after the event, any difference in market value of the property, as at May 2006 and when the plaintiffs took repossession, on the basis of a comparison of the property in the condition in which it was when repossessed, as against the condition in which it should have been if the contract had been performed and it had been maintained to the condition in which it was when possession was given to the defendant.

32. [32]
    As Mr Duncan himself conceded, his task was further complicated in that he had never been into the home to inspect it and had to work from the photographic evidence^[14] and the assistance he could gain from visual inspection of the locality and the position of the property (features which had not relevantly changed in the meantime).  He conceded that an ability to go into the property and to assess, for instance, whether the ambience had been improved by removal of the bars and opening up the external views, may have affected his opinions.

33. [33]
    However, Mr Duncan also explained that at the end of the day, his professional task was to make “a judgment call” as to what the market may pay and that typically involves making allowances for added value due to features, such as built in bars and sound systems. For that purpose he also had access to and paid regard to a valuation prepared by another valuer, as at 24 July 2006 and which gave a “current market value” of $2,050,000.

34. [34]
    Mr Duncan’s assessment was of a $105,000 loss in value, based on the assessment of market value assuming unchanged state of presentation, of $2,115,000 and market value of altered condition, of $2,010,000.

35. [35]
    Counsel for the defendant did at one point obtain a concession from Mr Duncan that assuming only about $4,000 was spent on the property to obtain the sale price of $2,100,000 in September 2006, then that figure may have been an accurate indication of its value in May 2006. This then led to a submission that the best case for the plaintiffs was a diminution in value of only $15,000. However and as Mr Duncan went on to explain, regard had also to be had to the unusually extended terms of settlement of the September 2006 contract and therefore the extent to which that price may reflect an allowance for delay in receipt of payment for sale. He also pointed out that there may be a need to assess the extent to which the expenditure that occurred, assisted in overcoming the factor he had identified as “market resistance and saleability/loss of bargaining power”. The more detailed calculations as finally presented by Mr Duncan were:

36. [36]
    It can therefore be noted that in respect of the assessed diminution in value, Mr Duncan had allowed:

1. (a)
   $75,000 for the market resistance factor;

2. (b)
   $5,000 (effectively when the adopted value of $2,010,000 is taken) for expenditure on repairs; and

3. (c)
   $25,000 difference in value of improvements on the land.

37. [37]
    I am satisfied that the plaintiffs have established a relevant diminution in value and that it is of an amount of no less than the claim based on reinstatement costs (in addition to the actual expenditure on repairs and maintenance). In these circumstances and where the approach of the High Court in the Tabcorp decision was to look primarily at reinstatement costs as the appropriate measure of damage (according to the Amann principle)^[15] and not withstanding the complication, in this case, of the resale without reinstatement, the reinstatement cost figures are the most appropriate and definite measure of damages.

The Claim for Compensation for Use and Occupation of the Property

38. [38]
    The basis contended by the plaintiffs for this claim lies in restitution, on the principle of unjust enrichment and not upon any implication in or arising from the contract.

39. [39]
    This contention involves an application of principle for which, it was submitted, there is no known directly comparable example.

40. [40]
    The relevant facts are not in dispute. Essentially they are that the defendant took early possession of the property, prior to settlement, pursuant to clause 1 in the special conditions of the contract. There was no contractual requirement for rent to be payable while the defendant remained in occupation, although he was required to pay other outgoings and consumables pursuant to clause 1.3(a) of the special conditions. However and as contemplated that possession was to be followed by completion, at which time the purchase price would be paid. As has been noted, that did not occur because the defendant elected to terminate the contract pursuant to PAMDA.

41. [41]
    In these circumstances, the plaintiffs rely upon the total failure of consideration or agreed return to them, under the contract and otherwise point to the benefit obtained by the defendant in the use and occupation of the property for a period of 704 days, from 4 June 2004 until 9 May 2006.

42. [42]
    If allowed, the quantum of the claim is agreed at a market rental rate of $670 per week, totalling an amount of $67,884.75.

43. [43]
    The defendant points to the statement in David Securities Pty Ltd v Commonwealth Bank of Australia (“David Securities”)^[16]:

“[It] is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable.  Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality.”

He emphasises the word “recovery” and points out that the restitution cases are generally concerned with money paid or work done for a promised return, which does not eventuate due to one such qualifying or vitiating factor.

