Restitution is now well established as a modern legal discipline. It has it own texts, a substantial journal literature, even a modicum of recognition from the courts. Yet the nature of restitution eludes consensus

The law of restitution

Restitution is now well established as a modern legal discipline. It has it own texts, a substantial journal literature, even a modicum of recognition from the courts. Yet the nature of restitution eludes consensus. The pioneers of the subject, eager to promote their vision of ‘restitution as unjust enrichment’, rely primarily on clarity of exposition, though also with occasional asides against the many they see as their enemies (see for example Birks 1985a, p 6; Burrows 1993, pp 2-6; Tettenborn 1996, pp 2-8). Their ultimate argument against all criticisms is through progressive refinement and redefinition of their ‘unjust enrichment’ theory, a strategy which has resulted in more and more precise notions, but also in a smaller and smaller ambit for their subject, as unpromising material is excluded.

In this paper we will discuss many important structural and taxonomic matters. Mentioned in passing is Prof Birks’ recanting of the perfect quadration of restitution and unjust enrichment, his conversion to the multi-causal nature of the response of restitution, and his consequent espousal of unjust enrichment as an appropriate for the subject.

This branch of the law had first been brought to the attention of English lawyers in 1966 by Robert Goff, later to be a law lord, and Gareth Jones, in their book, The Law of Restitution. They had shown that a mass of English legal decisions, both at common law and in equity, were alike in being concerned with the reversal of unjust enrichments. If Goff and Jones could thereby be said to have ‘created’ the subject of restitution in England, it was to be Birks’s book that triggered the huge modern academic interest in it. He argued, with the clarity and rigour and dramatic turn of phrase that were the hallmarks of his unique style of prose, that an elegant and illuminating conceptual structure underpinned the cases granting restitution of an unjust enrichment at the claimant’s expense. The law was therefore revealed to have a transparent rationality, with the judges being guided by coherent principles that ensured that like cases were treated alike. In the Birksian world there was no place for labels and fictions that were misleading or obscure. They were replaced by modern language that was precise and clear, and rendered the law and legal decision-making open and intelligible.

Birks followed the publication of his book with a torrent of articles on various aspects of the law of restitution. By now his work was inspiring not only other academics but was also influencing practitioners and judges. He came to be held in great esteem by many senior judges who admired the power of his analysis in pointing the way to a principled decision. The respect afforded to his views reached the point where, in one case, even a mere footnote in a Birks article proved to be the subject of several paragraphs of reasoning in the speeches of the law lords.

Throughout his career Birks was a passionate believer in the value of Roman law as a means of introducing students to refined legal concepts such as rights in rem and rights in personam. He was a great admirer of the work done by Gaius and Justinian in classifying Roman law in their Institutes and this was to be the underpinning of his approach to modern English law. It was the Roman law of quasi-contract that led Birks to the English law of restitution.

Just as the courts have rejected the implied contract fiction and begun to coalesce around a vision of a law of restitution founded upon the principle against unjust enrichment, academic debate has, almost inevitably, begun to call it into question. Birks, whose work was so influential in the developments sketched above, was once of the view that "Restitution and unjust enrichment identify exactly the same area of law. The one term quadrates with the other". That is, if the cause of action is the unjust enrichment of the defendant at the expense of the plaintiff, the remedy is restitution to the plaintiff from the defendant of the amount of that unjust enrichment. However, he has since recanted of this quadration. He now believes that restitution in the sense of giving back can be a response to an obligation arising not only from an unjust enrichment but also from consent (as where the defendant agreed to the return), and from a wrong (because restitution for the wrong is a consequence of the law relating to the wrong itself), so that to confine the meaning of the word ‘restitution’ to a response to unjust enrichment is to ignore that the natural meaning of the word restitution can include the other responses he identifies. For him, the remedy for this instability is to adopt ‘unjust enrichment’ as a more appropriate title for the subject than restitution. This, unfortunately, doesn’t clarify the situation. The stability which Birks requires of the phrase ‘unjust enrichment’ is illusory, because, though Birks would deny this, the phrase ‘unjust enrichment’ can be used in the law in manners which are neither pejorative nor as substantively precise as he would insist; indeed, there is a spectrum along which lie various visions of unjust enrichment, from the very technical descriptive principle advocated by Birks and adopted by the Irish, English and Australian courts, through the slightly more open-textured prescriptive principle adopted by the Canadian courts, and the related but less technical understandings of the principle, often expressed in equitable terms, to much looser senses and ultimately to pejorative dismissals of unfettered palm tree justice or worse. If the word ‘restitution’ is, as Birks puts it, multi-causal, then the phrase ‘unjust enrichment’ is equally multi-faceted. In both cases, there are many possible meanings, and the law seems to have chosen one meaning in each case; so that the phrase ‘unjust enrichment’ describes a cause of action for which the word ‘restitution’ describes its remedy. In so doing, it would simply be another example of the law ascribing to words stable legal definitions which differ in some way either from their meanings in ordinary speech or from other legally plausible meanings. Though the natural meaning of restitution might extend beyond unjust enrichment, and the possible usage of unjust enrichment might in its turn extend beyond restitution, nevertheless, their overlap indisputably defines a relatively stable field of the law of obligations. It is not now necessary to undo what has only recently been done, and done well.

