English unjust enrichment law

The English law of unjust enrichment is part of the English law of obligations, along with the law of contract, tort, and trusts. The law of unjust enrichment deals with circumstances in which one person is required make restitution of a benefit acquired at the expense of another in circumstances which are unjust.

The modern law of unjust enrichment encompasses what was once known as the law of quasi-contract. Its precise scope remains a matter of controversy.[1] Beyond quasi-contract, it is sometimes said to encompass the law relating to subrogation, contribution, recoupment, and claims to the traceable substitutes of misapplied property.

English courts have recognised that there are four steps required to establish a claim in unjust enrichment.[2] If the following elements are satisfied, a claimant has a prima facie right to restitution:

The law of unjust enrichment is among the most unsettled areas of English law. Its existence as a separate body of law was only explicitly recognised in 1991 in Lipkin Gorman v Karpnale Ltd.[4] While the law has rapidly developed over the last two decades, controversy continues over the precise structure, scope and nature of the law of unjust enrichment.

Background

History

The notion of an obligation to make restitution of benefits received at another's expense can be traced back to Roman law.[5] Its history in English law can be traced to the form of action known as indebitatus assumpsit. From this action came the 'common money counts'. Of present relevance are the following:

During the course of the 18th and 19th centuries the law of contract, the law of tort and the law of trusts emerged as discrete bodies of law within English private law. As many thought they covered the field, restitutionary claims as embodied in the common money counts were appended to the law of contract. The various claims were termed 'quasi-contractual'. This was because it was often necessary to plead that the defendant had promised to repay a debt, even though the promise was fictitious and the debt was imposed by the law. While restitutionary obligations were not enforced solely through these quasi-contractual claims, the law of quasi-contract constitutes the core of the modern law of unjust enrichment. A seminal case is Moses v Macferlan (1760) 2 Burr 1005.

Perhaps more than any other area of the common law, the law of unjust enrichment has been shaped by academic writing,[6] particularly by that of jurists from Oxford and Cambridge. Of course, the law did not develop in a vacuum: the American Law Institute drafted a Restatement of the Law of Restitution in 1937. The first major practitioner text in England appeared in 1966, written by Robert Goff and Gareth Jones.[7] It was Robert Goff (by this time Lord Goff) who gave the leading judgment in Lipkin Gorman v Karpnale Ltd over two decades later. Professor Peter Birks was instrumental in promoting the autonomy of unjust enrichment within the law of obligations in his seminal work Introduction to the Law of Restitution.[8] Academic writing continues to be heavily cited by the highest courts, particularly the more recent work of Professor Andrew Burrows and Professor Graham Virgo, as well as modern editions of Goff & Jones: The Law of Unjust Enrichment, now edited by Professor Charles Mitchell, Professor Paul Mitchell, and Dr Stephen Watterson. A good example of the close relationship between the academy and the profession in the development of this are of law is seen in the recent publication of the Restatement of the English Law of Unjust Enrichment.

Restitution or unjust enrichment?

As it has developed, the law of unjust enrichment has frequently been referred to as the 'law of restitution'. The difficulty with this is that it emphasises a legal response (restitution) rather than the event which gives rise to it (unjust enrichment).[9] In doing so, it is akin to treating contract (an event which gives rise to an obligation to perform) as coterminous with compensation (the law's response to non-performance or defective performance). That approach is obviously problematic: the law of compensation is wider than contract, encompassing compensation claims arising out of tortious conduct. This is equally true of restitution: a claimant can obtain restitution not only for an unjust enrichment, but also for a tort. It is in this sense that one can say that restitution is multi-causal: it is a legal response to a number of different events.

Continuing controversies

Controversy continues to surround many aspects of the modern law of unjust enrichment. This controversy extends to its very existence as an independent body of law, some arguing that the concept of unjust enrichment lacks the explanatory power it is so frequently asserted to have.[10]

It would be misleading to exaggerate the level of controversy, however. At least in English law, there is high authority accepting the principle of unjust enrichment as having fundamental explanatory force in this area of law.[11] Recent decisions have continue to clarify key aspects of actions in unjust enrichment.[12] Nevertheless, uncertainty pervades key areas of the law:

Despite this controversy, the statement by Justice Deane of appears to remain an accurate statement of the place of unjust enrichment in the Anglo-Australian law of obligations:[15] "[The concept of unjust enrichment] constitutes a unifying legal concept which explains why the law recognises, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognise such an obligation in a new or developing category of case.[16]

Analytic framework

English courts have recognised that there are four steps involved in establishing a claim to restitution for unjust enrichment. This analytic framework was developed by academics such as Professor Peter Birks. The four steps were expressly endorsed by the House of Lords (now Supreme Court) in Banque Financière de la Cité v Parc (Battersea) Ltd[17] in the form of four questions:

Subsequent case law and academic writing has given greater content to this commonly accepted framework. The application of the formula can be illustrated by Kelly v Solari.[18] In that case, a company paid out a life insurance policy to a widow by mistake. The company brought an action for money had and received against the widow, seeking restitution of the mistaken payment. Analysed in modern language, the widow had been enriched at the company's direct expense. The 'unjust factor' was mistake: the company had conferred the benefit whilst labouring under the incorrect tacit assumption that the payment was due.

