LEGAL COMPULSION
(A) THE ESSENTIAL CHARACTERISTICS OF LEGAL COMPULSION
Whereas duress depends on the defendant making unlawful threats or threats to do unlawful acts and undue pressure depends on the defendant’s conduct being characterized as unconscionable, there is a third and independent ground of restitution, called legal compulsion, which is also founded on the general principle of compulsion. Unlike duress and undue pressure, legal compulsion is applicable where payment is demanded by somebody to whom it is lawfully due, so that there is legal basis for that person’s receipt, but where the payment benefits another party and, as between the claimant and that other party, there is no lawful basis for the receipt of the benefit.
Legal compulsion will arise where the claimant is compelled to transfer a benefit to someone in circumstances where, if the claimant had not transferred the benefit, it would have been taken by recourse to the legal process.[1] This pressure may derive, for example, from an express or implicit threat to resort to litigation or to exercise a court order or to execute a judgment. Where legal compulsion operates as a ground of restitution it does so because, as with all grounds of restitution which are founded on compulsion, the effect of the pressure is that the claimant has no free choice but to transfer the benefit. But, even though the claimant’s intention to transfer the benefit may be treated as vitiated by the pressure, it does not automatically follow that the claimant can obtain restitution from the recipient of the benefit. This is because the pressure to transfer a benefit to prevent the other party from having recourse to legal process is ‘a normal and necessary incident of social life’.185 Consequently, the person who receives money or property as a result of the exercise of such threats will not be considered to have been unjustly enriched. Also, where the effect of the payment is to discharge a liability, there will be a legal basis for the recipient’s receipt. Both of these factors suggest that there can be no role for legal compulsion as a ground of restitution. But it may constitute a ground of restitution where three parties are involved. For example, where a creditor is owed money by the defendant and the claimant is lawfully compelled to discharge this liability, it is the defendant, rather than the third party, who can be considered to have been unjustly enriched at the expense of the claimant. This is because, where the claimant’s payment discharges the defendant’s liability to the third party,186 the defendant will have received a negative incontrovertible benefit, since the payment has saved the defendant money which he or she would otherwise inevitably have had to pay to the third party, and this benefit was received at the claimant’s expense since he or she paid the money to discharge the liability. Whether the claimant can successfully bring a restitutionary claim against the defendant in these circumstances will depend on whether the claimant can establish a ground of restitution, the most important of which is that of legal compulsion.
The claimant’s restitutionary claim against the defendant may take two forms. First, where the claimant is not primarily liable to pay the creditor but the defendant is, the claimant will wish to recover from the defendant the value of the money paid to the creditor. This is called reimbursement or recoupment. Secondly, where the claimant and the defendant share a common liability to the third party, and the claimant has paid what he or she owed and also some, or all, of what the defendant owed, the claimant will wish to recover the additional amount paid on behalf of the defendant. This is called contribution. In both cases the remedy which is awarded is restitutionary, since the claimant recovers what has been paid for the benefit of the defendant.1
Where the claimant seeks reimbursement or contribution from the defendant, the claimant will usually sue the defendant directly. But the claimant may be able to seek restitution using another route, namely the remedy of subrogation.188 Subrogation enables the claimant to rely on the rights of the third party against the defendant, even though the defendant’s liability to the third party has been discharged by the claimant’s payment.189 The main advantage of this is that it enables the claimant to take advantage of any security which the creditor had in respect of his or her claim against the defendant,190 or it may be relied on where a direct restitutionary claim against the defendant is not available. Although subrogation raises more complex questions, it will only be available once the claimant has established that the defendant has been unjustly enriched at the claimant’s
191
expense.
Birks, An Introduction to the Law of Restitution, 185.
- 186 For discussion of when the debt will be discharged, see p 235, below.
- 187 As regards recoupment, see Owen v Tate [1976] QB 402, 409 (Scarman LJ). As regards contribution, see
Deering v The Earl of Winchelsea (1787) 2 Bos and Pul 270, 272; 126 ER 1276, 1277 (Eyre CB).
- 188 See p 20, above.
- 189 Esso Petroleum Ltd v Hall Russell and Co Ltd [1989] AC 643.
- 190 Although this proprietary response is preferably treated as only available where the claimant can establish a claim to vindicate property rights rather than to reverse unjust enrichment. See further p 636, below.
- 191 Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221; Menelaou v Bank of Cyprus pic [2013] EWCA Civ 1960, [2014] 1 WLR 854.
- [1] This includes a foreign legal process: Liberian Insurance Agency Inc v Mosse [1977] 2 Lloyd’s Rep 560.