In fact, Birks argues that as a matter of taxonomy, the law of obligations divides into four: those obligations which arise from consent, wrongs, and unjust enrichment, and those which fall into a fourth miscellany; for him, the doctrines which protect the reliance interest at common law identified at various points in this comment provide an example within this fourth category. Consistently with his view that restitution can be a response to an obligation arising not only from an unjust enrichment but also from consent and from a wrong, he also argues that it can be a response to events ...

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Turning to the detail of the ‘unjust enrichment’ theory, we have a problem not merely in assessing what has been introduced, but also of determining what it is reasonable to expect. No theory of liability is perfect, and it is unreasonable to criticise a theory merely for failing to achieve perfection. And generalisation about liability may often be valuable and useful even where it is only partially true, or admits of major exceptions. On the other hand, where particular deficiencies in a theory are significant and have persisted over a period, despite concentrated attempts to resolve them, they certainly detract from the merits of the theory, and may even constitute grounds for rejecting it entirely. In this spirit, it may be suggested that certain difficulties in ‘unjust enrichment’ theory have become more than mere anomalies, and should make reasonable people doubt the utility of the theory.

Birks admits that the clarity of theory to which ‘unjust enrichment’ aspires is not the norm. Most subjects make no such attempts; they are ‘contextual’ subjects with no high theory. “There is nothing wrong with categories of that kind ... It is the function and virtue of these contextual categories that they collect together bits and pieces which are kept apart in other ways of dividing up the law” (Birks 1985a, p.74). There can therefore be no pretence that a theory of the sort urged is essential for a legal discipline. If restitution is based on such a theory, it is pretty unusual. The question is, whether there is any precedent for a subject so distant from society, and endowed with so fine a theory, that it can get by with only the latter. Do many such subjects exist? They are rare. Tort hardly fits the bill, for tort too is very diverse; what little theory the various torts share is small (really only some common rules about damages and about limitation, most of which apply also to contract and to breach of trust). Tort, indeed, is a rather good example of a ‘miscellaneous’ subject, the bounds of which are set by evolution and convention rather than a precise theory. That really only leaves Contract. Is Contract a worth-while model for restitution to emulate? Contract is not without its critics. Are all the critics wrong? Or are their criticisms irrelevant in the case of restitution? These are questions which ‘unjust enrichment’ theorists should attempt an answer.

In 1985 Peter Birks expressed the view that not only were contract and unjustified enrichment quite distinct areas of the law of obligations but also that “these involuntary obligations [of unjustified enrichment] ought to be treated entirely separately from contract”. While this proposition seems reasonable for initial exposition of the two subjects, there are a number of qualifications which ought to be entered. It would be a poor lawyer who was not fully aware of the interaction between contract and unjustified enrichment, and it is absolutely necessary for these advanced purposes to treat the two together at some stage. For confirmation of this, one need only look at some of the recent attempts to produce ‘codes’ embodying internationally acceptable principles of contract law all of which have to deal with enrichment or restitutionary issues at various points.

Enrichment cannot ignore contract anymore than contract can enrichment.

In various ways Scots law limits the availability of enrichment remedies where there is a contract. It is obvious that a contractual arrangement of this performance for that price cannot be upset by a claim on either side that the other is enriched under the contract. Fair pricedoctrines long ago evaporated in Scots law, if they were ever part of it. The Clive ‘code’ of unjustified enrichment follows the existing law when it provides that an enrichment is justified and irrecoverable if the enriched person is entitled to it by virtue of a contract.