Controversy over the status of the analytical framework

The precise status of this analytic framework and its underpinning concept of unjust enrichment is controversial.

As a matter of day-to-day practice, it is this framework which is routinely applied as the organising structure for the law. Nevertheless, practitioners frequently plead claims by reference to the old common counts. It is not yet possible to articulate the law without reference to these old categories. Whether it is desirable to do so remains a controversial question.

Enrichment

The first element of a claim is that a defendant is enriched. This requirement distinguishes a claim in unjust enrichment from a claim in tort: the law of unjust enrichment is not concerned with compensation for loss, but rather with the restitution of gains.

Historically, the nature of one's claim differed depending upon the nature of the enrichment. For example, if the defendant had received money, the plaintiff would bring an action for money had and received. If the plaintiff had discharged a liability of the defendant by paying money to a third party, the plaintiff would bring an action for money paid to the defendant's use. If instead the defendant had received services or goods, the plaintiff would recover bring a quantum meruit or a quantum valebat, respectively. These were claims for the reasonable value of the services or goods. It is no longer necessary to plead one's form of action. Whilst lawyers often draft their claims by reference to this language, academic commentators tend to analyse the law without regard to such historical distinctions. In short, an 'enrichment' for the purposes of the modern law may include, amongst other things: (i) money; (ii) services; (iii) chattels; and (iv) the discharge of a liability to a third party.

Whether a defendant has been enriched (and the proper valuation thereof) is determined objectively. Nevertheless, the law does take account of the defendant's autonomy. This is through the notion of 'subjective devaluation'.[23] In effect, a defendant is entitled to say 'I do not value the benefit as much as you claim I do' or even 'I did not want that benefit at all; to me it is worthless'. The law respects this argument because it protects individual autonomy. The law nevertheless 'looks for its limitations and curbs its excesses'.[24] A plaintiff can overcome subjective devaluation by demonstrating:[25]

The principles relating to enrichment can be illustrated can be illustrated by the following cases.

At the expense of another

The enrichment must have come at the 'expense' of the claimant. There are two particularly difficult issues:

The requirement that the enrichment be 'at the claimant's expense' distinguishes restitution for unjust enrichment from restitution for wrongs. In the former case, there must be a subtraction from the wealth of the claimant, at least in a notional sense. In the latter, there is no such requirement. For example, where a fiduciary receives a benefit in breach of the 'no profit' rule, the defaulting fiduciary will hold that property on constructive trust for the principal.[32] In such a case, the principal will have a direct (proprietary) claim against the fiduciary to recover the benefit. It does not matter that the principal (claimant) had no prior proprietary interest in the benefit, nor even that the benefit would never have otherwise been received by the principal.

In circumstances which are 'unjust'

In the eyes of the law, there is nothing objectionable about being enriched at the expense of another. But the law will intervene when such enrichment is 'unjust'. The question of injustice is not at large. English law adopts an 'unjust factor' approach to the law of restitution for unjust enrichment.[33] This means that a claimant must plead by reference to the various factors that the law recognises as 'unjust'.

In contrast to the English approach, most civil law jurisdictions adopt an 'absence of basis' analysis. On this view, a defendant's enrichment is 'unjustified' where there is no 'basis' for the defendant's receipt. An example of a 'basis' is where a defendant receives a benefit under a valid and subsisting contract. The difference is more than mere conceptual or semantic emphasis. Nevertheless, in the vast majority of cases, the outcome will be the same whether an 'unjust factor' or an 'absence of basis' approach is adopted.

English cases featuring general discussion on the question of injustice include:

Defences

Establishing that a defendant has received a benefit at the expense of the claimant in circumstances which are unjust gives rise to a prima facie right to restitution. In most cases, this is typically a personal right to the money value of the benefit conferred. Liability is strict: there is no need to prove any wrongdoing on the part of the defendant.

