(i) Reimbursement

Where the claimant has been compelled by law to discharge the defendant’s liability, the general principle is that the defendant will be required to reimburse the claimant for this expenditure if the defendant bears the ultimate liability for it.^[1] The defendant will bear the ultimate liability either where the defendant bears the whole of the liability and the claimant bears none of it, or where the claimant’s liability is subordinate to that of the defendant. Generally, the defendant’s liability will be characterized as ultimate where any benefit which was derived from the existence of the liability has been enjoyed by the defendant.^[2] For example, since a borrower has the use of the borrowed money rather than the guarantor, it is the borrower who will bear the ultimate liability for the debt.

(1) The Defendant Bears the Whole of the Liability

Where the defendant bears the whole liability and this liability has been discharged by the claimant, it is clearly appropriate that the defendant should make restitution to the claimant. This is illustrated by Exall v Partridge^[3] where the claimant had left his carriage on land, which was leased by the defendant, for the defendant to repair. The defendant had not paid his rent to his landlord who consequently entered the land and lawfully seized the claimant’s carriage in distress of rent. Since the claimant wanted to recover his carriage he was compelled to pay the rent to the landlord. The claimant then sought to recover the money he had paid to the landlord from the defendant. It was assumed that the claimant’s payment had discharged the defendant’s liability to the landlord, so clearly the defendant had been benefited. But it was still necessary to identify a ground of restitution. Duress of goods could not be established, both because the landlord had not acted unlawfully in seizing the carriage and because the money demanded was lawfully due to him. But it was held that the claimant could recover from the defendant what he had paid to the landlord on the ground that he had not paid the money voluntarily but had been compelled to do so by the landlord seizing his property.^[4] Le Blanc J even described this as ‘compulsion of law’.^[5] This compulsion derived from the fact that the landlord had seized the claimant’s goods by legitimate application of the legal process and, if the claimant wished to recover his carriage, he had no choice but to pay the money which the landlord sought. Although the landlord never said to the claimant that he must pay the debt, this was implicit since the landlord’s actions clearly indicated that if the debt was not paid by someone he would retain the claimant’s carriage. Since the defendant was not going to pay the rent, the claimant had no choice but to do so. Presumably, for reasons of consistency at least with economic duress and much of the rest of the law relating to unjust enrichment, the ‘but for’ test of causation is applicable in this type of case. If so, it follows that, where the claimant would have paid off the defendant’s debts even if his or her goods had not been seized by the third party, restitution will be denied, simply because there is insufficient evidence that the compulsion of law had deprived the claimant of a free choice as to how to spend his or her money.

In Exall v Partridge the claimant’s property had actually been seized by the third party. Exactly the same analysis should be possible where the third party has only threatened to seize the claimant’s goods if the money is not paid. In the context of duress of property no distinction is drawn between threats to seize goods and actual seizure, so there is no reason why such a distinction should be drawn in respect of legal compulsion.^[6]Also, it makes no difference whether the claimant has paid money to the third party to recover his or her goods or the claimant’s goods have been sold by the third party to pay off the debt, for in each case the defendant’s liability will have been discharged and the claimant will have been deprived of a free choice as to whether he or she should discharge the liability.²³⁷

In Exall v Partridge it was relatively straightforward to establish that the claimant was compelled to discharge the defendant’s liability, since the fact that the claimant’s property was taken by the third party was clearly outside the claimant’s control, because the carriage was under the control of the defendant. Crucially, there was no question of the claimant acting voluntarily in leaving the carriage on the defendant’s premises, because the defendant had requested the claimant to do this so that he could repair it. But what about a case where the claimant has left his property on the defendant’s premises without being requested to do so? In England v Marsden²³⁸ this was held to be sufficient to distinguish Exall v Partridge. The claimant had legitimately seized the defendant’s goods but left them on the defendant’s premises without being requested to do so and without any benefit to the defendant. The defendant’s landlord then seized the goods as distress for rent which was owed to him by the defendant. The claimant paid the rent to recover the goods and then sought to recover this from the defendant, but his claim failed because he had acted voluntarily in leaving the goods on the defendant’s premises. But this distinction, which depends on whether the defendant had requested the goods to be left on the premises or had benefited from the goods being left there, was later doubted in Edmunds v Wallingford.² 9 Any such distinction should be rejected because it does not follow from the fact that the claimant has left his or her property on the defendant’s premises without being requested to do so that the claimant was necessarily acting voluntarily when discharging the defendant’s liability. Rather, given that the claimant’s property has been seized, regardless of the reason why it was on the defendant’s property, the significant question is whether the claimant had any real choice but to discharge the liability to recover his or her property and, since usually the claimant had no reasonable alternative but to discharge the liability, the defendant should reimburse the claimant. The only possible qualification to this might arise where the claimant left property on the defendant’s premises knowing that there was a possibility that it might be seized by a landlord. Only in such a case might it be concluded that the claimant had taken the risk of the property being seized.^{[7] [8]}