It has recently been held in the Inner House that even ‘windfall’ gains which can be traced to contractual entitlements do not constitute enrichment. There is also a rule

clearly articulated in the cases that where there is a valid subsisting contract there can be no claim in recompense. Connelly v Simpson is authority for the proposition that, apart

from frustration, the condictio causa data causa non secuta is not available in cases where there is a contractual relationship between the parties; a view propounded vigorously and persuasively both before and after that case by Robin Evans Jones. In the great case of Morgan Guaranty Trust Co v Lothian Regional Council Lord President Hope stated that the

orderly development of Scots enrichment law would be best served if in general there were not different rules to be applied in each of its remedies without clear justification.

Let’s see if there is any liability at all which could not be described as an example of ‘unjust enrichment’?

The trouble with ‘unjust enrichment’ is not that it does not exist, but on the contrary that it is everywhere. Whenever X declines to pay Y a sum which justice demands X should pay, we can straightforwardly say that X is ‘unjustly enriched’ to the extent of the payment. Where, then, do we find limits to restitution? To the ‘miscellany’ school, the only limits we should expect to find are those posed by the presence of established areas of law. If I decline to pay you for goods you have sold me, there is no reason why my liability cannot be described as one for ‘unjust enrichment’. I have obviously been unjustly enriched, and only my handing over the price can render that enrichment just. We chose not to describe the case this way, but that is because this question is dealt with by the law of contract The limits of ‘restitution’ are therefore conventional only.

What limits can ‘unjust enrichment’ theorists place on their subject, other than that ‘the recognition that the beast is free does not preclude the assertion that it should be respectful of its neighbours’ (Barker 1995a, p 459)? ‘Unjust enrichment’ theorists have not exercised any particular restraint in the way they have used their concepts, and so are poorly-defended from the charge that they could include anything. They do not confine themselves to cases where the defendant is still in profit by the time of the action, for it seems that a defendant may be ‘unjustly enriched’ even though he is not a penny better off. Again, a defendant may (in the opinion of most writers) be ‘enriched’ by the receipt of worthless services (see for example Tettenborn 1996, p 6). Indeed, an incompetent trustee who contracts debts he cannot pay apparently ‘enriches’ his beneficiaries by so doing (Burrows 1993, pp 83-84)! The flexibility of the concepts being used is manifest; and indeed, some ‘unjust enrichment’ theorists would go still further, arguing that so long as the defendant is in some sense enriched, the liability need not take the form of removing the enrichment, but can consist of some other just response. Plainly, this theory could grow to embrace everything. Either ‘enrichment’ needs more careful definition, or the idea that it can police the outer boundary of restitution must be abandoned.

Of course, some liabilities are a great deal easier to regard as examples of ‘unjust enrichment’ than are others. The problem is that, having allowed the definition of ‘unjust enrichment’ theory to grow, yet also demanding a precise definition of liability, it is clear that something has to give. Much of property law could easily be described as concerned to remove ‘unjust enrichment’. Indeed, if we take the law’s allocation of property rights as settled and unchallengable (as law books tend to do), then most departures from that allocation produces an enrichment that is unjust. But this is not how the ‘unjust enrichment’ theorists want it, for they seek to separate out their own area; and their cases cannot be ‘property’ cases, for if they were, they would not need an explanation by means of ‘unjust enrichment’. So the most promising examples of liability for unjust enrichment are ruthlessly discarded by the ‘unjust enrichment’ school.

Considerations of restitution for services have persuaded some that restitution is simply about the protection of property. If I lose my property, and its proceeds end up with you, then it is unsurprising that I have a remedy, and this remedy should properly be regarded as protecting my property rights. ‘Unjust benefit’ is neither necessary nor complete to describe it: to the limited extent that property rights guard against ‘unjust benefit’, every property rule protects against unjust enrichment, not just the narrow band which ‘unjust enrichment’ theorists treat as their own.

‘Unjust enrichment’ theorists have many answers to this, but a major one is to assert that remedies are available not merely for the protection of property, but also for services unjustly appropriated or at least not paid for. It is of course possible to treat services as a variant of property, but this involves extreme artificiality. The question is, therefore, whether there is such a thing as ‘restitution for services’ and if so whether it can be treated as part of ‘unjust enrichment’ theory.

There is great confusion amongst ‘unjust enrichment’ theorists as to how to conceptualise services, or to say when they are ‘enriching’ (Hedley 1995, p. 596ff). But is there, in fact, any case-law to explain? There are of course many examples of marine salvage, but it now seems to be accepted by the theorists that these are not really reducible to any ‘unjust enrichment’ theory, or at least not the same one as is promoted generally (Birks 1985a, pp 307-308). As I have described elsewhere (Hedley 1997), there are about a dozen other reported instances of restitution for services. They are of a highly miscellaneous nature; it has proved very difficult indeed to fit them into the structure of ‘unjust enrichment’, a point which the theorists have acknowledged, even though they tend to blame the judges themselves rather than the theory. It is far from obvious that there is anything here that needs explanation, or that ‘unjust enrichment’ is the tool to do it with. The status of ‘restitution for services’, then, remains unclear; indeed, some theorists are retreating altogether from the idea that liability for services needs an explanation in terms of unjust enrichment.