The question then becomes whether there is a relevant bar or whether the defendant has a valid defence. Defences to restitutionary claims is a broader topic than defences to actions in unjust enrichment. Examples of defences or bars to restitutionary claims include:

Not all these defences are available to all restitutionary claims. The availability of a defence may turn on: whether a restitutionary claim is legal orequitable; whether a claim is for a personal or proprietary remedy; and whether the claim is brought under national or EU law.

Unjust factors

Outline below are the 'unjust factors' which have been recognised (or proposed) within the English law of unjust enrichment. Some of these doctrines feature in the law of contract, where they are termed 'vitiating factors'. The applicable principles are not always the same, however.

Failure of consideration

Where one person pays money to another for a consideration which wholly fails, he or she may be entitled to restitution on the ground of total failure of consideration. Academic writing typically refers to this ground as "failure of basis".[34]

Meaning of consideration

"Consideration" in this context does not bear its contractual meaning. This can be a particular source of confusion, given that the ground of restitution known as "failure of consideration" typically arises in contractual contexts.[35]

In its narrow and most commonly encountered sense, consideration refers to the failure of the condition on which a benefit was conferred.[36] Where the claimant has failed to receive any part of the bargained-for counter-performance;[37] or, more accurately, where the defendant has failed to commence performance any part of the bargained-for counter-performance,[38] there may be a total failure of consideration.

In its broader sense, consideration refers to the failure of a legal or factual state of affairs which has failed to materialise or subsist.[39]

The total failure rule

The orthodox rule is that the failure of consideration must be total. For example, the claimant must not have received any part of the bargained-for counter-performance. This requirement has been subject to persistent academic criticism.[40] It is subject to several qualifications. In such cases, the claimant may still be entitled to restitution. Examples include:

Claims in respect of non-money benefits

The ground of restitution known as total failure of developed within the action for money had and received. That action was only available in respect of money claims. Where the claimant conferred a non-money benefit upon a defendant, the correct form of action was a quantum meruit (services) or quantum valebat (goods). It is tolerably clear that failure of consideration can now apply to non-money claims.[44]

Taxonomy

Failure of consideration typically arises where a contract is "ineffective".[45] This is not a legal term of art, but rather a useful tool for exposition.[46] A contract may be ineffective for a number of reasons. Failure of consideration may arise:

Mistake

Where one person pays money to another whilst labouring under a causative mistake of fact or law, he or she may be entitled to restitution on the ground of mistake. Restitution for a mistaken payment is widely regarded as the paradigm case of restitution for unjust enrichment.[49]

The prevailing academic view[50] (for which there is some support in the cases)[51] is that mistake can be a ground of restitution for services.

Misrepresentation

Ignorance

Duress

Main article: Duress in English law

Undue influence and exploitation

Legal compulsion

Legal compulsion is a proposed ground of restitution. It is said to explain the law relating to recoupment and contribution.

Whether such claims are capable of being rationalised on the ground of unjust enrichment remains a controversial question.[56]

Necessity

Illegality

Incapacity

Remedy: personal and proprietary restitution

If a claimant can establish that the defendant has been enriched at the claimant's expense in circumstances which are unjust, the claimant has a prima facie right to restitution. The question then becomes whether the claimant is entitled to a personal or a proprietary remedy.

Historically, the indebitatus counts only afforded a personal remedy. Hence where the claimant's action would have been brought as an action for money had and received, for money paid, or as a quantum meruit or quantum valebat, the claimant is only entitled to a money award. In short, an action for restitution of unjust enrichment only generates a personal liability: the claimant has no proprietary interest in any specific asset of the defendant.

Academic writers have sought to expand the explanatory power of 'unjust enrichment'. To this end, writers have suggested that the doctrine of subrogation forms part of the law of unjust enrichment. If correct, this would be an instance of unjust enrichment generating a proprietary remedy. English courts have accepted that the concept of unjust enrichment has a role to play in subrogation.[57] The English approach has been stridently rejected by the High Court of Australia.[58]

Academic writers such as Professor Birks and Professor Burrows have argued that claims to the traceable substitute of one's property are claims in unjust enrichment.[59] This view has been rejected by the House of Lords.[60] They instead held that such claims were a matter of vindicating property rights, a view long associated with Professor Virgo.[61] Even if not (for the foreseeable future) a part of the law of unjust enrichment, a claim to the traceable proceeds of one's property remains part of the law of restitution. The remainder of this section concerns proprietary restitution. Proprietary restitution is where a claimant who is entitled to restitution is awarded a proprietary remedy.

