Agreements required to be evidenced in writing

NB THIS TOPIC WILL NOT BE COVERED IN THIS SEMESTER'S CONTRACT COURSE.

NB REFERENCES TO "HPH" OR JUST TO A PAGE NUMBER ARE TO HEFFEY, PATERSON AND HOCKER CONTRACT COMMENTARY AND MATERIALS 8TH ED 1998 (LBC INFORMATION SERVICES)

Introduction and historical origin

In looking at formation of contract, one perhaps surprising thing we discovered is that the law is very undemanding in terms of the formalities required for a contract. Contrary to popular belief, contracts do not generally have to be in writing. As a matter of sensible commercial practice, contracts often are in writing, but this is not because of a requirement of law.

There are some statutory exceptions to the general principle that contracts do not have to be in writing. There are a number of consumer statutes which have stipulated that relevant contracts must be in writing. Examples are residential tenancy legislation, used car sales, lay-by sales, door to door sales, consumer credit contracts and others. The consumer revolution in the 1960s and 70s generated this legislation which is motivated by the policy objective of protecting consumers. This is achieved by providing transparency and imposing limitations on what the providers of goods and services are allowed to do (for example limiting their ability to exclude liability through exemption clauses). We do not have a chance to look at this type of legislation, though some of it will be studied in other courses.

You will see in the case book a reference to the Statute of Frauds, an Act passed in England in 1677. What has this got to do with modern-day Australia? Well, back in the 17th century, the law of contract was beginning to take shape. In particular it was becoming possible to enforce executory (future) promises. The law of evidence, however, was still back in the dark ages. It did not allow anyone to give evidence to support their own case. It was possible to prove a case by simply getting 12 of your mates to come along and swear, for example, that so and so made a promise to pay some money. This laid the way open to make fraudulent claims by simply getting others to commit perjury on your behalf. The answer was provided by the Statute of Frauds which stipulated that certain contracts had to be evidenced in writing. Not all contracts - only a limited class of contracts. You can see the original provisions on p 317 of the case book.

To this day, the same statutory provision, re-enacted (or even still applying in their own right in NT and WA) in the States and ACT, governs at least contracts involving interests in land and one or two other contracts. Still, to this day, the legislation is referred to generically as the Statute of Frauds.

The Statute of Frauds has, it must be said, got a bad smell about it. It can be used as a technical defence to a contract claim. That is, it enables someone who has committed himself or herself to a contract to simply wriggle out of it on the basis that there is not a sufficient writing to satisfy the legislation. There is no merit, no plausible or understandable excuse for not performing; only a fortuitous, technical defence which would only be apparent to the person after they have talked to their lawyer. You will see on pp 318-9 of the case book that there have been some strong adverse statements about the Statute of Frauds over the years by commentators, judges and law reform agencies. It would probably do no harm whatsoever to simply get rid of it.

The effect of a successful Statute of Frauds defence is that the contract is unenforceable. It is important to note this effect. We have come across the notion of unenforceability before, namely, in connection with the discussion in Casey v Inland Revenue Commissioner of a contract which is unenforceable because the limitation period has run out. The important point to note is that a contract which does not comply with the Statute of Frauds is still a contract in substance but it has a procedural defect. It is perfectly good as a contract, for example, to pass property or whatever else is stipulated. The only problem is that a court will not enforce it. A defendant must specifically plead the statute and, if he or she does not, then that defence is lost and the contract is enforceable in the normal way. It is not for the court to raise the issue. This emphasises the procedural rather than substantive nature of the defence.

Because of the opportunity provided by the Statute of Frauds to avoid contractual obligations - it was sometimes said that the Statute enables fraud rather than prevents it - the courts of equity developed a most remarkable response. Equity effectively thumbed its nose at Parliament by developing a doctrine called the doctrine of part performance. The essence of this was that, if a contract did not comply with the section and if the plaintiff could show that he or she had made a commitment to the contract - acts of part performance - then equity would grant its own remedy of specific performance. So, although a person could not get the common law remedy of damages because the contract was unenforceable, nevertheless equity would grant its remedy of specific performance if there were sufficient acts of part performance.

