#6782 - Smith V. William Charlick - Restitution of Unjust Enrichment BCL

Smith v. William Charlick

Facts

The South Australian Wheat Harvest Board, having made contracts with the plaintiff company to sell to it wheat at 5s. and 6s. 6d. per bushel, and having delivered the wheat and received payment, required the company to pay an additional sum representing the difference between the contract price and 7s. 8d. per bushel for such wheat as was delivered after 30th January 1920. The Wheat Harvest Act 1917, sec. 5, forbade the sale of wheat by any one other than the Board; and the Board told the company that it would sell to the company no more wheat unless the additional sum were paid. The company carries on the business of milling, and, the wheat being essential for the business, the company paid the additional sum under protest. The Board made no pretence of any legal right to the payment, but relied on its (assumed) power to sell to whom it pleased.

Holding

Knox CJ

It is admitted by the formal admission put in at the trial that the petitioner was at all material times unable to purchase any wheat except from the Board, and that if the Board had not supplied the plaintiff with any wheat the plaintiff would have been unable to continue to carry on its business of a miller. It is clear that under the contracts no further money was due than that which had been paid, and that the Government could not have recovered one penny of the surcharge in an action or other legal proceeding. It is clear also that it did not represent that it had any legal right to the surcharge. On the contrary, it disclaimed any legal right to it. It is clear also that when the petitioner paid it he knew that the Board was not asserting the claim as a legal claim.

In the present case there was no mistake of fact, no threat of unauthorized interference with the person or the property or any legal right of the respondent, and no demand made under colour of office. The payment was made with full knowledge of all material facts. The respondent knew that the Board was not, and did not claim to be, legally entitled to demand the money. It was paid, not in order to have that done which the Board was legally bound to do, but in order to induce the Board to do that which it was under no legal obligation to do.

In my opinion none of the cases relied on by the respondent extends far enough to support the claim made in this case, and the appeal should be allowed.

Issacs J.

There was no new contract, and no consideration was given for the payment. But there is no doubt the Board honestly believed, not only in the moral justice of its demand, but also that it had the legal right to refuse to deal any longer with the respondent unless he acceded to the demand.

It is interpreted by the decision to cover a case where a party pays what is demanded on grounds not morally reprehensible, and merely as a condition of the other party's present willingness to deal with him in the future, no present contract or obligation whatever being made or entered into. The "great evil" to be averted would in terms include the refusal of a bank to increase the limit of a customer's credit or of a wholesale merchant to supply a retailer—the result being financial ruin, and the demand being for a sum of which, however just the demand might be or might be thought to be, strict law, as is recognized, would not compel the payment. As the learned Judge demonstrated, no case other than the three mentioned would support so wide a proposition. In my opinion those cases do not authorize it.

It is conceded that the only ground on which the promise to repay could be implied is "compulsion." The payment is said by the respondent not to have been "voluntary" but "forced" from it within the contemplation of the law. Leaving aside, for the present, the question whether in law the payment was "forced" from the respondent by some undue advantage taken of its situation having regard to the Wheat Harvest legislation, the point is whether the Board's insistence was what is regarded as "compulsion" from the simple standpoint of common law. "Compulsion" in relation to a payment of which refund is sought, and whether it is also variously called "coercion," "extortion," "exaction," or "force," includes every species of duress or conduct analogous to duress, actual or threatened, exerted by or on behalf of the payee and applied to the person or the property or any right of the person who pays or, in some cases, of a person related to or in affinity with him. Such compulsion is a legal wrong, and the law provides a remedy by raising a fictional promise to repay. Apart from any additional feature presented by the relevant legislation, it is plain that a mere abstention from selling goods to a man except on condition of his making a stated payment cannot, in the absence of some special relation, answer the description of "compulsion," however serious his situation arising from other circumstances may be (see Pollock on Contracts, 9th ed., pp. 477-478). The claim for repayment of a sum which has been paid on demand can only be successfully made where, as Lord Haldane L.C. said in Sinclair v. Brougham, "the law could consistently impute to the defendant at least the fiction of a promise" though, as Lord Sumner said in the same case, "it is hard to reduce to one common formula the conditions under which the law will imply a promise to repay money received to the plaintiff's use." At all events it is not sufficient that it is merely "unconscientious for the defendant to retain it", or that "it would be the right and fair thing that it should be refunded to the payer"

Higgins J.

Now, pressure may be legitimate or illegitimate. A type of the legitimate is found when a property owner refuses to sell his property, worth in the market 1,000, for less than 10,000. No one would say that if the purchaser contract to give the 10,000 owing to his urgent need, he could afterwards recover the difference of 9,000. The owner has a right to refuse to sell the property unless he get his price. A type of the illegitimate pressure is when a highwayman presents his pistol with the option "Your money or your life." The essential difference of the two cases seems to be that the property owner has a right to refuse to sell and the highwayman has no right to take the life.

For my part, I quite accept the view that compulsion may exist when the party receiving is not breaking any duty to the party paying; but the fact that the compulsion exists does not necessarily show that the party paying can recover the money—e.g., in the case put of the property owner. I accept also the view that the payment is not usually voluntary when the party paying pays under the threatened exercise of right by the party receiving which puts the party paying in the dilemma between submitting and incurring inordinate loss. But, as in the instance of the property owner, it does not follow that the payment can be recovered. The question in each case of...