Tracing at common law
Tracing in equity
Proprietary restitution

Following

Tracing

Mixing two claimants' money or money mixed with an innocent claimant

Backwards tracing

Swollen assets theory

Defences

Change of position

Main article: Change of position

Estoppel

Bona Fide Purchaser

It means that good value is given for receipt of assets without notice of breach of trust. It is a complete defence to any knowing receipt claim.

Agency

Another available defence is ministerial receipt, i.e. the recipient defendant receives the assets as agent for another.

Counter restitution impossible

Passing on

Illegality

Incapacity

See also

Notes

  1. See generally, Virgo, Principles of the Law of Restitution (3rd ed, 2015); Burrows, Law of Restitution (3rd ed, 2011); Mitchell, Mitchell, Watterson, Goff & Jones Law of Unjust Enrichment (8th ed, 2011); Edelman and Degeling, Equity in Commercial Law (LexisNexis, 2005).
  2. "Bank of Cyprus v Menelaou [2015] UKSC 66" (PDF).
  3. Mitchell, Charles; Mitchell, Paul & Watterson, Stephen (2011). Goff & Jones: The Law of Unjust Enrichment. Sweet & Maxwell.
  4. [1988] UKHL 12, [1991] 2 AC 548
  5. See, e.g., Theophilus, Paraphrase 3.27.3, 5; Gaius, Institutes
  6. See, e.g., Commerzbank v Gareth Price-Jones [2004] EWCA Civ 1663 at [47] (Mummery LJ).
  7. R Goff and G Jones, The Law of Restitution (1966)
  8. Birks, Peter (1985). An Introduction to the Law of Restitution.
  9. On this point, see generally Peter Birks, 'Property and Unjust Enrichment: Categorical Truths' [1997] NZLR 623.
  10. See Edelman and Degeling, Equity in Commercial Law (LexisNexis, 2005); Steve Hedley, A Critical Introduction to the Law of Restitution (1st ed, 2001).
  11. Lipkin Gorman v Karpnale [1991]; Bank of Cyprus v Menelaou [2015] UKSC 66.
  12. For example, Benedetti v Sawiris [2013] UKSC 50 on the meaning of enrichment.
  13. Namely, an action for money had and received (for money), a quantum meruit (for services), or a quantum valebat (for goods).
  14. Wasada Pty Ltd v State Rail Authority (NSW) (No 2) [2003] NSWSC 987, at [16] (Campbell J) citing Mason and Carter, Restitution Law in Australia (LexisNexis, 2nd ed, 2008) 59-60.
  15. The statement is wholly endorsed by the current editors of Goff & Jones: MItchell, MItchell, Watterson, Goff & Jones Law of Unjust Enrichment (8th ed, 2011) at [1-01]ff.
  16. Pavey & Mathews Pty Ltd v Paul (1987) 162 CLR 221 at 257 (Deane J).
  17. [1999] AC 221, per Lord Steyn and Lord Hoffmann, cf Gibb v Maidstone and Tunbridge Wells NHS Trust [2010] EWCA Civ 678 [26]-[27], Laws LJ critiquing the open-endedness of Lord Hoffmann's elaboration of the "unjust" step of a claim. This held an NHS trust had not acted ultra vires so that a £250k payment to a former chief executive could not be recovered as being irrationally overpaid.
  18. (1841) 9 M&W 54
  19. cf. Australia Financial Services v Hills [2014] HCA 14
  20. "Gibbs v Maidstone [2010] EWCA Civ 678 at [26] (Lawes LJ)".
  21. "Bank of Cyprus v Menelaou [2015] UKSC 66 at [19] (Lord Neuberger)".
  22. See generally, Edelman and Degeling, Equity in Commercial Law (LexisNexis, 2005).
  23. "Benedetti v Sawiris [2013] UKSC 50" (PDF).
  24. Birks, Peter (1985). An Introduction to the Law of Restitution. pp. 109–11.
  25. "Benedetti v Sawiris [2013] UKSC 50" (PDF).
  26. [2004] EWCA Civ 47, [37]
  27. (1799) 8 TR 308, 101 ER 1405
  28. [2003] EWHC (Admin) 388
  29. Investment Trust Companies v Commissioner [2014] EWHC 458 (Ch) at [67]-[68]; Menelaou v Bank of Cyprus plc [2015] UKSC 66
  30. See further: Graham Virgo, The Principles of the Law of Restitution (3rd ed, 2015) 118; McInnes, 'At the Plaintiff's Expense': Quantifying Restitutionary Relief' [1998] Cambridge Law Journal 472; Andrew Burrows, The Law of Restitution (2011, 3rd ed) 64-5.