44. [44]
    Here and as further stressed by the defendant, there was no agreement for the payment of rent, rather the lease provided for a licence, which the defendant seeks to characterise as given gratuitously. In this regard, he further seeks to characterise the “enhanced purchase price” under the contract, as being adjusted to suit the actual settlement date. Nevertheless he contends that there was one sum agreed to be paid in return for the property and there is nothing to be restored, as the property was returned to the plaintiffs and any issue as to diminution in value is a separate one.

45. [45]
    In cross-examination, Mr Roberts’ evidence was that the contract price was the result of the negotiation of increased amounts, in response to a request to extend the time for settlement. It was not clear if he agreed that the calculation was based on or on any particular rate of interest, over the period. He did accept that the base price was to be $2,150,000.

46. [46]
    However and more germanely, reference to the special terms of the contract indicate that whilst there was an agreed lump sum to be paid for the property on settlement, that price was not fixed irrespective of when settlement occurred. The conditions allowed for early settlement and a pro-rata reduction, calculated on the basis of $105,425 per annum or $2,027.40 per week and no separate consideration or reduction in the amount payable was included as referable to the licence to use or occupy. That contract was obviously executed in expectation of the defendant having possession of the property for most of the period until settlement. The defendant actually took possession on 4 June 2004, after payment of the initial deposit.

47. [47]
    The precise figures and calculations are unimportant. In the circumstances and notwithstanding that the licence to have possession and occupy prior to settlement was revocable, it is not possible to separate the right of possession from or as a component of the consideration to be paid for the property, in the sense that it was objectively intended that there be a gratuitous licence to use and occupy the property prior to settlement.

48. [48]
    Of course and as pointed out for the plaintiffs, in any event the contract is now only of evidential value and cannot be relied upon by defendant in answer to their claim, as he chose to lawfully terminate it.

49. [49]
    Unjust enrichment is not accepted as a definitive legal principle according to its own terms.^[17]

50. [50]
    In Spangaro v Corporate Investment Australia Funds Management Ltd (“Spangaro”)^[18] Finkelstein J said:

“48  To obtain restitutionary relief, a plaintiff must demonstrate that: (i) the defendant was enriched; (ii) the defendant's enrichment was at the plaintiff's expense; (iii) the enrichment was unjust (according to defined categories developed in the cases); and (iv) no restitutionary or other defences would preclude restitution being made: Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 at 256-257; Australian & New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662, 673; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 379, 392; Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221, 227, 234; Justice K Mason, `Where has Australian restitution law got to and where is it going?' (2003) 77 ALJ 358.”

51. [51]
    In the present case there was no contention made as to any restitutionary or other defence which would otherwise preclude an order for restitution. The plaintiff contends that the enrichment of the defendant was the benefit he obtained of the period of use and occupation of the property and that this came at the plaintiffs’ expense because of the failure of the expectation of recompense for that use and occupation, as a component of the purchase price that was expected to be paid.

52. [52]
    The plaintiffs’ submissions recognise the force of the observation in Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation^[19] to the effect that recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality but sought to characterise that qualifying or vitiating factor, in this case, as the termination of the contract resulting in a failure of consideration in circumstances where a premise upon which early possession could be taken was the recompense expected in the form of the purchase price.

53. [53]
    The defendant stresses that although total failure of consideration is given some limited recognition as such a vitiating factor in David Securities^[20], the issue usually only arises in circumstances where money has been actually paid.  He emphasises that the requirement of a vitiating factor defines the aspect of any enrichment being unjust and that here such a conclusion should not arise from his exercise of a statutory right to lawfully terminate the contract.

54. [54]
    In Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (receivers and managers appointed) (in liq)^[21], Bleby J was not prepared to unequivocally act upon the basis that total failure of consideration was a relevant vitiating factor establishing unjustness.  He pointed out that the issue has been the subject of academic debate, including the contention that the High Court judgment in David Securities actually treats provision of valuable consideration as a defence to a claim for unjust enrichment (in that case where the recognised vitiating factor was mistake of law).

