#6803 - Baltic Shipping Company V. Dillion - Restitution of Unjust Enrichment BCL

Baltic Shipping Company v. Dillion

Facts

This is an appeal by the owner and operator of a cruise vessel, the “Mikhail Lermontov”, which, on 16 February 1986, struck a shoal off Cape Jackson, on the north-eastern tip of the South Island of New Zealand, was holed and sank. The cruise commenced in Sydney on the evening of 7 February 1986 and was scheduled to end on the vessel's return to Sydney on the morning of 21 February 1986. The respondent was a passenger on the vessel. She lost possessions and suffered certain injuries as a result of the sinking. Together with 122 other passengers, she commenced proceedings in the Admiralty Division of the Supreme Court of New South Wales against the appellant and its agent, Charter Travel Co. Ltd.

The relevant issue is whether the award of restitution for the fare paid was properly made by the judge.

Holding

Mason CJ

Summary of the Law

In the context of the recovery of money paid on the footing that there has been a total failure of consideration, it is the performance of the defendant's promise, not the promise itself, which is the relevant consideration. In that context, the receipt and retention by the plaintiff of any part of the bargained-for benefit will preclude recovery, unless the contract otherwise provides or the circumstances give rise to a fresh contract. So, in Whincup v Hughes, the plaintiff apprenticed his son to a watchmaker for six years for a premium which was paid. The watchmaker died after one year. No part of the premium could be recovered. That was because there was not a total failure of consideration. A qualification to this general rule, more apparent than real, has been introduced in the case of contracts where a seller is bound to vest title to chattels or goods in a buyer and the buyer seeks to recover the price paid when it turns out that title has not been passed. Even if the buyer has had the use and enjoyment of chattels or goods purportedly supplied under the contract for a limited time, the use and enjoyment of the chattels or goods has been held not to amount to the receipt of part of the contractual consideration. Where the buyer is entitled under the contract to good title and lawful possession but receives only unlawful possession, he or she does not receive any part of what he or she bargained for. And thus, it is held, there is a total failure of consideration. As this Court stated in David Securities Pty. Ltd v Commonwealth Bank of Australia: “the notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact.”

Application to facts

I have come to the conclusion in the present case that the respondent is not entitled to recover the cruise fare on either of the grounds just discussed. The consequence of the respondent's enjoyment of the benefits provided under the contract during the first eight full days of the cruise is that the failure of consideration was partial, not total. I do not understand how, viewed from the perspective of failure of consideration, the enjoyment of those benefits was “entirely negated by the catastrophe which occurred upon departure from Picton”, to repeat the words of the primary judge.

Problem of apportionment

As the contract called for performance by the appellant of its contractual obligations from the very commencement of the voyage and continuously thereafter, the advance payment should be regarded as the provision of consideration for each and every substantial benefit expected under the contract. It would not be reasonable to treat the appellant's right to retain the fare as conditional upon complete performance when the appellant is under a liability to provide substantial benefits to the respondent during the course of the voyage. After all, the return of the respondent to Sydney at the end of the voyage, though an important element in the performance of the appellant's obligations, was but one of many elements. In order to illustrate the...