There is an enormous amount of case law on the Statute of Frauds, stretching back to the 17th century. In Cheshire & Fifoot's Law of Contract (7th Aus ed 1997) ch 16 covers this area and is 60 pages long. We do not go into much detail in this course because of time constraints.

The contracts affected

The only type of contract which has this writing requirement in all jurisdictions is the land one. In some jurisdictions, it is still necessary for contracts of guarantee to be evidenced by writing and in some jurisdictions contracts for sale of goods for $20 or more are covered by this legislation. Most jurisdictions have got rid of the sale of goods one. WA, Tasmania and NT have not. For a comprehensive statement of the various Statute of Frauds provisions in Australia, see Cheshire & Fifoot''s Law of Contract (7th Aus ed 1997) para 16.7. See also the case book pp 320-321, 328-329. Some of these types of contract are almost entirely redundant to-day. Examples are the contract by an executor of an estate to answer for damages out of their own estate and agreements in consideration of marriage.

We will concentrate only on contracts involving an interest in land. Before you do the Property course, you will not know what agreements, apart from out and out sales of land, are covered. Suffice it to say that the Statute of Frauds requirement covers sales, leases, mortgages, the creation of easements and some other less usual interests in land.

The formalities required - a valid note or memorandum

The legislation does not even require that the contract be in writing but, rather, requires that the relevant contract should be evidenced by writing. This is stated in the language of the section - see the original section on p 317 "unless the agreement upon which such action shall be brought, or some memorandum or note thereof shall be in writing, and signed by the party to be charged..." The relevant section in NSW is Conveyancing Act 1919 (NSW) s 54A. See p 328 for the other States and Territories.

Note that the note or memorandum must be signed by the "party to be charged". This means the defendant. The requirement is that only the defendant should have signed. This means that if there is a document which has been signed by one party and not by the other, then the contract is enforceable by one and not by the other. It depends, in other words, on who happens to sue. This feature alone is a sufficient reason for abolishing this ludicrous law.

The important words are "some memorandum or note thereof" which has, as we will see, been interpreted liberally. The contract must either be in writing or there must be a note or memorandum of the contract. The latter is the less demanding requirement and the case law has focused on what constitutes a sufficient note or memorandum. The courts have been motivated by the concerns, outlined already, that the Statute of Frauds provides an unmeritorious defence and that the opportunities for this should be minimised.

Let us look at what is a sufficient note or memorandum.

Contents The note or memorandum must contain the essentials of the contract, namely, the parties, the subject-matter, the consideration and the material terms. It does not have to have been created for the specific purpose of evidencing a contract. It may come into existence for some other purpose or it may even be a document which passes between one of the parties and an outsider.

There is a lot of case law on precisely what must be included. For example, does it matter if a minor term is not contained in the note or memorandum? There is case law which says that the contract is enforceable even though a minor or collateral term has been omitted. Can oral evidence be given as to a missing term? Can a plaintiff waive a term which has been omitted so that it cannot then be said that it has been omitted? Can a document, such as a solicitor's letter, which denies the existence of a contract but which nevertheless provides the necessary details, be used as a note or memorandum of the contract alleged?

These questions are posed to illustrate the thickets into which one is drawn by a Statute of Frauds defence. We do not have time to examine all these thickets. If, when in practice, you are ever confronted by a Statute of Frauds defence or you want to run one, there is a fair amount of law you will have to bone up on.

