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THE PRINCIPLES UNDERLYING THE AWARD OF RESTITUTIONARY REMEDIES FOR WRONGS

In Devenish Nutrition Ltd v Sanofi-Aventis SA (France)33 Arden LJ recognized that recent decisions of the courts had produced ‘a cultural change in the law in favour of the classification of remedies on a coherent basis rather than on the basis of some formulaic division between different wrongs’. It follows that, whilst subsequent chapters do consider the operation of the law of restitution with reference to particular types of wrongdoing, it is important to focus on the remedies and seek coherence in their interpretation and operation regardless of the nature of the wrong which has been committed. That is what this chapter seeks to achieve.

(A) THE FUNDAMENTAL PRINCIPLES

There are two conflicting principles which relate to the award of a restitutionary remedy for the defendant’s wrongdoing.[1] The first is that the defendant should not profit from his or her wrong.[2] If this principle is accepted and is taken to its logical conclusion it follows that, whenever the defendant obtains a benefit as a result of committing a wrong, he or she should be liable to pay the claimant the value of that benefit regardless of the type of wrong committed. The second principle contradicts the first, since it denies gain-based relief to the claimant where the effect of holding the defendant liable to pay the value of the benefit to the defendant would be that the claimant profits from the defendant’s commission of the wrong.[3] This is much more likely to be the case where a disgorgement remedy rather than a literal restitutionary remedy in available, since the latter simply returns to the claimant what the claimant lost, where as the former requires the defendant to give up to the claimant what the defendant had gained from the commission of the wrong, even if this was not gained from the claimant. If this second principle prevailed it would mean that gain-based relief would be unavailable in any case where the claimant had suffered no loss as a result of the defendant’s wrongdoing.[4] This would result in a significant restriction in the scope for the award of gain-based relief for wrongdoing, since often the defendant will have obtained a benefit from the commission of a wrong in circumstances where the claimant will have suffered little or no loss.

One method of reconciling these two principles is by concluding that any benefit obtained by the defendant should be paid to the State rather than to the claimant. This can already occur where the defendant has committed a criminal offence and he or she is deprived of any benefit obtained through the confiscation of the proceeds of the crime.[5] But this is because it is the function of the State to enforce the criminal law. Also State intervention is preserved for particularly culpable or harmful conduct which deserves criminalization for the benefit of the public. This is not the case with most forms of wrongdoing which involve the infringement of private rights. Sometimes, however, judges have stated that they would prefer to leave the matter to the State, so that, if no statutory provision has been made for disgorgement, the law of restitution should not be used to provide a remedy.[6] But, as Birks recognized:

If the courts continue to subscribe to that view they will acquiesce in a trend towards the disempowerment of the individual and the alienation of the citizen from the legal system. Faith in the law and in individual action within the law will give way to helpless grumbling against the bureaucracy.[7]

In fact, the law of restitution itself has been able to reach a compromise between the two conflicting principles, by recognizing that a gain-based response is appropriate only in respect of certain types of wrong. Where the defendant has committed one of these wrongs, the law of restitution considers that it is sometimes preferable that the claimant should obtain the benefit of the wrong rather than allow the defendant to profit from its commission, even though the result may be that the claimant profits from the wrong since he or she had suffered little or no financial loss as a consequence.[8] Consequently, it is necessary to determine which types of wrong will trigger a gain-based response. A number of factors can be identified which will assist in the determination of this.[9]

  • [1] See Halifax Building Society v Thomas [1996] Ch 217, 229 (Glidewell LJ); Attorney-General v Blake[2001] 1 AC 268, 278 (Lord Nicholls).
  • [2] Attorney-General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109,286 (Lord Goff); Attorney-Generalv Blake [2001] 1 AC 268, 278.
  • [3] Fyffes Group Ltd v Templeman [2000] 2 Lloyd’s Rep 643, 672 (Toulson J).
  • [4] Although note Stevens’s analysis of substitutive damages which are available as a substitute for the right
  • [5] infringed and which encompass gains made as a result of the infringement of the right: R Stevens, Torts andRights (Oxford: Oxford University Press, 2007), 60. 38 See p 535, below.
  • [6] See, in particular, Halifax Building Society v Thomas [1996] Ch 217, 229 (Peter Gibson LJ) and 230(Glidewell LJ). See also Chief Constable of Leicestershire v M [1989] 1 WLR 20, 23 (Hoffmann J).
  • [7] PBH Birks, ‘The Proceeds of Mortgage Fraud’ (1996) 10 TLI 2, 5.
  • [8] See especially Crown Dilmun v Sutton [2004] EWHC 52, [212] (Peter Smith J). Stevens explains theseawards as a substitute for the right which has been infringed: Torts and Rights, 61.
  • [9] See IM Jackman, ‘Restitution for Wrongs’ (1989) 48 CLJ 302; IM Jackman, The Varieties of Restitution(Sydney: The Federation Press, 1998). See generally Edelman, Gain-Based Damages.
 
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