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THE NATURE OF THE RELATIONSHIP BETWEEN THE PARTIES

In certain circumstances the nature of the relationship between the parties may influence the court’s decision to award restitutionary relief. The most important circumstance is whether the relationship between the parties can be characterized as commercial. This will be significant in two particular circumstances where the commercial characterization means that restitutionary claims are less likely to succeed.

(A) RELEVANCE TO UNJUST ENRICHMENT CLAIMS

The nature of the relationship between the claimant and the defendant may determine whether one of the recognized grounds of restitution is applicable. So, for example, in the context of the grounds of duress and undue influence, restitution is much more likely to be awarded where the claimant is a consumer and the defendant a commercial trader, than if both parties are trading companies which have entered into arm’s length commercial transactions.[1] The law of restitution is much more reluctant to intervene where the parties have entered into commercial transactions, because of the fear that this will introduce undesirable uncertainty into the commercial bargaining process and could ‘enable bona fide settled accounts to be reopened when parties to commercial dealings fall out’.[2] This was recognized by the Privy Council in Pao On v Lau Yiu Long,33 where Lord Scarman held that ‘justice requires that men, who have negotiated at arm’s length, be held to their bargains unless it can be shown that their consent was vitiated by fraud, mistake or duress’. Even so, exceptionally, restitution is prepared to intervene in such commercial transactions, primarily because the nature of the defendant’s conduct is so unconscionable that restitution is appropriate to protect the claimant from unscrupulous exploitation.[3]

(B) RELEVANCE TO THE IDENTIFICATION OF FIDUCIARY RELATIONSHIPS

Where a defendant owes fiduciary duties to the claimant and breaches those duties, the defendant will typically be liable to make restitution to the claimant ofany benefits obtained as a result of the wrongdoing. It is consequently important to determine whether the defendant owes fiduciary duties to the claimant. But the courts are generally reluctant to recognize that parties to a purely commercial transaction are subject to such duties.[4] Although it does not necessarily follow that, just because the relationship between the parties is purely commercial, one of the parties will not owe fiduciary duties to the other, such a fiduciary relationship will, however, only be recognized in exceptional circumstances.

  • [1] See, in particular, CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714.
  • [2] Ibid, 719 (Steyn LJ). 33 [1980] AC 614, 634.
  • [3] See Chapters 10 and 11. 35 See Chapter 19. 36 See Chapter 3.
  • [4] 37 United Australia Ltd v Barclays Bank Ltd [1941] AC 1. 38 See Chapters 18 and 20.
 
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