(2) The Claimant’s Liability is Ancillary to that of the Defendant The alternative situation where the claimant will seek to be reimbursed by the defendant is where, although the claimant was liable to the third party, that liability is ancillary to that of the defendant. Typically this will arise where the claimant is acting as surety for the defendant’s debt and the creditor threatens to sue the claimant unless the debt is discharged. The claimant will be liable to the third party to discharge the defendant’s debt by virtue of the guarantee but, because the defendant bears the primary liability in respect of the debt, the defendant will be required to reimburse the claimant.^[9]

This form of liability also arises in respect of the assignment of leases. This is illustrated by Moule v Garrett^[10] where the claimant was a tenant who had covenanted with his landlord that he would keep the leased property in repair. The claimant assigned the lease to an assignee who subsequently assigned it to the defendant. The defendant failed to keep the property in repair. The landlord sued the claimant for breach of covenant, since this liability to keep the property in repair continued despite the assignment. The claimant then brought an action against the defendant to recover what he had paid to the landlord. Since the claimant had not assigned the lease directly to the defendant he could not sue on an implied covenant to indemnify him, simply because there was no privity of contract between the claimant and the defendant. Despite this, the defendant was required to reimburse the claimant because his payment had discharged the defendant’s liability to the landlord. The defendant bore the primary liability since he had the immediate obligation to keep the property in repair and it was his default which resulted in the landlord suing the claimant for breach of the covenant. Cockburn CJ specifically justified the reimbursement by reference to the fact that the claimant had been compelled to pay the landlord.^[11]

The principle in Moule v Garrett is only applicable where the claimant’s payment to the landlord has discharged a liability owed by the defendant, for otherwise the defendant will not have been enriched. It is for this reason that Moule v Garrett was distinguished in

Bonner v Tottenham and Edmonton Permanent Investment Building Society,²⁴⁴ where the claimant tenant had assigned his lease to Price who had then mortgaged it to the defendant. When Price went bankrupt the defendant took possession, but failed to pay rent to the landlord. The landlord then sued the claimant for breach of his covenant to pay rent. The claimant was compelled to pay the landlord and then sought to recover this sum from the defendant. The claim failed because it was held that he had not discharged any liability of the defendant. This was because, unlike the defendant in Moule v Garrett who was an assignee, the defendant in Bonner was a sub-lessee and consequently was not liable to the landlord to pay the rent. Since the claimant had not discharged any liability of the defendant it could not be shown that the defendant had received any benefit from the claimant.²⁴⁵

Although the principle involving the discharge of the defendant’s primary liability is particularly important in respect of sureties and assignments of leases, it is applicable in a wide variety of situations. For example, in Brook’s Wharf and Bull Wharf Ltd v Goodman Bros²⁴⁶ the defendant stored a number of packages of squirrel skins, which had been imported from Russia, in the claimant’s bonded warehouse, from where they were stolen without negligence on the part of the claimant. The defendant remained liable to pay customs duties on the skins, but refused to pay. As a result the claimant was compelled under statute to pay the duties and then sought to recover this amount from the defendant. The claimant’s action succeeded because, although it was legally obliged to pay the custom duties, this liability was ancillary to that of the defendant who remained primarily liable for the duties. Lord Wright MR recognized that, if the claimant was not reimbursed by the defendant, the result would be that the defendant would be ‘unjustly benefited at the cost of the plaintiffs’.²⁴⁷ In McCarthy v McCarthy and Stone plc²⁴⁸ an employer had paid tax on behalf of an employee as it was required to do by virtue of a statutory scheme. Normally the employer would have been able to deduct this tax from the employee’s salary but this was not possible because the employee had left the firm. It was held that the amount paid by the employer could be recovered from the former employee on the ground of legal compulsion because the former employee bore the primary liability for the tax.