Time of creation The legislation requires that the note or memorandum should provide evidence of the contract alleged. It follows logically that the note or memorandum must have been brought into existence after the contract was made. It could not provide evidence of something which does not exist. The next case makes this point. Haydon v McLeod (HPH 330) In this case, involving an alleged contract for the sale of land, the defendant argued the Statute of Frauds. It was argued in reply that either there was a contract which could be spelt out of the exchange of letters which took place between the parties; or that this exchange of correspondence provided the necessary note or memorandum of an oral contract to satisfy the statutory requirement. Hood J rejected the first argument on the ground that it was not possible on the facts to infer that the contract was constituted by the exchange of letters. As to the alternative argument - that an oral contract was evidenced by the exchange of letters - Hood J said that it was impossible for letters which were sent before the oral contract was made to provide evidence of the contract. All they provide evidence of is a possible future contract. They provide evidence of negotiations or possibly instructions by one party to his or her solicitor to enter into a contract. None of this is sufficient. See p 331 top para line 4 "But documents written before any agreement ..."

An exception to this general proposition is noted on p 331. If a fully written contract is drawn up - not just a note or memorandum - and it is signed by the defendant, then, if it is accepted orally by the plaintiff, that document will suffice. This may not be logical but it is a well-established exception. A particular example of this is an option to buy granted by a defendant vendor which is exercised orally by a plaintiff purchaser. The written option provides the necessary note or memorandum.

Joining of documents The required note or memorandum can be a combination of documents. So long as the combination of documents contains sufficient information and the signature of the defendant, then that is enough. The courts over the years have struggled with the appropriate test for the joining of documents. If the documents are obviously together, such as the example of a letter and its envelope mentioned in the case book on p 332, then there is no problem about joining them. It is where the documents are not physically related to each other that difficulties may arise.

One, rather strict test is that the later document must expressly refer to the earlier document. So, for example if a letter started out: "I refer to your letter of the 5th June..." that would be sufficient to join the documents. A less strict test was put forward in the case

Harvey v Edwards Dunlop & Co Ltd (discussed HPH 337) a short extract of which is reproduced in the case book on p 337. There the requisite test for joining two documents was that the one document should merely refer to some written transaction from which the terms of the contract, etc can be deduced. If there is a reference to a transaction, then oral evidence may be used to prove the terms of the transaction. This is, almost certainly, the test which would be applied in Australia. An earlier High Court case Thomson v McInnes had put forward a stricter test. All this is discussed by the New South Wales Court of Appeal in where an option to purchase was not signed by the vendor (grantor of the option). One argument used by the vendor was that the option was unenforceable because it did not comply with the Conveyancing Act 1919 (NSW) s 54A (the Statute of Frauds provision relating to land contracts in NSW). However, the vendor's solicitor had sent a letter signed by the solicitor which, the purchaser argued, provided the missing signature. This, in turn, depended on whether the letter sufficiently referred to the option. Sheller JA, speaking for the Court of Appeal, said that he did not have to resolve the conflict between the two High Court authorites because, even on the stricter test, the letter did sufficiently refer to the option document. The option was therefore enforceable. (However, it turned out that the option had not been properly exercised by the purchaser because the option stipulated that the purchaser should include a signed contract when he exercised the option. This he had not done.) Signature The written note or memorandum must be signed by the "party to be charged" which means the defendant. This may mean, as already pointed out, that, where a document is signed by one party only, whether the contract is enforceable or not is entirely fortuitous. It depends on who is suing. In other words, where there is only one signature, the contract is enforceable by one party and not by the other. If the plaintiff happens to be the person who signed, then the contract will not be enforceable.

The courts have interpreted the requirement of signature very loosely. It does not have to be a signature in the usual sense. So long as the defendant's name appears on the document in some form, for example, it is typed on the document and the defendant acknowledges this, that is sufficient. In other words, if the defendant treats the document with his or her name in it as a record of the contract, that is sufficient. But, there are some limits to the flexibility shown by the courts. This is illustrated by

Saunders v Pirie and Cripps (HPH 338) In this case the plaintiff tried to rely on some notes taken by the defendant's solicitor. The content of the notes is reproduced on p 339 2nd last para. Brererton J could not see how these notes could possibly be the requisite note or memorandum. They were not necessarily even a record of a contract that had been made; they might equally have been instructions about a contract to be made. But, in any case, on the question of signature, the defendant's name appearing on the notes was never acknowledged by the defendant who had neither read nor even seen the notes. You can see on p 341 some statements from the older cases about what is required by way of signature. For example if a document is produced which contains the required details including the defendant's name, then, if it is acknowledged to be a record of the agreement, that is enough. In the present case, the solicitor's notes simply did not meet this description.

