Menu
Home
Log in / Register
 
Home arrow Law arrow The principles of the law of restitution
Source

(A) THE CONCEPTION OF THE UNJUST ENRICHMENT PRINCIPLE

The seeds of unjust enrichment can be traced back to the old forms of action, especially the action of indebitatus assumpsit which was developed in the seventeenth century. The conception of what would eventually become the modern principle of unjust enrichment can be identified in the judgment of Lord Mansfield in Moses v Macferlan.4 But it took 230 years for the unjust enrichment principle to be recognized explicitly by the House of Lords. Two reasons can be identified for this. First, the development of the law occurred within four forms of action: money had and received to the defendant’s use; money paid to the defendant; quantum valebat to recover the reasonable value of goods; and quantum meruit to recover the reasonable value of services. This artificial division of claims prevented their unification in a single unjust enrichment principle. The artificiality of the distinction became even more marked following the abolition of the forms of action by the Common Law Procedure Act 1852. But the language of the forms of action continued to be used, and they still appear to rule us from their graves.5

The second reason for the late recognition of unjust enrichment was the implied contract theory. The old forms of action originally required the claimant to prove that the defendant owed money to the claimant and had promised to repay this money.

Although initially the defendant’s promise to repay the claimant had to be proved expressly, increasingly it was implied from the circumstances of the case, so that the promise became a fiction.[1] [2] This was recognized by Barry J in William Lacey (Hounslow) Ltd v Davis7 who said:

In these quasi-contractual cases the court will look at the true facts and ascertain from them whether or not a promise to pay should be implied, irrespective of the actual views or intentions of the parties at the time when the work was done or the services rendered.

In fact the award of restitution in these cases can, in retrospect, be justified by reference to the principle of unjust enrichment. But, until the middle of the twentieth century, the claim depended on whether it was possible to imply a promise by the defendant to repay the claimant. If the facts of the case were inconsistent with the implication of such a promise, it followed that the restitutionary claim must fail. So, for example, restitutionary remedies could not be awarded where there was an express contract in existence which prevented a contract from being implied or where one of the parties was incapacitated from making a contract.[3]

It was this emphasis on promise to pay and the notion of an implied contract that proved to be the main obstacle to the recognition of a distinct law of unjust enrichment. Analysis in terms of implied promises meant that the question whether a restitutionary remedy was available was treated simply as an appendix to the law of contract, as was reflected by the fact that such restitutionary liability was characterized as quasi- contractual.[4] [5] The law of unjust enrichment has, however, been emancipated from its reliance on contract. This occurred in the important case of United Australia Ltd v Barclays Bank Ltd,10 where Lord Atkin memorably said:

These fantastic resemblances of contracts invented in order to meet requirements of the law as to forms of action which have now disappeared should not in these days be allowed to affect actual rights. When these ghosts of the past stand in the path of justice clanking their medieval chains the proper course for the judge is to pass through them undeterred.[6] [7] [8] [9]

The implied contract approach to restitutionary awards for unjust enrichment was ‘unequivocally and finally’ rejected by the House of Lords in Westdeutsche Landesbank Girozentrale v Islington LBC,12 and this has since been confirmed by the Supreme Court.12 13 14 It follows that unjust enrichment claims will succeed even though it is not possible to imply a contract between the parties. This was recognized by the decision of the Court of Appeal in Haugesund Kommune v Depfa ACS Bank.14 The case involved a bank which had lent money to Norwegian public authorities in circumstances where the authorities lacked the capacity to borrow the money. It followed that the bank was unable to sue on the contract of loan, which was void. It was held, however, that the bank could recover the amount lent by a claim founded on the unjust enrichment principle. The fact that it was not possible to imply a promise to repay the money, because that would contradict the public authority’s lack of contractual capacity, was considered to be irrelevant.

This rejection of the implied contract theory does not prevent a claimant from suing the defendant on an implied contract. The effect of the United Australia case is to remove the fiction of an implied contract from English law, but it does not prevent the implication of a contract from the facts where the evidence is consistent with such an implication.[10] Where, however, there is insufficient evidence to imply a contract, relief can still be obtained by operation of law, by reference to principles such as unjust enrichment.[11] [12]

The legacy of the fictional implied contract does unfortunately live on, since judges still sometimes consider whether a contract can be implied when determining whether restitutionary relief should be available to the claimant. One of the most blatant contemporary examples of such reliance on the implied contract principle is contained in the judgment of Millett LJ in Taylor v Bhail.17 One of the questions for the court in that case was whether a builder could recover the reasonable value of his building work from a customer after the builder had inflated the estimated price of the work to enable the customer to defraud his insurance company. This inflation of the price made the transaction illegal and, since the courts will not enforce illegal transactions,[13] the claimant’s action on the contract failed. But Millett LJ also concluded that the claimant’s restitutionary claim should fail because ‘[t]he illegality renders any implied promise to pay a reasonable sum unenforceable—just as it renders the express promise to pay the contract price unenforceable’.

