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A decision of the Supreme Court of South Australia, Bleby J, was yesterday handed down in the case of Ethnic Earth v Quoin Technology [2006] SASC 7.

Quoin Technology (QT) entered into a sale of business agreement with Ethnic Earth (EE). The total purchase price was $396,000. Two initial payments, totalling $150,000 were paid by EE to QT.

A subsequent variation of the contract rendered the agreement void under s 6(1) Land and Business Act 1994 (SA). That section states: a contract for the sale of a business that provides for the payment of part of the purchase price of the business (except a deposit), before the date of settlement, is void.

EE brought a claim seeking restitution of the $150,000 it had paid. It relied on the authorities of David Securities, Pavey & Matthews and Barclays Bank v Simms (among others).

The following points of interest could be said to emanate from the decision:

1. [62] Fault in unjust enrichment cases is irrelevant.

2. [63] The implied contract theory is to be rejected in favour of the unifying legal concept of unjust enrichment.

3. [65] A claim in unjust enrichment will be established if the plaintiff establishes that the defendant has been enriched, at the expense of the plaintiff, pursuant to an element of injustice.

4. [69] Per Professor Burrows and Goff J in Barclays Bank, claims for recovery of money paid under a void contract are best treated as instances of mistake or as based on a policy motivated factor, not failure of consideration.

5. [71-74] EE’s claim based on mistake should fail because when the two payments were made the contract was enforceable. The obligation to pay the purchase price only ceased upon agreement of a subsequent variation of the contract.

6. [78-84] There was no failure of consideration.

7. [85-87] If an unjust factor were made out, QT would nonetheless be entitled to rely on the defence of change of position (it had parted with business assets and extended time for completion following receipt of the two payments from EE).

Michael