Whilst the vast majority of the cases which are concerned with the discharge of the defendant’s primary liability involve discharge simply by payment of money to the creditor, there are some examples of cases where the discharge of liability occurs by the claimant expending money on work. So, for example, in Gebhardt v Saunders²⁴⁹ the claimant, who was the tenant of the defendant’s house, had received a notice from the sanitary authority which required either the owner or the occupier to abate a nuisance arising from water and sewage collecting in the cellar of the house, with a financial penalty if the nuisance was not abated. The notice was directed at both the owner and the occupier because it was unclear what the cause of the problem was. If it was due to blocked drains, the claimant as occupier would have been liable to abate the nuisance, but if it arose from structural problems, the defendant as owner would have been liable. Since the problem needed to be resolved urgently, the claimant did the necessary work in the course of which it was discovered that the problem arose from a structural defect in the drains, so the defendant was liable. The claimant successfully recovered the costs and expenses in abating the nuisance from the defendant. The exact ground of restitution in this case is ^{[12] [13] [14]}

somewhat uncertain. It could have been a mistaken belief that there was an existing liability to do the work,^[15] or even necessity,^[16] but the judges appeared to assume that it was legal compulsion.^[17] This was particularly because, since the notice from the sanitary authority was directed to the claimant as well as the defendant, if the claimant had failed to do anything he would have been liable to pay a penalty. To avoid paying the penalty, the claimant incurred expenditure on the work.^[18] Since it eventually turned out that the claimant bore no liability at all, this case could be treated as falling within the first category of cases, where the defendant bears the whole liability. Whichever category the case falls within is of no legal importance, because it is clear that it was the defendant who bore the ultimate liability, and this is sufficient justification for the award of restitution on the ground of legal compulsion.

The cause of action arising from the discharge of another’s obligation by operation of law is sometimes described as ‘recoupment’. There is, however, a danger in using this term in that it can hide the fact that liability is founded on unjust enrichment. This danger is especially well illustrated by the decision of the Court of Appeal in Niru Battery Manufacturing Co v Milestone Trading Ltd (No 2).^[19] Two parties, A and B, had previously been found to be jointly and severally liable to another party, C. A was liable for the tort of negligence and B was liable to make restitution of a mistaken payment by virtue of the unjust enrichment principle. A discharged B’s liability by paying C and then sought restitution from B.^[20] The Court held that B was liable to make recoupment to A, which was considered to be both cause of action and remedy, because B’s liability had been discharged completely. But this is only relevant where B bears the whole liability or is primarily liable. That was not the case here, where the liability was joint, and so the recoupment claim should have been rejected.

(3) Voluntary Payments

One problem which has arisen particularly in respect of the claimant discharging the defendant’s liability to a creditor concerns the role of voluntariness or risk-taking.^[21] It is obvious that a claimant who voluntarily discharges the defendant’s liability in circumstances where the claimant would not suffer in any way if the liability was not discharged, is unable to establish a restitutionary claim based on legal compulsion, simply because of the absence of any compulsion.^[22] But a difficult question arises where, for example, the claimant has voluntarily become surety for the defendant’s liability without being requested to do so by the defendant, and is then compelled by the creditor to discharge the liability. Can the claimant rely on legal compulsion to obtain restitution from the defendant in these circumstances? It is obvious that the claimant was compellable by law to pay the creditor, but does it, and should it, make any difference that the claimant voluntarily became the surety?

This question arose in Owen v Tate²⁵⁸ where the claimant, without consulting the defendant, deposited a sum of money with the defendant’s creditor as security for a loan. The reason for this was that the defendant’s previous surety wished to recover the title deeds of her property which had been surrendered to the creditor and, as a favour to her, the claimant agreed to become surety in her place. When the defendant discovered that the claimant had become the surety it protested, but when it was pressed for payment by the creditor, it asked the creditor to have recourse to the money which the claimant had deposited. The claimant then sought to be reimbursed by the defendant. The Court of Appeal assumed that the claimant’s payment had discharged the defendant’s debt and, whether or not the principle of automatic discharge is accepted, this must have been correct, if only because the defendant had requested the creditor to resort to the claimant’s payment to discharge the debt.^{[23] [24]} The only question remaining for the court concerned the relevance of the fact that the claimant had voluntarily become the surety in the first place. Scarman LJ identified two relevant principles. First, where the claimant is compelled to pay money which the defendant is liable to pay, the claimant has a right to be reimbursed by the defendant. Secondly, this is subject to the principle that the claimant will not be reimbursed where the claimant voluntarily paid the money or voluntarily assumed the obligation to pay.^[25] The claimant will have acted voluntarily where he or she paid money or incurred liability in circumstances where there was ‘no antecedent request, no consideration or consensual basis’ to do so.^[26] Since this second principle qualifies the first, and because the claimant had voluntarily guaranteed the defendants’ liability, it followed that he had no right to be reimbursed by the defendant.^[27] The only exception to this was recognized as arising where the claimant voluntarily incurred the liability in circumstances where it was reasonably necessary in the interests of the claimant or the defendant or both of them to do so.^[28] The effect of this decision is that, where a claimant has incurred liability as a surety, he or she will be able to seek reimbursement from the defendant only where the defendant has expressly or impliedly requested the claimant to act as surety or where it was necessary for the claimant to become surety.

