(B) CIRCUMSTANCES WHERE THE FAULT OF EITHER PARTY IS RELEVANT
Fault is relevant in the law of restitution in a number of different circumstances.[1]
- (1) Where the claimant wishes to found a restitutionary claim on the commission of a wrong, the fault of the defendant may be important when considering whether the defendant has committed a wrong. But, whether fault needs to be proved, and, if it does, the degree of fault required, will depend on the nature of the wrong which has been committed. Some wrongs can be committed without proof of fault, such as breach of contract or breach of fiduciary duty. Other wrongs, especially some torts and serious criminal offences, will only be committed if the defendant was at fault in some way.
- (2) Some of the defences which apply to restitutionary claims will only succeed if the claimant was acting in good faith. So, for example, if the defendant acted in bad faith he or she will not be able to rely on the defences of change of position[2] or bona fide purchase.[3] What is meant by bad faith for these purposes is a matter of controversy, but certainly neither defence will be available to a defendant who knew of or suspected the existence of the restitutionary claim.
- (3) In the context of certain restitutionary claims founded on the reversal of the defendant’s unjust enrichment, the fault of both the claimant and the defendant may be relevant when considering whether a ground of restitution can be established. For example, some grounds of restitution will only be established if the defendant is considered to be more blameworthy than the claimant.[4] For other grounds of restitution, whilst it might appear on the face of the ground that it is not necessary to prove that the defendant was at fault, fault is implicit in the nature of the ground, such as where the defendant has compelled the claimant to transfer a benefit[5] or the defendant has exploited the claimant’s weaker position.9 The fault of the defendant may also be a relevant consideration when identifying and valuing an enrichment.10 Sometimes, whether the claimant was at fault in some way will also be relevant when establishing a ground of restitution. So, if a claimant knew or suspected that money had been incorrectly transferred to the defendant, the claimant will not be able to establish that he or she had been mistaken.11
- (4) Where a restitutionary claim arises in Equity the question of fault is often explicit. For example, where the defendant has received property which has been transferred in breach of trust, he or she may be liable to the beneficiary of the trust in an action for knowing receipt. But this will depend on the claimant proving that the defendant had acted unconscionably in receiving the property.12 The meaning of uncon- scionability for these purposes is a matter of some controversy, but it is clear that it requires proof of fault on the part of the defendant before restitutionary liability can be established.
- [1] PBH Birks, ‘The Role of Fault in the Law of Unjust Enrichment’ in GH Jones and WS Swadling (eds), TheSearch for Principle (Oxford: Oxford University Press, 1999), 235-75; GJ Virgo, ‘The Role of Fault in the Law ofRestitution’ in AS Burrows (ed), Mapping the Law of Obligations (Oxford: Oxford University Press, 2006).
- [2] See Chapter 25. 3 See Chapter 23.
- [3] 7 Such as the ground ofthe defendant being more responsible for participation in an illegal transaction than
- [4] the claimant. See Chapter 11. 5 See Chapter 10.
- [5] 9 See Chapter 11. 10 See Chapter 4. 11 See Chapter 9. 12 See Chapter 22.