The judgment of Brererton J produced in your materials was a dissenting judgment but this was the view which was followed in the High Court.

The consequences of non-compliance

Unenforceability If there is not a sufficient note or memorandum to satisfy the Statute of Frauds, then the contract is unenforceable. This means, as we have already seen, that the contract is perfectly valid but that it cannot be enforced in a court of law. Even this last statement must be qualified: it cannot be enforced in a court of law so long as the defendant has pleaded the defence. If the defendant has not pleaded the defence then the court must enforce the contract - it is not for the court to raise the defence.

A further qualification is that a court of equity may enforce it. We will turn to that under the heading of Equitable intervention below.

The contract, if it goes ahead without objection, is effective to pass property, create obligations, etc. This is illustrated by

Thomas v Brown (HPH 342-3) where a deposit had been paid and then the plaintiff purchaser tried to recover the deposit after reneging on the contract. The contract did not comply with the statutory requirements and so it could not be enforced. But, to the extent that it had been performed already by the payment of a deposit, the payment was a perfectly valid payment and therefore the deposit could not be recovered.

So, the consequences of non-compliance with the statutory requirements are straightforward enough. However, the idea of unenforceability can give rise to some tricky problems. These are illustrated by the next two cases.

Perpetual Executors & Trustees Assoc of Australia Ltd v Russell (HPH 343) In this case some land which was legally owned by the trustee company as administrator of an estate was occupied by the defendant. The defendant alleged that he was entitled to occupy the land under a lease granted to him by the deceased when he was still alive. This lease also included an option to purchase. The defendant had tried to exercise the option to purchase but his efforts had been refused by the trustee company.

It was acknowledged that the defendant had a contract of lease plus an option to purchase but that there was no note or memorandum. It was also not possible to argue that the doctrine of part performance would apply to this case. (This is a way to get around the Statute of Frauds which we will be examining shortly.) So, the position was that the defendant was in residence but had been unsuccessful in enforcing the option to purchase.

The plaintiff company was seeking to regain possession of the property. The defendant was seeking to retain possession of the property and to enforce the option. The trial judge dismissed both claims. The trial judge's reasoning is summed up in the judgment on p 344 middle para. The defendant could simply say that he was in possession under an executed agreement and that the plaintiff could do nothing to recover the land. The parties were thus left in limbo, as Evatt J noted (p 344 last para)

"The parties remain between two worlds - one dead, the other powerless to be born..."

It was clear that the defendant could not enforce the option because there was no writing. Who did the property belong to? The answer was: the plaintiff and so the High Court ordered that the plaintiff could recover the property. The case illustrates that the idea of unenforceability is sometimes difficult to sort out, given that actual performance under an unenforceable contract is perfectly valid.

The next case raises similarly difficult problems.

Head v Kelk (HPH 346) The executor of an estate sought to recover money from the defendant which had been lent to him by the deceased. The defendant argued that it was one of the terms of the loan that he would not have to pay it back if the lender died within 3 or 4 years. The lender did die within this time and so the defendant borrower said that he did not have to pay the money back. The terms of the loan were not in writing. (This was a contract which was within the Statute of Frauds because it lasted for more than a year - one of the categories we do not look at.) It was argued that the defendant borrower could not rely on the terms of the contract because it was unenforceable for want of writing. The defendant argued that he was not relying on the terms of the contract: the contract was executed, that is, the loan had been made. The plaintiff, if anyone, was trying to enforce the contract. The court held that the defendant could not be made to pay back the money. Equitable intervention - part performance From a very early time after the Statute of Frauds was passed, the equity courts decided that they were going to do their utmost to prevent the Statute being used effectively as an instrument of fraud. That is, the equity courts recognised that the Statute provided an unmeritorious defence - a technical defence - to a contract claim. The principal response to this was the doctrine of part performance. The essence of this doctrine was that if the plaintiff could show that he or she had acted under the contract - had partly performed the contract - then a court of equity would enforce the contract even though a court of law would not.

