#3670 - Essence Of Unjust Enrichment - Aspects Of Obligations

Unjust Enrichment (i): Introduction, Enrichment and Expense

1. Essence of the Law of Restitution

   1. Initial Questions

      1. Restitution

         1. What is it About?

            • This is the body of law defined with reference to gain-based rather than loss-based remedies

• Barker –the separation of remedy from right has caused analytical problems that have not been adequately dealt with (e.g. subjective devaluation barring a whole claim). We should have a remedial analysis instead using primary and secondary rights. Primary rights are infringed and the remedy is for defendant to give back the property. The secondary right is to get a court order for this if the primary right is not remedied. This is subtly different from the primary remedy because it may take the form of valuation/quantum meruit etc.

  This is a more organised and analytically sound way of seeing things

  1. Judicial Methodology of Unjust Enrichment

• Virgo – House of Lords had been waiting for this opportunity and the case was influenced by the way it was argued. Instead of logical analysis, unjust enrichment was simply asserted

  1. Nature of Restitutionary Remedies

     1. Personal Restitutionary Remedies

        • These are remedies assessed by the value of the benefit received by the defendant. The defendant is only personally liable to pay the value of that benefit to the claimant

        • You are still liable to pay these even if you have spent the money

     2. Proprietary Restitutionary Remedies

        • These are when proprietary remedies are asserted in money, and that money must be returned

        • Proprietary remedies are more advantageous because if defendant goes bust, claimant gets priority over all the other creditors. Additionally, if the property increases in value the claimant will get the benefit of the increase

     3. Restoring What the Claimant Has Lost

        • One characteristic of restitutionary remedies is that they restore what the claimant has lost; being founded on corrective justice

        • Fuller and Perdue – restitution presents twice as strong a claim as reliance because it means that B loses the property whilst A gains it. The discrepancy is two

     4. Disgorgement

        • Restitutionary remedies are characterised by the fact that the defendant has gained but the claimant has not lost

  1. Traditional and Alternative Approaches

     1. Traditional –Law of Restitution is the Law of Unjust Enrichment

        1. General

           • This is the view that unjust enrichment is the trigger for restitution

           • Fibrosa Spolga Akcyjna v Fairbairn Lawson Combe Barbour (1943) (HL) –Lord Wright –based on principle that a man must be prevented from benefitting from money when his keeping it is against conscience. These fall within a third category of restitution

           • Lipkin Gorman v Karpnale (1991) (HL) –Lord Goff –claim to recover money in restitution is as of right. The underlying principle is unjust enrichment

     2. Alternative –Multi-Causal

        1. Virgo

           • Virgo –gain-based remedies are triggered by three principles: unjust enrichment, restitution for wrongs and vindication of/interference with property rights

• Virgo –Lipkin Gorman really a case about unjust enrichment at all because there is no ground. Failure of consideration cannot have occurred because he had authority to withdraw the money; unconscionability is far too vague. In addition, there is no causal connection between the receipt and loss –it was the partner who spent the money and not the solicitors

  Because the claim was based on retention of the claimant’s money, the proper remedy was through vindication of property rights (e.g. money held back on constructive trust)

  • Burrows – third principle is consumed by the second and the third is problematic anyway because unjust enrichment is concerned with the creation of new rights

  • Burrows – vindication of property rights is not what is happening in the tracing cases because it doesn’t explain why different rights are given in the substitute property. It also fails to see unjust enrichment as a source of property rights.

  1. Birks

• Birks –rejected this approach, saying that unjust enrichment is the only trigger. However, it is multi-causal and restitution is triggered by three distinct causes: (1) wrongs (tort); (2) consent (contract) –e.g. contractual obligation to repay a loan; (3) unjust enrichment; (4) other events (e.g. income tax, judgment of a court, wrongful receipt)

  • Burrows – obligation by contract is no different from any other primary obligation to perform a contractual duty. Specific performance usually overlaps with restitution. Income tax is also problematic because it is not triggered by unjust enrichment; in addition the gains were not made at the expense of the State. Wrongful receipt is problematic because unjust enrichment is concerned with the creation of new rights; judgment of court merely replaces another right.