Steve Hedley postulates a proprietary theory. He argues that the real question is to what extent a donor has to realize what she is doing before a donor is treated as having formed an effective intention to pass property. Only extreme misperceptions on the donor’s part should have the effect of failing to pass property. Two instances of such misperceptions are mistake as to the amount transferred and mistake of the identity of the donee. Hedley does not think that it is helpful to analyze the law with reference to mistake.

According to Steve Hedley in discussing the anticipated contract cases, “nearly everything is contractual. What little can not be explained by contract cannot be explained by unjust enrichment theory either. Therefore, unjust enrichment theory has nothing to contribute to this area.”

Hedley considers theoretical objections to the concept of implied contracts and quasi-contract and rebuts them. The author proposes four ways in which ‘implied contract’ is under-used in the law of restitution:

Almost-but-not-quite contracts;
Contracts by other names
Wrongful failure to contract;
What results from contracts is contractual.

He advocates that implied contract should be developed in all these respects to ensure that restitutionary justice is done by application of contractual principles where an element of the strict requirement for a contract is absent.

Wrongs

The traditional view of English law is that a wrong is a breach of a duty owed to "persons generally". For their part, civil lawyers see delicts as unlawful violations of general legal relations between persons. The major difference is the perspective from which such breaches/violations are analysed: duties broken by the wrongdoer for the common law, violated rights of the victim for the civil law. This does not have a great impact on the topic under examination in this paper because both indicate some sort of wrongful behaviour categorised as a hazard for society.

Yet, as we shall see, common lawyers tend to admit that breach of contract is a wrong. As has been said, although breach of contract cannot be considered to be of the same magnitude of wrongfulness as committing a tort or crime or even a breach of fiduciary duty, it is wrongful, as has been recognised for the purposes of economic duress. This illustrates the level of care which English lawyers take when qualifying breach of contract under the category "wrongs". This suggests a distinction between different grades of wrongfulness which is taxonomically incorrect: breach of contract can be a wrong or not, but it cannot be "less" a wrong than other wrongs, tertium non datur. This kind of prudent approach is alien to civil lawyers, who found the exclusion of breach of contract from the law of delicts on the want of generality which characterises the breach in question: this does not engender the violation of a "social interest" because only a very specific group has an interest in the performance of the party in breach. Hence, from the very beginning the contractual relationship affects only the parties to it, whereas a delict is an offence against the whole of society. Yet generality appears as a requirement in both the aforementioned definitions of wrongs and delicts; how can the outcome be so different?

A plausible answer could be that the original meaning has been developed in English law up to a point at which its essence has changed. The requirement of generality has gradually disappeared from the basic definition which in its most recent form can be read thus: a wrong is the breach of a duty. If "wrong" is defined as a breach of duty without any further qualification, its meaning is greatly enlarged: torts, equitable wrongs and breach of contract all find their cause in a breach of a duty, be it a duty owed to society, or to the other contracting party.

A category of "wrongs" intended as breach of duty does not exist in civil law. This is why the question of the possible delictual character of a breach of contract, if raised, is dismissed in both of the civil law systems under comparison. Thus, an analysis of restitution for delicts conducted from the perspective of, say, German law would ignore breach of contract. From the same perspective, an analysis of restitution for wrongs would hardly be conceivable, because German or Italian lawyers would consider "wrongs" to have the same meaning as "delict".

Under this premise, a qualification of the topic as restitution for ‘wrongs’ appears to be most satisfactory from a comparative point of view and most precise as far as legal theory is concerned.

Conclusion

To sum up, the claims by ‘unjust enrichment’ theorists that they have authority for their view contains elements of equivocation. There are many judges who speak of ‘unjust enrichment’, but much more is needed. Again, there are many academics, especially in the area of contracts, who are open to ideas of ‘unjust enrichment’ as a corrective to many of the problems of their disciplines; yet, very far from welcoming such writers as allies, they have been rebuffed. Contract text writers who have added chapters on restitution have been brusquely told not to waste their time. And from the responses to the more innovative contractual theorists, it is clear that they are not welcome at all: ‘unjust enrichment’ theory asserts that there is a sharp line between liabilities voluntarily accepted and those involuntarily imposed, and so those who would bring unjust enrichment into contract are letting the side down by blurring this line. So yet again, what looks like strong support for the ‘unjust enrichment’ approach seems to be unwelcome to the proponents of the theory.