Equity's remedy was the remedy of specific performance. It would be defying the Statute to make an order for common law damages. That would make the contract enforceable in law where the Statute had said that it was not. But making an order for specific performance was apparently acceptable, even though this really was defying Parliament's dictates.

Once it was accepted that a court of equity could order specific performance, then it was also possible to get damages indirectly. This is because of a statutory provision which added to the equitable remedy of specific performance. It is generically called Lord Cairn's Act. It allows a court to award damages in lieu of specific performance if specific performance is no longer possible. This is what was actually done in Waltons Stores v Maher. You will see a reference to damages in equity under Lord Cairn's Act on p 347 3rd last para.

The doctrine of part performance requires that the plaintiff must be able to show that he or she has made a substantial commitment to the contract so that it would be unconscionable to allow the defence. Note that it must be the acts of the plaintiff. The doctrine is based on the idea of unconscionability generated by the plaintiff's reliance on the existence of a contract. Acts of the defendant which show that there is a contract therefore do not count.

Over the years there has been a controversy about what kind of commitment to the contract is sufficient. There must, in short, be sufficient acts of part performance before a court of equity will make an order for specific performance.

What are sufficient acts of part performance? The answer to this depends on two lines of cases: there is a strict test of part performance and a less strict test. In Australia it is reasonably clear that the strict test applies. The difference between the two tests is:

·the acts of part performance must be "unequivocally and in their own nature referable to some such agreement as that alleged" - the strict test found in Maddison v Alderson (see p 351);

·the acts of part performance are "such as must be referred to some contract, and may be referred to the alleged one; that they prove the existence of some contract, and are consistent with the contract alleged" - the less strict test found in Kingswood Estate Co Ltd v Anderson and applied by the House of Lords in Steadman v Steadman (see p 351 half way down "The true principle ...").

Ogilvie v Ryan (HPH 348) This case contains more or less all you need to know about the doctrine of part performance and how it is applied in Australia (i.e. the strict test). It also nicely illustrates the different results of applying the strict and the less strict test.

The case involved an arrangement between Annie Ryan and a man with whom she lived in a de facto relationship. Initially they lived in her house which she rented. The company which owned the house and of which the man was the managing director wanted to sell the property. The man suggested that they move to another house. He promised her that she would be able to live in the house for the rest of her life. He was getting old and wanted someone to look after him in his old age. She agreed to this arrangement. This time the house was in his name. They moved and then about 2 years later he died. His will said nothing about her right to live in the house. His executor brought an action to evict her.

The case raised two possible bases for her claim to be entitled to a life estate in the house. One was in contract; the other was on the basis of an equitable constructive trust. This latter mechanism is new to you and you will learn about it in detail in the equity and trusts course. The first 3 pages of the extract (pp 348-350) deal with the constructive trust point. Suffice it to say that Holland J was prepared to find that a trust had been established in her favour and so she was not evicted.

On p 350 he turns to the alternative ground - contract. First, you might wonder how you can spell a contract out of such an arrangement. It was certainly arguable that there was possibly no intention to create legal relations, possibly no consideration, possible uncertainty and so forth. But the courts in these types of cases, of which there have been many, have always taken a very flexible approach. Anyway, none of these points were argued and the only point which was argued in answer to Annie Ryan's claim based on contract was that there was no note or memorandum to satisfy s 54A of the Conveyancing Act 1919 (NSW) (which is the Statute of Frauds provision in NSW). This was a contract involving an interest in land and so attracted the Statute of Frauds requirements.

There was no paper and so there was no note or memorandum. This left the possibility that there were sufficient acts of part performance. You can see the alleged acts of part performance on the bottom of page 350 numbered 1 to 4. Were these sufficient to trigger equity's intervention in the form of an order for specific performance?

Holland J dismissed number 4 at the outset because it involved expenditure of money on the house long after litigation had commenced. See bottom para p 350.