  1. Reversal of Unjust Enrichment

     1. Descriptive Sense of Unjust Enrichment

        • This is that it is undesirable that the defendant can retain a benefit. This accords with what Lord Wright said in Fibrosa

        • Baylis v Bishop of London (1913) (CA) –Hamilton LJ – rejected unjust enrichment, saying that judges are not free to administer “justice as between man and man”

        • Banque Financière de la Cité v Parc (1999) (HL) –Lord Clyde – unjust enrichment is not entirely discretionary in its application so as to enable the court to withhold a remedy when all necessary elements for its satisfaction have been established

     2. Concept, Principle or Law?

        • Bofinger v Kingsway Group Ltd (2009) (??) – unjust enrichment is a concept and an ex post facto explanation of a result

• Virgo – unjust enrichment is a law, having moved from a principle to a law

  1. Substantive Sense of Unjust Enrichment

     • Banque Financière de la Cité v Parc (1999) (HL) – Lord Steyn –a personal restitutionary remedy is available when–

       (a) defendant received an enrichment

       (b) enrichment was received at claimant’s expense

       (c) received in circumstances of injustice (i.e. one of the recognised grounds of restitution)

       (d) no defence available

  2. Forms of Action

     • Although causes of action in their own right have been abolished, the language continues–

       (a) Money had and received (e.g. mistaken payment to a defendant)

       (b) Money paid to the defendant’s use (e.g. payment to third party to benefit defendant)

       (c) Quantum valebat – reasonable value of goods

       (d) Quantum meruit –reasonable value of services

• Yeoman’s Row Management v Cobbe (2008) (HL) – agreement was oral but not in writing. Planning permission was granted for defendant’s property which then increased in value. Question was whether claimant could sue defendant for the work in obtaining planning permission. Lord Scott – claimant could sue in unjust enrichment or total failure of consideration. Also said there was a separate claim in quantum meruit

• Quantum meruit was abolished in 1852 as a cause of action. Lord Scott was therefore describing three parts of the same thing–unjust enrichment. Total failure of consideration is the ground of restitution and not an action in its own right.

  1. Deprivation of Benefits from a Wrongdoer

     • The underlying cause of action is the tort in this case. You do not have to prove the elements of unjust enrichment for restitution for wrongs

     • Attorney-General v Blake (2001) (HL) –restitution is the remedy; cause of action is breach of contract and restitution strips the profits made as a result of breaching the contract

  2. Vindication of Property Rights With Which Defendant Has Interfered

• Yeoman’s Row Management v Cobbe (2008) (HL) –Lord Scott – other remedies [that are not proprietary estoppel] follow upon in personam claims for [inter alia] restitution

  • Foskett v McKeown (2001) (HL) –Lord Browne-Wilkinson –this has nothing to do with restitution. Beneficiaries of a trust can assert rights against stolen property and obtain restitution because of their property right not unjust enrichment

  • The Lipkin Gorman analysis therefore has been rejected

  1. Recognition

     1. Implied Contract

        1. General

           • This can be traced back to an old 17^th century action where claimant transferred money to defendant and sue defendant by pleading and proving a promise to repay

           • William Lacey v Davis (1957) (HC) –over time, this became a fiction and a debt was created where there was a mistaken payment

        2. Rejection

           • United Australia v Barclays (1941) (HL) –Lord Atkin – rejected the implied contract theory

           • Taylor v Bhail (1996) (CA) –Millett LJ –denied restitution because there was no implied contract on the facts. Shows the theory is still lurking in the background

           • Haugesund Kommune v Depfa ACS Bank (2010) (CA) –money lent to somebody who didn’t have capacity to borrow. Restitution denied; final proof that implied contract has gone

        3. Objections

           • It relied on a fiction and said nothing about why the promise should be implied. It masked the proper basis for recovery and judge’s didn’t have to provide full reasoning

     2. Other Theories

        1. Stoljar

           • Stoljar –the law is best viewed as giving a remedy because without claimant’s consent, defendant received property that belonged to the claimant at time of receipt

           • Burrows –only works in a limited number of occasions, e.g. where a third party transfers the money or where there is a fundamental mistake. For cases on total failure of consideration, the property does pass to the payee. Also doesn’t help with quantum meruit because there it is the loss to the claimant that is in issue rather than defendant’s gain

        2. Unjust Sacrifice

           • Another approach is that for, e.g. services, these should not be artificially forced into unjust enrichment because they concern loss rather than...