The New South Wales Court of Appeal has considered the application of a concept of ‘split election’ in the context of equitable remedies sought against multiple defendants. While a ‘split election’ cannot be applied in cases of a single defendant, the Court has held that gain-based and compensatory remedies can be the subject of a ‘split election’ in cases where there are multiple wrongdoers. The Court has also reaffirmed that there is no positive duty on a fiduciary to disclose breaches of duty nor a positive duty to obtain informed consent in circumstances where fiduciaries have breached duties.

 

 

 On ‘beautifully simple facts’, the recent decision of the Supreme Court of the United Kingdom in Barton v Morris [2023] UKSC 3 (‘Barton’) highlights the difficulties in identifying when an enforceable and subsisting contract will preclude a claim in restitution for unjust enrichment. In Barton, the contract was silent as to whether the defendant had an obligation to pay the plaintiff in the circumstances that arose. The majority of the Supreme Court denied the claim for unjust enrichment because to allow it would interfere with the parties’ contractual allocation of risk and subvert the law of contract. The majority’s decision was correct. Lord Burrows’ dissent was concerning, however, because it demonstrated an impermissible approach to contractual construction which interfered with the parties’ allocation of risk.

This article will argue that where a contract has not been set aside, whether a claim for unjust enrichment is available is primarily a question of construction, the purpose of which is to ascertain the parties’ common intention. Construction will directly determine whether and to whom risks are allocated under a contract. Attributing meaning to silence is not a question of construction because there are no express words to construe. It is a fact that may be relevant to the parties’ intention. The authors’ position is that absent some clear fact indicating otherwise, where a contract is silent about a circumstance, the probable result is that the parties will have allocated the risk of that circumstance to one party, thereby excluding a claim for unjust enrichment. Undue weight should not be placed on silence to support an improper construction that the parties have not allocated the risk. Barton is relevant to Australian law because Australian courts have dealt with similar issues. The decision of Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 (‘Roxborough’) demonstrates the importance of proper construction to avoid subverting the law of contract.

 

 

 In early 2020, in response to the outbreak of COVID-19, governments began to implement lockdowns as a public health measure. Many businesses were forced to close or significantly reduce their trading. One consequence of these measures was disruption to private contractual relations. In Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 407 ALR 613; [2023] HCA 6 (Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ), the High Court of Australia considered, for the first (and likely only) time a contractual obligation that was affected by pandemic-era trading restrictions. In so doing, the Court eschewed a ripe opportunity to develop the doctrine of supervening illegality, but nevertheless helpfully applied and illuminated the orthodox principles of contractual construction. Most significantly, the Court found that an obligation to carry on a business in the usual and ordinary course was subject to an overriding qualification of lawfulness, a finding with important consequences to the construction of like terms.

 

 

 Section 561 of the Corporations Act 2001 (Cth) (‘Corporations Act’) allows for debts due to company employees in a winding up to be satisfied from property subject to a circulating security interest, in priority to the claims of secured parties. In Resilient Investment Group Pty Ltd v Barnet and Hodgkinson as liquidators of Spitfire Corporation Limited (in liq) [2023] NSWCA 118 (‘Spitfire’), the NSW Court of Appeal decided whether approximately $2 million of research and development tax incentive offset refunds (‘R&D Refunds’) were to be considered a ‘circulating asset’ within the definition provided by s340 of the Personal Property Securities Act 2009 (Cth) (‘PPSA’) (which I address below) and therefore available to employees as property subject to a ‘circulating security interest’ under s561. The contest was between Resilient Investment Group Pty Ltd (‘Resilient’), a secured creditor of Spitfire Corporation Limited (in liq) (‘Spitfire’), and the Commonwealth, which had advanced the relevant employee entitlements to Spitfire’s employees under the Fair Entitlements Guarantee scheme and was consequently a subrogated creditor of Spitfire. There was an ancillary issue whether Spitfire was the ‘true employer’ of the employees that attracted the relevant entitlements, where the ‘employer of record’ was Aspirio Pty Ltd (‘Aspirio’), a wholly owned subsidiary of Spitfire.

The Court of Appeal (Gleeson JA, White and Brereton JJA agreeing) overturned the conclusion reached by the primary judge, in finding that R&D Refunds were not a circulating asset and therefore not subject to a circulating security interest for the purposes of s561. The Court of Appeal agreed with the primary judge that Spitfire was the ‘true employer’ of the relevant employees, as determined by reference to the substance and totality of the relationship.

 

 

• The relationship between common law and express powers to terminate a contract: practical considerations

• Settlement deeds and releases: the governing legal principles

• Proportionate liability, indemnities and contractual warranties