Holland J then launched into a detailed examination of the case law on part performance, starting on p 351 2nd para. He highlighted the 2 tests - the strict Maddison v Alderson test and the less strict Steadman v Steadman (following Kingswood Estate v Anderson) test. The problem facing Holland J is then disclosed on p 352, namely the doctrine of precedent. In a previous case on which Holland J had sat, a case called Millett v Regent, the NSW Court of Appeal had overruled his approach which was to apply the less strict test. Millett v Regent then went on to the High Court which simply endorsed what the NSW Court of Appeal had decided. The High Court's decision was an extremely rare instance of the High Court giving an ex tempore judgment, that is, an oral judgment without reserving its decision. So the upshot of Millett v Regent is that we have a High Court case which apparently endorsed the use of the strict test. But there was some room for doubt because of the way in which Gibbs J, speaking for the High Court, expressed the test. It is at least arguable that his expression of the test is a hybrid between the strict and less strict - see p 353.

"It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged." The next problem is: how do these different tests actually apply to particular facts? It is here that there is a great deal of room for interpretation and differences of views. Some of these sorts of arguments are canvassed in Holland's discussion of Millett v Regent on pp 352-353. Do the acts of part performance have to be acts required by the contract? Or is it sufficient if they are acts authorised by the contract? Do they have to be acts in execution of the contract? Is it sufficient if they are acts which point unequivocally to the contract alleged? Of course, the three judges in the Court of Appeal in Regent v Millett all had different points of view.

Given that the High Court has probably said in Millett v Regent that we have to follow the strict test in Australia, what does the test in Maddison v Alderson actually mean? The strictest interpretation of this strict test is that the alleged acts of part performance must unequivocally point to the alleged and contract and no other (see middle p 351 "... be referable to no other title"). On the other hand Gibbs J himself in Millett v Regent expressed a less strict interpretation of the strict test ending with the words "...referable to some contract of the general nature of that alleged." (p 353).

Holland J had no doubt that, however interpreted, the strict test could not help Annie Ryan. The alleged acts could be explained in a number of ways and did not unequivocally refer to the alleged contract. Her giving up her rented house could be explained by her wishing to go on living with the man and her looking after him in his declining years could be explained by love and affection rather than a contract. On the other hand, had Holland J been free to apply the Steadman test, he would have had no trouble coming to the conclusion that these were sufficient acts of part performance.

So, the end result was that Annie Ryan could not satisfy the requirements of the doctrine of part performance, though she did succeed on an entirely different basis, namely, constructive trust.

The case of Ogilvie v Ryan is important for both showing the present state of the doctrine of part performance in Australia and illustrating how the different tests make a difference to the outcome. It also shows that within the strict test there is some uncertainty.

Over the years there have been many cases on what types of acts or conduct constitute sufficient acts of part performance. For example:

·payment of money does not necessarily suffice;

·taking over possession of land usually is a sufficient act of part performance;

·the act does not necessarily have to be actual performance of the contract.
 

Equitable intervention - estoppel

 Apart from the somewhat restricted doctrine of part performance, there are other ways of establishing an enforceable interest which simply by-pass contract. These ways have come to the fore in more recent times because of the development of equitable doctrines - particularly estoppel - and because the doctrine of part performance was not delivering. We saw an example in Ogilvie v Ryan where contract did not work but constructive trust did work. The thrust of the article by Pauline Ridge, referred to on p 348, is that the doctrine of part performance has been sidelined because of the strict test. Instead, other equitable doctrines have provided a remedy.

Firstly, why should not estoppel in its general application fill the bill? We have seen that in the Waltons case the High Court was able to deal with a claim involving an interest in land - a commercial lease - on the basis of estoppel and the Court rejected the argument that if estoppel is used to establish a contract then the Statute of Frauds requirements must be satisfied. The Statute of Frauds is simply irrelevant to a claim based on some doctrine other than contract.

