The study guide states that unjust enrichment is not available if a valid and subsisting contract

governs the relationship between the parties. Does the decision of the High Court in Lumbers v W
Cook Builders Pty Ltd [2008] HCA 27 support this statement?

The statement at hand, simply communicates that if a contract does not exist between parties, and a
benefit is gained, then the party who has suffered detriment due to this gain may claim restitution.
Many plaintiffs before have been successful in claiming such compensation according to this policy,
and their cases have been almost identical to that of Builder’s, but Builder’s case was not successful,
which is why the statement does not support this specific case. The case was peculiar in that it
included a third party who was not included in the dispute, which made it an exception to the rule
and unjust enrichment or an estoppel could not be applied.

The legal component of equity acts as ‘a mechanism to soften the sometimes harsh effects of the
law’.1 It is remedial in nature in that it performs a sort of in personam “balancing act” between the
parties in dispute. The remedies of restitution offered by equity are available if a contract does not
exist between the parties. That is to say, ‘the quasi-contractual obligation to pay for and just
compensation for a benefit, which has been accepted will only arise where there is no applicable
genuine agreement or where such agreement is frustrated, avoided or unenforceable’. 2 Therefore it
is necessary to establish if a contract was in action, and if so with which parties did the contract or
contracts exist.

An oral agreement constituting a contract was allegedly made between Lumbers and Sons. ‘In
determining whether parties have made a contract courts are often guided by an assessment of
whether the parties have engaged in a process of offer and acceptance...Mutual assent constituting
an agreement might be inferred from an objective assessment of parties’ conduct’. 3 It was evident
that Lumbers made an offer to Mr David McAdam, who acted as an agent for Sons and accepted the
Lumber’s offer to build a house in exchange for monetary payment. There was also consideration,
signified in the exchange of goods and there was clear intent in both parties to fulfil their promises;
depicted in their conduct, for instance Lumber’s lump sum payments and Sons use of the Lumber’s
architectural plans. Sons also came to an oral agreement with Builders, as the trial judge held, ‘The
“arrangements”, said by Builders to have resulted in a contract, involved a proposal made by Mr
McAdam on behalf of Sons which was accepted by Mr Jeffery Cook on behalf of Builders’. 4

1
Bernadette Mulholland, Tutorial notes (2010).
2
Trischa Mann, Oxford Australian Law Dictionary (2010), 220.
3
Geoff Lindsay, Contract (5th ed, 2004), 22.
4
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412, 419.
Although the two contracts were legally in place, there was never a contractual relationship
established between Lumbers and Builders. As the justices held, ‘[Builders] did not seek to prove
that the Lumbers had ever asked Builders to do whatever Builders did in connection with the
Lumber’s house. And the evidence that was led at trial showed that the Lumbers had never asked
Builders to do anything in connection with the Lumber’s house’. 5 Without offer and acceptance, a
contract could not exist between the two parties and Builder’s did not have the legal right to directly
claim against the Lumbers as they may have thought. As supported in Toll v Alphapharm,6 ‘It is not
the subjective beliefs or understandings of the parties about their rights and liabilities that govern
their contractual relations. What matters is what each party by words and conduct would have led a
reasonable person in the position of the other party to believe.’ However, Builders did submit in
their Statement of Claim that they substituted the place of Sons in the contract between Sons and
Lumbers when the reorganisation of the Cook Company occurred. Allegedly, the building obligations
within the contract as well as the right to claim directly against the Lumbers were rightfully assigned
to them after the division of the Cook company. This may have been plausible if the appellant had
not acted unconscionably, seeing that at the time of reorganisation ‘[Mr Cook] did not speak to Mr
McAdam, Warwick Lumbers or [the architect] about the terms of the contract which he and his
immediate family were apparently taking over in Builders’. 7 The judge also held that, ‘Jeffery Cook
did not request the Lumbers to make payments direct to Builders rather than Sons...It was only well
after the liquidation that anyone put the Lumbers on notice that any sum was outstanding, and
suggested a direct claim as an equitable assignee’. 8 As Builders acted without conscientiousness,
Son’s contractual position could not be assigned to them. Vanstone J also noted that the contract
between Sons and Lumbers was of a personal nature and incapable of assignment. 9

