CRITIQUE AND COMMENT COMMON LAW DIVERGENCES T HE HON PAUL FINN* When Sir Owen Dixon commented in 1942 that no good could come of ‘divergences’ between the common law administered in English and Australian courts, the then orthodoxy was that the common law of England was the common law to be applied in Australia. Over 40 years later and in a much changed constitutional and legal environ- ment, Sir Anthony Mason highlighted the need to fashion a common law for Australia that was best suited to our conditions and circumstances. The common law of England, like the law of other jurisdictions, was simply a possible source of law in Australia. The assistance properly to be derived from that source is a recurrent issue for our courts. The recent decision of the Full Court of the Federal Court in Grimaldi v Chameleon Mining NL [No 2] provides an extended illustration. This lecture focuses primarily upon equitable doctrine and remedy in Australia and England both to illustrate significant differences between the two legal systems and to explain at least some of the causes. Reference necessarily will be made to how divergence is reflected in the differing extents to which commercial dealings are regulated in the two jurisdictions; to the debates about unjust enrichment and its province; and to the significance statutes have in contriving the context in which Australia’s common law is evolving. CONTENTS I Introduction .............................................................................................................. 510 II The Unconscionable Dealings Doctrine ............................................................... 521 III Undue Influence ....................................................................................................... 523 IV Australian Fiduciary Law ........................................................................................ 524 V Estoppel in Equity .................................................................................................... 526 VI The Constructive Trust ............................................................................................ 531 * BA, LLB (UQ); LLM (Lond); PhD (Cantab). Professorial Fellow, Melbourne Law School, The University of Melbourne; Former Justice of the Federal Court of Australia. This lecture was originally presented by the author as ‘Common Law Divergences’ (Speech delivered at Allen Hope Southey Memorial Lecture, Melbourne Law School, 21 November 2012). 509 510 Melbourne University Law Review [Vol 37:509 VII The Statutory Context ............................................................................................. 534 VIII Conclusion ................................................................................................................ 535 I INTRODUCTION Let me begin by setting the scene for what follows. The story of the changes in the formal character of the common law in Australia is well-known and requires little elaboration. Seventy years ago, ours was the common law of England. So much was this felt to be so that Sir Owen Dixon could state uncontroversially: We are studious to avoid establishing doctrine which English courts would dis- avow. For we believe that no good can come of divergences between the com- mon law as administered in one jurisdiction of the British Commonwealth and as administered in another.1 Thus, it was that the rules of contract law were the rules of English contract law. This was their justification. That was sufficient.2 Forty-five years later, but in a changed Australia, Sir Anthony Mason gave his imprimatur to a process which was then well in train: There is … every reason why we should fashion a common law for Australia that is best suited to our conditions and circumstances. … The value of English judgments, like Canadian, New Zealand and for that matter United States judgments, depends on the persuasive force of their reasoning.3 A year later the transition from the common law of England to the common law of Australia was belatedly formalised for all practical purposes in the amendment made to s 80 of the Judiciary Act 1903 (Cth).4 As Justice James Allsop neatly put it extra-curially: ‘The common law of England had 1 Sir Owen Dixon, ‘Two Constitutions Compared’ in Sir Owen Dixon, Jesting Pilate: And Other Papers and Addresses (Law Book, 1965) 104. This address was originally presented on 26th August 1942. 2 This cast of mind was highly formalistic and largely unquestioning of the law’s policies and purposes. It was reflected in the style of legal education for much of the 20th century. 3 Sir Anthony Mason, ‘Future Directions in Australian Law’ (1987) 13 Monash University Law Review 149, 154. 