Secondly, it is at least arguable that the use of a Statute of Frauds defence is almost invariably going to be unconscionable. It is, after all, about a contract which has been made and then one of the parties wants to get out. The elements of estoppel may very well be satisfied - an assurance, detrimental reliance, a going back on the assurance and an unconscionable result if the person who wants to go back on the assurance is allowed to. This type of argument was successfully mounted in

Collin v Holden [1989]VR 510 The case is discussed in Cheshire & Fifoot's Law of Contract (7th Aus ed 1997) in para 16.67. A background to this case is the Victorian Statute of Frauds legislation which requires not only that there should be a note or memorandum but also that any agent involved in signing a contract must be authorised in writing to be an agent. This extra requirement is unique to Victoria. In this case, barristers for each party to litigation over real property signed a settlement agreement. The agreement was not signed by Collin or Holden themselves. As a result of the settlement the case was adjourned. Later, one of the parties, Holden, decided to renege on the settlement agreement. It was argued that the settlement agreement was unenforceable because it was signed by Holden's agent - the barrister - and the barrister had not been authorised in writing as required by the legislation. The judge Tadgell J held that H was estopped from using this defence. It would be unconscionable to allow him to use it, having regard to the settlement which had occurred. What detrimental reliance was there on the part of C? Tadgell J said that her agreeing to discontinuing proceedings was sufficient.

I have suggested (C&F para 16.67), perhaps somewhat mischievously, that this argument could be used in all Statute of Frauds cases to defeat the unmeritorious defence. In other words it is always unconscionable to use a Statute of Frauds defence!

There is another possible equitable device which can be used in cases involving interests in land. We have seen that a particular branch of estoppel, proprietary estoppel, was influential in the Waltons case. We also touched on this doctrine in Beaton v McDivitt. You may recall that proprietary estoppel is about establishing an interest in land against an owner who has either encouraged another to believe that he or she has an interest in the land or has stood by and allowed the person to believe that he or she has an interest in the land. A case which illustrates this is

Riches v Hogben [1986] 1 Qd R 315 You will deal with this case in the Property course so I will only give you a brief sketch to illustrate the usefulness of proprietary estoppel where part performance fails.

What happened in Riches v. Hogben was that the plaintiff, a man in his sixties with a wife and family of five young children, entered into an oral contract in England with his octogenarian mother whereby the mother undertook to buy a house in Australia and put it in her son's name if he would, with his family, migrate to Australia with her and there live with and care for her. To this end, the son gave up the rent-free council house in which he and his family were living, disposed of his household effects and car well below market value so as to meet the departure date, and with his wife, children and mother travelled to Australia at the mother's expense. Upon arrival in Australia the mother did buy a house, but in her own name. She assured her son "it will still be your home albeit in my name", but, within only a few days of their moving in, the mother ordered her son, his wife and children to leave the house. They had had an argument over whether she, the mother, should buy a vacuum cleaner.

The son sued to enforce the contract with his mother, or otherwise fulfil his expectation. The trial judge, McPherson J found that

·that it would not be enforceable under the doctrine of part performance if it was a contract within the Statute of Frauds but that, because it was a contract for future land, it was not within the Statute of Frauds;

·that therefore it was enforceable as a contract;

·if he was wrong, there was an enforceable obligation on the basis of proprietary estoppel quite apart from contract.

 However, the Full Court found that the contract was within the Statute of Frauds and was unenforceable because of the strict test applied in connection with part performance. Yet, said the Full Court, an equity arose in favour of the son under the doctrine of proprietary estoppel, entitling him to a conveyance of the house. He had an expectation of acquiring an interest in land, which expectation was created and encouraged by his mother, and upon which expectation the son relied, altering his position so as to expose himself to loss if the expectation were not fulfilled.

So, as I said, Riches v. Hogben illustrates both the utility and the breadth of the doctrine.

To sum up, the Statute of Frauds provides a barrier to legal enforceability of contracts which come within its provisions, mainly affecting contracts involving interests in land. Equity has come up with a number of ways of getting around this legal barrier but, of course, equity can only provide equitableremedies. One such device is the doctrine of part performance but, as we have seen, that is of limited usefulness because of the strict test which has been adopted in Australia. Apart from part performance, equity also provides the possibility of constructive trust, proprietary estoppel or just the general law of estoppel to provide relief to the victim of a person who has reneged on his or her promises.