  31. Kleinwort Benson Ltd v Birmingham City Council [1996] 4 All ER 733 (England); Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68 (Australia); Kingstreet Investments Ltd v New Brunswick [2007] 1 SCR 3 (Canada)
  32. FHR European Ventures v Cedar Capital Partners [2015] AC 250
  33. See, e.g., See Deutsche Morgan Grenfell Group plc v IRC [2006] UKHL 49
  34. A fact noted by the Supreme Court in Barnes v Eastenders [2014] UKSC 26; see generally, Virgo, Principles of the Law of Restitution (3rd ed, 2015); Burrows, Law of Restitution (3rd ed, 2011); Mitchell, Mitchell, Watterson, Goff & Jones Law of Unjust Enrichment (8th ed, 2011); Edelman and Degeling, Equity in Commercial Law (LexisNexis, 2005).
  35. Note that it is generally not possible to obtain restitution on the ground of total failure of consideration where a contract is subsisting. "Contractual context" here should be interpreted broadly: it refers to situations in which there is, or was a contract.
  36. See Frederick Wilmot-Smith, 'Reconsidering "Total" Failure' (2013) 72(2) Cambridge Law Journal 414-36.
  37. Rover International v Cannon [1989] 1 WLR 912
  38. Stocznia Gdanska v Latvian Shipping [1989] 1 WLR 574
  39. Roxborough v Rothmans [2001] HCA 68; Barnes v Eastenders [2014] UKSC 26
  40. See Barnes v Eastenders [2014] UKSC 26
  41. Giedo van der Garde BV v Force India Formula One Team [2010] EWHC 2373 (QB)
  42. Rowland v Divall [1923] 2 KB 500
  43. Giedo van der Garde BV v Force India Formula One Team [2010] EWHC 2373 (QB)
  44. See Cobbe v Yeoman's Row [2008] UKHL 55; Barnes v Eastenders [2014] UKSC 26.
  45. Keith Mason, John Carter, Gregory Tolhurst, Mason & Carter's Restitution Law in Australia (2nd ed, 2008) 311ff.
  46. Keith Mason, John Carter, Gregory Tolhurst, Mason & Carter's Restitution Law in Australia (2nd ed, 2008) 312ff.
  47. See Fibrosa Spolka v Fairbairn [1942] UKHL 4; restitution for frustrated contracts are now governed by the Law Reform (Frustrated Contracts) Act 1943.
  48. This category of case is vividly illustrated by the Local Authorities Swaps Litigation of the 1990s.
  49. See Birks, Unjust Enrichment (2nd ed, 2005).
  50. Graham Virgo, The Principles of Restitution (3rd ed, 2015) at 125-6; Mitchell, Mitchell, Watterson, eds., Goff & Jones' Law of Unjust Enrichment (8th ed, 2011) at [9-02].
  51. Craven-Ellis v Canons Ltd [1936] 2 KB 403; Rover International Ltd v Cannon Film Sales Ltd (No 3) [1989] 1 WLR 912; Greenwood v Bennett [1973] QB 195; Marshall v Marshall [1999] 1 Qd R 173 (C recovered money paid to D under a mistake of fact, but subject to a quantum meruit; facts unclear, but potentially for mistakenly supplied services); cf. Lumbers v Cook Builders (2008) 232 CLR 635 (strong emphasis on the requirement of a request in quantum meruit claims).
  52. Exall v Partridge (1799) 101 ER 1405; for a modern example, see Owen v Tate [1976] 1 QB 402
  53. Albion Insurance v Government Insurance Office of NSW (1969) 121 CLR 342.
  54. Dering v Earl of Winchelsea (1787) 29 ER 1184
  55. For example, see the Civil Liability (Contribution) Act 1978
  56. See, e.g., Jonathan Hilliard, 'A Case for the Abolition of Legal Compulsion as a Ground of Restitution' (2002) 61 Cambridge Law Journal 551
  57. Bank of Cyprus v Menelaou [2015] UKSC 66
  58. Bofinger v Kingsway [2009] HCA 44
  59. See generally, Andrew Burrows, The Law of Restitution (3rd ed, 2011); Graham Virgo, The Principles of the Law of Restitution (3rd ed, 2015); Mitchell et al, Goff & Jones The Law of Unjust Enrichment (8th ed, 2011).
  60. See Foskett v McKeown [2001]; this approach was recently re-affirmed in Bank of Cyprus v Menelaou [2015] UKSC 66.
  61. Graham Virgo, The Principles of the Law of Restitution (3rd ed, 2015).

References

This article is issued from Wikipedia - version of the Monday, May 02, 2016. The text is available under the Creative Commons Attribution/Share Alike but additional terms may apply for the media files.