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(ii) Are ‘Restitutionary Damages’ Really Restitutionary?

Whether the award of damages in circumstances where the defendant has saved money is necessarily a restitutionary remedy is a particularly controversial matter, since in many cases it is possible to characterize the remedy as both compensatory, by reference to the amount lost by the claimant, and restitutionary, by reference to the amount saved by the defendant. This is primarily because the method which is adopted to determine the amount which the defendant saved through the commission of the wrong is what the defendant would have had to pay the claimant to obtain that which was actually obtained by committing the wrong. So, for example, if the defendant had taken the claimant’s car without the claimant’s permission and so saved the cost of hire the measure of damages will be the amount the defendant would have had to pay to the claimant to hire the car. It has been argued by Sharpe and Waddams[1] that the damages which the claimant receives in such circumstances are compensatory rather than restitutionary. This is because such damages seek to compensate the claimant for the loss of the opportunity to bargain with the defendant for an appropriate fee for the use of the claimant’s property. The authors argue that the damages should be assessed as equal to the full profits made by the defendant, because the defendant in breaching the contract ‘has prevented anyone from knowing how much in fact would have been paid for the right taken’.[2]

Such a compensatory analysis might sometimes be appropriate, at least where the claimant would have been willing to hire the property to the defendant or somebody else, but a principle of lost opportunity to bargain cannot be used to explain the function of the remedy which has been awarded in every case where the defendant has saved money by interfering with the claimant’s property. This is because damages have been awarded in a number of cases where the defendant has interfered with the claimant’s property even though there was no evidence that the claimant would have bargained with the defendant or even that the claimant would have used the property itself,[3] and sometimes it is clear that the claimant would definitely not have bargained with the defendant.[4] If the damages which were awarded in these cases are to be treated as compensatory rather than restitutionary it is necessary to introduce a fiction that the claimant would have been prepared to bargain with the defendant, even though this might be contradicted by the evidence. Such artificiality can be avoided simply by concluding that the claimant may be awarded a remedy which is assessed by reference to the amount saved by the defendant as a result of the wrongdoing.

A further danger in analysing these remedies as operating only to compensate the claimant for loss suffered, is that such an analysis increasingly depends on a strange and artificial notion of loss to ensure that the claimant obtains a remedy. Where the defendant has been enriched as a result of the commission of a wrong, but the claimant suffered no real financial loss, it is appropriate to consider the award of a restitutionary remedy which explicitly focuses on the defendant’s benefit, rather than create a constructive loss.[5]

  • [1] RS Sharpe and SM Waddams, ‘Damages for Lost Opportunity to Bargain’ (1982) 2 OJLS 290. SeeInverugie Investments Ltd v Hackett [1995] 1 WLR 713.
  • [2] Sharpe and Waddams, ‘Damages for Lost Opportunity to Bargain’, 296. See Severn Trent Water Ltd vBarnes [2004] EWCA Civ 570, p 449, below.
  • [3] See, the analysis in The Mediana [1900] AC 113, 177 (Earl of Halsbury LC); Watson, Laidlaw and Co Ltdv Pott, Cassels and Williamson (1914) 31 RPC 104, 119 (Lord Shaw).
  • [4] See, in particular, Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246,Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyd’s Rep 359 and Gondall v Dillon Newspapers Ltd[2001] RLR221.
  • [5] See Attorney-General v Blake [2001] AC 268, 279 (Lord Nicholls). Cf ibid, 299 (Lord Hobhouse).
 
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