A similar approach was adopted in Esso Petroleum Ltd v Hall Russell and Co Ltd,²⁶⁴ where restitution was denied because the claimant was compelled to discharge the defendant’s liability pursuant to an agreement with the creditor which the claimant had voluntarily made. Since the claimant had voluntarily incurred the liability in the first place it was not possible for it then to claim that it had been legally compelled to pay the third party.^{[29] [30]} In Ibrahim v Barclays Bankplc²⁶⁶ the Court of Appeal, in recognizing that a debt might be discharged automatically where the claimant had voluntarily incurred liability by contract, cited Owen v Tate without criticism as an example of a case where recoupment might be denied even though the debt had been discharged, presumably because the liability was voluntarily incurred. In other words, voluntariness does not prevent automatic discharge of the debt, at least where payment was legally compelled, but voluntariness will defeat recoupment.

Owen v Tate has generally been considered to be wrongly decided.^[31] The result appears unjust since the claimant had conferred a benefit on the defendant by discharging the debt, but the defendant was still not required to reimburse the claimant. If the case is analysed simply in terms of causation it is difficult to defend, since, at the time the claimant’s money was taken to discharge the debt, legal compulsion was operating. Ultimately, the validity of the decision is a matter of policy. Should we regard somebody who has voluntarily assumed a liability as acting in such a way that restitution should be denied? The particular difficulty with Owen v Tate is that there is nothing to suggest that the claimant had done anything which was detrimental to the interests of the defendant. Even though, as Scarman LJ found,^[32] the claimant had acted behind the back of the defendant in the interests of another party, the claimant had not harmed the defendant in any way. Despite this, Ormrod LJ^[33] did suggest that the defendant’s position was worsened by the intrusion of the claimant. If this really was shown to be the case, it would have been possible to conclude that the defendant had not in fact benefited from the discharge of the liability, so the defendant could plead subjective devaluation to negate the enrichment element of the unjust enrichment claim.

Voluntariness, as defined in Owen v Tate, does not defeat restitutionary claims in other areas where the ground of restitution is legal compulsion. So, for example, in Edmunds v Wallingford²⁷⁰ the fact that the claimant’s goods which were seized had been voluntarily left on the defendant’s premises was held to be irrelevant. It is also inconsistent with the law of contribution, whereby a surety is entitled to contribution from a co-surety regardless of whether or not the claimant had been requested by the defendant to become a surety.²⁷¹ The emphasis in Owen v Tate on whether the defendant had requested the claimant to act as surety, whether expressly or impliedly, appears to arise from an unfortunate misunderstanding of the earlier cases on discharge of liability. In these cases²⁷² the claimant’s action was typically founded on the count for money paid, which required the claimant to plead that the defendant had requested the payment. In many of these cases this request was implied in highly artificial circumstances. Rather than rejecting the need for a request, Owen v Tate has affirmed it as a requirement. This is unacceptable and should be rejected. It is an example of the forms of action continuing to rule us from their graves.²⁷³

The validity of Owen v Tate is therefore in doubt. The preferable view is that, where the claimant has been legally compelled to discharge the defendant’s liability, the fact that the claimant has not been requested to do so should be irrelevant both to whether the debt was discharged and to whether the claim can be established. In those rare cases where the reason for the claimant voluntarily discharging the liability is so that the claimant can harass the defendant, it should be possible to deny restitution by means of subjective devaluation or by barring the claim on the ground that the claimant had been acting

officiously.²⁷⁴

(4) Damages Paid to Two Claimants for Wrongful Interference with the Same Goods

A final category of reimbursement grounded on legal compulsion arises where a tortfeasor has been compelled to pay damages to two claimants for wrongful interference with the same goods. By virtue of section 7(4) of the Torts (Interference with Goods) Act 1977 any claimant who is unjustly enriched as the result of double enforcement of liability is liable to reimburse the wrongdoer to the extent of that enrichment. So, for example, if A has converted goods which are owned by B but had been found by C, both B and C might sue A for the tort of conversion. If A pays damages to both of them, C will be required by statute to pay the damages to B, who will then be unjustly enriched and so will be required to make restitution to A. This is a somewhat convoluted statutory attempt to avoid double liability. What is particularly significant for this book is that the liability to reimburse is specifically tied to unjust enrichment.