‘Restitution’ is essentially a miscellaneous category, its various constituents united only by the fact that they have all been rejected from inclusion in other theories. Restitution consists of the left-overs of the law. Attempts to unite the material by reference to ‘unjust enrichment’ are therefore misguided. It does not follow, of course, that none of these left-overs is of any value. What one set of theorists throws away, another may treasure: and such areas as subrogation and mistaken payments (to name but two) are, I believe, of considerable importance. Rather, the importance of ‘restitution’ is no more than the importance of its parts. Of course, it does not logically follow from the miscellaneous nature of restitution that there are no common themes, or underlying forms of order. Rather, there is no a priori reason to expect such order, and it would be rather surprising if it were present. Arguments that there is some sort of order must be considered on their merits; but arguments that there must be some sort of order may be discounted. It is rather like the difference between a rubbish bin and a bottle bank. We might find order and value in either; it cannot be ruled out. But there is better reason to expect it in the latter. With the former, we know that those who put the stuff there thought it miscellaneous and valueless. They may have been wrong. But careful enquiry is needed.

Feeling themselves attacked on all sides, ‘unjust enrichment’ theorists have yet to give a very principled answer to any particular opposing point of view. There is a dim recognition that the ‘restitution as miscellany’ view is one which must be reckoned with. Yet no-one argues that restitution does or should include every residual form of liability (Birks 1985, p. 74), though the principle of selection is somewhat obscure. It is not for the ‘miscellany' school to explain the ‘point’ of restitution, especially since they doubt whether there is one. The existence of an academic subject called ‘restitution’ is a fact. But it is not for a school which doubts its bona fides to be told to explain its ‘point’.

What divides the two schools? They are united in believing that the topics conventionally regarded as within restitution have positive value, and amply merit the academic attention paid to them. They are united in their use of induction and generalisation as essential legal techniques. And they are agreed that talk of ‘unjust enrichment’ is a valuable part of legal and moral discourse. In an attempt to define how we differ, but some issues may be identified where the merits of ‘unjust enrichment’ approach, at least as currently practised, seem particularly in doubt.

Bibliography

1. Birks, “The Law of Unjust Enrichment: A Millennial Resolution”, [1998] Singapore JLS 318

2. Birks "Property and Unjust Enrichment: Categorical Truths" [1997] NZLR 623

3. Birks, P. and Rose, F. (eds), (2000) Lessons of the swaps litigation (Oxford: Mansfield Press).

4. Birks, P., (1985a) Introduction to the law of restitution (Oxford: Oxford University
Press).

5. Birks, P (1985b) 'Six questions in search of a subject: Unjust enrichment in a crisis of identity' 30 Juridical Review 227.

6. Burrows, A (2002) The law of restitution 2nd ed (London: Butterworths) ch 3.

7. Hedley, S (2001a) Restitution: Its division and ordering (London: Sweet and Maxwell) ch 1.

8. Hedley, S (2001b) A critical introduction to restitution (London: Butterworths) ch 6.

9. Hedley, S (1995) "Unjust enrichment" Cambridge Law Journal 578.

10. Hedley, S (1997) “Restitution: contract's twin?” in F Rose (ed), Papers from the 1996 SPTL Restitution Conference (Oxford: Hart Publishing, forthcoming).

11. Tettenborn, A., Law of Restitution, 1996

Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd 1996 GWD 21-1218.

Gloag, Contract, 320; NV Devos Gebroeder v Sunderland Sportswear Ltd 1990 SC 291; Morgan Guaranty

Trust Co of New York v Lothian RC 1995 SLT 299 at 309J-K per Lord President Hope; Dollar Land

1993 SC 391.

See his articles, “Contract, unjust enrichment and the third reception of Roman law in Scotland”,

(1993) 109 LQR 663; and (with J A Dieckmann) “The dark side of Connelly v Simpson”, 1995 JR 90.

1995 SLT 299.

STEVE HEDLEY, RESTITUTION: ITS DIVISION AND ORDERINGS 13 (2001).

Restitution is now well established as a modern legal discipline. It has it own texts, a substantial journal literature, even a modicum of recognition from the courts. Yet the nature of restitution eludes consensus

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Wrongs

Conclusion

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