4 Law and Justice Legislation Amendment Act 1988 (Cth) s 41. The reference in s 80 of the Judiciary Act 1903 (Cth) to the ‘common law of England’ was deleted and replaced with the ‘common law in Australia’. 2013] Common Law Divergences 511 ceased, literally overnight, to be law, but had become a source of law for legal development’.5 Today, it is abundantly clear that there are separate bodies of English and Australian common law.6 And there are clear ‘divergences’ reflected, not merely in isolated and specific court rulings, but also in differing casts of mind, distinctive methodologies and markedly different contexts (particularly legislative ones) in which the respective bodies of common law do their work. My purpose in this lecture is to illustrate these matters. If I have a message it is this. We have in the past borrowed, and will con- tinue to borrow, from abroad in the endeavour of making our own law. But to adapt the language of a great Californian Chief Justice and jurist, Roger Traynor, we must, of necessity, ‘subject [foreign decisions] to inspection at the border to determine their adaptability to native soil’.7 This challenge for judge and counsel alike was demonstrated starkly in the very recent decision of the Full Court of the Federal Court in Grimaldi v Chameleon Mining NL [No 2] (‘Grimaldi’)8 (a decision in which I participat- ed). It did so in two respects. First, despite the importuning of the appellants’ counsel, the Court declined to engage in detailed consideration of apparently relevant English authority on de facto directors.9 This was because, when examined by the Court, ‘the legislative context of the English decisions … so differs from Australia’s’, as to warrant their being treated with considerable reserve.10 In any event, the present state of Australian jurisprudence on de facto directors made it unnecessary to seek guidance from abroad.11 The second illustration fromGrimaldi is the more revealing. In the late 19th century, the English Court of Appeal held in Lister & Co v Stubbs12 that, while 5 James Allsop, ‘Some Reflections on the Sources of Our Law’ (Speech delivered at the Supreme Court of Western Australia Judges’ Conference, 18 August 2012) 7 [20] <http://nswca.jc.nsw.gov.au/courtofappeal/Speeches/allsop180812.pdf>. I am grateful to his Honour for providing me with a copy of this important piece. 6 See Mark Leeming, ‘Subrogation, Equity and Unjust Enrichment’ in Jamie Glister and Pauline Ridge (eds), Fault Lines in Equity (Hart Publishing, 2012) 27, especially 29–33. 7 Roger J Traynor, ‘Statutes Revolving in Common Law Orbits’ (1968) 17 Catholic University Law Review 401, 409. 8 (2012) 200 FCR 296. 9 Including the United Kingdom Supreme Court decision in Revenue and Customs Commis- sioners v Holland [2010] 1 WLR 2793: see ibid 318–19 [51]–[53] (Finn, Stone and Perram JJ). 10 Grimaldi (2012) 200 FCR 296, 320–1 [59] (Finn, Stone and Perram JJ). This matter was not explored by counsel. 11 Ibid. 12 (1890) 45 Ch D 1. 512 Melbourne University Law Review [Vol 37:509 an agent was accountable to its principal for a bribe or secret commission received, the agent did not hold the bribe as a constructive trustee nor could the bribe be traced by the principal. That proposition was recently reaffirmed by the English Court of Appeal in Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd (‘Sinclair Investments’),13 notwithstanding the contrary conclusion reached by the Privy Council in 1994.14 The Full Court inGrimaldi refused to follow Sinclair Investments. It applied what it considered to be orthodox Australian fiduciary law; it endorsed the policy reasons informing the grant of proprietary relief to sanction the corruption of fiduciaries,15 and in so doing it aligned Australian law on bribes and secret commissions with that of the United States,16 Canada,17 Singapore18 and New Zealand.19 To revert to my opening comments, this is the legal universe of Sir Anthony Mason, not Sir Owen Dixon. The subject of divergence has attracted recent scholarly attention in this country.20 However, it has been the ongoing, sometimes strident, debate between the predominantly English advocates of an encompassing law of restitution and the predominantly Australian defenders of equity against the extravagant claims of unjust enrichment which has given the subject its sharper edge.21 13 [2012] Ch 453. This decision was widely, but not universally, acclaimed in England by academic commentators: see, eg, Graham Virgo, ‘Profits Obtained in Breach of Fiduciary Duty: Personal or Proprietary Claim’ (2011) 70 Cambridge Law Journal 502. Cf David Hay- ton, ‘Proprietary Liability for Secret Profits’ (2011) 127 Law Quarterly Review 487. See also, since Grimaldi, Lord Peter Millett, ‘Bribes and Secret Commissions Again’ (2012) 71 Cam- bridge Law Journal 583; FHR European Ventures