Restitution There is one, final doctrine which I will just touch on. This comes, again, from outside the law of contract. This time it is the law of restitution. We have come across snippets of the law of restitution before. There is a heterogeneous collection of doctrines which constitutes the law of restitution. One such doctrine is quantum meruit which allows someone to recover money for services rendered when there is no contract to provide the remedy. An example is where the contract is void for uncertainty and yet the service has been performed. The person who benefited from the service is obliged to pay a reasonable remuneration to the person who rendered the service.

Supposing a contract is not void but unenforceable because of the operation of the Statute of Frauds and one party has performed under the contract. When he or she sues to be paid for what he or she has done, can the defendant simply use the defence to resist payment and thereby get something for nothing? The basis of much of the law of restitution is unjust enrichment. This was the basis, for example, in the Trident case for Gaudron J's judgment where she said that the insurance company would be unjustly enriched if it took the premium and then refused to pay out on the policy.

This kind of problem was the subject of consideration in

Pavey & Matthews Pty Ltd v Paul (HPH 362) This was not a Statute of Frauds case as such. Instead, other legislation (which was designed to protect consumers) was the basis for this case. You can see the relevant legislative provision from the Builders Licensing Act 1971 (NSW) on p 362. Section 45 clearly provides that if a building contract is not in writing and signed by both parties then the builder cannot enforce. What happened in this case was that the builder and Mrs Paul entered into an oral contract under which the builder would carry out building work. She paid some of the money owing but in the end refused to pay the balance - nearly $27,000. She argued that the contract was unenforceable because of s 45.

On a plain reading of the section, Mrs Paul seemed to have an unanswerable case. Yet there is an obvious injustice involved. You might say that the builder only had himself to blame because he did not comply with legislation which was specifically put there to protect people like Mrs Paul. So, the High Court was faced with a dilemma.

It resolved the dilemma in favour of the builder. In doing so, the Court had to go through some logical gyrations. This case is regarded as the definitive statement in Australia on an important part of the law of restitution. The Court went back to the beginnings of the law of contract - the actions in assumpsit and indebitatus assumpsit - and some very learned historical analysis can be found in the case. The extract which appears in the case book is a very much shortened version of what appears in the report with most of the historical material taken out.

The problem historically with this aspect of the law of restitution was that in the past it had been called "implied contract". Because of this, it might be more difficult to step around the statutory provision if it could be said that the court was enforcing an implied contract. This would appear to be very close to defying the intention of parliament. But the law of restitution and its underlying theory has gone through changes and the implied contract basis has now been rejected. Instead, a remedy is based on unjust enrichment. If someone has provided services or goods to another and the latter has accepted them, then the latter is obliged to pay for them. The amount to be paid is a reasonable remuneration. Note that this is not the contract price, though the contract price may act as a guide to what should be paid.

Using this reasoning the majority of the High Court, who found in favour of the builder, held that they were not enforcing the contract - that was forbidden by the legislation - but, instead, were making an order for reasonable remuneration because the building work had been done at Mrs Paul's request and she had accepted the benefit of it. In this type of action the unenforceable contract does have a role. It proves that the work was done on a commercial basis and it may provide the basis for calculating how much is owed.

Finally, note that it is possible to draft legislation which excludes all remedies, not just enforceability of contract. In both the extracted judgments, reference is made to the money lending cases. Under that legislation it is clear that moneylenders cannot recover the money that has been lent, nor any interest, nor can they enforce any security which has been given by the borrower if the statutory requirements have not been complied with. Builders, it seems, are treated more leniently. However, since the High Court's decision in Pavey some State legislatures have amended the legislation so that non-complying builders cannot claim for payment under any cause of action. This is noted in Cheshire & Fifoot's Law of Contract (7th Aus ed 1997) para 16.55 footnote 240.