55. [55]
    The facts of Ethnic Earth are complicated and do not require elaboration, as it is suffice to note that Bleby J otherwise found that there was no relevant failure of consideration.^[22]

56. [56]
    In Spangaro^[23], Finkelstein J did not express the situation with any equivocation:

“51 The question whether CIAFM's enrichment was unjust, is not to be determined "by reference to some subjective evaluation of what is fair or unconscionable": David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR at 379. Instead, one must turn to the recognised categories of unjust enrichment to identify the basis for the obligation to make restitution. A common basis is when money has been paid for a consideration which has failed: Moses v Macferlan (1760) 2 Burr 1005, 1012 [97 ER 676, 680-681]; Royal Bank of Canada v The King [1913] AC 283, 296; Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516. In this context, "consideration" can be distinguished from consideration sufficient to form a contract and "it is, generally speaking, not the promise which is referred to as the consideration, but the performance of the promise": Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] UKHL 4; [1943] AC 32, 48. There will be a "failure of consideration" where a payment has been made for a certain condition or purpose that is not fulfilled (including an unpromised future event), or in contemplation of a state of affairs which does not materialise: Martin v Andrews (1856) 7 El & Bl 1 at 4 [119 ER 1148, 1149]; Chillingworth v Esche [1924] 1 Ch 97; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR at 382; Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 389; Roxborough v Rothmans 208 CLR at 525, 557. As Professor Burrows points out in The Law of Restitution, 2^nd edn, (2002) at 407, the distinction between a promised event and an unpromised event is immaterial because in both cases "the defendant's enrichment is the same in that, where the future event does not occur, the basis for the claimant's conferral of the benefit is undermined". Here, the unpromised event is the establishment of the project. It did not eventuate because minimum subscription was not reached.

52 In the context of restitutionary claims founded on failure of consideration it is important to note the historical requirement that any relevant contract be ineffective. That requirement may now have been dispensed with: Roxborough v Rothmans [2001] HCA 68; (2001) 208 CLR 516. Be that as it may, in the present case there was no contract between Mr Spangaro and CIAFM. A contract (the Management Agreement) may have come into existence if the conditions precedent had been satisfied. But they were not.”

Discussion of the Claim for Restitution

57. [57]
    In the present case and for the reasons already given, it is clear that there has been a relevant failure of consideration (from the plaintiffs’ perspective) in respect of an ineffective contract.

58. [58]
    The plaintiffs further support their restitutionary claim by making some valid analogy to the restitutionary basis upon which recovery for use and occupation of property has been recognised in cases involving the awarding of damages for breach or repudiation of contract. In both Hodder v Watters^[24] and Doubikin Holdings v Grail Pty Ltd^[25], Fullagar J and Seaman J respectively, recognised the propriety of allowance for an occupation rent or for the benefit of occupation.  In the earlier case, Fullagar J recognised the right only in equity, whereas in the later case, Seaman J thought that the same position was arrived at by common law on the basis of the vendors’ loss of the use and occupation of the land and its rents and profits.

59. [59]
    In Landers v Schmidt^[26] and in the context of a contract which was made voidable before completion, at the election of a purchaser and pursuant to s 73 of the Property Law Act 1974-1981 and where there was an agreement as to a rental for the possession granted under the contract, Connolly J (with whom Lucas SPJ agreed) observed:

“The appellants contend that, even if the respondents had the right to avoid the contract ab initio, what they did was to repudiate future performance.  In my judgment there is nothing in this point.  Had they avoided in the strict sense they would have been excused from future performance and that is precisely what they refused.  I hold therefore that their refusal was justified and that it cannot be treated as a breach of contract giving rise to an action for damages.

The consequence, in my judgment, is that the appellants cannot recover damages for the loss of their bargain.  On the other hand, the obligation of the respondents to pay rental, whether described as interest or otherwise, is not affected by this conclusion.  Had they duly avoided the contract pursuant to s. 73 and nonetheless remained in possession, their obligation to pay an appropriate rent and their liability in damages by way of mesne profits could not be doubted.”

