Lloyd's Maritime and Commercial Law Quarterly
DOES A SUBCONTRACTOR HAVE RESTITUTIONARY RIGHTS AGAINST THE EMPLOYER?
Peter Watts *
From time to time around the Commonwealth subcontractors who have contracted with a head contractor to perform work on the land (or other property) of an employer have brought a direct action for payment against the employer. Invariably, the head contractor has become insolvent or threatens to do so, and in desperation the subcontractor sues the employer. These claims have generally failed.1 Frequently the subcontractor has pleaded its case in contract. The recent growth of interest in the law of restitution has led some lawyers to speculate that restitution, or “unjust enrichment”, may be a more fruitful basis for the subcontractor’s suit. It is easy to argue that this “new” legal development opens the way for a fresh appraisal of the subcontractor’s position. My own suspicion is that, while the earlier judges may not have expressly adverted to the possibility of a restitution claim, many, at least, will have directed their minds to the general merits of allowing a direct claim before reaching the conclusion to dismiss the action.2 Many of the restitution text writers have not favoured an improvement in the subcontractor’s position through developments in their subject,3 but some writers have suggested that there is at least limited scope for restitution in this field.4
As far as the courts are concerned, the New Zealand Court of Appeal recently left open the possibility of a subcontractor’s restitutionary claim against the employer, while rejecting an argument that such a claim would lead to a proprietary right against the relevant land.5 An analogous issue, some would say a mirror issue, recently came before
* Associate Professor of Law, University of Auckland.
1. See, e.g., Hampton v. Glamorgan County Council [1917] A.C. 13; Brown & Davies Ltd. v. Galbraith [1972] 1 W.L.R. 997; Winterton Construction Pty. Ltd. v. Hambros Australia Ltd. (1991) 101 A.L.R. 363, 373–376 (Fed. Ct. of Aust.); and Re County of St. Paul No. 19 and Genereux Workshop (Bonnyville) Ltd. (1984) 12 D.L.R. (4th) 238 (Alberta C.A.).
2. Some jurisdictions have in fact given statutory rights against employers to subcontractors and their employees to secure payment: see, e.g., in New Zealand the Wages Protection and Contractors’ Liens Act 1939, now repealed. And for an account of the U.S. “Mechanics Liens” statutes, see J. P. Dawson, “The Self-Serving Intermeddler” (1974) 87 Harv. L.R. 1409, 1450 ff.
3. See Lord Goff of Chieveley & G. Jones, The Law of Restitution, 4th edn, ed by G. Jones (London, 1993), 55–58; P. Birks, An Introduction to the Law of Restitution (Oxford, 1985) (hereafter “Birks”), 281–283; and the U.S. Restatement of Restitution, s. 110.
4. See A. Burrows, “Restitution from Assignees” [1994] R.L.R. 52, discussed further below. See also A. Burrows, The Law of Restitution (London, 1993), 271–272; P. D. Maddaugh & J. D. McCamus, The Law of Restitution (Toronto, 1990), 749 ff.; and G. E. Palmer, The Law of Restitution (Boston, 1978), Vol. I, 469–471.
5. Investors Protection Co. Ltd. v. Ray Courtney Architects Ltd. (1993) 7 P.R.N.Z. 1. The court stated (at p. 5): “the usual remedy for unjust enrichment is personal in the form of restitution by a monetary award”, following LAC Minerals Ltd. v. International Corona Resources Ltd. (1989) 61 D.L.R. (4th) 14. The court found that the applicant would have had no expectation of acquiring any interest in the land and that, otherwise, there was no warrant for giving an effective priority in a contractor’s insolvency to a subcontractor over the other creditors.
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