As there was no contract between Lumber s and Builders and no grounds for equitable assignment,
it would appear there are proper grounds for remuneration to be recovered through unjust
enrichment. After all, the three elements of unjust enrichment 10 appeared to be satisfied in that the
defendant had received a benefit, the benefit was received at the plaintiff’s expense and it would be
unconscionable for the defendant to retain the benefit. A similar circumstance arose in Steele v
Tardiani, 11 when restitution was recovered to the plaintiff through the means of a quantum meruit

5
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412, .
6
Toll v Alphapharm (2004) 52 HCA 129, 136.
7
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412, 420.
8
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412, 420.
9
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412, 421.
10
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412,423.
11
(1946) 72 CLR 386.
as the defendant had benefitted from an unpaid part of the plaintiff’s work and labour. And again in
Pavey v Matthews, 12 the court granted remuneration to the plaintiff through a quantum meruit
claim and ruled, ‘There is no apparent reason in justice why a builder who is precluded from
enforcing an agreement should also be deprived of the ordinary common law right to bring
proceedings on a common indebitatus count to recover fair and reasonable remuneration for work
which he has actually done...’ Builders also claimed that, ‘the Lumbers, by moving in and occupying
the house, accepted the benefit’, which entitled them to remuneration as in Hoeing v Isaacs,13 where
it occurred that the plaintiff could recover the entire balance owing to him after the defendant had
accepted the work provided. However, Builders never received a quantum meruit remedy from the
Lumbers. This is why the case does not support the statement at hand. There was not a valid and
subsisting contract governing the relationship between Lumbers and Builders, therefore the quasi-
contractual obligation to provide restitution for a benefit should apply, but as we know it did not.
The court could not establish unjust enrichment in this case in that Lumbers were not unjustly
enriched or did not obtain a “windfall”.

The court held:

...it is not right to describe the result as one in which the Lumbers have in any sense
obtained a “windfall”. The economic result arrived at follows either from the
bargain that Sons made with them, or from the way in which Sons has subsequently
dealt with the bargain. It is not a result that follows from any thing that the
Lumbers sought to have builders do or refrain from doing. 14

To recover restitution, Builders needed to claim against their contractual agreement with Sons. As
the ruling held, ‘...as a claim ought to be made by Builders it ought to have been made against
Sons...It cannot be said that the Lumbers have an obligation to make restitution to Builders’. 15

As Builder’s claim should have been brought against Sons, promissory estoppel was also unavailable
to Builders in their claim against Lumbers. This was because in order for an estoppel to function,
there had to be an initial promise between the parties, which had then been withdrawn and
therefore has caused detriment to the party that relied upon it. Remuneration for Builder’s work
was promised by Sons, therefore restitution could only be made to Builders by Sons, as the court
held, ‘Builder’s services were not performed at the request of the Lumbers, but pursuant to a

12
(1987) 162 CLR 22; 69 ALR 577, 608.
13
(1952) 2 all ER 176.
14
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412, 441.
15
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412, 421.
contract between Sons and Builders. There was no acquiescence by the Lumbers in the provision of
services by Builders.’16

The justices further concluded:

The Lumbers accepted no benefit at the expense of Builders which it would be

unconscionable to retain. The Lumbers made a contract with Sons which has
either been fully performed by both parties or it has not. If either the
agreement between Son and the Lumbers or the agreement or arrangement
between Sons and Builders has not been fully performed (because all that is
owed by one party to the other has not been paid) that is a matter between
the parties in the relevant agreement. 17

The statement does not support the case of Lumbers v W Cook Builders 18 as a contract did not exist
between the disputing parties and yet the court rightfully found no grounds on which Builders could
claim restitution or equitable estoppel against Lumbers. Builders had to look to Sons and hold them
to their obligatory duties in order to recover their loss. The case was peculiar in its three dimensional
state, and the exception to the rule.

16
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412, 425.
17

18
Lumbers v W Cook Builders Pty Ltd (2008) HCA 27; 274 ALR 412.