60. [60]
    In the present case the focus is firmly on the benefit derived by the defendant and in this regard, the plaintiffs also point to the restitutionary principles of quantum meruit and quantum valebant (or valebat), as considered by the High Court in Pavey & Matthews Pty Ltd v Paul (“Pavey & Matthews”),^[27]

61. [61]
    The seminal judgment in Pavey & Matthews, in this respect, was given by Deane J (with the agreement of Mason and Wilson JJ).  In that case the court was concerned with exploration of the basis of a claim for reasonable remuneration for work performed under an unenforceable building contract.  After referring to the basis of an obligation to pay “reasonable remuneration for the executed consideration” as recognised by Jordan CJ in Horton v Jones (No. 1)^[28], as arising independently of any genuine agreement or promise or therefore from the existence of any unenforceable contract as a source of any such implications, Deane J went on to observe:

“The “action of debt” for “reasonable remuneration” to which Jordan CJ referred was not an action on the old express quantum meruit count under which a plaintiff claimed not a liquidated amount payable by the defendant but a nominated sum being “so much money as he therefore reasonably deserved to have” (see Chitty's Treatise on Pleading, 7th ed (1844), vol 1, p 351). That being so, his Honour was not concerned to resolve the old conflict about whether the special quantum meruit and quantum valebant (or valebat) counts could lie in debt where the essence of the action was the alleged retention of a liquidated amount which was due (contrast, eg, the views expressed in Chitty, op cit, at 375 and in Ames, op cit, at 89). It is true that Horton v Jones (No 1) was decided at a time when the old forms of action were still alive in New South Wales. The special quantum meruit and quantum valebant counts had, however, long been obsolete (see, eg, Chitty, op cit, at 352; Horton v Jones (No 2)). The position was explained by Bullen & Leake (Precedents of Pleadings, 3rd ed (1868), p 35), in words which were subsequently quoted with approval by Farwell LJ in Lagos v Grunwaldt: “there were also formerly in use counts known as quantum meruit and quantum valebat counts, which were adopted where there was no fixed price for work done or goods sold, etc.  These counts however have fallen into disuse, and have been superseded by the general application of the indebitatus counts.” In a case where there was no fixed remuneration or price, the action on one of the ordinary common indebitatus counts, which had absorbed the express quantum meruit and quantum valebant counts, was in substance to recover a “ quantum meruit “ or “ quantum valebant “ in the sense that it was to recover the amount which represented reasonable remuneration. It had, however, long been settled that such an action on an ordinary common indebitatus count was to recover the amount payable as a liquidated amount or debt. As Farwell LJ observed in Lagos v Grunwaldt “everything that could be sued for under those counts comes within the description of debt or liquidated demand”. That being so, there remained no objection to such an action being brought in debt: see, generally, Horton v Jones (No 2) at; Chitty, op cit, at 352; and, eg, Gardner v Bowman.”^[29] (citations omitted)

…

“It is not necessary to pursue here the question whether, now that the common law is released from the controls of the old forms of action, there is a continuing need for or utility in the traditional approach that any claim which would in previous times have been asserted by a common indebitatus count must be seen as lying either in contract or quasi-contract (see, eg, the discussion of the subject by Lord Wright, op cit, and by W S Holdsworth, “Unjustifiable Enrichment”, Law Quarterly Review, vol 55 (1939), 37). It suffices to say that, even accepting that traditional approach, it is clear that the old common indebitatus count could be utilised to accommodate what should be seen as two distinct categories of claim: one to recover a debt arising under a genuine contract, whether express or implied; the other to recover a debt owing in circumstances where the law itself imposed or imputed an obligation or promise to make compensation for a benefit accepted. In the first category of case, the action was brought upon the genuine agreement regardless of whether it took the form of a special or a common count. It follows from what has been said above that the cases in which a claimant has been held entitled to recover in respect of an executed consideration under an agreement upon which the Statute of Frauds precluded the bringing of an action should be seen as falling within the second and not the first category. In that second category of case, the tendency of common lawyers to speak in terms of implied contract rather than in terms of an obligation imposed by law (see, eg, per Salter J, Scott v Pattison) should be recognised as but a reflection of the influence of discarded fictions, buried forms of action and the conventional conviction that, if a common law claim could not properly be framed in tort, it must necessarily be dressed in the language of contract. That tendency should not be allowed to conceal the fact that, in that category of case, the action was not based upon a genuine agreement at all. Indeed, if there was a valid and enforceable agreement governing the claimant's right to compensation, there would be neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration. The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.”^[30] (citations omitted)

Then and in a passage approved in David Securities^[31], Deane J said:

“To identify the basis of such actions as restitution and not genuine agreement is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate. The circumstances in which the common law imposes an enforceable obligation to pay compensation for a benefit accepted under an unenforceable agreement have been explored in the reported cases and in learned writings and are unlikely to be greatly affected by the perception that the basis of such an obligation, when the common law imposes it, is preferably seen as lying in restitution rather than in the implication of a genuine agreement where in fact the unenforceable agreement left no room for one. That is not to deny the importance of the concept of unjust enrichment in the law of this country. It constitutes a unifying legal concept which explains why the law recognises, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognise such an obligation in a new or developing category of case (see Muschinski v Dodds; Goff & Jones, op cit, at 11 ff). In a category of case where the law recognises an obligation to pay a reasonable remuneration or compensation for a benefit actually or constructively accepted, the general concept of restitution or unjust enrichment is, as is pointed out subsequently in this judgment, also relevant, in a more direct sense, to the identification of the proper basis upon which the quantum of remuneration or compensation should be ascertained in that particular category of case.” (citations omitted) ^[32]

62. [62]
    In the present case, it is true that the contract became unenforceable because the defendant exercised a lawful right to terminate it. Whilst, at the relevant time, s 367 of PAMDA allowed this, that legislation, apart from making specific provision for the refund of any deposit paid under the contract and recovery by the buyer of reasonable legal and other expenses incurred after the buyer signed the contract, ^[33] provided for no further effect as to the respective rights of the parties to the terminated contract.

63. [63]
    The fact of the present circumstances is that the defendant, in the outcome, obtained the significant benefit of the use and occupation of the property, prior to the termination of the contract. On the other hand, the plaintiffs received no remuneration for the provision of this benefit and for the reasons already given, it should not be concluded that this benefit was conferred gratuitously.

64. [64]
    That is, the effect of these circumstances is that the defendant has been enriched, to that extent, at the expense of the plaintiffs and the remaining question is whether this should be regarded as being unjust, so as to allow for fair and just restitution or reparation and so that the plaintiffs may recover the value of the benefit they conferred on the defendant.

65. [65]
    Similarly, to the conclusion of Finkelstein J in Spangaro,^[34] in the present circumstances the total failure of the consideration expected by the plaintiffs, under the terminated contact, should be seen as a sufficient vitiating factor and as providing the necessary requirement of unjustness. 

66. [66]
    In David Securities,^[35] the reasoning proceeded upon the basis that the identification of mistake was itself sufficient to establish the necessary unjustness in a prima facie sense, without any further independent proof.  However, the further reasoning in allowing for proof of valuable consideration as a defence, indicates that a requirement of total failure of consideration is, at least, closely related to the concept.  As noted in David Securites:^[36]

“… [T]he respondent’s attempt to analysis the facts on a broader basis of unjust enrichment rather than mistake specifically, already discussed, echo the view expressed by some writers that ‘the true basal principle which enables recovery of money paid under a mistake, whether of fact or law, is “failure of consideration” ’ (1).  It is unnecessary in the present context to assess the merits of this argument because, as we have stated, the more traditional approach, exemplified by the judgment of Goff J in Barclays Bank and the decision in this court in Westpac Banking Corporation, specifically provides for the ‘defence’ of valuable consideration.”  (citations omitted)

67. [67]
    In this case, it is also of significance to note that whilst the effect of PAMDA was not to make or declare this contract illegal, the right of termination pursuant to s 367 and as exercised by the defendant, was premised upon a failure of compliance with statutory obligation as to the provision of an accompanying warning statement and therefore upon such an illegality.

68. [68]
    It should therefore be concluded that there has been an unjust enrichment of the defendant for which he should make reparation, at the agreed weekly market rate of $670, for the period from 4 June 2004 until 9 May 2006.

Conclusion

69. [69]
    Accordingly, the plaintiffs are entitled to recover:

1. (a)
   $28,245.00 as damages for breach of contract; and

2. (b)
   $67,884.75 as restitution or reparation for use and occupation of real property.

70. [70]
    The plaintiffs also claimed and there was no dispute as to their entitlement to interest on these sums, under s 47 of the Supreme Court Act 1995, at the rate of 9% per annum from 9 May 2006 to 30 June 2007 and 10% per annum from 1 July 2007 to the date of judgment.  The calculation totals $48,869.67.

71. [71]
    Accordingly, the order of the court is that the defendant pay the plaintiffs the sum of $144,999.42 (including interest to the date of judgment).

72. [72]
    I will hear further submissions as to costs.