• [1] Re Downer Enterprises Ltd [1974] 1 WLR 1460, 1468 (Pennycuick V-C).
• [2] Birks, An Introduction to the Law of Restitution, 192.
• [3] (1799) 8 Term Rep 308, 101 ER 1405. See also Johnson v Royal Mail Steam Packet Co [1867] LR 3 CP 38;Edmunds v Wallingford (1885) 14 QBD 811; and Whitham v Bullock [1939] 2 KB 81.
• [4] See, in particular, Grose J in Exall v Partridge (1799) 8 Term Rep 308, 311; 101 ER 1405, 1406.
• [5] Ibid, 311; 1407. 3 See Maskellv Horner [1915] 3 KB 106.
• [6] 237 Edmunds v Wallingford (1885) 14 QBD 811. 238 (1866) LR 1 CP 529.
• [7] (188 5) 14 QBD 811. Although it was suggested that restitution would be denied if the claimant left thegoods on the defendant’s premises without the defendant’s express consent.
• [8] By analogy with Esso Petroleum Ltd v Hall Russell and Co Ltd [1989] AC 643.
• [9] Anson v Anson [1953] 1 QB 636. See also Re a Debtor [1937] Ch 156, 163 (Greene LJ).
• [10] (1872) LR 7 Exch 101. See also Selous Street Properties Ltd v Oronel Fabrics Ltd (1984) 270 EG 643, 749and Beckton Dickinson UK Ltd v Zwebner [1989] QB 208.
• [11] Moule v Garrett (1872) LR 7 Exch 101, 104.
• [12] [1899] 1 QB 161. See also Re Nottand Cardiff Corp [1918] 2 KB 146; Receiver for the Metropolitan PoliceDistrict v Croydon Corp [1957] 2 QB 154; and Esso Petroleum Co Ltd v Hall Russell and Co Ltd [1989] AC 643.
• [13] See particularly Vaughan Williams LJ in Bonner v Tottenham and Edmonton Permanent InvestmentBuilding Society [1899] 1 QB 161, 177.
• [14] [1937] 1 KB 5 34. 247 Ibid, 545 . 248 [2007] EWCA Civ 664. 249 [1892] 2 QB 452.
• [15] This was Birks’s preferred explanation of the case. SeeBirks, An Introduction to the Law of Restitution, 191.
• [16] See Chapter 12.
• [17] See also Andrew v St Olave’s Board of Works [1898] 1 QB 775.
• [18] It might be doubted whether the threat of the penalty was a sufficient cause of the claimant incurring theexpenditure. It is just as likely that he incurred the expenditure out of necessity, to stop sewage leaking into thecellar. But, where two grounds of restitution are operating, the claimant should be able to rely on both of themto show that they jointly caused him or her to benefit the defendant.
• [19] [2004] EWCA Civ 487, [2004] 2 All ER (Comm) 289.
• [20] The case also concerned claims for contribution and subrogation. See p 249, below.
• [21] See p 36, above.
• [22] There may, depending on the circumstances, be a claim grounded on mistake.
• [23] [1976] QB 402. See also Esso Petroleum Co Ltd v Hall Russell and Co Ltd [1989] AC 643.
• [24] See p 235, above.
• [25] Re National Motor Mail-Coach Co Ltd [1908] 2 Ch 515, 520 (Swinfen Eady J).
• [26] Owen v Tate [1976] QB 402, 408 (Scarman LJ).
• [27] See also Re National Motor Mail-Coach Co Ltd [1908] 2 Ch 515.
• [28] Owen v Tate [1976] QB 402, 409-10 (Scarman LJ). 9 [1989] AC 643.
• [29] the defendant.
• [30] [2012] EWCA Civ 640, [2013] Ch 400, [49] (Lewison LJ).
• [31] See Birks, An Introduction to the Law of Restitution, 311. 2 Owen v Tate [1976] QB 402, 412.
• [32] 269 Ibid, 4 1 3 . 4 (188 5) 14 QBD 811. 271 See p 247, below.
• [33] 272 See, in particular, Exall v Partridge (1799) 8 Term Rep 308, 101 ER 1405.