Such reliance on quasi-contractual reasoning should have no part to play in the modern law of restitution. The obligation to make restitution is imposed as a matter of law and does not involve enforcement of any fictional promise made by the defendant.[14] [15]

The rejection of the implied contract theory opened the way for the recognition of a unified unjust enrichment principle. In fact, the first recognition of unjust enrichment in the House of Lords occurred two years after the decision in United Australia, in the judgment of Lord Wright in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd:20

It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution.

Lord Wright had clearly been influenced in his recognition of unjust enrichment by the work of Seavey and Scott in the United States, who had used the principle as the foundation of the American Law Institute’s Restatement of the Law of Restitution, QuasiContracts and Constructive Trusts, promulgated in May 1936.[16] In November 1937 Lord

Wright delivered a lecture to the Cambridge University Law Society[17] [18] on Sinclair v Brougham,23 which he explained as giving relief:

to prevent unjust enrichment, or to achieve restitution, if we accept the useful term which has been employed in the recently published American Restatement of the Law of Restitution. The word itself is only an echo of the language which will be found in English judgments . . . It is therefore important not merely to recognise the existence of this separate head in the law (in which word I include law and equity) but to enumerate, to classify and to distinguish.[19]

Although the course seemed to be set for the assimilation of the unjust enrichment principle into English law by the House of Lords,[20] [21] [22] this did not occur. In Reading v Attorney-General26 Lord Norman stated that the ‘exact status of the law of unjust enrichment is not yet assured’. Further, Lord Diplock in Orakpo v Manson Investments27 stated that ‘there is no general doctrine of unjust enrichment recognised in English law. What it does is to provide specific remedies in particular cases of what might be classified as unjust enrichment in a legal system that is based on the civil law’.

  • [1] See Sinclair v Brougham [1914] AC 398, 452 (Lord Sumner); Fibrosa Spolka Akcyjna vFairbairn LawsonCombe Barbour Ltd [1943] AC 32, 63 (Lord Wright).
  • [2] [1957] 1 WLR 932, 936. 8 Sinclair v Brougham [1914] AC 398.
  • [3] 9 An expression which had been recognized by Lord Mansfield in Moses v Macferlan (1760) 2 Burr 1005,
  • [4] 1008; 97 ER 976, 978.
  • [5] [1941] AC 1. 11 Ibid, 28.
  • [6] 12 [1996] AC 669, 710 (Lord Browne-Wilkinson), 718, (Lord Slynn), 720 (Lord Woolf), 738 (Lord Lloyd).
  • [7] See also Kleinwort Benson Ltd v Glasgow CC [1999] 1 AC 153.
  • [8] Benedetti v Sawiris [2013] UKSC 50, [2014] AC 938, [148] (Lord Reed).
  • [9] [2010] EWCA Civ 579.
  • [10] See further p 135, below. 16 Cf S Hedley, ‘Implied Contract and Restitution’ (2004) CLJ 435.
  • [11] 17 [1996] CLC 377. See also Guinnessplc v Saunders [1990] 2 AC 663, 689 (Lord Templeman).
  • [12] 18 Holman v Johnson (1775) 1 Cowp 341, 98 ER 1120. See Chapter 27.
  • [13] 19 This view has been endorsed in the House of Lords in Westdeutsche Landesbank Girozentrale v Islington
  • [14] LBC [1996] 2 AC 669, 710 (Lord Browne-Wilkinson).
  • [15] [1943] AC 32, 61. See also Brook’s Wharf and Bull Wharf Ltd v Goodman Bros [1937] 1 KB 534, 545where, as the Master of the Rolls, he referred to an obligation arising by operation of the law where thedefendant was ‘unjustly benefited at the cost of the plaintiffs’.
  • [16] Restatement of the Law of Restitution, Quasi-Contracts and Constructive Trusts (St Paul, MN: AmericanLaw Institute Publishing, 1937).
  • [17] RA Wright, ‘Sinclair v Brougham’ (1938) 6 CLJ 305.
  • [18] Sinclair v Brougham [1914] AC 398.
  • [19] Wright, ‘Sinclair v Brougham, 306. See also Lord Wright, ‘United Australia Ltd v Barclays Bank Ltd(1941) 57 LQR 184 and A Denning, ‘The Recovery of Money’ (1949) 65 LQR 37, 48.
  • [20] Although it was also recognized by Lord Pearce in Attorney-General v Nissan [1970] AC 179, 228.
  • [21] [1951] AC 507, 513-14.
  • [22] [1978] AC 95, 104. Other sceptics included Lord Radcliffe in Bossevain v Weil [1950] AC 327, 341; LordSimonds in Ministry of Health v Simpson [1951] AC 251,275; and Lord Templeman in Guinness plc v Saunders [1990] 2 AC 663, 689, although the latter changed his mind soon afterwards in Lipkin Gorman v Karpnale [1991] 2 AC 548.
 
Source
Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >
 
Subjects
Accounting
Business & Finance
Communication
Computer Science
Economics
Education
Engineering
Environment
Geography
Health
History
Language & Literature
Law
Management
Marketing
Mathematics
Political science
Philosophy
Psychology
Religion
Sociology
Travel